MARTINSVILLE, VA - Hooker Furniture (Nasdaq:HOFT) today reported consolidated net sales of $228.3 million and net income of $7.9 million, or $0.74 per share, for its fifty-two week fiscal year ended February 2, 2014.

Sales increased by $9.9 million, or 4.5% for fiscal 2014 compared to the prior year, which included five additional shipping days. Annual net income decreased 8.1%, or $697,000. Earnings per share decreased to $0.74 for fiscal 2014 compared to $0.80 for last year. The decrease in annual net income was attributed primarily to start-up costs for the Company's two new businesses, H Contract, which furnishes upscale senior living facilities, and Homeware, a direct-to-consumer e-commerce operation. Collectively, these new ventures negatively impacted operating income by approximately $1.5 million pre-tax ($1.0 million, or $0.09 per share, after tax) for the 2014 fiscal year and approximately $292,000 pre-tax ($186,000, or $0.02 per share, after tax) for the fourth quarter of fiscal 2014.

The fiscal 2014 consolidated net sales increase was primarily due to higher average selling prices in both of the Company's operating segments, casegoods and upholstery, partially offset by higher discounting and returns and allowances in the casegoods segment and five fewer shipping days in fiscal 2014 than in fiscal 2013. Based on actual shipping days, consolidated net sales per day increased 6.6% to $913,000 per day for the 2014 fiscal year as compared to $856,000 per day for the 2013 fiscal year.

Gross profit increased in the fiscal 2014 annual period in absolute terms, due primarily to increased net sales in both operating segments. The Company's upholstery segment nearly doubled operating profitability in fiscal 2014 after reporting operating losses since the fiscal 2009 second quarter through the fiscal 2013 second quarter, and posted 1.4% and 7.4% net sales increases for the 2014 fiscal fourth quarter and fiscal year, respectively, compared to the same prior-year periods. The Company's casegoods segment reported a $1.3 million or 3.4% increase in gross profit to $39.3 million from $38.1 million in the prior year.

"We accomplished a great deal this year, growing sales across both segments while launching two new businesses," said Paul B. Toms Jr., chairman and chief executive officer. "We improved upholstery profitability and properly sized and aligned our inventories. We ended the year with a broad spectrum of collections and product lines performing well," he said.

"Although earnings were down slightly, we were comparing against a very strong prior year in which we had an extra week in the fourth quarter. If you exclude the start-up costs for our new ventures, we would have been more profitable this year compared to last year," he added.

For the fiscal 2014 fourth quarter, consolidated net sales decreased 3.5% to $57.6 million as compared to $59.6 million for the fiscal 2013 fourth quarter, which had an extra week in the fiscal period. Based on fiscal fourth quarter actual shipping days, consolidated net sales for the 2014 fiscal fourth quarter increased 4.6% to $960,000 per day as compared to $918,000 per day for the 2013 fiscal fourth quarter. Consolidated net income for the fiscal 2014 fourth quarter decreased $1.7 million to $2.0 million, or $0.19 per share due to lower net sales, increased discounting in the casegoods segment, a lower year-end LIFO adjustment compared to the prior year quarter, as well as startup costs related to H Contract and Homeware. In the casegoods segment, lower revenues were driven by decreased unit volume on essentially flat average selling prices. Upholstery net sales increased 1.4% compared to the fiscal 2013 fourth quarter, driven by higher average selling prices, partially offset by lower unit volume.

Cash, Debt and Inventory

The Company finished the 2014 fiscal year with $23.9 million in cash and cash equivalents and no long-term debt. Additionally, $12.9 million was available on its $15.0 million revolving credit facility, net of $2.1 million reserved for standby letters of credit. Consolidated inventories stood at $49.0 million, down $856,000 from the fiscal 2013 year end.

"Because of a much-improved in-stock position on casegoods and import leather upholstery, the Company shipped in a timelier manner across both segments during the fiscal year," Toms said. "Since year end, we have also made progress reducing backlogs and shipment lead times at Sam Moore, where we were challenged with high backlogs throughout the year."

Business Outlook

"We are beginning to see retail conditions improve after a slow December and January and some weather-related impacts in February," Toms said. "The improvement was confirmed as we talked with retail customers during the Spring International Home Furnishings Market. The overall economy seems resilient and able to shake-off bad news. There's a firmer foundation under key indicators for our industry, like housing, jobs, the stock market and consumer confidence. For both the near and long term, we are fairly bullish. We are planning for growth by expanding our domestic upholstery capacity, warehousing and distribution in both the U.S. and Asia, and capital spending on information systems. With our strongest product line in years and the bright potential of our two new ventures targeting Millennials and Baby Boomers seeking senior living options, we are planning for a larger business going forward."

