Martinsville, VA -- Hooker Furniture today reported net sales of $55.7 million, a 6% year- over -year increase for its fiscal 2011 third quarter which began on August 2, 2010 and ended October 31, 2010. The Company increased net sales $3.1 million from $52.6 million during the same period a year ago.

Net income for the third quarter increased $213,000 to $1.2 million, or $0.11 per share, compared to net income of $957,000, or $0.09 per share, for the comparable period last year.

For the first nine months of the fiscal year, which began on February 1, 2010 and ended October 31, net sales increased $9.8 million, or 6.5% to $160.5 million compared to $150.6 million for the same period a year ago. The Company reported net income for the first nine months of $3.4 million or $0.32 per share, compared with net income of $38,000, or less than one cent per share, in the fiscal 2010 nine-month period.

"Given weaker than expected consumer demand during the summer and early fall, we're gratified to have achieved our second consecutive quarter of year-over-year sales increases and to have remained consistently profitable throughout the year," said Paul B. Toms Jr., chairman and chief executive officer. "We were successful this quarter in focusing our inventory mix on those best-selling products that drive our business. Consequently, as we've seen demand pick up since early November, we are well-positioned from an inventory availability standpoint to ship customer orders for in-line merchandise immediately."

During the recently completed quarter, increased sales were driven by higher unit volume across all divisions as the Company continued to make progress in shipping an order backlog elevated during the first half of the year from production delays and shipping bottlenecks. As both the shipping and production delays and incoming order rates moderated during the quarter, the Company's backlog shrank to slightly below historical levels. On October 31, the order backlog was at 5.7 weeks of sales, as compared to 8.2 weeks at the end of the most recent first quarter and 7.3 weeks during the same period a year ago.

During the quarter, wood furniture sales increased nearly 4%, while upholstery sales increased approximately 11%, contributing to the $3.1 million increase in revenues compared to the same time a year ago. Imported upholstery sales increased nearly 50% compared to the prior-year quarter, while domestic upholstery sales were essentially flat for the same period.

Gross profit decreased $402,000 to $12.3 million or 22.0% of net sales in the fiscal 2011 third quarter, compared to $12.7 million or 24.1% of net sales in the same period a year ago. Gross margins for wood furniture decreased modestly in the most recent third quarter compared to last year's third quarter, primarily due to increased freight costs for imported furniture experienced during the first half of the year. In the last 30 to 45 days, freight rates have come down with peak season surcharges no longer in effect.

Higher upholstery sales, resulting in improved manufacturing efficiencies, drove improved margins for upholstered and leather furniture, along with ongoing cost reduction efforts. The upholstery division improved to an operating loss of 2.8% of net sales for the fiscal 2011 third quarter, compared to 6.8% for the same period a year ago.

Selling and administrative expenses decreased both as a percentage of sales and in absolute terms. For the fiscal year 2011 third quarter, selling and administrative expenses were 19% of net sales, or $10.6 million, as compared to $10.9 million, or 20.7% of net sales, for the same period a year ago. The decrease in spending was primarily due to the impact of cost reductions implemented in fiscal year 2010, undertaken in response to lower sales volume, as well as lower bad debts and employee benefits expense.

Quality-related costs also declined during the quarter and throughout the first nine months of the year. "A significant improvement in our product and packaging quality, resulting in a reduction of quality-related costs, has been a real bright spot in our performance this year," said Toms, noting that quality costs have been reduced over $1 million as returns and allowances have improved versus the same period a year ago.

Operating profitability for the fiscal 2011 third quarter decreased slightly year over year compared to the fiscal 2010 third quarter. This decrease is primarily due to increased freight costs on imported product, partially offset by decreased selling and administrative expenses and improved domestic upholstery plant utilization due to higher sales. As a result, the Company realized operating income for the fiscal year 2011 third quarter of $1.7 million, or 3.0% of net sales, compared to operating income of $1.8 million, or 3.4% of net sales, in the fiscal year 2010 third quarter.

