SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 29, 1995
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 0-314
PULASKI FURNITURE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0594965
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 1371 24301
Pulaski, Virginia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 980-7330
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Stock Purchase Rights*
(Title of Class)
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 twelve 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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of the Common Stock held by non-affiliates
of the registrant as of December 15, 1995: $43,828,886.**
Number of shares of Common Stock outstanding as of December 15,
1995: 2,839,179.
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* On December 3, 1987 the Board of Directors of the registrant approved a
Rights Agreement pursuant to which a special dividend consisting of the
Preferred Stock Purchase Rights was distributed to the holders of record of the
registrant as of December 15, 1987.
** In determining this figure, the registrant has assumed that all of its
officers, directors and persons known to the registrant to be the beneficial
owners of more than five percent of the registrant's Common Stock are
affiliates. Such assumption shall not be deemed to be conclusive for any other
purpose. The aggregate market value has been computed based on the last sale
price for December 15, 1995, as reported by The Wall Street Journal.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Pulaski Furniture Corporation's 1995 Annual Report
to Security Holders are incorporated by reference into Parts
II and IV of this Form 10-K.
2. Portions of Pulaski Furniture Corporation's definitive Proxy Statement
for its 1996 Annual Meeting of Stockholders (filed with the Securities
and Exchange Commission pursuant to Regulation 14A under the Securities
Exchange Act of 1934) are incorporated by reference into Part III of
this Form 10-K.
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PART I
Item 1. Business
General
Since its organization in 1955, Pulaski Furniture Corporation (the
"Company") has engaged exclusively in the production and sale of furniture
products. The Company presently manufactures medium-priced wooden bedroom,
dining room and occasional furniture (in plants located in Pulaski, Dublin and
Martinsville, Virginia), grandfather, mantel and wall clocks (in its plant in
Ridgeway, Virginia), and higher-priced solid mahogany bedroom, dining room and
occasional furniture (in the Company's plant in Mebane, North Carolina). During
the 1990 fiscal year, the Company entered the upholstery business, which it
currently operates out of a leased portion of a building in Christiansburg,
Virginia. The Company's furniture is predominately in the traditional style.
Furniture and clock styles are periodically updated, revised or discontinued by
the Company in anticipation of the April and October markets in High Point,
North Carolina. Also, the Company imports some specialized furniture items and
furniture parts. The Company currently anticipates that its demand for these
imports will increase in the future as some of the Company's product lines
utilizing these imports mature.
Over the course of the past several years the Company has increased
substantially its production capacity, which has permitted increased sales when
market conditions are favorable. This has resulted in a significant increase in
the overall size of the Company. In 1973, the Company began operating its plant
in Dublin and completed a renovation of the Pulaski plant. In 1975, the Company
completed an expansion and renovation of the Martinsville plant. The Company
acquired substantially all of the assets of Coleman Furniture Corporation in
1983. In 1985, the Company completed the renovation of a portion of the former
Coleman plant and the construction of a new facility connecting the former
Coleman plant to the existing Pulaski facility. Also, in 1985, the Company
acquired Gravely Furniture Company, Incorporated (currently, Ridgeway Clock
Company) of Ridgeway, Virginia. Ridgeway Clock Company manufactures grandfather,
mantel and wall clocks. In 1988, the Company completed construction of a new
finishing plant located at its Pulaski facilities. Also in 1988, the Company
acquired Craftique, Inc. with manufacturing facilities located in Mebane and
Durham, North Carolina. In 1994, the Company completed an expansion of its
Pulaski operations by construction of a new manufacturing facility. The new
facility houses highly-automated production lines, which should provide the
Company with access to lower price points in the market. See Item 2--Properties.
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Materials
Lumber constitutes the principal material used by the Company in the
manufacturing of its furniture products. The Company also uses lumber in its
manufacturing of clock cases. The Company purchases lumber from sawmill
operators and lumber dealers. Clock components are purchased from various
domestic and foreign sources. Other materials essential to the Company's
manufacturing include veneers, finishing materials, chipcore, sandpaper, lumber
squares, fabric, glue, mirrors, hardware, glass, carvings, packing materials,
wooden frames for use in its upholstery business and other product supplies.
In 1983, the Company entered into a joint venture with three other
companies to form Triwood, Inc. to own and operate plant facilities in Henry
County, Virginia for the production of chipcore, an essential material used to
manufacture the Company's furniture products. Triwood, Inc. began operations
during 1985, and the Company entered into a firm purchase arrangement for
chipcore with Triwood, Inc. In 1995, the Company sold its interest in Triwood,
Inc. The Company's net investment in the venture, as of the end of the 1995
fiscal year, was approximately $1,172,014. The Company believes that chipcore
and all other required materials can be obtained from suppliers as needed.
Marketing and Promotion
Through a sales force of about 100 persons, including 55 regular
commission salesmen, the Company serves approximately 11,000 retail customers
located in all fifty states of the United States, the District of Columbia,
Puerto Rico, Canada, Mexico, Australia, New Zealand, the European Common Market
and parts of the Far East. The substantial majority of the Company's sales are
within the United States and its territories, however, the Company has
experienced growth in its international sales over the course of the last few
years. During the Company's fiscal years ended in 1995, 1994 and 1993, export
sales by the Company aggregated approximately $10,046,000, $8,770,000 and
$8,502,000, respectively.
The sales force for the Company's products, other than its Craftique
products, is organized into three geographical regions. A regional sales manager
is responsible for the Company's sales in each region, and the regional managers
report to the Vice President-Sales. The Company's Craftique products are sold
through a sales force responsible to a national sales manager for the division.
The national sales manager for the Craftique division reports to the Company's
Vice President-Sales. In addition, most of the Company's foreign export sales
are made through foreign representatives and distributors, who report to the
Company's regional export sales manager.
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The Company currently utilizes a small number of trademarks and
tradenames in connection with certain lines of the Company's products and a few
patents in connection with certain of its products. All trademarks, tradenames
and patents utilized by the Company either are owned by the Company or one of
its subsidiaries. From time to time, the Company may apply for the registration
of additional trademarks or the issuance of additional patents in connection
with its products.
The Company permits its sales personnel to spend part of their time
selling home furnishings (such as lines of accessories and lamps) manufactured
by other companies. These secondary products are considered complementary to,
and not competitive with, the Company's products. The Company's products are
distributed to customers by truck and rail facilities.
For the display of its products, the Company maintains permanent
showrooms at the International Home Furnishings Market in High Point, North
Carolina, the Tupelo Furniture Market in Tupelo, Mississippi and the San
Francisco Mart in San Francisco, California. The annual rentals for these
display facilities total approximately $338,626.
As of October 29, 1995, the Company's unfilled customers' orders for
furniture and clocks totalled approximately $26 million (compared with
approximately $27.7 million as of October 30, 1994). The decrease in the backlog
of unfilled orders since October 30, 1994 is primarily attributable to system
improvements allowing for prompter shipments. The backlog of unfilled orders is
valued at prices prevailing at the time the orders were taken. The Company
expects to fill all of the unfilled customer orders for the 1995 fiscal year
during the 1996 fiscal year.
Demand for the Company's furniture products generally is highest in the
period from September through January and lowest in June and August. Demand for
the Company's clock products is generally highest in the period from August
through December.
Competition
The business in which the Company is engaged is highly competitive with
several manufacturers competing for product acceptability in the retail market.
Competition within the markets for medium and higher-priced wooden bedroom,
dining room and occasional furniture and for clocks occurs principally in the
areas of style, quality and price. The Company has recently been successful
introducing new lines that were favorably received by the market. Although it is
difficult to compare manufacturers by size, the Company estimates that, based on
its 1995 net sales, the Company ranks among the 25 largest furniture
manufacturers in the United States.
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Employees
The Company employs approximately 2,200 persons on a full-time basis,
approximately 10% of whom are salaried and none of whom is represented by a
labor union. The Company considers its employee relations to be good.
Item 2. Properties
General
The Company owns all of its manufacturing and warehouse facilities,
except the portion of a facility in Christiansburg, Virginia, which houses the
Company's upholstery business, and warehouse space in Pulaski and Martinsville,
Virginia and in Mebane, North Carolina (each of which is rented on a monthly
basis). The Company's operating plants are well-maintained and include many
items of equipment and machinery of recent design. The Company believes that its
present operating plant capacity is sufficient to meet current and projected
future demand for its products.
Insurance is maintained against certain risks, including fire and
business interruption, and in such amounts as the Company deems desirable.
Pulaski Facilities
Pulaski, Virginia is the site of the Company's general offices and of
two of its principal furniture manufacturing plants. The Company's buildings
located in Pulaski are constructed primarily of brick and cinder block and were
erected and have been renovated at various times from 1926 to the present.
In 1983, the Company acquired real estate, improvements and equipment
from Coleman Furniture Corporation, including land and building space adjoining
the Company's original Pulaski plant. In 1985, the Company completed the
renovation of a portion of the former Coleman plant adjoining the Company's
original Pulaski plant and the integration of that portion of the plant with the
original Pulaski facility. The cost of the renovation (including capitalized
interest expense) was approximately $8,000,000. The remaining portion of the
former Coleman property is being used for warehouse and office space or
otherwise is being held for
renovation and future expansion. In 1988, a new finishing plant was brought on
line at a total project cost of $3,955,000. The new plant includes updated
equipment providing improved finishing techniques and greater safety for
employees.
In 1994, the Company completed an expansion of its Pulaski
facilities by the construction of a new 75,000 square foot
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manufacturing facility. The total cost of the expansion was approximately $13.6
million. The new manufacturing facility is designed to utilize newer equipment
and to provide for more efficient manufacturing of certain lines of the
Company's furniture products.