Table I
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
         
  Thirteen Fourteen Fifty-two Fifty-three
  Weeks Ended Weeks Ended Weeks Ended Weeks Ended
  February 2, February 3, February 2, February 3,
  2014 2013 2014 2013
         
Net sales $ 57,572 $ 59,641 $ 228,293 $ 218,359
         
Cost of sales  43,618  42,842  173,568  165,813
         
Gross profit  13,954  16,799  54,725  52,546
         
Selling and administrative expenses  10,480  11,488  42,222  39,606
         
Operating income   3,474  5,311  12,503  12,940
         
Other income, (expense), net  10  (45)  (35)  53
         
Income before income taxes  3,484  5,266  12,468  12,993
         
Income tax expense  1,485  1,568  4,539  4,367
         
Net income  $ 1,999 $ 3,698 $ 7,929 $ 8,626
         
Earnings per share:        
Basic and diluted $ 0.19 $ 0.34 $ 0.74 $ 0.80
         
Weighted average shares outstanding:      
Basic 10,724 10,715 10,722 10,745
Diluted 10,758 10,742 10,752 10,775
         
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 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended
  February 2, February 3, February 2, February 3,
  2014 2013 2014 2013
         
Net Income  $ 1,999  $ 3,698  $ 7,929  $ 8,626
Other comprehensive income (loss):        
Amortization of actuarial (loss) gain  (84)  190  (163)  145
Income tax effect on amortization of actuarial gains  31  (69)  59  (51)
Adjustments to net periodic benefit cost  (53)  121  (104)  94
         
Comprehensive Income  $ 1,946  $ 3,819  $ 7,825  $ 8,720
         
 
 
Table III
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, including share data)
     
As of February 2, February 3,
  2014 2013
Assets    
Current assets    
Cash and cash equivalents $ 23,882  $ 26,342
Accounts receivable, less allowance for doubtful accounts of $1,243 and $1,249 on each date  28,075 28,272
Inventories 49,016 49,872
Prepaid expenses and other current assets 2,413 3,569
Deferred taxes 1,664 1,612
Income tax recoverable 682  -- 
Total current assets  105,732  109,667
Property, plant and equipment, net 23,752 22,829
Cash surrender value of life insurance policies 18,891 17,360
Deferred taxes 4,051 4,379
Intangible assets 1,382 1,257
Other assets  355  331
Total non-current assets  48,431  46,156
Total assets $ 154,163 $ 155,823
     
Liabilities and Shareholders' Equity    
Current liabilities    
Trade accounts payable $ 6,418 $ 11,620
Accrued salaries, wages and benefits 3,478 3,316
Accrued commissions 934 996
Other accrued expenses 759 1,535
Total current liabilities 11,589 17,467
Deferred compensation 7,668 7,311
Other long-term liabilities 103  -- 
Total long-term liabilities 7,771  7,311
Total liabilities  19,360  24,778
     
Shareholders' equity    
Common stock, no par value, 20,000 shares authorized, 10,753 and 10,746 shares issued and outstanding on each date  17,585 17,360
Retained earnings  117,120 113,483
Accumulated other comprehensive income  98  202
Total shareholders' equity  134,803  131,045
Total liabilities and shareholders' equity $ 154,163 $ 155,823
   
   
TABLE IV  
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
     
   For The  
   52 Weeks Ended  53 Weeks Ended  
  February 2, February 3,  
  2014 2013  
Operating Activities:      
Net income  $ 7,929  $ 8,626  
Adjustments to reconcile net income to net cash      
provided by (used in) operating activities:      
Depreciation and amortization  2,491  2,566  
(Gain) loss on disposal of assets  (8)  32  
Deferred income tax (benefit) expense  340  20  
Non-cash restricted stock and performance awards  338  465  
Provision for doubtful accounts  (455)  61  
Changes in assets and liabilities      
Trade accounts receivable  653  (2,526)  
Income tax recoverable  (682)  --   
Inventories  856  (15,736)  
Gain on life insurance policies  (147)  (680)  
Prepaid expenses and other current assets  30  172  
Trade accounts payable  (5,158)  2,387  
Accrued salaries, wages and benefits  162  (539)  
Accrued income taxes  (751)  1,444  
Accrued commissions  (62)  44  
Other accrued (income) expenses  (32)  251  
Deferred compensation  88  80  
Other long-term liabilities  104  --   
 Net cash provided by (used in) operating activities   5,696  (3,333)  
       
Investing Activities:      
Purchases of property, plant and equipment  (3,471)  (4,061)  
Proceeds received on notes receivable  36  37  
Proceeds from sale of property and equipment  22  303  
Purchase of intangible  (125)  --   
Premiums paid on life insurance policies  (834)  (902)  
Proceeds received on life insurance policies  517  --   
 Net cash used in investing activities   (3,855)  (4,623)  
       
Financing Activities:      
Cash dividends paid  (4,301)  (5,386)  
Purchase and retirement of common stock  --   (671)  
 Net cash used in financing activities   (4,301)  (6,057)  
       
Net (decrease) / increase in cash and cash equivalents  (2,460)  (14,013)  
Cash and cash equivalents at the beginning of year  26,342  40,355  
Cash and cash equivalents at the end of year  $ 23,882  $ 26,342  
       
Supplemental schedule of cash flow information:      
Income taxes paid, net  $ 5,534  $ 2,901  
Source: Hooker Furniture

Have something to say? Share your thoughts with us in the comments below.