<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 February 29, 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
--------------------------------------------------------
(Address of principal executive offices, Zip Code)
(540) 632-2133
------------------------
(Registrant's telephone number,
including area code)
__________________________________________________
(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 March 24, 2000.
Class Number
----- ------
Common Stock, no par value 7,617,298 Shares
1
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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)
February 29, November 30,
2000 1999
---------- ------------
<S> <C> <C>
Assets
Current assets
Cash, primarily interest-bearing deposits.................. $ 1,515 $ 157
Trade receivables, less allowances of $530 and $525........ 27,884 26,599
Inventories................................................ 38,482 37,051
Prepaid expenses and other................................. 2,141 2,408
-------- --------
Total current assets.................................... 70,022 66,215
Property, plant and equipment, net........................... 47,568 45,138
Other assets................................................. 4,990 5,070
-------- --------
$122,580 $116,423
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable..................................... $ 1,711 $ 3,776
Accrued salaries, wages and benefits....................... 3,753 5,387
Other accrued expenses..................................... 4,352 2,495
-------- --------
Total current liabilities............................. 9,816 11,658
Long-term debt............................................... 12,500 7,000
Deferred liabilities......................................... 2,380 2,402
-------- --------
Total liabilities.......................................... 24,696 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............................................ 85,337 82,816
-------- --------
Total stockholders' equity................................. 87,755 85,234
-------- --------
$122,580 $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)
Three Months Ended
----------------------------
February 29, February 28,
2000 1999
----------- -------------
Net sales............................ $56,289 $52,604
Cost of sales........................ 41,787 38,843
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Gross profit..................... 14,502 13,761
Selling and administrative expenses.. 9,342 8,180
------- -------
Operating income................. 5,160 5,581
Other expense, net................... (50) (145)
------- -------
Income before taxes............. 5,110 5,436
Income taxes........................ 1,941 2,050
------- -------
Net income...................... $ 3,169 $ 3,386
======= =======
Earnings per share:
Basic and diluted............... $ .42 $ .44
======= =======
Weighted average shares outstanding.. 7,617 7,660
======= =======
The accompanying notes are an integral part of the financial statements.
3
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HOOKER FURNITURE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
February 29, February 28,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers..................................... $ 55,212 $ 52,489
Cash paid to suppliers and employees............................. (54,338) (49,828)
Income taxes paid, net........................................... (492) (1,321)
Interest paid, net............................................... (106) (148)
-------- --------
Net cash provided by operating activities...................... 276 1,192
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment, net................... (3,770) (1,206)
-------- --------
Net cash absorbed by investing activities...................... (3,770) (1,206)
-------- --------
Cash flows from financing activities:
Proceeds (payments) on long-term debt............................ 5,500 (1,000)
Cash dividends paid.............................................. (648) (574)
Purchase and retirement of common stock.......................... (530)
-------- --------
Net cash provided (absorbed) by financing activities........... 4,852 (2,104)
-------- --------
Net increase (decrease) in cash.................................... 1,358 (2,118)
Cash at beginning of year.......................................... 157 3,625
-------- --------
Cash at end of period.............................................. $ 1,515 $ 1,507
======== ========
Reconciliation of net income to net cash provided
by operating activities:
Net income...................................................... $ 3,169 $ 3,386
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............................. 1,342 1,149
Gain on disposal of property, plant and equipment......... (2)
Changes in assets and liabilities:
Trade receivables...................................... (1,285) (283)
Inventories............................................ (1,431) 2,459
Prepaid expenses and other assets...................... 347 (1,095)
Trade accounts payable................................. (2,065) (3,176)
Other accrued expenses................................. 223 (1,280)
Deferred liabilities................................... (22) 32
-------- --------
Net cash provided by operating activities...................... $ 276 $ 1,192
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
HOOKER FURNITURE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share and per share data)
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 Hooker'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
-----------
(Unaudited)
February 29, November 30,
2000 1999
----------- -----------
Finished furniture........................ $ 32,243 $31,673
Furniture in process...................... 2,005 1,665
Materials and supplies.................... 13,915 13,244
-------- -------
48,163 46,582
Reduction to LIFO basis................... 9,681 9,531
-------- -------
$ 38,482 $37,051
======== =======
3. Property, Plant and Equipment
-----------------------------
(Unaudited)
February 29, November 30,
2000 1999
-------- --------
Buildings................................ $ 40,516 $ 40,047
Machinery and equipment 42,959 40,888
Office fixtures and equipment............ 8,579 6,323
Construction in progress and other....... 4,861 5,894
-------- --------
Property, plant and equipment, at cost.. 96,915 93,152
Less accumulated depreciation............ (50,718) (49,385)
-------- --------
46,197 43,767
Land..................................... 1,371 1,371
-------- --------
$ 47,568 $ 45,138
======== ========
5
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Notes to Financial Statements - Continued
- -----------------------------------------
4. Long-Term Debt
--------------
(Unaudited)
February 29, November 30,
2000 1999
----------- -----------
Industrial revenue bonds due 2006........ $ 7,000 $ 7,000
Revolving line of credit................. 5,500
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$12,500 $ 7,000
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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 February 29,
2000.
6
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HOOKER FURNITURE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
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Results of Operations - First Quarter 2000 Compared to First Quarter 1999
- -------------------------------------------------------------------------
Net sales increased $3.7 million or 7.0% for the three-month period ended
February 29, 2000 from the comparable 1999 period. The increase was due
principally to increased unit volume in imported furniture, home office
furniture and wall systems partially offset by decreased unit volume in
entertainment centers and bedroom furniture. Average selling prices were lower
during the 2000 period principally due to the mix of products shipped (primarily
increased imported furniture shipments).
