MARTINSVILLE, Va. - Hooker Furniture (Nasdaq:HOFT) today reported net sales of $50.2 million and net income of $1.5 million, or $0.14 per share, for its fiscal 2013 second quarter, which ended July 29, 2012. For the fiscal 2013 first half, net sales were $101.9 million and net income was $2.5 million, or $0.23 per share.
For the fiscal 2013 second quarter, net sales decreased 9.7%, or $5.4 million, and net income decreased 10.4%, or $172,000, to $0.14 per share compared to $0.15 per share in the comparable period a year ago.
For the fiscal 2013 first half, sales decreased 10.6%, or $12.1 million, and net income increased 15.0%, or $325,000, compared to the prior-year period. Earnings per share for the fiscal 2013 first half increased to $0.23 per share compared to $0.20 per share in the prior year.
Performance in both fiscal 2013 periods was primarily driven by lower net sales, reduced sales discounting, lower freight costs on imported products and lower domestic manufacturing costs.
"We're disappointed in our sales performance so far this year, but pleased that we have been able to achieve comparable to higher profitability on lower sales for both casegoods and upholstery," said Paul B. Toms Jr., chairman and chief executive officer. "We've maintained profitability by improving our domestic upholstery manufacturing operations and by managing costs. In addition, we believe we are now positioned to stabilize and grow sales again. We are almost re-stocked on best-selling products, and we believe we have both the heavy discounting and higher freight rates behind us. We're also preparing to ship several new, well-received collections that will be debuting on retail floors during the historically strong fall selling season," he added.
Fiscal 2013 second quarter highlights (compared to fiscal 2012 second quarter):
• Gross profit increased as a percentage of net sales to 22.5%, from 21.9%, but decreased in absolute terms by 7.4%, or $897,000, to $11.3 million. These changes were primarily due to lower sales volume, decreased casegoods segment discounting, reduced upholstery segment manufacturing costs and lower freight costs on imported products.
• Selling and administrative expenses:
• decreased in absolute terms by 7.5%, or $726,000, to $8.9 million, primarily due to decreases in sales-related expenses; and
• increased as a percentage of net sales from 17.4% to 17.8%, due to lower net sales.
• Operating income increased to 4.6% of net sales, from 4.5%, but decreased in absolute terms by 6.9%, or $171,000, to $2.3 million.
• Net income decreased as a percentage of net sales to 2.9%, from 3.0%, and in absolute terms by 10.4%, or $172,000, to $1.5 million, or $0.14 per share, compared to $1.6 million, or $0.15 per share in the prior year.
Fiscal 2013 first half highlights (compared to fiscal 2013 first half):
• Gross profit increased as a percentage of net sales to 21.8%, from 20.4%, but decreased in absolute terms by 4.4%, or $1.0 million, to $22.2 million, primarily due to lower sales volume, decreased casegoods and upholstery segment discounting, reduced upholstery segment manufacturing costs and lower freight costs on imported products.
• Selling and administrative expenses:
• decreased in absolute terms by 8.1%, or $1.6 million, to $18.3 million, primarily due to decreases in sales-related expenses; and
• increased as a percentage of net sales to 18.0%, from 17.5%, due to lower net sales.
• Operating income increased as a percentage of net sales to 3.8%, from 2.8%, and in absolute terms by $609,000 or 18.8%, from $3.2 million to $3.9 million.
• Net income increased as a percentage of net sales to 2.5%, from 1.9%, and in absolute terms by 15.0%, or $325,000, to $2.5 million, or $0.23 per share, compared to $2.2 million, or $0.20 per share in the prior year.
Cash, Inventory and Debt
Cash and cash equivalents increased $3.0 million to $43.3 million as of July 29, 2012, from $40.4 million on January 29, 2012, due principally to:
• a $3.4 million increase in accounts payable, due to increased inventory purchases;
• a $2.1 million decrease in accounts receivable, due to lower sales; and
• a $1.7 million increase in inventories due to restocking efforts.