The complete Pulaski facility now contains approximately 980,000 square
feet of production, warehouse and office space and approximately 120,000 square
feet of additional building space available for future expansion at renovation
costs. The facility is located on approximately twenty-nine acres. During the
last year the Pulaski facility primarily produced occasional furniture
(including curios, consoles, tables, chairs and other accent pieces) and served
as a dimension plant (producing rough-cut materials) for the Company's other
facilities.
Dublin Plant
The Dublin plant, which began operations in 1973, consists of
approximately 570,000 square feet of factory and warehouse space located on a
153.5-acre parcel owned by the Company (including 106.5 acres acquired in 1983
from Coleman Furniture Corporation). The plant produces bedroom, dining room and
occasional furniture (including curios, collectors cabinets, consoles and other
accent pieces). This parcel fronts on State Route #100, close to Interstate
Highway 81 and is served by the Norfolk & Southern Railroad.
The Dublin plant also produces veneer in a 36,000 square foot brick and
cinder block building constructed in 1964.
Martinsville Plant
The Martinsville plant manufactures occasional furniture, including
curios, desks, consoles and other accent pieces. A major renovation and
expansion program for the Martinsville plant was completed in fiscal 1975. The
plant contains approximately 190,000 square feet of manufacturing, warehouse and
office space and is located on a tract of about eight acres in the City of
Martinsville, Virginia.
Ridgeway Clock Company Plant
In 1985, the Company acquired Gravely Furniture Company, Incorporated,
located in Ridgeway, Virginia. Gravely Furniture Company, Incorporated was
renamed Ridgeway Clock Company. Ridgeway Clock Company manufactures grandfather,
mantel and wall clocks. Ridgeway Clock Company purchases clock parts from
foreign and domestic sources and assembles the parts into manufactured wooden
clock cases. The Ridgeway Clock Company plant contains
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approximately 326,000 square feet of production, warehouse and office space
located on approximately 79.5 acres.
Craftique, Inc. Plant
The Company's Craftique plant located in Mebane, North Carolina,
manufactures solid mahogany bedroom, dining room and occasional furniture. The
Craftique plants contains approximately 42,000 square feet of production and
office space located on approximately thirty-one acres. Craftique also owns an
industrial tract of approximately one acre in Durham, North Carolina.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item *. Executive Officers of the Registrant
The Company's executive officers are as follows:
Year
First
Name Age Elected Office
Bernard C. Wampler 64 1967 Chairman of the Board and
Chief Executive Officer
John G. Wampler 37 1988 President and Chief
Operating Officer
Ira S. Crawford 58 1978 Vice President -
Administration, Secretary
Jason A. Gibbs 62 1969 Treasurer, Controller
and Assistant Secretary
James H. Kelly 53 1971 Vice President - Product
Development
Randolph V. Chrisley 47 1983 Vice President - Sales
James W. Peele 44 1995 Vice President -
Manufacturing
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John G. Wampler is the son of Bernard C. Wampler and the grandson of
John W. Stanley, director of the Company. Each of the executive officers, other
than Mr. Peele, has been an officer of the Company for the last five years. Mr.
Peele previously had served as an assistant to the Vice President of
Manufacturing of the Company (1992-1995). Prior to joining the Company, Mr.
Peele was employed as Operations Manager for Mubeles Andes (1990-1991). The
Company's executive officers are elected by and serve at the pleasure of the
Company's Board of Directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The information contained on page 2 of the Company's 1995 Annual Report
to Security Holders is incorporated herein by reference.
Item 6. Selected Financial Data
The information contained on page 3 of the Company's 1995 Annual Report
to Security Holders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information contained on pages 4 and 5 of the Company's 1995 Annual
Report to Security Holders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements contained on pages 6 through the left column
of the inside back cover of the Company's 1995 Annual Report to Security Holders
are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The Company's 1996 Proxy Statement contains information on pages 1
through 4 concerning directors, persons nominated to become directors, and
executive officers of the Company. Such information is incorporated herein by
reference.
Item 11. Executive Compensation
The Company's 1996 Proxy Statement contains information on pages 4
through 8 concerning executive compensation. Such information is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The Company's 1996 Proxy Statement contains information on pages 3 and
4 concerning security ownership of certain beneficial owners and management and
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The Company's 1996 Proxy Statement contains information on page 8
concerning certain relationships and related transactions and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a)(1) The following financial statements of the registrant, included
in the 1995 Annual Report to Security Holders, are incorporated herein by
reference in Item 8:
Consolidated balance sheets -- October 29, 1995 and
October 30, 1994
Consolidated statements of income and retained earnings
- - Years ended October 29, 1995, October 30, 1994 and
October 31, 1993
Consolidated statements of cash flows -- Years ended October
29, 1995, October 30, 1994 and October 31, 1993
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Notes to consolidated financial statements
(a)(2) The following financial statement schedules of Pulaski Furniture
Corporation are included in Item 14(d):
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
(a)(3) Exhibits
The following documents are filed as exhibits to this Form
10-K pursuant to Item 601 of Regulation S-K:
3.1 Restated Articles of Incorporation of Pulaski
Furniture Corporation (8)
3.2 Bylaws of Pulaski Furniture Corporation (8)
4.1 Pulaski Furniture Corporation's Series A Company
Note in the principal amount of $3,000,000, given
to the Industrial Development Authority of Pulaski
County (1)
4.2 Pulaski Furniture Corporation's Series B Company
Note in the principal amount of $5,000,000, given
to the Industrial Development Authority of Pulaski
County (1)
4.3 Industrial Development Authority of Pulaski
County's Industrial Development Revenue Note in the
principal amount of $3,000,000, given to Sovran
Bank, N.A. as Note Agent (Series A) (1)
4.4 Industrial Development Authority of Pulaski
County's Industrial Development Revenue Note in the
principal amount of $5,000,000, given to Sovran
Bank, N.A., as Note Agent (Series B) (1)
4.5 Industrial Development Authority of Pulaski
County's Industrial Development Revenue Note in
principal amount of $2,000,000, given to Sovran
Bank as Note Agent (Series A) (1)
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4.6 Pulaski Furniture Corporation's Series A Company Note
in principal amount of $2,000,000 given to the
Industrial Development Authority of Pulaski County
(1)
4.7 Note Purchase Agreement and Agreement of Sale
between Industrial Development Authority of Pulaski
County, Sovran Bank, N.A., Planters Bank & Trust
Co.; and Pulaski Furniture Company, dated April 1,
1984 (1)
4.8 Reimbursement, Purchase and Loan Agreement between
Pulaski Furniture Corporation and Sovran Bank,
N.A., dated April 1, 1984 (1)
4.9 UDAG Grant Agreement No. B-82-AB-51-0189, as
executed and delivered by the Town of Pulaski and
the United States Department of Housing & Urban
Development (1)
4.10 Term Loan Agreement between Pulaski Furniture
Corporation and Wachovia Bank and Trust Company,
N.A., dated October 21, 1985 (4)
4.11 Term Loan Note in principal amount of $4,000,000
between Pulaski Furniture Corporation and Wachovia
Bank and Trust Company, N.A., dated October 21,
1985 (4)
4.12 Term Loan Agreement between Pulaski Furniture
Corporation and Sovran Bank, N.A., dated October
23, 1985 (4)
4.13 Term Loan Note in principal amount of $4,000,000
between Pulaski Furniture Corporation and Sovran
Bank, N.A., dated October 23, 1985 (4)
4.14 Rights Agreement between Pulaski Furniture
Corporation and Sovran Bank, N.A., dated as of
December 3, 1987 (6)
4.15 Note Issuance Agreement and Revolving Credit
Agreement between Pulaski Furniture Corporation and
Sovran Bank, N.A. in principal amount of
$10,000,000, dated December 1, 1988 (7)
4.16 Form of Variable Rate Taxable Promissory Note in
principal amount of $10,000,000 between Pulaski
Furniture Corporation and Sovran Bank, N.A., dated
December 9, 1988 (7)
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4.17 Form of Revolving Credit Facility Note in principal
amount of $10,000,000 between Pulaski Furniture
Corporation and Sovran Bank, N.A., dated December
9, 1988 (7)
4.18 Form of Credit Agreement in principal amount of
$10,000,000 between Pulaski Furniture Corporation and
Wachovia Bank of North Carolina, N.A., dated as of
December 10, 1993 (9)
4.19 Form of Promissory Note in principal amount of
$10,000,000 made by the Company to Wachovia Bank of
North Carolina, N.A., dated December 10, 1993 (9)
4.20 Amendment to Term Loan Agreement between the
Company and Wachovia Bank of North Carolina, N.A.,
dated July 25, 1994
4.21 Amendment to Promissory Note made by the Company to
Wachovia Bank of North Carolina, N.A., dated July
25, 1994
10.1 Deferred Compensation Agreement between the Company
and Bernard C. Wampler dated December 2, 1977 (2)
10.2 The Company's Stock Option Plan (8)
10.3 The Company's Executive Life Insurance Plan (5)
10.4 The Company's Production and Administrative
Incentive Plans (5)
10.5 Conversion Agreement between Pulaski Furniture
Corporation and Sovran Bank, N.A., dated as of
March 3, 1986 (5)
11 Computation of Earnings Per Share
13 Pulaski Furniture Corporation's 1995 Annual Report
to Security Holders (3)
20 Pulaski Furniture Corporation's Proxy Statement for
the Annual Meeting of Stockholders to be held
February 9, 1996
21 Subsidiaries of Registrant
23 Consent of Ernst & Young LLP
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Footnotes:
(1) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 28,
1984
(2) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30,
1977
(3) With the exception of the information incorporated herein by
reference to the Company's Annual Report for the fiscal year
ended October 29, 1995, the Annual Report shall not be deemed
"filed" as part of this report on Form 10-K
(4) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 27,
1985
(5) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 26,
1986
(6) Incorporated herein by reference to the Company's Form 8-A,
dated December 17, 1987, For Registration of Certain Classes
of Securities Pursuant to section 12(b) or (g) of the
Securities Exchange Act of 1934
(7) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30,
1988
(8) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 29,
1989
(9) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31,
1993
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PULASKI FURNITURE CORPORATION
(Registrant)
Date: January 26, 1996 By /s/ John G. Wampler
John G. Wampler,
President and Chief
Operating Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Date: January 26, 1996 By /s/ Bernard C. Wampler
Bernard C. Wampler,
Director, Chairman of the Board
and Chief Executive Officer
Date: January 26, 1996 By /s/ John W. Stanley
John W. Stanley,
Director
Date: January 26, 1996 By /s/ Clifford A. Cutchins, III
Clifford A. Cutchins, III,
Director
Date: January 26, 1996 By /s/ John D. Munford
John D. Munford,
Director
Date: January 26, 1996 By /s/ John G. Wampler
John G. Wampler,
Director
Date: January 26, 1996 By /s/ Harry H. Warner
Harry H. Warner,
Director
Date: January 26, 1996 By /s/ Hugh V. White, Jr.