For the first nine-months of fiscal 2011, the Company's operating income increased to $4.9 million, or 3.1% of net sales, compared to operating income of $657,000, or 0.4% of net sales, in the first nine months of fiscal 2010. The Company reported net income for the 2011 first nine months of $3.4 million or $0.32 per share, compared with net income of $38,000, or less than one cent per share, in the fiscal 2010 nine-month period. Fiscal year 2011 first nine month results include a $500,000 charge ($312,000 or $0.03 per share, after tax), representing the Company's insurance deductible for a fire at one of its distribution facilities during the fiscal 2011 first quarter. Fiscal year 2010 nine month results include an intangible asset impairment charge on the Company's Bradington-Young trade name of $613,000 ($382,000 or $0.04 per share, after tax.)

Cash, Inventory and Debt

Cash and cash equivalents decreased $17.5 million to $20.5 million as of October 31, 2010 from $38.0 million on January 31, 2010 due principally to increased inventories, and increases in prepaid expenses and other current assets and trade receivables, partially offset by increased accounts payable. "We continued through the quarter to build inventory as we shipped our backlog and improved our in-stock position on best-selling products for the expected seasonal uptick in the third and fourth quarters," Toms said. "While demand in the third quarter was weaker than expected, orders have been trending favorably since early November. Average daily orders for November outpaced average daily order rates in the second and third quarters of this fiscal year and November was the best month for incoming orders since April."

The Company had no long-term debt at October 31, 2010. At quarter-end, it had $13.1 million available on its revolving line of credit and $14.6 million available to borrow on the cash surrender value of company-owned life insurance policies.

Business Outlook

"Throughout the year, we've successfully focused on those factors over which we have control. These include developing products and programs to stimulate business and engage the consumer, reducing costs, improving quality and leveraging our financial and logistics strength to flow best selling products and have them in-stock to ;provide better service to our customers. We had a solid market in October, and more importantly, the products we have introduced over the last few markets are in the pipeline and performing well at retail," Toms said. "All along, we've said that all we needed to turn the corner was a little help from the economy. We've been encouraged by what we've heard and seen in the last 30 days about improved business as we have visited retailers around the country. As orders trend in a positive direction, we are well-positioned to leverage the current uptick in consumer demand, as well as any sustainable improvement that may materialize," he said.

Announcements

On November 8, 2010, Hooker Furniture announced that it would transfer the Cherryville, N.C. operations and corporate offices of its Bradington-Young leather upholstery division to Hickory, N.C., consolidating its domestic upholstery finished goods production at the company's Hickory plant. The purpose of the consolidation is to enhance long-term competitiveness and improve efficiencies, significantly lowering the break-even point with the goal of achieving profitability at current sales levels.

On November 26, 2010, Hooker Furniture announced that Bruce Cohenour had resigned from his position of President of Hooker Furniture Casegoods, effective November 30. There are no immediate plans to fill the position.

Conference Call Details

Hooker Furniture will present its fiscal 2011 third quarter results via teleconference and live internet web cast on Wednesday morning, December 8, 2010 at 9:00 AM Eastern Time. The dial-in number for domestic callers is 877-665-2466 and the number for international callers is 678-894-3031. The call will be simultaneously web cast and archived for replay on the Company's web site in the Investor Relations section.

Ranked among the nation's top 10 largest publicly traded furniture sources based on 2009 shipments to U.S. retailers, Hooker Furniture Corporation is an 86-year old residential wood, metal and upholstered furniture resource. Major wood furniture product categories include home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand, and sold at moderate price points under the Envision Lifestyle Collections by Hooker Furniture brand. Youth bedroom furniture is sold under the Opus Designs by Hooker Furniture brand. Hooker's residential upholstered seating companies include Cherryville, N.C.-based Bradington-Young LLC, a specialist in upscale motion and stationary leather furniture, and Bedford, Va.-based Sam Moore Furniture LLC, a specialist in upscale occasional chairs with an emphasis on cover-to-frame customization.

SOURCE: Hooker Furniture

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