MARTINSVILLE, VA - Hooker Furniture (Nasdaq:HOFT) today reported consolidated net sales of $244.4 million and net income of $12.6 million, or $1.16 per diluted share, for its fifty-two week fiscal year ended February 1, 2015.
Sales increased by $16.1 million, or 7% for fiscal 2015 compared to the prior year. Annual net income increased 58.7%, or $4.7 million. Earnings per share increased to $1.16 per diluted share compared to $0.74 for last year. The increase in net income was driven by operating profitability improvements in all segments.
For the fiscal 2015 fourth quarter, consolidated net sales increased 12.7% to $64.9 million, compared to $57.6 million for last year's fourth quarter. Consolidated net income for the fiscal 2015 fourth quarter increased $2.3 million to $4.3 million, or $0.40 per diluted share due to higher net sales in all segments, decreased discounting in the casegoods segment and lower upholstery manufacturing costs.
After reporting the highest quarterly net sales in six years for the third quarter, "Momentum continued to build, resulting in an outstanding fourth quarter that surpassed expectations and made for a great year," said Paul B. Toms Jr., chairman and chief executive officer.
On the strength of the double-digit sales increase in the fourth quarter, the Company "improved profitability in all segments in addition to making progress on multiple operational and strategic fronts during the year," Toms said.
Consolidated operating profitability increased by $6.5 million or 52.4% in fiscal 2015, over the prior year primarily due to a casegoods segment operating profitability improvement of $5.1 million and upholstery segment operating profitability increase of nearly one million dollars.
Gross profit increased in the fiscal 2015 annual period, in both absolute terms and as a percentage of net sales, due to increased net sales in all operating segments, lower discounting in the casegoods segment and reduced manufacturing costs in the upholstery segment.
The casegoods segment led the way, in sales and profitability, with shipments up $10 million for the year. "The increase was driven by a stronger, broader product assortment, 60% plus growth in container direct sales, 40% plus growth in international businesses and lower discounting," Toms said. "We gained traction in the 'better' price points of our "good-better-best" assortment through greater merchandising focus and the opening of a Vietnam distribution center to service a mixed container program."
Toms credited better finished goods forecasting and inventory management for significantly lower discounting throughout the year. "Efforts over the past two years to improve sales and operations planning processes paid off with the right mix of best-selling product in stock to ship on a timely basis throughout the year," he said.
While sales in the upholstery segment increased at a somewhat lower rate than casegoods, Sam Moore Furniture and Bradington-Young reported single-digit revenue gains, as Sam Moore significantly improved service, reducing delivery times to 4 to 6 weeks during the second half of the year.
In addition, "Our two new strategic initiatives, Homeware and H Contract, contributed about $5 million of sales for the year, and H Contract reported a small operating profit," Toms said.
"While our increase in profitability was driven by casegoods, improved performance at Sam Moore, continued profitability gains at Bradington-Young and a small operating profit at H Contract all played a significant role as well," Toms said. "The profitability performance for the year says a lot about the leverage in our business model."
Cash, Debt and Inventory
The Company finished the 2015 fiscal year with $38.7 million in cash and cash equivalents and no long-term debt. Additionally, $13.5 million was available on its $15.0 million revolving credit facility, net of $1.5 million reserved for standby letters of credit. Consolidated inventories stood at $45.0 million, down $4 million from the fiscal 2014 year end.
Business Outlook
"Our business was hitting on all cylinders across all product lines, types of retailers and geographic regions in the fourth quarter," said Toms. "However, business slowed somewhat in the first two months of our fiscal first quarter, which is typical.
"We have experienced increased ocean freight rates since late July and expect some margin deterioration in our first quarter results. However, we expect to mitigate these increases by our second fiscal quarter," Toms continued. "Overall economic conditions are favorable to the furniture industry, with new and existing home sales the strongest in recent years. Housing affordability remains good and significant improvements in the unemployment rate and job growth are positive indicators. We are optimistic that housing and furniture retailing will continue to strengthen, and believe we are well positioned with a fresh and salable product line across all brands and the right inventory to service our customers throughout the country," Toms concluded.