Hugh V. White, Jr.,
Director
Date: January 26, 1996 By /s/ Jason A. Gibbs
Jason A. Gibbs,
Treasurer, Controller, and
Assistant Secretary (Principal
Financial Officer)
<PAGE>
Report of Independent Auditors
We have audited the accompanying consolidated balance sheets of Pulaski
Furniture Corporation and Subsidiaries as of October 29, 1995 and October 30,
1994, and the related consolidated statements of income, retained earnings, and
cash flows for each of the three years in the period ended October 29, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pulaski
Furniture Corporation at October 29, 1995 and October 30, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 29, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note 7 to the financial statements, effective November 1, 1993,
the Corporation changed its method of accounting for income taxes.
ERNST & YOUNG LLP
Winston-Salem, North Carolina
January 24, 1996
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
<S> <C> <C> <C> <C> <C>
Balances at Beginning (1) (2) Balance at End
DESCRIPTION of Period Charged to Costs Charged to Other Deductions - Describe of Period
and Expenses Accounts - Describe
Year Ended October 29, 1995:
Deducted from asset accounts
Allowance for doubtful accounts $1,000,000 $704,112 $704,112 (1) $1,000,000
Year Ended October 30, 1994:
Deducted from asset accounts
Allowance for doubtful accounts $900,000 $303,845 $203,845 (1) $1,000,000
Year Ended October 31, 1993:
Deducted from asset accounts
Allowance for doubtful accounts $900,000 $600,776 $600,776 (1) $900,000
</TABLE>
(1) Uncollectible accounts written off, net of recoveries
<PAGE>
EXHIBITS
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
PULASKI FURNITURE CORPORATION
Exhibit Index
Page
3.1 Restated Articles of Incorporation of Pulaski Furniture
Corporation
3.2 Bylaws of Pulaski Furniture Corporation
4.1 Pulaski Furniture Corporation's Series A Company Note in
the principal amount of $3,000,000, given to the Industrial
Development Authority of Pulaski County
4.2 Pulaski Furniture Corporation's Series B Company Note in
the principal amount of $5,000,000, given to the Industrial
Development Authority of Pulaski County
4.3 Industrial Development Authority of Pulaski County's
Industrial Development Revenue Note in the principal amount of
$3,000,000, given to Sovran Bank, N.A. as Note Agent (Series
A)
4.4 Industrial Development Authority of Pulaski County's
Industrial Development Revenue Note in the principal amount of
$5,000,000, given to Sovran Bank, N.A., as Note Agent (Series
B)
4.5 Industrial Development Authority of Pulaski County's
Industrial Development Revenue Note in principal amount of
$2,000,000, given to Sovran Bank, N.A. as Note Agent (Series
A)
4.6 UDAG Grant Agreement No. B-82-AB-51-0189, as executed and
delivered by the Town of Pulaski and the United States
Department of Housing & Urban Development
4.7 Note Purchase Agreement and Agreement of Sale between
Industrial Development Authority of Pulaski County, Sovran
Bank, N.A., Planters Bank & Trust Co., and Pulaski Furniture
Company, dated April 1, 1984
<PAGE>
Page
4.8 Reimbursement, Purchase and Loan Agreement between Pulaski
Furniture Corporation and Sovran Bank, N.A., dated April 1,
1984
4.9 Pulaski Furniture Corporation's Series A Company Note in
principal amount of $2,000,000 given to the Industrial
Development Authority of Pulaski County
4.10 Term Loan Agreement between Pulaski Furniture Corporation and
Wachovia Bank and Trust Company, N.A., in principal amount of
$4,000,000, dated October 21, 1985
4.11 Term Loan Note in principal amount of $4,000,000 between
Pulaski Furniture Corporation and Wachovia Bank and Trust
Company, N.A., dated October 21, 1985
4.12 Term Loan Agreement between Pulaski Furniture Corporation
and Sovran Bank, N.A., in principal amount of $4,000,000, dated
October 23, 1985
4.13 Term Loan Note in principal amount of $4,000,000 between
Pulaski Furniture Corporation and Sovran Bank, N.A., dated
October 23, 1985
4.14 Rights Agreement between Pulaski Furniture Corporation and
Sovran Bank, N.A., dated as of December 3, 1987
4.15 Note Issuance Agreement and Revolving Credit Agreement between
Pulaski Furniture Corporation and Sovran Bank, N.A. in
principal amount of $10,000,000, dated December 1, 1988
4.16 Form of Variable Rate Taxable Promissory Note in principal
amount of $10,000,000 between Pulaski Furniture Corporation
and Sovran Bank, N.A., dated December 9, 1988
4.17 Form of Revolving Credit Facility Note in principal
amount of $10,000,000 between Pulaski Furniture Corporation
and Sovran Bank, N.A., dated December 9, 1988
4.18 Form of Credit Agreement in principal amount of $10,000,000
between Pulaski Furniture Corporation and Wachovia Bank of
North Carolina, N.A., dated as of December 10, 1993
4.19 Form of Promissory Note in principal amount of $10,000,000
made by the Company to Wachovia Bank of North Carolina, N.A.,
dated December 10, 1993
4.20 Amendment to Term Loan Agreement between the Company and
Wachovia Bank of North Carolina, N.A., dated July 25,
1994*
<PAGE>
Page
4.21 Amendment to Promissory Note made by the Company to Wachovia
Bank of North Carolina, N.A., dated July 25, 1994*
10.1 Employment Agreement between the Company and Bernard C.
Wampler, dated December 2, 1977
10.2 The Company's Stock Option Plan
10.3 The Company's Executive Life Insurance Plan
10.4 The Company's Production and Administrative
Bonus Plans
10.5 Conversion Agreement between Pulaski Furniture Corporation and
Sovran Bank, N.A., dated as of March 3, 1986
11 Computation of Earnings Per Share*
13 Pulaski Furniture Corporation's 1995 Annual Report to Security
Holders
20 Pulaski Furniture Corporation's Proxy Statement for the Annual
Meeting of Stockholders to be held February 9, 1996
21 Subsidiaries of Registrant*
23 Consent of Ernst & Young LLP*
- --------
*Filed with this Report on Form 10-K; all other exhibits are herein
incorporated by reference
Exhibit 4.20
THIS AMENDMENT TO TERM LOAN AGREEMENT, made this 25th day of July 1994
by and between PULASKI FURNITURE CORPORATION (hereinafter called the
"Borrower"); and WACHOVIA BANK OF NORTH CAROLINA, N.A. (hereinafter called the
"Bank");
WITNESSETH:
WHEREAS, the Borrower and the Bank entered into a Term Loan Agreement
dated the 10th day of December, 1993 (hereinafter called the "Term Loan
Agreement"); and
WHEREAS, the Borrower and the Bank now mutually desire to affect
certain amendments to the Term Loan Agreement:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein and in the Term Loan Agreement contained, the parties agree as
follows:
1. Paragraph 2 of the Term Loan Agreement which paragraph begins on
page one thereof, is hereby amended and restated to read as follows:
The Borrower has requested the Bank to make a term loan to the
Borrower in the principal amount of up to $13,000,000.00 and the Bank
is willing to extend such term loans on the terms and conditions
herein after set forth.
2. Section 2.01 of the Term Loan Agreement, which paragraph begins on
page 13 thereof, is hereby amended and restated to read as follows:
SECTION 2.01. Agreement to Lend. The Bank agrees, on the terms and
conditions set forth herein, to make from time to time during the
Drawdown Period Advances (collectively, the "Loan") to the Borrower up
to but not exceeding the agreement principal amount of Thirteen
Million and No/100 Dollars ($13,000,000.00) (the "Commitment"). Each
advance shall be in an aggregate principal amount of $500,000.00 or
any larger multiple of $100,000.00 (except that any advance may be in
the aggregate amount of the Unused Commitment). No more than three (3)
Advances may be requested by the Borrower during an Interest Period
when the Loan is a Eurodollar Loan. The Advances shall be evidenced by
a note of the Borrower in the principal amount equal to Thirteen
Million and No/100 Dollars ($13,000,000.00) to the order of the Bank
(the "Note"). The Note shall be substantially in the form annexed
hereto as Exhibit "A" dated the Closing Date. The loan shall bear
interest and shall be repaid as set forth in the Note and this
Agreement.
3. Except as herein amended, the terms and provisions of the Term Loan
Agreement shall be and remain in full force in effect.
IN WITNESSETH WHEREOF, the parties hereto have caused this amendment
to Term Loan Agreement to be executed as of the year and day first above
written.