"Our cash position remains strong, although we expect a modest decrease in cash during the second half of fiscal 2013 as we continue to replenish inventories and repurchase shares under last quarter's board authorization," said Toms. "We are in an improving inventory position, and the composition of our inventories with best-selling and newer products is much better compared to the prior year period."
The Company had no long-term debt at July 29, 2012 and had $13.2 million available on its $15.0 million revolving credit facility, net of $1.8 million reserved for standby letters of credit.
Business Outlook
"There's been no significant upturn in retail business yet, but we are hopeful that demand will improve as we enter what is typically the strongest selling season of the year. While housing activity has recently improved by some measures, both housing activity and consumer confidence are still below historically healthy levels," Toms said.
"Demand for casegoods remains subdued with incoming orders decreasing in the high single digit range during the second quarter compared to the same period last year, but we are encouraged that incoming order rates for upholstery were up 12% year-over-year in the second quarter," he said.
"Our consolidated backlog was up about $5 million at the end of the fiscal 2013 second quarter compared to the same date last year, and we expect to derive benefits during the third quarter from shipping bestsellers that we have re-stocked in inventory, as well as successfully launched new April furniture market introductions that will hit retail floors in September and October," Toms said.
"We are closely monitoring the possibility of a strike by the International Longshoremen's Association (ILA) on October 1, 2012, which is likely if an agreement is not reached between the ILA and the United States Maritime Alliance before September 30, 2012. We increased ordering five months ago in order to mitigate the potential impact of a strike and expect to receive about twice the normal amount of inventory for the six weeks ahead of October 1st. We are hopeful that the two parties can reach an agreement before the deadline," he said.
"On the internal operations side of our business, our Enterprise Resource Planning (ERP) system became operational this week for our casegoods segment after nearly two years of design, planning, conversion and training efforts by our associates and implementation partner. At this point, it appears that our operations are stable and everything is proceeding according to expectations," Toms concluded.
Dividends
At its September 5, 2012 meeting, our board of directors declared a quarterly cash dividend of $0.10 per share, payable on November 30, 2012 to shareholders of record at November 16, 2012.
| Table I | ||||
| HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except per share data) | ||||
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||
| July 29, 2012 |
July 31, 2011 |
July 29, 2012 |
July 31, 2011 |
|
| Net sales | $ 50,185 | $ 55,574 | $ 101,915 | $ 113,967 |
| Cost of sales | 38,920 | 43,411 | 79,728 | 90,771 |
| Gross profit | 11,265 | 12,163 | 22,187 | 23,196 |
| Selling and administrative expenses | 8,943 | 9,669 | 18,337 | 19,955 |
| Operating income | 2,322 | 2,494 | 3,850 | 3,241 |
| Other income, net | 20 | 27 | 64 | 81 |
| Income before income taxes | 2,342 | 2,521 | 3,914 | 3,322 |
| Income tax expense | 868 | 875 | 1,420 | 1,153 |
| Net income | $ 1,474 | $ 1,646 | $ 2,494 | $ 2,169 |
| Earnings per share: | ||||
| Basic | $ 0.14 | $ 0.15 | $ 0.23 | $ 0.20 |
| Diluted | $ 0.14 | $ 0.15 | $ 0.23 | $ 0.20 |
| Weighted average shares outstanding: | ||||
| Basic | 10,770 | 10,761 | 10,771 | 10,761 |
| Diluted | 10,789 | 10,784 | 10,800 | 10,785 |
| Table II | ||||
| HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||
| UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
| (In thousands) | ||||
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||
| July 29, 2012 |
July 31, 2011 |
July 29, 2012 |
July 31, 2011 |
|
| Net Income | $ 1,474 | $ 1,646 | $ 2,494 | $ 2,169 |
