<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
------- Exchange Act of 1934
For the quarterly period ended May 31, 2000 or
------------
Transition report pursuant to Section 13 or 15(d) of the
------- Securities Exchange Act of 1934
For the transition period from __________ to __________.
Commission file number 000-25349.
HOOKER FURNITURE CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0251350
------------------------------------- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
440 East Commonwealth Boulevard, Martinsville, VA. 24112
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(Address of principal executive offices, Zip Code)
(540) 632-2133
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(Registrant's telephone number,
including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of July 7, 2000.
Class Number
----- ------
Common Stock, no par value 7,617,298 Shares
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PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
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HOOKER FURNITURE CORPORATION
BALANCE SHEETS
(In thousands, including share data)
<TABLE>
<CAPTION>
(Unaudited)
May 31, November 30,
2000 1999
-------- --------
<S> <C> <C>
Assets
Current assets
Cash, primarily interest-bearing deposits............. $ 2,606 $ 157
Trade receivables, less allowances of $536 and $525... 29,262 26,599
Inventories........................................... 38,030 37,051
Prepaid expenses and other............................ 1,980 2,408
-------- --------
Total current assets................................ 71,878 66,215
Property, plant and equipment, net..................... 47,389 45,138
Other assets........................................... 6,649 5,070
-------- --------
$125,916 $116,423
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable................................ $ 1,594 $ 3,776
Accrued salaries, wages and benefits.................. 5,066 5,387
Other accrued expenses................................ 3,134 2,495
-------- --------
Total current liabilities............................ 9,794 11,658
Long-term debt......................................... 12,000 7,000
Deferred liabilities................................... 2,450 2,402
-------- --------
Total liabilities..................................... 24,244 21,060
-------- --------
Common stock held by ESOP.............................. 10,129 10,129
Stockholders' Equity
Common stock, no par value, 10,000 shares authorized,
7,617 shares issued and outstanding................... 2,418 2,418
Retained earnings...................................... 89,125 82,816
-------- --------
Total stockholders' equity............................ 91,543 85,234
-------- --------
$125,916 $116,423
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
HOOKER FURNITURE CORPORATION
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended May 31, Ended May 31,
------------------ --------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales.............................. $66,013 $59,367 $122,302 $111,971
Cost of sales.......................... 48,403 43,672 90,190 82,515
------- ------- -------- --------
Gross profit......................... 17,610 15,695 32,112 29,456
Selling and administrative expenses.... 10,404 9,037 19,746 17,217
------- ------- -------- --------
Operating income..................... 7,206 6,658 12,366 12,239
Other expense, net..................... (55) (131) (105) (276)
------- ------- -------- --------
Income before taxes.................. 7,151 6,527 12,261 11,963
Income taxes........................... 2,717 2,447 4,658 4,497
------- ------- -------- --------
Net income........................... $ 4,434 $ 4,080 $ 7,603 $ 7,466
======= ======= ======== ========
Earnings per share:
Basic and diluted.................... $.58 $.53 $1.00 $.98
======= ======= ======== ========
Weighted average shares outstanding.. 7,617 7,633 7,617 7,646
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
HOOKER FURNITURE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months
Ended May 31,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers.......................... $ 120,002 $ 110,723
Cash paid to suppliers and employees.................. (109,292) (100,516)
Income taxes paid, net................................ (4,699) (5,035)
Interest paid, net.................................... (326) (108)
--------- ---------
Net cash provided by operating activities............. 5,685 5,064
--------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment, net........ (6,942) (2,681)
--------- ---------
Net cash absorbed by investing activities............. (6,942) (2,681)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt.......................... 16,000 2,500
Payments on long-term debt............................ (11,000) (3,058)
Cash dividends paid................................... (1,294) (1,146)
Purchase and retirement of common stock............... (620)
--------- ---------
Net cash provided (absorbed) by financing activities.. 3,706 (2,324)
--------- ---------
Net increase in cash................................... 2,449 59
Cash at beginning of year.............................. 157 3,625
--------- ---------
Cash at end of period.................................. $ 2,606 $ 3,684