ATTEST: BORROWER:
PULASKI FURNITURE CORPORATION
By: /s/ James Gibbs By: /s/John G. Wampler
James Gibbs John G. Wampler
Treasurer President
BANK:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /s/John J. Carlin
John J. Carlin
AVP
Exhibit 4.21
THIS AMENDMENT TO PROMISSORY NOTE, made this 25th day of July, 1994,
by and between PULASKI FURNITURE CORPORATION (hereinafter called the
"Borrower"); and WACHOVIA BANK OF NORTH CAROLINA, N.A. (hereinafter called the
"Bank");
WHEREAS, the Borrower and the Bank entered into a Credit Agreement
dated the 10 day of December, 1993; and
WHEREAS, the Borrower and the Bank entered into a Promissory Note
dated the 10 day of December, 1993; and
WHEREAS, the Borrower and the Bank now mutually desire to effect
certain amendments to the Promissory Note;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein and in the Credit Agreement and in the Promissory Note
contained, the parties agree as follows:
1. Paragraph 1 of the Promissory Note, which paragraph begins on
page 1 thereof, is hereby amended and restated to read as follows:
FOR VALUE RECEIVED, the undersigned PULASKI FURNITURE CORPORATION,
a Virginia corporation, (the "Borrower"), hereby promises to pay to the order
of WACHOVIA BANK OF NORTH CAROLINA, N.A., a national banking association
(together with its endorsers, successors and assigns, the "Bank"), the
principal sum of Thirteen Million and No/100th Dollars ($13,000,000.00) or such
lesser amount as shall equal the unpaid principal amount of the Loan made by
the Bank to the Borrower pursuant to the Credit Agreement referred to below,
on the dates provided for in the Credit Agreement. The Borrower promises to
pay interest on the unpaid principal amount of this Note on the dates and at
the rate or rates provided for in the Credit Agreement. Interest on any
overdue principal of and, to the extent permitted by law, overdue interest on
the principal amount hereof shall bear interest at the rate or rates as
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or
other funds immediately available at the principal office of the Bank located
at 301 North Main Street, Winston-Salem, North Carolina, 27150-3099, or at
such other locations as the holder of this Note may designate in writing.
2. Except as herein amended, the terms and provisions of the
Promissory Note shall be and remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Promissory Note to be executed as of the year and day first above written.
PULASKI FURNITURE CORPORATION
ATTEST:
/s/ JASON GIBBS By: /s/ JOHN S. WAMPLER
Asst. Secretary Title: President
[CORPORATE SEAL]
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
PULASKI FURNITURE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended
Oct. 29, 1995 Oct. 30, 1994 Oct. 31, 1993
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 2,841,426 2,853,711 2,818,094
Dilutive stock options - based on treasury
stock method using average market prices 8,255 24,150 22,153
Dilutive shares under Salaried Employer
Stock Purchase Plan - based on average
shares issuable 13,447 10,801 11,372
---------- ---------- ----------
TOTAL 2,863,128 2,888,662 2,851,619
Income before cumulative effect of
accounting change $4,475,171 $2,772,402 $4,352,176
Cumulative effect of accounting change 396,092
---------- ---------- ----------
Net income $4,475,171 $3,168,494 $4,352,176
---------- ---------- ----------
Income per share before cumulative effect
of accounting change $1.56 $0.96 1.53
Cumulative effect of accounting change 0.14
---------- ---------- ----------
Net Income per share $1.56 $1.10 $1.53
FULLY DILUTED
Average shares outstanding 2,841,426 2,853,711 2,818,094
Dilutive stock options - based on treasury
stock method using year-end market value or
average market price if average is greater 8,255 24,150 22,153
Dilutive shares under Salaried Employee
Stock Purchase Plan - based on average
shares issuable 13,447 10,801 11,372
---------- ---------- ----------
TOTAL 2,863,128 2,888,662 $2,851,619
Income before cumulative effect
of accounting change $4,475,171 $2,772,402 $4,352,176
Cumulative effect of accounting change 396,092
---------- ---------- ----------
Net income $4,475,171 $3,168,494 $4,352,176
Income per share before cumulative
effect of accounting change $1.56 $0.96 $1.53
Cumulative effect of accounting change 0.14
---------- ---------- ----------
Net income per share $1.56 $1.10 $1.53
---------- ---------- ----------
</TABLE>
[LOGO]
PULASKI FURNITURE CORPORATION
1995 ANNUAL REPORT
OFFICERS
BERNARD C. WAMPLER
Chairman of the Board and
Chief Executive Officer
JOHN G. WAMPLER
President and Chief Operating
Officer
IRA S. CRAWFORD
Vice President-
Administration; Secretary
RANDOLPH V. CHRISLEY
Vice President-
Sales
JAMES H. KELLY
Vice President-
Product Development
JASON A. GIBBS
Treasurer, Controller and
Assistant Secretary
JAMES W. PEELE
Vice President-
Manufacturing
DIRECTORS
BERNARD C. WAMPLER
Chairman of the Board and
Chief Executive Officer
CLIFFORD A. CUTCHINS, III*
Retired Chairman of the Board of
Sovran Financial Corporation,
Norfolk, Va.
JOHN D. MUNFORD*
Retired Vice Chairman of Union
Camp Corporation, Franklin, Va.
JOHN W. STANLEY
Retired Chairman of the Board of Blue
Ridge Transfer Company, Inc.,
Roanoke, Va.
JOHN G. WAMPLER
President and Chief Operating Officer
of Pulaski Furniture Corporation
HARRY H. WARNER*
Financial Consultant, Lexington, Va.
HUGH V. WHITE, JR.
Partner of Hunton & Williams-
Attorneys, Richmond, Va.
- -----------
*Member of Audit Committee
TABLE OF CONTENTS
Message to Stockholders..................................... 1
General Information ........................................ 2
Selected Financial Data .................................... 3
Management's Discussion and Analysis ....................... 4
Consolidated Balance Sheets.................................. 6
Consolidated Statements of Income and
Retained Earnings........................................ 8
Consolidated Statements of Cash Flows........................ 9
Notes to Consolidated Financial Statements...................10
Report of Independent Auditors................Inside Back Cover
CORPORATE DATA
CORPORATE OFFICES
Pulaski Furniture Corporation
One Pulaski Square
P.O. Box 1371
Pulaski, Virginia 24301
(540) 980-7330
STOCK TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
First Union National Bank
of North Carolina
Two First Union Center, M-12
Charlotte, NC 28288
(800) 829-8432
STOCK LISTING
Traded Over-The-Counter
NASDAQ Symbol-PLFC
LEGAL COUNSEL
Hunton & Williams
Richmond, Virginia
ANNUAL MEETING
The Annual Meeting of Stockholders of Pulaski Furniture Corporation will be
held on Friday, February 9, 1996 at 10 a.m. at the Roanoke Airport Marriott,
Roanoke, Virginia.
ADDITIONAL INFORMATION
A copy of Form 10-K, the Annual Report filed with the Securities and Exchange
Commission, is available without charge to stockholders upon written request
directed to the Corporation, attention Secretary.
[PHOTO GOES HERE]
This piece was selected by Home Magazine to receive a 1995 American Furniture
award. The award recognizes and honors excellence and creativity in American
design. The Croquet Information Center was chosen because its design so clearly
responds to the demands for form and function required by today's lifestyles.
The Croquet Information Center acknowledges that the kitchen is family
central. This practical desk holds family files, messages, and cookbooks in
one functional piece. It's sized to fit even a nook or cranny.
MESSAGE TO STOCKHOLDERS
In Megatrends, a well-read book published in 1983, John Naisbitt
encouraged us to think globally and act locally. When reflecting on 1995, and
thinking about the challenges facing our industry and your Corporation, it is
obvious that just thinking globally and acting locally is not enough. We must
excel in both arenas. The world has gotten smaller, and it has effected major
changes in our industry. Your Corporation is prepared to perform well in this
new environment.
Nineteen ninety-five was a challenging year for furniture manufacturers
because of limited growth. Business for the industry as a whole increased less
than 3 percent and actually saw a decline in shipped units. In addition to this
challenge, consumers shopped for furniture intermittently throughout the year,
which resulted in significant peaks and valleys of demand. Given this
background, we are pleased to report that your Corporation outperformed the
industry. Sales increased to $172,842,000 from $148,698,000 in 1994. Net Income
increased to $4,475,000 compared to $3,168,000 for 1994.
The improved performance required significant contributions from the many
stakeholders of your Corporation. It started with our employees and sales
representatives, at all levels of the Corporation, who worked together as a team
to produce quality products and to place those products with the right
retailers. It continued with our suppliers, who helped us to control inflation
and to provide well-made components and appropriate services. Of course, it was
all made possible by our customers, who represent the best retailers in our
industry. Their vast command of market share allowed us to grow this year.
Your Corporation worked in all 50 states, several territories, and over 30
foreign countries in 1995. We need a worldwide network of customers, employees,
suppliers, and partners to meet the challenges of the future. A great deal of
the Corporation's resources have been employed in recent years to help establish
the right network. We are starting to reap more of the benefits of this network.
Our export sales grew in 1995 and remained at 6 percent of total sales. Our
import business showed another year of gains and will continue to grow as we use
it to augment our domestic production and to increase our market share with
American retailers.
We divested ourselves of the Corporation's holdings in Triwood. The
changes in our product line have resulted in decreased demand for this
facility's product so it made sense to deploy company assets elsewhere. We sold
our share of Triwood above its value on our books which resulted in a one time
gain of $327,986.
When we think about 1996, we anticipate a business climate that will be
very similar to 1995. Influences such as lower interest rates and continued
strong housing starts will be positive for our industry; however, high consumer
debt could have a negative impact. Your Corporation will strive to make 1996 a
more successful year.
