Hooker Furniture Reports Fifth Consecutive Quarter Of Increased Sales

Martinsville, Va., Dec. 11, 2013 (GLOBE NEWSWIRE) -- Hooker Furniture (Nasdaq:HOFT) today reported net sales of $59.1 million and net income of $2.1 million, or $0.20 per share, for its fiscal 2014 third quarter ended November 3, 2013. Sales increased $2.3 million, or 4.1%, while net income decreased $317,000, or 13.0%, compared to last year's third quarter. Earnings per share decreased to $0.20 from $0.23 in the comparable period a year ago.

For the fiscal 2014 first nine months, net sales increased 7.6%, or $12 million, to $170.7 million, and net income increased 20.3%, or $1 million, to $5.9 million, or $0.55 per share, compared to $0.46 in the prior-year period.

"We're pleased with our year-to-date sales performance and the strength of incoming orders and backlogs as we enter a historically strong retail furniture-selling season," said Paul B. Toms Jr., chairman and chief executive officer. "This was one of our strongest shipping quarters in the last five years, and demand is up for both casegoods and upholstery compared to a year ago," he said. "We had our second largest shipping quarter in five years, exceeded only slightly by last year's fourth quarter, which had an extra week. Our written business at the October High Point Market was the best in the last three years," he added.

The net sales gain for the third quarter was driven by higher average selling prices in both casegoods and upholstery due to changes in product mix. For the nine months, sales increases were also driven by higher average selling prices in both operating segments, along with increased unit volume in the upholstery segment.

Toms attributed the decline in net income for the fiscal 2014 third quarter to previously announced increased discounting in casegoods to dispose of slow-moving casegoods inventory, start-up costs for the new H Contract and Homeware brands and production ramp-up costs at Sam Moore. "Our casegoods inventories are still above targeted levels, and we've had higher discounts, primarily related to groups and product lines we are discontinuing. With Homeware and H Contract, we anticipated start-up costs and spending would come before revenues on both these long-term strategic initiatives. Our profitability challenges at Sam Moore revolve around the ramp-up of production and higher labor costs to meet demand that's increased 15% to 20% per year during the last two-and-a-half years," he said.

Fiscal 2014 third quarter highlights (compared to fiscal 2013 third quarter):

  • Gross profit remained essentially flat in absolute terms at $13.6 million in both quarters, but decreased slightly as a percentage of net sales to 23.0%, compared to 23.9% in the prior-year quarter. The improvements in net sales were offset by increased discounting in the casegoods segment and higher cost of sales in the upholstery segment.
  • Selling and administrative expenses increased $662,000 to $10.4 million, or 17.7% of net sales, from $9.8 million, or 17.2% of net sales, in last year's quarter primarily due to start-up costs for the H Contract and Homeware brands.
  • Operating income decreased $624,000, or 16.5%, to $3.2 million, or 5.3% of net sales, from $3.8 million, or 6.7% of net sales.
  • Net income decreased $317,000, or 13.0%, to $2.1 million, or 3.6% of net sales, from $2.4 million, or 4.3% of net sales.

Fiscal 2014 first nine months highlights (compared to fiscal 2013 first nine months):
  • Gross profit increased $5 million, or 14.1%, to $40.8 million, or 23.9% of net sales, from $35.7 million, or 22.5% of net sales. These changes were primarily due to: - higher sales volume in both segments;   - slightly reduced cost of sales as a percentage of net sales and lower distribution costs in our casegoods segment, the latter being due to the closure of several Asian warehouses; and   - to a lesser extent, reduced upholstery segment cost of sales as a percentage of net sales.
  • Selling and administrative expenses increased $3.6 million, or 12.9%, to $31.7 million, or 18.6% of net sales, from $28.1 million, or 17.7% of net sales, due to start-up costs from H Contract and Homeware and additional factors including increases in professional services expense, benefits expense and bad debts expense.
  • Operating income increased as a percentage of net sales to 5.3%, from 4.8%, and in absolute terms by $1.4 million, or 18.4%, from $7.6 million to $9.0 million.
  • Net income increased as a percentage of net sales to 3.5%, from 3.1%, and in absolute terms by 20.3%, or $1 million, to $5.9 million, or $0.55 per share, compared to $4.9 million, or $0.46 per share, in the prior year.

Cash, Inventory and Debt

Cash and cash equivalents increased $3.6 million to $30 million as of November 3, 2013, from $26.3 million on February 3, 2013, due principally to:
  • a $1.7 million decrease in accounts receivable; and
  • an $878,000 decrease in inventories, as a result of our efforts to reduce levels of slow moving and discontinued inventory.

"Our inventories are currently about 10% above targeted levels," Toms said. "We have adjusted our ordering, but expect that it will be the first quarter of our next fiscal year before we experience the impact of those adjustments. The inventory composition is improving, with a higher percentage of active, in-line and best-selling items and less pre-discontinued and discontinued product," Toms said, adding that he expects the current level of discounting to continue through the fourth quarter.