Table I | ||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF INCOME | ||||
(In thousands, except per share data) | ||||
Thirteen | Thirteen | Fifty-two | Fifty-two | |
Weeks Ended | Weeks Ended | Weeks Ended | Weeks Ended | |
February 1, | February 2, | February 1, | February 2, | |
2015 | 2014 | 2015 | 2014 | |
Net sales | $ 64,903 | $ 57,572 | $ 244,350 | $ 228,293 |
Cost of sales | 47,401 | 43,618 | 181,550 | 173,568 |
Gross profit | 17,502 | 13,954 | 62,800 | 54,725 |
Selling and administrative expenses | 10,994 | 10,480 | 43,752 | 42,222 |
Operating income | 6,508 | 3,474 | 19,048 | 12,503 |
Other income, (expense), net | 167 | 10 | 350 | (35) |
Income before income taxes | 6,675 | 3,484 | 19,398 | 12,468 |
Income tax expense | 2,376 | 1,485 | 6,819 | 4,539 |
Net income | $ 4,299 | $ 1,999 | $ 12,579 | $ 7,929 |
Earnings per share: | ||||
Basic | $ 0.40 | $ 0.19 | $ 1.17 | $ 0.74 |
Diluted | $ 0.40 | $ 0.19 | $ 1.16 | $ 0.74 |
Weighted average shares outstanding: | ||||
Basic | 10,746 | 10,724 | 10,736 | 10,722 |
Diluted | 10,776 | 10,758 | 10,771 | 10,752 |
Cash dividends declared per share | $ 0.10 | $ 0.10 | $ 0.40 | $ 0.40 |
Table II | ||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
(In thousands) | ||||
13 Weeks Ended | 13 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | |
February 1, | February 2, | February 1, | February 2, | |
2015 | 2014 | 2015 | 2014 | |
Net Income | $ 4,299 | $ 1,999 | $ 12,579 | $ 7,929 |
Other comprehensive income (loss): | ||||
Amortization of actuarial (loss) gain | (649) | (84) | (687) | (163) |
Income tax effect on amortization of actuarial gains | 233 | 31 | 254 | 59 |
Adjustments to net periodic benefit cost | (416) | (53) | (433) | (104) |
Comprehensive Income | $ 3,883 | $ 1,946 | $ 12,146 | $ 7,825 |
Table III | ||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||
CONSOLIDATED BALANCE SHEETS | ||
(In thousands, including share data) | ||
As of | February 1, | February 2, |
2015 | 2014 | |
Assets | ||
Current assets | ||
Cash and cash equivalents | $ 38,663 | $ 23,882 |
Accounts receivable, less allowance for doubtful accounts of $1,329 and $1,243 on each date | 32,245 | 29,393 |
Inventories | 44,973 | 49,016 |
Prepaid expenses and other current assets | 2,353 | 2,413 |
Deferred taxes | 1,808 | 1,664 |
Income tax recoverable | -- | 682 |
Total current assets | 120,042 | 107,050 |
Property, plant and equipment, net | 22,824 | 23,752 |
Cash surrender value of life insurance policies | 20,373 | 18,891 |
Deferred taxes | 4,084 | 4,051 |
Intangible assets | 1,382 | 1,382 |
Other assets | 2,050 | 355 |
Total non-current assets | 50,713 | 48,431 |
Total assets | $ 170,755 | $ 155,481 |
Liabilities and Shareholders' Equity | ||
Current liabilities | ||
Trade accounts payable | $ 10,293 | $ 7,077 |
Accrued salaries, wages and benefits | 4,824 | 3,478 |
Accrued commissions | 916 | 934 |
Other accrued expenses | 2,180 | 759 |
Customer deposits | 853 | 659 |
Total current liabilities | 19,066 | 12,907 |
Deferred compensation | 8,329 | 7,668 |
Income tax accrual | 90 | 103 |
Other long-term liabilities | 360 | -- |
Total long-term liabilities | 8,779 | 7,771 |
Total liabilities | 27,845 | 20,678 |
Shareholders' equity | ||
Common stock, no par value, 20,000 shares authorized, 10,774 and 10,753 shares issued and outstanding on each date | 17,852 | 17,585 |
Retained earnings | 125,393 | 117,120 |
Accumulated other comprehensive income | (335) | 98 |
Total shareholders' equity | 142,910 | 134,803 |
Total liabilities and shareholders' equity | $ 170,755 | $ 155,481 |
Table IV | |||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(In thousands) | |||
For the 52 Week Periods Ended February 1, 2015 and February 2, 2014 and the 53 Week Period Ended February 3, 2013 | |||
2015 | 2014 | 2013 | |
Operating Activities: | |||
Net income | $ 12,579 | $ 7,929 | $ 8,626 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||
Depreciation and amortization | 2,599 | 2,491 | 2,566 |
(Gain) loss on disposal of assets | (23) | (8) | 32 |
Deferred income tax expense | (135) | 340 | 20 |
Non-cash restricted stock and performance awards | 123 | 338 | 465 |
Provision for doubtful accounts | 928 | 456 | 61 |
Changes in assets and liabilities | |||
Trade accounts receivable | (3,780) | (1,576) | (2,526) |
Income tax recoverable | 682 | (682) | -- |
Inventories | 4,043 | 856 | (15,736) |
Gain on life insurance policies | (709) | (147) | (680) |
Prepaid expenses and other current assets | (76) | 30 | 172 |
Trade accounts payable | 3,216 | (4,499) | 2,387 |
Accrued salaries, wages and benefits | 1,347 | 162 | (539) |
Accrued income taxes | 1,314 | (751) | 1,444 |
Accrued commissions | (18) | (62) | 44 |
Customer deposits | 194 | 659 | -- |
Other accrued (income) expenses | 109 | (31) | 251 |
Deferred compensation | 317 | 88 | 80 |
Other long-term liabilities | 58 | 103 | -- |
Net cash provided by (used in) operating activities | 22,768 | 5,696 | (3,333) |
Investing Activities: | |||
Purchases of property, plant and equipment | (2,994) | (3,471) | (4,061) |
Proceeds received on notes receivable | 31 | 36 | 37 |
Proceeds from sale of property and equipment | 71 | 22 | 303 |
Purchase of intangible | -- | (125) | -- |
Premiums paid on life insurance policies | (789) | (834) | (902) |
Proceeds received on life insurance policies | -- | 517 | -- |
Net cash used in investing activities | (3,681) | (3,855) | (4,623) |
Financing Activities: | |||
Cash dividends paid | (4,306) | (4,301) | (5,386) |
Purchase and retirement of common stock | -- | -- | (671) |
Net cash used in financing activities | (4,306) | (4,301) | (6,057) |
Net increase (decrease) in cash and cash equivalents | 14,781 | (2,460) | (14,013) |
Cash and cash equivalents at the beginning of year | 23,882 | 26,342 | 40,355 |
Cash and cash equivalents at the end of year | $ 38,663 | $ 23,882 | $ 26,342 |
Supplemental schedule of cash flow information: | |||
Income taxes paid, net | $ 4,696 | $ 5,534 | $ 2,901 |
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