The Board of Directors increased the first quarter dividend to $.16 per
share in 1996 from $.15 per share for the first quarter of 1995.
We thank our stockholders and Board of Directors for their continued
support.
Sincerely,
/s/ Bernard C. Wampler
Bernard C. Wampler
Chairman and CEO
/s/ John G. Wampler
John G. Wampler
President and COO
[PHOTO GOES HERE]
1
<PAGE>
PULASKI FURNITURE CORPORATION AND SUBSIDIARIES
GENERAL INFORMATION
Organized in Virginia in 1955, the Corporation manufactures and sells
medium-priced wooden bedroom, dining room and occasional furniture produced in
its manufacturing plants located in Pulaski, Dublin, and Martinsville, Virginia.
The Corporation also has a veneer plant located in Dublin, Virginia, which
produces veneer used at all manufacturing plants. The Corporation's Ridgeway
Clock Company plant manufactures grandfather, mantel and wall clocks and is
located in Ridgeway, Virginia. The Corporation's Craftique plant in Mebane,
North Carolina produces solid mahogany bedroom, dining room and occasional
furniture. The Corporation leases a building of approximately 100,000 square
feet in Christianburg, Virginia to house the Corporation's upholstery
operations.
At the end of 1995 fiscal year, 2,827,882 shares of the Corporation's
10 million authorized shares of Common Stock were outstanding. In addition, the
Corporation has authorized one million shares of Cumulative Preferred stock of
which no shares were outstanding.
MARKET AND DIVIDEND INFORMATION
Pulaski Furniture Corporation's stock is listed on the NASDAQ National
Market System, which is the most active listing of over-the-counter quotations.
During the fiscal year 1995, the Corporation believes that Wheat First
Securities, Inc., of Richmond, Virginia, was the most active market-maker for
the stock. The Corporation had approximately 875 stockholders of record as of
October 29, 1995. The range of closing sales prices as reported by the NASDAQ
and cash dividends for the last two fiscal years are listed in the following
chart. The market quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.
SALES PRICES OF COMMON STOCK
1995 1994 DIVIDENDS
FISCAL DECLARED
QUARTER HIGH LOW HIGH LOW 1995 1994
First... 20.50 16.00 27.00 18.625 $0.15 $0.14
Second.. 21.375 17.50 26.75 22.75 $0.15 $0.14
Third... 20.00 17.00 23.50 18.00 $0.15 $0.14
Fourth.. 18.50 16.00 21.00 17.50 $0.15 $0.14
[PHOTO GOES HERE]
Pulaski's Collector Curios are available in a variety of styles and finishes
featuring mirrored backs and canister lighting that create the ultimate
showcase.
2
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 29, OCTOBER 30, OCTOBER 31, NOVEMBER 1, NOVEMBER 3,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales .................. $172,842,105 $148,698,029 $137,650,721 $123,918,019 $120,575,933
Net Income ................. 4,475,171 3,168,494 4,352,176 2,599,059 1,800,066
Earnings Per Share ......... 1.56 1.10 1.53 0.91 0.63
Total Assets................ 118,675,813 112,750,099 99,336,183 91,075,577 92,074,129
Long-Term Debt.............. 29,354,804 31,398,173 20,357,425 22,369,346 23,878,691
Cash Dividends Per Share.... 0.60 0.56 0.52 0.52 0.52
Book Value Per Share........ 19.78 18.69 18.29 17.38 16.98
Net Working Capital......... 51,787,988 47,203,234 44,291,637 43,682,801 43,317,362
Current Ratio............... 2.9 3.1 3.1 3.9 4.0
</TABLE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of
operations for the fiscal years ended October 29, 1995 and October 30, 1994.
(dollars in thousands, except earnings per share).
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
(12 WEEKS IN (12 WEEKS IN (12 WEEKS IN (16 WEEKS IN (52 WEEKS IN
1995 AND 1994 1995 AND 1994 1995 AND 1994 1995 AND 1994 1995 AND 1994
<S> <C> <C> <C> <C> <C>
October 29, 1995
Net Sales............. $41,270 $38,989 $30,236 $62,347 $172,842
Gross Profit.......... 8,238 7,390 7,390 $10,978 33,996
Net Income............ 1,373 1,094 (602) $2,610 4,475
Earnings per share.... 0.48 0.38 (0.21) 0.91 1.56
October 30, 1994
Net Sales............. $32,150 $32,901 $27,691 $55,956 $148,698
Gross Profit.......... 6,410 6,685 5,085 9,121 27,301
Net Income............ 1,125(1) 877 319 847 3,168(1)
Earnings per share.... 0.39(1) 0.30 0.11 0.30 1.10(1)
</TABLE>
(1) Net income includes the cumulative effect of accounting change for income
taxes. The cumulative effect of the accounting change increased net income
by $396,092 or $0.14 per share.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
1995 COMPARED TO 1994
The improvement in earnings from 1994 to 1995 and particularly the fourth
quarter of 1995 was primarily attributable to the increase in sales, and to the
lower cost of products sold as a percentage of sales.
Net sales increased 16.2% or $24,144,076 from 1994 to 1995. The
Corporation shipped approximately 29% more units in 1995 at an average unit
price of approximately 7.5% less. The large increase in units shipped and the
lower unit price was attributable primarily to products produced in the new
factory. The new factory in Pulaski began operations in May, 1994, and produces
occasional furniture. Export sales for fiscal 1994 and 1995 were approximately
6% of net sales.
Cost of products sold decreased from 81.64% of net sales in fiscal 1994 to
80.33% of net sales in fiscal 1995. The percentage decreases were primarily in
factory labor, factory supplies, fuel and insurance.
There was no appreciable difference in selling, general and administrative
expenses as a percentage of net sales between fiscal 1995 and fiscal 1994.
The increase in interest expense in fiscal 1995 from fiscal 1994 reflected
the increase in average outstanding debt and higher interest rates. The
Corporation's average amount of outstanding indebtedness for borrowed money was
$41,675,218 in fiscal 1995 and $37,919,172 in fiscal 1994. The weighted average
borrowing rates for the three fiscal years of 1993, 1994 and 1995 were 5.13%,
4.77% and 6.44% respectively. The weighted averages excluding the interest rate
swap costs would have been 3.26%, 3.74% and 5.94%. The interest rate swap costs
increased interest expense by $439,932, $389,925 and $206,595 in 1993, 1994 and
1995 respectively.
Net income was reduced by approximately $63,000 for fiscal 1995 and
$10,000 for fiscal 1994, as a result of the Corporation's proportionate share of
the losses incurred by the Triwood, Inc. joint venture. On October 6, 1995, the
Corporation sold its proportionate share of the investment in Triwood, and
recorded a gain of $327,986, which is included in other income.
1994 COMPARED TO 1993
The decrease in income before cumulative effect of accounting change of
$1,579,774 from 1993 to 1994 was attributed mostly to increases in manufacturing
costs and selling and administrative costs, not adequately absorbed by price
increases, and also attributed to start up costs of approximately $780,000
related to a new plant.
Net sales increased 8.0% or $11,047,308 from 1993 to 1994. The Corporation
shipped approximately 4% more units in 1994 at an average unit price of
approximately 3.0% more. Export sales for fiscal 1993 and 1994 were
approximately 6% of net sales.
The increase in cost of products sold as a percentage of net sales in
fiscal 1994 compared with fiscal 1993 was primarily due to increases in factory
labor, factory supplies, and the cost of employee insurance. The increase in
factory labor was caused by an overall increase in the number of employees,
primarily relating to the new plant, and to rate increases.
The increase in selling, general and administrative expenses as a
percentage of net sales in fiscal 1994 from fiscal 1993, was due primarily to
increases in expenses related to marketing, information systems and the cost of
employee insurance. The increase in marketing expenses was caused by increased
emphasis on the promotion and marketing of the Corporation's products. The
increase in information systems expenses was caused primarily by improvements in
the manufacturing and administrative systems.
The increase in interest expense in fiscal 1994 from fiscal 1993 reflected
the increase in average outstanding debt partially offset by lower interest
rates. The Corporation's average amount of outstanding indebtedness for borrowed
money was $37,919,172 in fiscal 1994 and $23,545,048 in fiscal 1993. The
weighted average borrowing rates for the three fiscal years of 1992, 1993 and
1994 were 5.36%, 5.13% and 4.77% respectively. The weighted averages excluding
the interest rate swap costs would have been 4.03%, 3.26% and 3.74%. The
interest rate swap costs increased interest expense by $330,020, $439,932 and
$389,925 in 1992, 1993 and 1994 respectively.
The increase in miscellaneous other income reflects a gain of $691,000
from insurance proceeds related to storm damage of the contents of a finished
goods warehouse.
Net income was reduced by approximately $10,000 for fiscal 1994 and
$65,000 for fiscal 1993, as a result of the Corporation's proportionate share of
the losses incurred by the Triwood, Inc. joint venture.
The cumulative effect of accounting change in 1994 was a net addition to
income of $396,092, and is described in Note 7 of the Consolidated Financial
Statements.
The Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 119 "Disclosure about Derivative Financial
Instruments and Fair Value". and No. 123 "Accounting for Stock-based
Compensation". The Company is required to adopt these standards in fiscal years
1995 and 1996. The adoption will not have any material impact on the Company's
operations or financial position.
CAPITAL RESOURCES, LIQUIDITY AND EFFECTS OF INFLATION
Net Cash from Operating Activities for the year totaled approximately
$2,080,000. Accounts receivable increased approximately $2,246,000, and
inventories increased approximately $6,466,000. These increases were the primary
reasons for the short-term borrowings during the year.