| Other comprehensive income: | ||||
| Amortization of actuarial gains | (14) | (82) | (29) | (163) |
| Income tax effect on amortization of actuarial gains | 5 | 31 | 11 | 61 |
| Adjustments to net periodic benefit cost | (9) | (51) | (18) | (102) |
| |
|
|||
| Comprehensive Income | $ 1,465 | $ 1,595 | $ 2,476 | $ 2,067 |
| Table III | ||
| HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, including share data) | ||
| July 29, 2012 |
January 29, 2012 |
|
| Assets | ||
| Current assets | ||
| Cash and cash equivalents | $ 43,325 | $ 40,355 |
| Accounts receivable, less allowance for doubtful accounts of $1,467 and $1,632, respectively | 23,711 | 25,807 |
| Inventories | 35,820 | 34,136 |
| Prepaid expenses and other current assets | 3,749 | 4,194 |
| Total current assets | 106,605 | 104,492 |
| Property, plant and equipment, net | 22,570 | 21,669 |
| Intangible assets | 1,257 | 1,257 |
| Cash surrender value of life insurance policies | 17,185 | 16,217 |
| Other assets | 5,088 | 5,536 |
| Total assets | $ 152,705 | $ 149,171 |
| Liabilities and Shareholders' Equity | ||
| Current liabilities | ||
| Trade accounts payable | $ 12,660 | $ 9,233 |
| Accrued salaries, wages and benefits | 2,321 | 3,855 |
| Other accrued expenses | 2,090 | 792 |
| Accrued dividends | 1,078 | 1,078 |
| Total current liabilities | 18,149 | 14,958 |
| Deferred compensation | 7,299 | 7,100 |
| Total liabilities | 25,448 | 22,058 |
| Shareholders' equity | ||
| Common stock, no par value, 20,000 shares authorized, 10,781 and 10,782 shares issued and outstanding on each date | 17,313 | 17,262 |
| Retained earnings | 109,853 | 109,742 |
| Accumulated other comprehensive income | 91 | 109 |
| Total shareholders' equity | 127,257 | 127,113 |
| Total liabilities and shareholders' equity | $ 152,705 | $ 149,171 |
| Table IV | ||
| HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| Twenty-Six Weeks Ended | ||
| July 29, 2012 |
July 31, 2011 |
|
| Cash flows from operating activities | ||
| Cash received from customers | $ 104,093 | $ 115,290 |
| Cash paid to suppliers and employees | (95,713) | (96,924) |
| Income taxes received/(paid), net | 13 | (115) |
| Interest (paid)/received, net | (20) | 20 |
| Net cash provided by operating activities | 8,373 | 18,271 |
| Cash flows from investing activities | ||
| Purchase of property, plant and equipment | (2,935) | (1,871) |
| Proceeds received on notes issued for the sale of property | 18 | 17 |
| Proceeds from the sale of property and equipment | 598 | 3 |
| Premiums paid on life insurance policies | (783) | (1,020) |
| Proceeds received on life insurance policies | -- | 560 |
| Net cash used in investing activities | (3,102) | (2,311) |
| |
||
| Cash flows from financing activities | ||
| Cash dividends paid | (2,159) | (2,156) |
| Purchase and retirement of common stock | (142) | -- |
| Net cash used in financing activities | (2,301) | (2,156) |
| Net increase in cash and cash equivalents | 2,970 | 13,804 |
| Cash and cash equivalents at beginning of period | 40,355 | 16,623 |
| Cash and cash equivalents at end of period | $ 43,325 | $ 30,427 |
| Reconciliation of net income to net cash provided by operating activities: | ||
| Net income | $ 2,494 | $ 2,169 |
| Depreciation and amortization | 1,475 | 1,255 |
| Non-cash restricted stock awards and performance grants | 160 | (101) |
| Provision for doubtful accounts | (13) | 705 |
| Deferred income taxes | 387 | (346) |
| (Gain) on disposal of property | (39) | (3) |
| (Gain) on insurance policies | (460) | (388) |
| Changes in assets and liabilities: | ||
| Accounts receivable | 2,109 | 551 |
| Inventories | (1,684) | 15,330 |
| Prepaid expenses and other current assets | 774 | 667 |
| Trade accounts payable | 3,427 | (2,399) |
| Accrued salaries, wages and benefits | (1,534) | (448) |
| Accrued income taxes | 1,046 | 1,384 |
| Other accrued expenses | 170 | (373) |
| Deferred compensation | 61 | 268 |
| Net cash provided by operating activities | $ 8,373 |
$ 18,271 |
Source: Hooker Furniture
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