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 November 3, 1996
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: (540) 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 20, 1996: $34,912,656.**
Number of shares of Common Stock outstanding as of December 20, 1996: 2,837,552.
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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 20, 1996, as reported by The Wall Street Journal.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Pulaski Furniture Corporation's 1996 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 1997 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). 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 provides 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. The
Company believes that all 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 1996, 1995 and 1994, export
sales by the Company aggregated approximately $10,700,000, $10,046,000 and
$8,770,000, respectively.
The sales force for the Company's products, other than its Craftique
products, is organized into two 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.
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
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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 $368,786.
As of November 3, 1996, the Company's unfilled customers' orders for
furniture and clocks totalled approximately $23.3 million (compared with
approximately $26 million as of October 29, 1995). The decrease in the backlog
of unfilled orders since October 29, 1995 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 1996 fiscal year
during the 1997 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 1996 net sales, the Company ranks among the 25 largest furniture
manufacturers in the United States.
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.
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Item 2. Properties
General
The Company owns all of its manufacturing and warehouse facilities,
except 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 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.
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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. During 1996 construction of a 4,400
square foot addition was completed, increasing the total square footage of the
Dublin plant to 40,400 square feet.
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 approximately 326,000
square feet of production, warehouse and office space located on approximately
79.5 acres.
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Craftique, Inc. Plant
The Company's Craftique plant, located in Mebane, North Carolina,
manufactures solid mahogany bedroom, dining room and occasional furniture. The
Craftique plant contains approximately 42,000 square feet of production and
office space located on approximately thirty-one acres.
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 65 1967 Chairman of the Board and
Chief Executive Officer
John G. Wampler 38 1988 President and Chief
Operating Officer
Ira S. Crawford 59 1978 Vice President -
Administration, Secretary
Jason A. Gibbs 63 1969 Vice President - Chief
Financial Officer,
Treasurer and Assistant
Secretary
James H. Kelly 54 1971 Vice President - Product
Development
Albert J. Kincel 48 1996 Vice President - Chief
Information Officer
Randolph V. Chrisley 48 1983 Vice President - Sales
James W. Stout 51 1996 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. Stout and Mr. Kincel, has been an officer of the Company for the last
five years. From January 1995 to January 1996, when he joined the Company, Mr.
Kincel was employed with Electronic Data Systems, Inc. (EDS) as a Manufacturing
Specialist and was responsible for the design and implementation of technical
solutions for major manufacturing accounts. During his entire tenure at EDS, Mr.
Kincel acted as the account manager responsible for all information systems of
the Company. Prior to joining EDS, Mr. Kincel was the founder and President of
A.J. and A.J. Co., a computer/business consulting firm. Mr. Stout has been with
the Corporation since 1972, starting as a trainee. In 1975, he was promoted to
the position of Plant Manager of our Pulaski Plant and held that position until
being named Vice President of Manufacturing in 1996. 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 1996 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 1996 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 1996 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 15 of the
Company's 1996 Annual Report to Security Holders are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Company's 1997 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 1997 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 1997 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 1997 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 1996 Annual Report to Security Holders, are incorporated herein by reference
in Item 8:
Consolidated balance sheets -- November 3, 1996 and October
29, 1995
Consolidated statements of income and retained earnings - -
Years ended November 3, 1996, October 29, 1995 and October 30,
1994
Consolidated statements of cash flows -- Years ended
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November 3, 1996, October 29, 1995 and October 30, 1994
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
<TABLE>
<CAPTION>
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COL. A COL. B COL. C COL. D COL. E
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ADDITIONS
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Balance at Beginning (1) (2) Balance at End
Description of Period Charged to Costs Charged to Other Deductions - of Period
and Expenses Accounts - Describe Describe
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<S> <C>
Year ended November 3, 1996:
Deducted from asset accounts
Allowance for doubtful accounts $1,000,000 $125,217 $225,217 (1) $900,000
==================== ================ ============= ==============
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
==================== ================ ============= ==============
</TABLE>
(1) Uncollectible accounts written off, net of recoveries
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 (10)
4.21 Amendment to Promissory Note made by the Company to
Wachovia Bank of North Carolina, N.A., dated July 25,
1994 (10)
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 1996 Annual Report to
Security Holders (3)
20 Pulaski Furniture Corporation's Proxy Statement for
the Annual Meeting of Stockholders to be held
February 14, 1997
21 Subsidiaries of Registrant
23 Consent of Ernst & Young LLP
27 Financial Data Schedule (11)
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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 November 3, 1996, 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
(10) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended October 29, 1995
(11) The Electronic Data Schedule is submitted with the electronic
filing of the Company's Annual Report on Form 10-K but shall
not be deemed to be "filed" as part of this report
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(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 13, 1997 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 13, 1997 By /s/ Bernard C. Wampler
-------------------------------
Bernard C. Wampler,
Director, Chairman of the Board
and Chief Executive Officer
Date: January 13, 1997 By /s/ John W. Stanley
-------------------------------
John W. Stanley,
Director
Date: January 13, 1997 By /s/ Harry J.G. vanBeek
-------------------------------
Harry J.G. vanBeek,
Director
Date: January 13, 1997 By /s/ John D. Munford
-------------------------------
John D. Munford,
Director
Date: January 13, 1997 By /s/ John G. Wampler
-------------------------------
John G. Wampler,
Director
Date: January 13, 1997 By /s/ Harry H. Warner
-------------------------------
Harry H. Warner,
Director
Date: January 13, 1997 By /s/ Hugh V. White, Jr.
-------------------------------
Hugh V. White, Jr.,
Director
Date: January 13, 1997 By /s/ Jason A. Gibbs
-------------------------------
Jason A. Gibbs,
Treasurer, Controller, and
Assistant Secretary (Principal
Financial Officer)
<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 1996 Annual Report to
Security Holders..........................................