========= =========
Reconciliation of net income to net cash provided
by operating activities:
Net income............................................ $ 7,603 $ 7,466
Depreciation and amortization........................ 3,012 2,251
Loss on disposal of property, plant and equipment.... 20
Changes in assets and liabilities:
Trade receivables................................... (2,663) (1,634)
Inventories......................................... (979) 1,581
Prepaid expenses and other assets................... 508 (1,402)
Trade accounts payable.............................. (2,182) (1,867)
Other accrued expenses.............................. 318 (1,451)
Deferred liabilities................................ 48 120
--------- ---------
Net cash provided by operating activities............ $ 5,685 $ 5,064
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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HOOKER FURNITURE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Dollar amounts in tables or text, in thousands
unless otherwise indicated)
1. Preparation of Interim Financial Statements
-------------------------------------------
The financial statements of Hooker Furniture Corporation (referred to as
"Hooker" or the "Company") have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). In the opinion
of management, these statements include all adjustments necessary for a fair
presentation of the results of all interim periods reported herein. All such
adjustments are of a normal recurring nature. Certain information and footnote
disclosures prepared in accordance with generally accepted accounting principles
are condensed or omitted pursuant to SEC rules and regulations. However,
management believes that the disclosures made are adequate for a fair
presentation of results of operations and financial position. Operating results
for the interim periods reported herein may not be indicative of the results
expected for the year. These financial statements should be read in conjunction
with the financial statements and accompanying notes included in the Company's
Annual Report on Form 10K for the fiscal year ended November 30, 1999.
All share and per share data reflect the effect of a two-for-one stock split
distributed in the form of a stock dividend on January 31, 2000.
2. Inventories
-----------
<TABLE>
<CAPTION>
(Unaudited)
May 31, November 30,
2000 1999
------- -------
<S> <C> <C>
Finished furniture....... $30,856 $31,673
Furniture in process..... 2,716 1,665
Materials and supplies... 14,364 13,244
------- -------
47,936 46,582
Reduction to LIFO basis.. 9,906 9,531
------- -------
$38,030 $37,051
======= =======
</TABLE>
3. Property, Plant and Equipment
-----------------------------
<TABLE>
<CAPTION>
(Unaudited)
May 31, November 30,
2000 1999
------- -------
<S> <C> <C>
Buildings................................. $42,580 $40,047
Machinery and equipment................... 44,400 40,888
Office fixtures and equipment............. 9,060 6,323
Construction in progress and other........ 2,008 5,894
------- -------
Property, plant and equipment, at cost.. 98,048 93,152
Less accumulated depreciation............. 51,945 49,385
------ ------
46,103 43,767
Land...................................... 1,286 1,371
------- -------
$47,389 $45,138
======= =======
</TABLE>
5
<PAGE>
Notes to Financial Statements - Continued
-----------------------------------------
4. Long-Term Debt
--------------
<TABLE>
<CAPTION>
(Unaudited)
May 31, November 30,
2000 1999
------ ----
<S> <C> <C>
Industrial revenue bonds due 2006.. $7,000 $7,000
Revolving line of credit........... 5,000
------- ------
$12,000 $7,000
======= ======
</TABLE>
5. Investment in and Advances to Investee Company
----------------------------------------------
The Company owns a 50% interest in a joint venture, accounted for by the equity
method, which produced particleboard for furniture manufacturing. During 1998,
the joint venture was cited by the Environmental Protection Agency ("EPA") for a
violation of certain regulations under the Clean Air Act Amendments of 1990.
The joint venture members determined that the cost of modification to the plant
to come into compliance, together with other needed capital improvements, would
be prohibitive and the joint venture elected to cease operations in November
1998. Effective June 1, 1999, the joint venture entered into a lease for the
land and building owned by the joint venture with a third party lessee. The
lease term is for two years with an option to purchase for $2.7 million. The
Company's equity in the anticipated proceeds from the sale of the property,
together with other net assets of the joint venture are approximately equal to
the Company's carrying value of $2.1 million, included in "other assets", at May
31, 2000. On June 30, 2000, the Company acquired the remaining 50% interest in
the joint venture for an aggregate consideration of $1.9 million, including the
assumption of the first $100,000 of liability, if any, related to the 1998 EPA
citation. Pursuant to an indemnification agreement, the two parties will share
any liability, in excess of $100,000, equally. The Company intends to operate
its imports business as a wholly owned subsidiary, through this entity.