4
<PAGE>
The Corporation has short-term lines of credit totaling $16,000,000 with
interest not to exceed prime rates. At October 29, 1995, which was approximately
the middle of the Corporation's heaviest shipping season, the Corporation had
$12,000,000 outstanding under these credit lines.
Because of the available lines of credit, the strong working capital
position, and its ability to generate cash through operations, the Corporation
believes it has adequate liquidity to meet its short-term and long-term debt
obligations, cover its capital expenditures, pay cash dividends and to continue
controlled growth indefinitely. The Corporation has no plans to borrow any
additional long-term debt or to sell additional equity securities.
The Corporation uses the LIFO method of accounting for its inventories.
Under this method, the cost of products sold reported in the financial
statements approximates current costs and thus reduces distortion in reported
income due to increasing costs. Under the LIFO method, the Corporation increased
its inventory reserve in 1995 by approximately $1,075,000, the effect of which
decreased net income by approximately $726,000 or 25 cents per share.
The charges to operations for depreciation represent the allocation of
historical costs incurred over past years and are significantly less than if
they were based on current cost of productive capacity being consumed.
Construction of the Corporation's Dublin, Virginia plant was completed in 1973,
the Martinsville plant was renovated in 1974, and the renovation and expansion
of the Pulaski facilities were completed in 1986, with further expansions in
1988 and 1994. The Ridgeway division was acquired in 1985, and the Craftique
division was acquired in 1988. The Accentrics division began operations in
leased facilities in November 1989.
The replacement costs for assets acquired in prior years will likely
exceed the original costs of the replaced assets. However, increased costs of
replacement assets will result in higher depreciation charges which will be
taken into consideration in setting pricing policies. Provision for depreciation
for fiscal 1995 was approximately $5,243,000.
The Corporation's financial statements are prepared in accordance with
generally accepted accounting principles using historical costs, which are
not adjusted to reflect changes in purchasing power. However, use of the LIFO
method of valuing inventories in the Corporation's financial statements
compensates for some of the effects of inflation.
DISCUSSION-FOURTH QUARTER
The increase in sales in the fourth quarter ended October 29, 1995, was
due primarily to the increased demand for the Corporation's furniture. The
increase in earnings was due primarily to the increase in sales.
The Board of Directors at its December 8, 1995, meeting increased the
dividend to 16 cents per common share payable on January 2, 1996 to stockholders
of record December 15, 1995, and authorized the purchase by the Corporation of
up to 200,000 shares of its common stock presently outstanding.
[PHOTO GOES HERE]
HOME OFFICE
The new Home Office/Library Collection is targeted for the customer that is
seeking unparalleled elegance, distinctive styling and functionally engineered
cases to accommodate the latest computer equipment. This Armoire features file
drawer, pull-out keyboard and printer shelves, bulletin board, CD and disk
storage, surge protected control center and faux book doors.
[PHOTO GOES HERE]
5
Consolidated Balance Sheets
<TABLE>
<CAPTION>
October 29 October 30
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 1,721,546 $ 1,088,322
Short-term investments.................................................. 14,615 64,615
Trade receivables, less allowance of
$1,000,000 in 1995 and 1994........................................ 35,674,329 33,427,941
Inventories:
Finished furniture................................................. 22,936,830 18,084,326
Furniture in process............................................... 4,422,309 4,302,708
Lumber and purchased veneers....................................... 5,260,981 4,290,592
Manufacturing supplies............................................. 7,788,751 7,265,510
40,408,871 33,943,136
Prepaid expenses........................................................ 407,186 465,309
Deferred income taxes................................................... 578,727 493,064
TOTAL CURRENT ASSETS 78,805,274 69,482,387
PROPERTY, PLANT AND EQUIPMENT:
Land.................................................................... 640,979 640,979
Buildings............................................................... 31,179,684 30,903,196
Machinery and equipment................................................. 49,029,973 46,896,444
Furniture, fixtures and office equipment................................ 3,510,526 3,096,041
Vehicles................................................................ 651,732 660,439
85,012,894 82,197,099
Less allowances for depreciation........................................ 46,118,654 41,128,037
38,894,240 41,069,062
OTHER ASSETS:
Investment in and advances to investee company.......................... 1,235,170
Cash surrender value of life insurance,
less loans of $728,408 in 1995 and $625,445 in 1994................ 976,299 963,480
976,299 2,198,650
$118,675,813 $112,750,099
</TABLE>
6
<TABLE>
<CAPTION>
OCTOBER 29 OCTOBER 30
1995 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses:
Accounts payable....................................... $ 9,764,380 $ 8,543,642
Wages and commissions.................................. 2,213,933 2,395,963
Payroll taxes and taxes withheld from employees........ 733,928 578,601
12,712,241 11,518,206
Notes Payable............................................ 12,000,00 8,000,000
Current portion of long-term debt........................ 2,047,618 2,004,249
Federal and state income taxes...................... 257,427 756,693
TOTAL CURRENT LIABILITIES 27,017,286 22,279,148
DEFERRED COMPENSATION....................................... 2,268,749 1,937,923
DEFERRED INCOME TAXES....................................... 4,094,245 3,871,331
LONG-TERM DEBT.............................................. 29,354,804 31,398,173
STOCKHOLDERS' EQUITY:
Common Stock (authorized 10,000,000 shares, issued
shares, 2,827,882 in 1995 and 2,849,159 in 1994)........ 5,827,093 6,084,210
Retained earnings......................................... 50,296,885 47,529,123
Unamortized restricted stock.............................. (183,249) (349,809)
Total stockholders' equity................................ 55,940,729 53,263,524
$118,675,813 $112,750,099
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS
<TABLE>
<CAPTION>
Years Ended
OCTOBER 29 OCTOBER 30 OCTOBER 31
1995 1994 1993
<S> <C> <C> <C>
Net sales.................................................. $172,842,105 $148,698,029 $137,650,721
Cost of products sold...................................... 138,845,650 121,397,370 109,369,585
33,996,455 27,300,659 28,281,136
Selling, general and administrative expenses............... 25,122,493 22,223,313 20,302,921
8,873,962 5,077,346 7,978,215
Other income:
Interest........................................... 27,940 134,866 146,570
Miscellaneous...................................... 600,559 698,291 62,917
628,499 833,157 209,487
9,502,461 5,910,503 8,187,702
Other deductions
Interest expense................................... 2,738,021 1,748,330 1,296,464
Miscellaneous...................................... 68,613 39,693 59,310
Proportionate share of loss in investee company.... 63,156 10,078 64,752
2,869,790 1,798,101 1,420,526
Income before income taxes and cumulative effect
of accounting change..................................... 6,632,671 4,112,402 6,767,176
Income taxes............................................... 2,157,500 1,340,000 2,415,000
Income before cumulative effect of accounting change....... 4,475,171 2,772,402 4,352,176
Cumulative effect of accounting change..................... 396,092
Net income................................................. 4,475,171 3,168,494 4,352,176
Retained earnings at beginning of year..................... 47,529,123 45,959,916 43,074,546
Cash dividends (per share: 1995-$.60
1994 - $.56; 1993 - $.52)................................ (1,707,409) (1,599,287) (1,466,806)
Retained earnings at end of year........................... $ 50,296,885 $ 47,529,123 $ 45,959,916
EARNINGS PER SHARE
Income before cumulative effect of accounting change....... $1.56 $0.96 $1.53
Cumulative effect of accounting change..................... 0.14
Net income................................................. $1.56 $1.10 $1.53
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
8
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 29 OCTOBER 30 OCTOBER 31
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 4,475,171 $ 3,168,494 $4,352,176
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization........... 5,242,754 4,495,436 3,724,465
Provision for deferred income taxes................... 137,251 (196,084) (462,000)
Provision for deferred compensation................... 330,826 139,470 276,714
Proportionate share of loss in investee company....... 63,156 10,078 64,752
Gain on sale of investee company...................... (327,986)
Loss on sale of property, plant and equipment......... 28,370 13,636 59,296
Cumulative effect of accounting change................ (396,092)
Changes in operating assets and liabilities:
Increase in trade receivables......................... (2,246,388) (2,597,950) (3,044,925)
Increase in inventories....................... (6,465,735) (3,165,285) (4,693,333)
Increase (decrease) in accounts payable
and accrued expenses....................... 1,194,035 661,436 (224,393)
Increase (decrease) in federal income taxes
payable.................................... (499,266) (618,516) 540,601
Other......................................... 148,267 (54,636) (167,496)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,080,455 1,459,987 425,857
INVESTING ACTIVITIES
Purchases of property, plant and equipment.............. (2,950,513) (13,554,857) (5,036,788)
Proceeds from sale of property, plant and equipment..... 20,772 27,246 48,375
Proceeds from sale of investee stock and
collection of advances........................ 1,500,000
Purchases of investments................................ (2,240,000)
Sales of investments.................................... 50,000 142,000 2,431,200
NET CASH USED IN INVESTING ACTIVITIES (1,379,741) (13,385,611) (4,797,213)
FINANCING ACTIVITIES
Issuance of common stock................................ 422,632 590,278 716,166
Repurchase of common stock.............................. (679,750) (656,891) (541,144)
Payment of dividends.................................... (1,707,409) (1,599,287) (1,466,806)
Proceeds from long-term debt............................ 13,000,000
Payments on long-term debt.............................. (2,000,000) (2,001,203) (1,500,002)
Increase in notes payable............................... 4,000,000 1,000,000 7,000,000
Other................................................... (102,963) (16,658) (27,417)
NET CASH PROVIDED BY FINANCING ACTIVITIES (67,490) 10,316,239 4,180,797
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 633,224 (1,609,385) (190,559)
Cash and cash equivalents at beginning of year.......... 1,088,322 2,697,707 2,888,266
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,721,546 $ 1,088,322 $2,697,707
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: The Corporation is engaged exclusively in the production and
sale of furniture products.