The Company had no long-term debt at November 3, 2013 and had $12.9 million available on its $15.0 million revolving credit facility, net of $2.1 million reserved for standby letters of credit.

Business Outlook

"Business has been reasonably steady all year, with sales up each quarter on a year-over-year basis," Toms said. "We have solid economic fundamentals on our side, including conditions for an improved housing market, and a stock market pushing all-time highs. There are some negatives, including political gridlock in Washington, D.C. and recent slight declines in consumer confidence, but we are generally still bullish on both a short and long-term basis. We realize we are going up against an outstanding fourth quarter last year that included an extra week. However, based on current revenue and earnings momentum, a very successful October High Point Market and the strength of our product line, we believe we can continue to grow and gain market share in our segments of the home furnishings industry."

Dividends

On November 26, 2013, the Company's board of directors declared a quarterly cash dividend of $0.10 per share, payable on December 27, 2013, to shareholders of record at December 12, 2013.

Conference Call Details

Hooker Furniture will present its fiscal 2014 third quarter results via teleconference and live internet web cast on Wednesday afternoon, December 11, 2013 at 2:00 PM 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 at www.hookerfurniture.com in the Investor Relations section.

Ranked among the nation's top 10 largest publicly traded furniture sources based on 2012 shipments to U.S. retailers, Hooker Furniture Corporation is an 89-year old residential wood, metal and upholstered furniture resource. Major casegoods product categories include home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand. Hooker's residential upholstered seating product lines include Bradington-Young, a specialist in upscale motion and stationary leather furniture, and Sam Moore Furniture, a specialist in upscale occasional chairs, settees, sofas and sectional seating with an emphasis on cover-to-frame customization and Seven Seas, imported leather upholstered furniture targeted at the upper-medium price-range. The Homeware product line offers direct-to-consumer,  customer-assembled, modular upholstered and casegoods products designed for younger and more mobile furniture customers. The H Contract product line supplies upholstered seating and casegoods to upscale senior living facilities. Please visit our websites at www.hookerfurniture.com, www.bradington-young.com www.sammoore.com, www.homeware.com, and www.hcontractfurniture.com.

Certain statements made in this release, other than those based on historical facts, are forward-looking statements. These statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as "believes," "expects," "projects," "intends," "plans," "may," "will," "should," "would," "could" or "anticipates," or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Those risks and uncertainties include but are not limited to: (1) general economic or business conditions, both domestically and internationally, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; (2) disruptions involving our vendors or the transportation and handling industries, particularly those affecting imported products, including customs issues, labor stoppages, strikes or slowdowns and the availability of shipping containers and cargo ships; (3) disruptions affecting our Henry County, Virginia warehouses and corporate headquarters facilities; (4) price competition in the furniture industry; (5) changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of our imported products and raw materials; (6) the cyclical nature of the furniture industry, which is particularly sensitive to changes in consumer confidence, the amount of consumers' income available for discretionary purchases, and the availability and terms of consumer credit; (7) risks associated with the cost of imported goods, including fluctuation in the prices of purchased finished goods and transportation and warehousing costs; (8) adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products; (9) risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices and availability of key raw materials, as well as changes in transportation, warehousing and domestic labor costs and environmental compliance and remediation costs; (10) our ability to successfully implement our business plan to increase sales and improve financial performance; (11) the direct and indirect costs associated with the implementation of our Enterprise Resource Planning system, including costs resulting from unanticipated disruptions to our business; (12) achieving and managing growth and change, and the risks associated with new business lines, acquisitions, restructurings, strategic alliances and international operations; (13) risks associated with distribution through third-party retailers, such as non-binding dealership arrangements; (14) capital requirements and costs; (15) competition from non-traditional outlets, such as catalog and internet retailers and home improvement centers; (16) changes in consumer preferences, including increased demand for lower-quality, lower-priced furniture due to declines in consumer confidence and/or discretionary income available for furniture purchases and the availability of consumer credit; and (17) higher than expected costs associated with product quality and safety, including regulatory compliance costs related to the sale of consumer products and costs related to defective or non-compliant products. Any forward-looking statement that we make speaks only as of the date of that statement, and we undertake no obligation, except as required by law, to update any forward-looking statements whether as a result of new information, future events or otherwise.
Table I
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
         
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  November 3, October 28 November 3, October 28
  2013 2012 2013 2012
         