6
<PAGE>
HOOKER FURNITURE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
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Results of Operations - Second Quarter 2000 Compared to Second Quarter 1999
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Net sales increased $6.6 million or 11.2% for the three-month period ended May
31, 2000 from the comparable 1999 period. The increase was due principally to
higher unit volume in entertainment centers, bedroom furniture, imported
furniture, and home office furniture partially offset by lower unit volume in
wall systems. Average selling prices were also higher during the 2000 period.
During late January through early February 2000, the Company made the conversion
to a new order processing system. With the new system in place, the Company is
processing orders faster with less human intervention. As a result, the Company
is achieving a significant reduction in the amount of time required to process a
customer's order, from receipt of the order until ultimate shipment from
inventory.
Gross profit margin for the 2000 period increased to 26.7% compared to 26.4% in
the 1999 period. The increase was due principally to lower raw material costs
and lower delivered cost of imported furniture as a percent of sales and
improved operating efficiencies.
Selling and administrative expenses rose $1.4 million to 15.8% of net sales in
the 2000 period compared to 15.2% in the 1999 period. The increase in expenses
was due principally to higher depreciation expense related to system conversions
placed in service in January and February 2000, increased warehousing and
shipping costs and higher selling costs to support increased sales. In 1999,
the Company began a 180,000 square foot addition to its central distribution
center (the "CDC") in Martinsville, Virginia. The Company substantially
completed the consolidation of finished inventory formerly kept in three
separate warehouses into the CDC in 1999, but continued to operate dual
facilities through March 2000. The Company opened the 180,000 square foot
addition to its central distribution center in February 2000 and closed the one
remaining dual facility in early April 2000. The closed facility is presently
offered for sale or lease.
As a result of the above, operating income decreased to 10.9% of net sales in
the 2000 period from 11.2% in the comparable 1999 period.
The Company's effective tax rate increased from 37.5% in the three-month 1999
period to 38.0% in the comparable 2000 period.
Results of Operations - Six Months 2000 Compared to Six Months 1999
-------------------------------------------------------------------
Net sales increased $10.3 million or 9.2% for the six-month period ended May 31,
2000 from the comparable 1999 period. The increase was due principally to higher
unit volume in imported and home office furniture partially offset by lower unit
volume in bedroom furniture, wall systems and entertainment centers. Average
selling prices were also higher during the 2000 period.
Gross profit margin was 26.3% in both the 2000 and 1999 periods. Lower raw
material costs as a percent of sales and improved operating efficiencies were
offset by higher employee benefits cost for manufacturing employees (primarily
medical claims) incurred in the 2000 period. Medical claims declined marginally
during the second quarter from levels experienced during the first quarter.
7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
--------------------------------------------------------------------------
Operations - Continued
----------------------
Results of Operations - Six Months 2000 Compared to Six Months 1999 - Continued
-------------------------------------------------------------------------------
Selling and administrative expenses rose $2.5 million to 16.2% of net sales in
the 2000 period compared to 15.4% in the 1999 period. The increase in expenses
was due principally to higher warehousing and shipping costs resulting from the
interim operation of dual warehousing facilities as discussed above, increased
depreciation expense related to system conversions placed in service in January
and February 2000, and higher selling costs to support increased sales.
As a result of the above, operating income decreased to 10.1% of net sales in
the 2000 period from 10.9% in the comparable 1999 period.
The Company's effective tax rate increased from 37.6% in the six-month 1999
period to 38.0% in the comparable 2000 period.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
As of May 31, 2000, assets totaled $125.9 million, up from $116.4 million at
November 30, 1999. Stockholders' equity at May 31, 2000, was $91.5 million,
rising from $85.2 million at November 30, 1999. During the six-month period
ended May 31, 2000, cash generated from operations of $5.7 million and net
borrowings from the Company's revolving credit line of $5.0 million funded
capital expenditures amounting to $6.9 million, an increase in available cash of
$2.4 million and dividend payments totaling $1.3 million. During the comparable
1999 period, cash generated from operations of $5.1 million funded $2.7 million
in capital expenditures, dividend payments of $1.1 million, purchases of the
Company's common stock totaling $620,000 and net repayments under the revolving
credit line amounting to $558,000.
