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Hooker Furniture Doubles Net Income On Higher Sales In Fiscal 2014 First Quarter

"Start-up costs associated with both new product lines were approximately $440,000 before tax and $294,000 after tax, or $0.03 per share, in the first quarter," Toms said. The Company projects start-up costs will account for $0.12 to $0.15 per share for the full 2014 fiscal year.

"We're pleased with our overall direction in profitability, especially in the improving performance of our domestic upholstery operations," Toms said. Michael Delgatti, president of Hooker Upholstery, added, "We believe our upholstery companies are making progress in numerous areas, including market share growth and in our journey towards sustainable profitability."

Additional fiscal 2014 first quarter highlights (compared to the fiscal 2013 first quarter)

  • Gross profit increased 27.4% to $13.9 million, or 24.7% of net sales, as compared to $10.9 million, or 21.1% of net sales, in the prior-year period, primarily due to:
  • higher sales volume in both segments;
  • decreased discounting in our casegoods segment; and
  • lower domestic upholstery costs as a percentage of net sales.
  • Selling and administrative expenses increased 13.7% to $10.7 million, or 19% of net sales, due to start-up costs for the Company's H Contract and Homeware product lines and increased:
  • bonus expense, due to improved earnings performance;
  • furniture disposals eligible to be deducted as contributions for income tax purposes; and
  • bad debt expense, due to the reduction of our allowance for doubtful accounts in the prior year quarter because of favorable collections experience.
  • Operating income increased 111.6% to $3.2 million, or 5.7% of net sales, from $1.5 million, or 3% of net sales, in the prior year period, due to the factors discussed previously.
  • Income tax expense increased to $1.1 million, or 1.9% of net sales, from $552,000, or 1.1% of net sales, in the prior year period, primarily due to higher taxable income. The Company's effective tax rate decreased to 33.6% from 35.1%, primarily due to larger anticipated rate benefits from earnings on company owned life insurance policies and distributions from our former captive insurance arrangement.
  • Net income increased 108.4% to $2.1 million (3.8% of net sales), or $0.20 per share, from $1.0 million (2% of net sales), or $0.09 per share, in the prior year period.

Cash, Inventory and Debt Levels

Cash and cash equivalents increased $2.4 million to $28.7 million as of May 5, 2013, from $26.3 million on February 3, 2013, due principally to:

  • a $3.4 million decrease in inventories, due to increased sales and lower inventory purchases; and
  • a $1.8 million decrease in accounts receivable, due to cash collections in excess of net sales during the quarter.

These decreases were partially offset by $2.1 million in income tax payments and $1.1 million in dividend payments during the quarter.

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