FISCAL YEAR: The Corporation uses a 52-53 week year. All fiscal years
presented include 52 weeks.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Corporation and its wholly-owned subsidiaries, Craftique,
Inc., and Pulaski Foreign Sales Corporation, Inc. Significant intercompany
accounts and transactions have been eliminated. The Corporation owned until
October, 1995 a 25% interest in Triwood, Inc. which is accounted for under the
equity method.
CASH EQUIVALENTS: The Corporation considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
INVESTMENTS: Investments, which consist principally of tax exempt
bonds, are stated at cost which approximates market.
INVENTORIES: Inventories are stated at the lower of LIFO (last-in,
first-out) cost or market.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated
at cost. Depreciation has been computed on a straight-line basis over the
estimated useful lives of the related assets.
EARNINGS PER SHARE: Earnings per share are computed based on the weighted
average number of common and common equivalent shares (stock options)
outstanding during each year.
RECLASSIFICATION: Certain reclassifications were made in prior years'
financial statements to conform to the 1995 presentation.
NOTE 2. INVENTORIES
Current cost of the LIFO inventories exceeded the carrying amount by
approximately $14,852,000 and $13,777,000 at October 29, 1995 and October 30,
1994, respectively.
NOTE 3. FINANCING ARRANGEMENTS AND COMMITMENTS
Long-term debt consists of the following:
OCTOBER 29 OCTOBER 30
1995 1994
Industrial Development Revenue Notes,
due in installments of $5,000,000
in 2004 and 2009.............. $10,000,000 $10,000,000
Notes payable under revolving credit facility 9,000,000 9,000,000
Notes payable to bank, due in quarterly
installments of $428,572 beginning
December, 1995 through December, 2002 12,000,000 13,000,000
Notes payable to banks, due in varying
quarterly installments through
October, 2000................. 402,422 1,245,268
Notes payable at 3% interest to the Town of
Pulaski, Virginia, due in quarterly
installments through April 30, 1995 157,154
31,402,422 33,402,422
Less current maturities............. 2,047,618 2,004,249
$29,354,804 $31,398,173
Future maturities of long-term debt at October 29, 1995 are as follows:
1996..................................... $ 2,047,618
1997..................................... 10,783,375*
1998..................................... 1,714,286
1999..................................... 1,714,286
2000..................................... 1,714,286
2001 and thereafter...................... 13,428,571
$31,402,422
* Of this amount, $9,000,000 is extended automatically unless the bank
providing the revolving credit facility gives notice of termination as described
below.
The Industrial Development Revenue Notes, which may be called prior to
maturity, bear interest at tax-exempt market rates. Interest cost (including
related letter of credit and servicing fees) averaged 4.78% during 1995. At the
option of the Corporation, or if called prior to maturity, the notes may be
placed with a bank under a letter of credit arrangement. In this event, the
notes would bear interest at two-thirds of the prime rate.
The Corporation has a note and revolving credit agreement with a bank
which provides for $10 million in notes supported by a revolving credit
facility. The notes bear interest at current market rates (averaged 6.04% in
1995) and are renewable on an annual basis subject to minimum annual reductions
of long term debt. The agreement requires annual commitment fees of one quarter
of one percent of the total amount of the revolving credit facility. At the
option of the bank, the revolving credit facility may be terminated on February
28 of any year if the bank gives notice of termination not later than 60 days
before March 1 of the preceding year.
The Corporation has a term loan agreement with a bank that had an
outstanding amount of $12 million at October 29, 1995. The note bears interest
at a variable rate not to exceed LIBOR plus 3/8% (averaged 6.36% in 1995). The
agreement requires annual commitment fees of one eighth of one percent of the
unused commitment.
Notes payable to banks bear interest at variable rates not to exceed the
London Interbank Offered Rate (LIBOR) plus five-eighths of one percent.
The average interest rate for the year was 6.92%.
To manage the interest rate exposure under its long-term obligations, the
Corporation has entered into a swap agreement with a major financial institution
in the notional amount of $8 million. Under the terms of the agreement, the
Corporation makes payments at a fixed rate (8.87%) and receives payments at
variable rates based on LIBOR, the net of which is included as an adjustment to
interest expense. The weighted average variable rate received by the Corporation
was 2.58%, 4.00%, and 3.37% for 1995, 1994 and 1993, respectively. The increase
to interest expense totaled $206,595, $389,925 and $439,932 for 1995, 1994 and
1993, respectively.
The agreements contain various conditions which provide, among other
things, restrictions relating to the maintenance of working capital, payment of
dividends and additional indebtedness. The Corporation was in compliance with
these conditions at October 29, 1995. At October 29, 1995, retained earnings
available for payment of dividends amounted to approximately $21,934,000.
Under short term line of credit arrangements, the Corporation may borrow
up to $16 million at October 29, 1995 which would bear interest at rates not to
exceed the prime rate. At October 29, 1995, the Corporation had $12 million
outstanding under these arrangements.
In connection with the purchase of inventory from foreign suppliers,
the Corporation has available letters of credit of approximately $11 million,
with $8.1 million outstanding at October 29, 1995.
10
Interest paid in 1995, 1994, and 1993 was $2,715,441, $1,691,686, and
$1,316,104, respectively. Of these amounts, $104,399 was capitalized during
1994.
NOTE 4. COMMON STOCK
Changes in Common Stock for the two years in the period ended 1995 were as
follows:
COMMON STOCK
SHARES AMOUNT
BALANCE AT OCTOBER 31, 1993....................... 2,814,776 $5,645,373
Shares issued under Salaried Employee
Stock Purchase Plan....................... 20,914 388,163
Common Stock acquired and retired........... (27,331) (656,891)
Shares issued under Stock Incentive
Plan for Non-Employee Directors........... 800 20,800
Shares issued under Stock Incentive Plan.... 12,500 181,315
Restricted shares issued under Stock
Incentive Plan............................ 27,500 505,450
BALANCE AT OCTOBER 30, 1994....................... 2,849,159 $6,084,210
Shares issued under Salaried
Employee Stock Purchase Plan.............. 19,923 405,632
Common Stock acquired and retired........... (42,000) (679,750)
Shares issued under Stock Incentive Plan
for Non-Employee Directors................ 800 17,000
BALANCE AT OCTOBER 29, 1995....................... 2,827,882 $5,827,092
In 1988, as part of a shareholder rights plan, the Board of Directors
declared a dividend distribution of one preferred share purchase right for each
outstanding share of common stock.
Each right entitles its holder to buy one one-hundredth of a share of the
Corporation's Series A Cumulative Preferred Stock at an exercise price currently
in excess of market value. The rights will become exercisable only if a person
or group acquires or obtains the right to acquire, 20% or more of the
Corporation's common stock (an "Acquiring Person") or commences a tender offer
that would result in the offeror owning 30% or more of the Corporation's
outstanding common stock ("Triggering Events"). If an Acquiring Person acquires
30% or more of the Corporation's common stock or engages in certain other
transactions with the Corporation, each right will entitle the holder, other
than an Acquiring Person, to acquire the Corporation's Series A Preferred Stock
or, at the option of the Corporation, other securities or property, having a
value equal to twice the right's exercise price. Likewise, if the Corporation is
acquired in a merger or other business combination, or the Corporation sells
more than 50% of its earnings power or assets, each right will entitle the
holder, other than an Acquiring Person, to purchase securities of the acquiring
entity with a market value equal to twice the right's exercise price. The rights
expire December 15, 1997, and are subject to redemption at the discretion of the
Corporation's Board of Directors at a price of $0.01 per right within 10 days
following the occurrence of a Triggering Event, subject to extension of
the period by the Board of Directors. The Corporation has authorized one
million shares of cumulative preferred stock, of which 500,000 shares have
been designated as Series A Cumulative Preferred Stock reserved for issuance
upon exercise of such rights.
NOTE 5. STOCK PURCHASE AND INCENTIVE PLANS
The Salaried Employees Stock Purchase Plan provides for the sale of Common
Stock annually based on payroll deductions of up to 8% of employee compensation
at a price equal to 70.7% of market price on the date of purchase. Compensation
expense recognized in 1995, 1994, and 1993 related to the Plan was $179,003,
$171,554, and $164,075, respectively. At October 29, 1995, 25,297 shares are to
be issued pursuant to the Plan's provisions, after which there will remain
36,166 shares available for purchase in the future.
Under the Stock Incentive Plan, as amended in 1989, key employees were
granted options to purchase Common Stock at a price determined by a committee
appointed by the Board of Directors or determined pursuant to a formula approved
by the committee. The committee was also able to grant stock appreciation rights
(SARs) in relation to the grants of stock options. The stock options and SARs
expire ten years after the date of grant.
At October 29, 1995, outstanding options and SARs under the Stock
Incentive Plan were as follows:
NUMBER OF SHARES OPTION PRICE OR
DATE AND SARS UNDER FAIR MARKET VALUE AT GRANT
GRANTED OPTION PER SHARE
December 6, 1986....... 5,000 18.75
December 3, 1987....... 5,000 15.00
December 8, 1988....... 22,500 17.375
December 8, 1989....... 22,500 18.75
December 7, 1990....... 22,500 16.125
December 6, 1991....... 20,000 14.75
All shares under option at October 29, 1995 are exercisable. All shares
issued upon exercise of options during the three years ended October 29, 1995
related to options granted between December 5, 1985 and December 6, 1991.
The Stock Incentive Plan, as amended in 1991, permits the committee of the
Board of Directors to make awards of the Corporation's common stock upon such
terms and conditions as may be established by the committee. Restrictions on
shares issued under the plan lapse at the rate of 20% of the stock per year.