Net sales  $ 59,125  $ 56,803  $ 170,721  $ 158,718
         
Cost of sales  45,527  43,243  129,950  122,971
         
 Gross profit  13,598  13,560  40,771  35,747
         
Selling and administrative expenses  10,443  9,781  31,742  28,118
         
 Operating income  3,155  3,779  9,029  7,629
         
Other income (expense), net  9  34  (45)  98
         
 Income before income taxes  3,164  3,813  8,984  7,727
         
Income tax expense  1,048  1,379  3,054  2,799
         
 Net income  $ 2,116  $ 2,434  $ 5,930  $ 4,928
         
Earnings per share:        
 Basic  $ 0.20  $ 0.23  $ 0.55  $ 0.46
 Diluted  $ 0.20  $ 0.23  $ 0.55  $ 0.46
         
Weighted average shares outstanding:        
Basic 10,724 10,723 10,721 10,755
Diluted 10,753 10,742 10,748 10,787
         
 
 Table II
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  November 3, October 28, November 3, October 28,
  2013 2012 2013 2012
         
Net Income  $ 2,116  $ 2,434  $ 5,930  $ 4,928
 Other comprehensive income:        
 Amortization of actuarial gain   (27)  (14)  (81)  (43)
 Income tax effect on amortization of actuarial gains  10  5  30  16
 Adjustments to net periodic benefit cost  (17)  (9)  (51)  (27)
         
Comprehensive Income  $ 2,099  $ 2,425  $ 5,879  $ 4,901
         
 
Table III
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, including share data)
  November 3, February 3,
  2013 2013
Assets    
Current assets    
 Cash and cash equivalents  $29,946 $26,342
 Accounts receivable, less allowance for doubtful accounts of $1,082 and $1,249, respectively  26,545  28,272
 Inventories 48,995  49,872
 Prepaid expenses and other current assets 5,146  5,181
 Total current assets  110,632  109,667
Property, plant and equipment, net 23,594  22,829
Intangible assets 1,382  1,257
Cash surrender value of life insurance policies 18,501  17,360
Other assets  4,653  4,710
 Total assets $158,762 $155,823
     
Liabilities and Shareholders' Equity    
Current liabilities    
 Trade accounts payable  $12,271 $11,620
 Accrued salaries, wages and benefits 3,068  3,316
 Other accrued expenses 1,695  2,531
 Total current liabilities  17,034  17,467
Deferred compensation 7,851  7,311
 Total liabilities  24,885  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  17,528  17,360
 Retained earnings  116,197  113,483
 Accumulated other comprehensive income  152  202
 Total shareholders' equity  133,877  131,045
 Total liabilities and shareholders' equity  $158,762  $155,823
     
 
 Table IV 
 HOOKER FURNITURE CORPORATION AND SUBSIDIARIES 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (In thousands) 
     
   Thirty-Nine Weeks Ended 
   November 3,   October 28, 
  2013 2012
 Cash flows from operating activities     
 Cash received from customers   $ 172,409  $ 155,192
 Cash paid to suppliers and employees  (158,704) (153,368)
 Income taxes paid, net  (3,904) (900)
 Interest paid, net  (14) (28)
 Net cash provided by operating activities  9,787 896
     
 Cash flows from investing activities     
 Purchase of property, plant and equipment  (2,608) (3,850)
 Proceeds received on notes issued for the sale of property  30 24
 Proceeds from the sale of property and equipment  31 403
 Purchase of Homeware.com URL  (125)  -- 
 Premiums paid on life insurance policies  (802) (870)
 Proceeds received on life insurance policies   516  -- 
 Net cash used in investing activities  (2,958) (4,293)
     
 Cash flows from financing activities     
 Cash dividends paid  (3,225) (3,235)
 Purchase and retirement of common stock   --  (671)
 Net cash used in financing activities  (3,225) (3,906)
     
 Net increase in cash and cash equivalents  3,604 (7,303)
 Cash and cash equivalents at beginning of period  26,342 40,355
 Cash and cash equivalents at end of period   $ 29,946  $ 33,052
     
 Reconciliation of net income to net cash provided     
 by operating activities:     
 Net income   $ 5,930  $ 4,928
 Depreciation and amortization  1,818 2,248
 Non-cash restricted stock awards and performance grants  500 300
 Provision for doubtful accounts  (191) (87)
 Deferred income taxes  (331) 260
 (Gain) on disposal of property   (6)  (45)
 (Gain) on insurance policies   (480)  (545)
 Changes in assets and liabilities:     
 Accounts receivable  1,918 (3,562)
 Inventories  877 (4,718)
 Prepaid expenses and other current assets  46 160
 Trade accounts payable  651 171
 Accrued salaries, wages and benefits  (248) (270)
 Accrued income taxes  (519) 1,636
 Other accrued expenses  (317) 303
 Deferred compensation  139 117
 Net cash provided by operating activities   $ 9,787  $ 896
     
CONTACT: For more information, contact:         Paul B. Toms Jr.         Chairman and Chief Executive Officer         Phone: (276) 632-2133, or         Paul Huckfeldt, Vice President, Chief Financial Officer         Phone: (276) 632-2133, or         Kim D. Shaver         Director, Marketing Communications         Phone: (336) 880-1230

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