During late January through early February 2000, the Company made the conversion
to a new order processing system. The conversion was completed prior to the end
of the fiscal quarter. 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 decreased to 25.8% compared to 26.2% in
the 1999 period. The decline was due principally to higher employee benefits
cost for manufacturing employees (primarily medical claims) incurred in the 2000
period, partially offset by improved operating efficiencies and lower raw
material costs. Operating efficiencies improved despite the loss of several
production days at our North Carolina facilities due to inclement winter
weather. Lower raw material costs were partially offset by the higher delivered
cost of imported furniture.
Selling and administrative expenses rose $1.2 million to 16.6% of net sales in
the 2000 period compared to 15.6% in the 1999 period. The increase in expenses
was due principally to increased warehousing and shipping costs, higher selling
costs to support increased sales and higher employee benefit costs for selling
and administrative employees (primarily medical claims). 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. During the three-month period of 2000, the Company
continued to operate dual warehousing facilities. The Company opened the 180,000
square foot addition to its central distribution center in February 2000 and
expects to close the one remaining dual facility in early April 2000. Management
continues to evaluate the sale, lease or alternate use of this facility.
The Company experienced a higher level of medical claims in the 2000 period that
affected both cost of sales and selling and administrative expenses. The Company
records medical claims when reported by the plan administrator. Management
believes that the claims cost incurred by the Company during the first quarter
of 2000 is not necessarily indicative of the cost it may experience for the
balance of the year.
As a result of the above, operating income decreased to 9.2% of net sales in the
2000 period from 10.6% in the comparable 1999 period.
The Company's effective tax rate increased from 37.7% in the three-month 1999
period to 38.0% in the comparable 2000 period.
7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations - Continued
- ----------------------
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
As of February 29, 2000, assets totaled $122.6 million, up from $116.4 million
at November 30, 1999. Stockholders' equity at February 29, 2000, was $87.8
million, rising from $85.2 million at November 30, 1999. During the three-month
period ended February 29, 2000, cash generated from operations and borrowings
from the Company's revolving credit line funded capital expenditures, an
increase in available cash and dividend payments. During the comparable 1999
period, cash generated from operations and available cash funded capital
expenditures, repayments on the revolving credit line, dividend payments and
purchases of the Company's common stock.
Cash generated from operations of $276,000 during the 2000 period declined from
$1.2 million in the comparable 1999 period. Higher payments to suppliers and
employees during the 2000 period, principally to support higher inventory
levels, were partially offset by higher amounts of cash received from customers
as a result of higher sales and lower tax payments as compared with the 1999
period.
Investing activities consumed $3.8 million during the 2000 period compared to
$1.2 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. The lumber facilities at the Maiden facility will
become fully operational in April 2000.
The Company generated cash of $4.9 million from financing activities in the 2000
period compared to utilizing $2.1 million for financing activities in the 1999
period. During the 2000 period, the Company borrowed $5.5 million from its
revolving line of credit to fund capital expenditures, make dividend payments of
$648,000 and increase its available cash. During the 1999 period, the Company
repaid $1.0 million on its revolving credit line, made dividend payments of
$574,000, and purchased over 38,000 shares of its common stock at an average
price of $13.88 per share ($530,000 aggregate). In December 1999, the Company
declared a quarterly dividend of $.085 per share that was paid in February 2000.
At February 29, 2000, the Company had $2.5 million available under its revolving
line of credit and $8.3 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 in the foreseeable future,
including capital expenditures for the expansion of manufacturing capacity,
working capital requirements, and the Company's dividend program.
8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations - Continued
- ----------------------
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 February 29, 2000, the Company had $5.5
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 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Exhibit 27.1 Financial Data Schedule for the quarter ended February
29, 2000. *
(b) Reports on Form 8-K
-------------------
Form 8-K filed December 30, 1999, announcing the promotions of Paul B.
Toms, Jr. to President and Chief Operating Officer and Douglas C.
Williams to Executive Vice President - Manufacturing.
* 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: March 28, 2000 By: /s/ E. Larry Ryder
-------------------
E. Larry Ryder
Senior Vice President -
Finance and Administration
(Principal Financial and
Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 1,515
<SECURITIES> 0
<RECEIVABLES> 28,414
<ALLOWANCES> 530
<INVENTORY> 38,482
<CURRENT-ASSETS> 70,022
<PP&E> 98,286
<DEPRECIATION> 50,718
<TOTAL-ASSETS> 122,580
<CURRENT-LIABILITIES> 9,816
<BONDS> 12,500
10,129<F1>
0
<COMMON> 2,418
<OTHER-SE> 85,337
<TOTAL-LIABILITY-AND-EQUITY> 122,580
<SALES> 56,289
<TOTAL-REVENUES> 56,289
<CGS> 41,787
<TOTAL-COSTS> 51,129
<OTHER-EXPENSES> (75)
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 125
<INCOME-PRETAX> 5,110
<INCOME-TAX> 1,941
<INCOME-CONTINUING> 3,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,169
<EPS-BASIC> .42
<EPS-DILUTED> .42
<FN>
<F1>REPRESENTS COMMON STOCK HELD BY ESOP
</FN>
</TABLE>