Upon issuance of restricted stock under the plan, unearned compensation
equivalent to the market value at the date of grant is charged to stockholders'
equity and subsequently amortized on the ratable vesting period method.
Amortization of $166,560 and $291,321 was recorded in fiscal 1995 and 1994
respectively. At October 29, 1995, there were 156,000 shares available for
future issuance.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which established accounting and reporting standards for
stock-based employee compensation plans. The new standard encourages companies
to adopt a fair value method of accounting for an employee stock compensation
plan. However, it also allows companies to continue to measure compensation cost
using the intrinsic value based method prescribed by APB Opinion No. 25 so long
as certain pro forma disclosures are made in the footnotes. SFAS No. 123 is
effective for fiscal years beginning after December 15, 1995, the Corporation's
1997 fiscal year. The Corporation has not determined the method it will use, and
the precise future effect of these rules on the Corporation's reported operating
results will depend upon the method adopted.
NOTE 6. PENSION PLAN
The Corporation has a defined benefit pension plan covering substantially
all of its employees. The benefits are based on years of service and the
employee's highest five year average compensation. The Corporation's funding
policy is to contribute annually the amount required to fund current service
cost plus an amortization of prior service cost and actuarial gains and losses
over approximately 30 years to the extent such amounts are currently deductible
for federal income tax purposes. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets:
OCTOBER 29 OCTOBER 30
1995 1994
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including
vested benefits of $8,689,660 and
$7,947,566 in 1995 and 1994, respectively. $ 8,852,453 $ 8,093,025
Projected benefit obligation for service
rendered to date.............. $11,964,876 $11,069,551
Plan assets at fair value........... 11,801,453 9,884,534
Projected benefit obligation (greater) than
plan assets................... (163,423) (1,185,017)
Unrecognized net loss from past experience
different from that assumed... 190,308 1,388,507
Unrecognized net asset at
November 2, 1987.............. (350,639) (400,730)
Net pension liability recognized
in balance sheet.............. $(323,754) $ (197,240)
Net pension cost included the following components:
1995 1994 1993
Service cost.................... $ 513,188 $ 458,138 $ 395,793
Interest cost on projected
benefit obligation........ 814,413 690,469 629,933
Actual gain on plan assets...... (1,948,326) (86,444) (737,221)
Net amortization and deferral... 1,104,832 (699,131) 16,067
Net periodic pension cost....... $ 484,107 $ 363,032 $ 304,572
Assumptions used in accounting for the pension plan were:
1995 1994 1993
Weighted average discount rate................ 7.50% 7.50% 7.50%
Rate of increase in compensation level....... 6.0% 6.0% 6.0%
Expected long term rate of return on assets.. 8.0% 8.0% 8.0%
Approximately 99.7% of plan assets at October 29, 1995 are invested in
listed stocks and bonds, and the remaining plan assets are held in interest
bearing investments, primarily a common trust fund.
The Corporation also sponsors an unfunded Supplemental Executive
Retirement Program (SERP), which is a nonqualified plan that provides additional
retirement benefits to certain key employees. Pension expense recognized in
1995, 1994 and 1993 related to the SERP was $305,652, $247,173 and $321,563,
respectively. At October 29, 1995, the projected benefit obligation for this
plan totaled $2,438,763, of which an unrecognized net obligation of $67,411 and
unamortized prior service cost of $380,106 are subject to later amortization.
The remaining $1,991,246 is an additional pension liability recognized in the
balance sheet at October 29, 1995.
NOTE 7. INCOME TAXES
Effective November 1, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). Under SFAS 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption of
SFAS 109, income tax expense was determined using the deferred method. Deferred
tax expense was based on the items of income and expense that were reported in
different years in the financial statements and tax returns and were measured at
the tax rate in effect in the year the difference originated.
As permitted by SFAS 109, the Corporation has elected not to restate
the financial statements of any prior years. The cumulative effect of the change
increased net income for 1994 by $396,092 (or $.14 per share).
The provisions for income taxes consisted of the following:
DEFERRED
LIABILITY METHOD METHOD
1995 1994 1993
Current:
Federal.......... $1,871,828 $1,495,441 $2,741,186
Tax credits...... (86,583) (97,467) (144,186)
1,785,245 1,397,974 2,597,000
State.................. 235,004 138,110 280,000
2,020,249 1,536,084 2,877,000
Deferred:
Federal.......... 108,755 (175,974) (409,369)
State............ 28,496 (20,110) (52,631)
137,251 (196,084) (462,000)
$2,157,500 $1,340,000 $2,415,000
The total provision for income taxes varied from the U.S. federal
statutory rate for the following reasons:
1995 1994 1993
Statutory federal income tax rate... 34.0% 34.0% 34.0%
Tax credits......................... (1.3) (1.6) (1.4)
State income tax, net of federal tax benefit 2.6 1.9 2.2
Change in valuation allowance....... (3.8)
Other............................... 1.0 (1.7) .9
Effective tax rate.................. 32.5% 32.6% 35.7%
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:
OCTOBER 29, OCTOBER 30,
1995 1994
Deferred tax liabilities:
Depreciation............................... $(4,914,903) $(4,584,441)
Inventory valuation........................ (15,103) (31,487)
Total deferred tax liabilities.......... (4,930,006) (4,615,928)
12
Deferred tax assets:
Deferred compensation......... 835,761 744,597
Receivable allowance.......... 368,380 368,380
Investment and advances to investee company.. 250,442
Net operating loss carryforwards............. 132,522 166,944
Other........................................ 210,347 124,684
Total deferred tax assets.................... 1,547,010 1,655,047
Valuation allowance for deferred tax assets.. (132,522) (417,386)
Net deferred tax assets...................... 1,414,488 1,237,661
Net deferred liabilities.....................$(3,515,518) $(3,378,267)
Deferred tax liability.......................$(4,094,245) $(3,871,331)
Deferred tax assets.......................... 578,727 493,064
Net deferred tax liability...................$(3,515,518) $(3,378,267)
The valuation allowance was reduced in 1995 by $250,442 as a result of
the collection of advances to and sale of investment in the investee company.
At October 29, 1995, the Corporation has net operating tax loss
carryforwards of approximately $2,600,000 for state income tax purposes that
expire in years 1996 through 2000.
Deferred income taxes result from timing differences in the recognition of
income and expenses for financial reporting and tax purposes. The sources of
these differences and the net tax provisions for the year ended October 31, 1993
are:
DEFERRED METHOD
1993
Depreciation........................ $ (311,126)
Pension Expense..................... 40,058
Deferred Compensation............... (167,789)
Other............................... (23,143)
$ (462,000)
The Corporation made income tax payments of $2,520,000, $2,155,000, and
$2,324,000, in 1995, 1994, and 1993, respectively.
NOTE 8. CONCENTRATION OF CREDIT RISK
Pulaski Furniture manufactures medium-priced bedroom, dining room and
occasional furniture for a variety of customers in the retail furniture
industry. Ridgeway Clock manufactures grandfather, mantel and wall clocks.
Craftique produces solid mahogany bedroom, dining room and occasional
furniture. Substantially all of the Corporation's accounts receivable are due
from companies in the retail furniture industry. Management periodically
performs credit evaluations of its customers and generally does not require
collateral.
NOTE 9. OTHER INCOME
Other income for 1995 includes a gain of $327,986 for the sale of the
Corporation's investment in the investee company on October 6, 1995.
In August, 1994, the contents of one of the Corporation's finished goods
warehouses was damaged by a storm. The Corporation has received insurance
proceeds equal to the wholesale value of the inventory destroyed. Accordingly, a
gain of $691,000 on the insurance settlement is included in other income on the
1994 Consolidated Statements of Income.
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
Board of Directors and Stockholders
Pulaski Furniture Corporation
We have audited the accompanying consolidated balance sheets of Pulaski
Furniture Corporation and Subsidiaries as of October 29, 1995 and October 30,
1994, and the related consolidated statements of income and retained earnings
and cash flows for each of the three years in the period ended October 29, 1995.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Pulaski
Furniture Corporation and Subsidiaries at October 29, 1995 and October 30, 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended October 29, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 7 to the financial statements, effective November 1,
1993, the Corporation changed its method of accounting for income taxes.
/s/ Ernest & Young LLP
Ernest & Young LLP
Winston-Salem, North Carolina
November 22, 1995
[Inside Back Cover]
[PULASKI LOGO]
[ACCENTRICS LOGO]
[CRAFTIQUE LOGO]
[RIDGEWAY LOGO]
PLANTS LOCATED AT PULASKI, MARTINSVILLE, DUBLIN, RIDGEWAY AND CHRISTIANSBURG,
VIRGINIA AND MEBANE, NORTH CAROLINA
[PHOTO]
Ridgeway's Croquet Floor Clock features a triple chime movement, brass finish
dial with blue moon, Croquet emblem embossed on a polished brass bob and beveled
glass. Beautifully carved foliate posts accent the Newport Cherry finish.
Exhibit 21
Subsidiaries of Registrant
Jurisdiction
Name of Incorporation
1. Craftique, Inc. North Carolina
2. Pulaski Foreign Sales Corporation, Inc. U.S. Virgin Islands
Consent of Independent Auditors
We consent to the incorporation by reference in Post Effective Amendment No. 1
to Registration Statement Number 2-75876 on Form S-8 dated January 20, 1983, of
our report dated November 22, 1995 with respect to the consolidated financial
statements and schedule included in the Annual Report on Form 10-K of Pulaski
Furniture Corporation for the year ended October 29, 1995.
ERNST & YOUNG LLP
Winston-Salem, North Carolina
January 24, 1996
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