Cash generated from operations of $5.7 million during the 2000 period increased
from $5.1 million in the comparable 1999 period. During the 2000 period, higher
cash received from customers, resulting from increased sales, and lower tax
payments were partially offset by higher payments to suppliers and employees and
higher interest payments, as compared with the 1999 period.
Investing activities consumed $6.9 million during the 2000 period compared to
$2.7 million in the comparable 1999 period. Capital expenditures were higher in
the 2000 period as the Company completed the addition to the CDC and continued
its construction of raw lumber grading, storage and drying facilities at the
Maiden, North Carolina plant, which were placed in service in April 2000.
The Company generated cash of $3.7 million from financing activities in the 2000
period compared to utilizing $2.3 million for financing activities in the 1999
period. During the 2000 period, net borrowings of $5.0 million helped to fund
capital expenditures of $6.9 million, make dividend payments of $1.3 million and
increase available cash by $2.4 million. During the 1999 period, cash from
operations funded dividend payments of $1.1 million, purchases of over 44,000
shares of the Company's common stock at an average price of $14.04 per share
($620,000 aggregate) and net repayments of $558,000 against the revolving line
of credit. In March 2000, the Company's Board of Directors declared a quarterly
dividend of $.085 per share that was paid in May 2000.
8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
--------------------------------------------------------------------------
Operations - Continued
-----------------------
Financial Condition, Liquidity and Capital Resources - Continued
----------------------------------------------------------------
At May 31, 2000, the Company had $3.0 million available under its revolving line
of credit and $6.9 million of availability under additional lines of credit to
fund working capital needs. The Company believes it has the financial resources
needed to meet business requirements for the foreseeable future.
Forward-Looking Statements
--------------------------
Certain statements made in this report are not based on historical facts, but
are forward-looking statements. These statements can be identified by the use
of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy. These statements
reflect the Company's reasonable judgment with respect to future events and are
subject to risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such risks and
uncertainties include the cyclical nature of the furniture industry,
fluctuations in the price of lumber which is the most significant raw material
used by the Company, competition in the furniture industry, capital costs and
general economic or business conditions, either nationally or internationally.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company's obligations under its lines of credit and industrial revenue bonds
bear interest at variable rates. The Company has entered into an interest rate
swap agreement that, in effect fixes the rate of interest on the industrial
revenue bonds at 4.71% through 2006. At May 31, 2000, the Company had $5.0
million outstanding under its lines of credit. A 10% fluctuation in market
interest rates would not have a material impact on the Company's results of
operations or financial condition.
9
<PAGE>
HOOKER FURNITURE CORPORATION
PART II. OTHER INFORMATION
-----------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On March 30, 2000, the Company held its Annual Meeting of
Stockholders. At the meeting, the following business was transacted:
Messrs. J. C. Hooker, Jr., Toms, Williams, Long, Ryder, Beeler,
Gregory, Groves, A. F. Hooker, Jr., and Walker were elected to serve as
directors of the Company for a term of one year. The votes cast for the
election of each Director were 6,345,613 in favor, none against and none
abstained.
The stockholders also ratified the selection of BDO Seidman, LLP as
the Company's independent auditors. The votes cast were 6,332,702 votes in
favor of the ratification, 66 against and 12,845 abstained.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Exhibit 27. 1 Financial Data Schedule for the six months ended May 31, 2000.*
(b) Reports on Form 8-K
-------------------
None.
* Filed herewith.
10
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
HOOKER FURNITURE CORPORATION
Date: July 14, 2000 By: /s/ E. Larry Ryder
------------------------------------
E. Larry Ryder
Senior Vice President - Finance and
Administration
(Principal Financial and Accounting
Officer)
11