20 Pulaski Furniture Corporation's Proxy Statement for the
Annual Meeting of Stockholders to be held February 14, 1997
21 Subsidiaries of Registrant*...............................
23 Consent of Ernst & Young LLP*.............................
27 Financial Data Schedule...................................
- --------
*Filed with this Report on Form 10-K; all other exhibits are herein incorporated
by reference
EXHIBIT 11
PULASKI FURNITURE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------------
November 3, October 29, October 30,
1996 1995 1994
-------------------- ------------------- --------------------
<S> <C>
PRIMARY
Average shares outstanding 2,838,836 2,841,426 2,853,711
Dilutive stock options - based on
treasury stock method using
average market prices 4,164 8,255 24,150
Dilutive shares under Employee
Stock Purchase Plan - based
on average shares issuable 15,303 13,447 10,801
-------------------- ------------------- --------------------
TOTAL 2,858,303 2,863,128 2,888,662
==================== =================== ====================
Net income before cumulative
effect of accounting change $4,308,067 $4,475,171 $2,772,402
Cumulative effect of accounting change 396,092
-------------------- ------------------- --------------------
Net income after cumulative
effect of accounting change $4,308,067 $4,475,171 $3,168,494
-------------------- ------------------- --------------------
Net income per share:
Before cumulative effect $1.51 $1.56 $0.96
Cumulative effect of accounting change 0.14
-------------------- ------------------- --------------------
After cumulative effect $1.51 $1.56 $1.10
==================== =================== ====================
FULLY DILUTED
Average shares outstanding 2,838,836 2,841,426 2,853,711
Dilutive stock options - based on
treasury stock method using
the greater of year-end market
value or average market value 4,164 8,255 24,150
Dilutive shares under Employee
Stock Purchase Plan - based
on average shares issuable 15,303 13,447 10,801
---------------- ------------------- --------------------
TOTAL 2,858,303 2,863,128 2,888,662
---------------- ------------------- --------------------
Net income per share:
Before cumulative effect $1.51 $1.56 $0.96
Cumulative effect of accounting change 0.14
-------------- ------------------- --------------------
After cumulative effect $1.51 $1.56 $1.10
============== =================== ====================
</TABLE>
Exhibit 13
Annual Report
Message to Stockholders
We are pleased to report a year of improvement operations in 1996. This year
proved to be another year of formidable challenges to the furniture industry's
ability to make a profit. Key indicators such as stable interest rates and
improved strength in the housing market should have resulted in a stronger year
for our industry, but consumer with a high debt load found other ways to spend
their money than on big ticket items like furniture. Retail sales of furniture
were soft throughout the year.
With the challenge of the marketplace, your Corporation's sales decreased from
$172,842,000 in 1995 to $166,646,000 in 1996. Net income decreased from
$4,475,000 in 1995 to $4,308,000 in 1996, but 1995 included a one time gain of
$327,986 on the sale of the Corporation's holdings in Triwood, Inc. Net income
from continuing operations increased 3 cents per share in 1996 versus 1995. We
thank our worldwide network of customers, employees, suppliers, and partners for
their dedicated work in 1996 which allowed your Corporation to achieve these
results.
We understand that Pulaski Furniture must excel in the use of technology in
order to meet and exceed the expectations of its customers. Information systems
must provide timely and accurate data in order for management to react properly
to an ever changing market. Ninety-six was a year of new directions for your
Corporation's information systems. We successfully made a transition from an
environment of mini-computers and proprietary, centralized programming to client
server network. The new network can more readily employ software from the best
providers such as Microsoft. It allows the corporation to better utilize the
creativeness and ability of its employees through a network of personal
computers. To this end, we complete over two thousand hours of computer training
in 1996.
Sales and profits continued to grow in the import division in 1996. Offshore
sourcing, particularly in Eastern Asia, will provide a larger part of our
product mix. Your Corporation has developed expertise in this area and plans to
fully exploit this growing opportunity in the future.
Clifford A. Cutchins, III, Retired from the Board of Directors in February after
24 years of service. His extensive knowledge of banking and sound business
practices will be missed. We thank him for his many years of wise counsel.
The Board of Directors, at December 13, 1996 meeting, increased the dividend to
17 cents per share for the first quarter of 1997. The increase reflected the
confidence in our operating plans for the future. Also, effective January 1,
1997, the Board elected Albert J. Kincel the Vice President/Chief Information
Officer, and elected James W. Stout the Vice President of Manufacturing. They
will be strong contributors to our senior management team.
It is difficult to make forecasts for 1997, but your Corporation is well
positioned to take advantage of market trends. We are an innovative company that
can bring best selling products to the marketplace quickly. Our products are in
good niches such as the curio cabinet business, and we are able to augment
domestic production with the extensive global sourcing program. We look forward
to the challenge of 1997.
We thank our stockholders and Board of Directors for their continued confidence
and support.
Sincerely,
/s/ Bernard C. Wampler
Chairman and CEO
/s/ John G. Wampler
President and COO
[PICTURE]
<PAGE>
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 also has an import division that supplements its
product mix with furniture and accessories.
At the end of 1996 fiscal year, 2,783,579 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 1996, the Corporation believes that Wheat First Securities,
Inc., of Richmond, Virginia, was the most active market maker for the stock. The
Corporation had approximately 900 stockholders of record as of November 3, 1996.
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
FISCAL 1996 DIVIDENDS
QUARTER HIGH LOW DECLARED 1996
First... $19.75 $16.00 $0.16
Second... 20.75 15.25 $0.16
Third... 19.50 15.50 $0.16
Fourth... 17.375 15.25 $0.16
FISCAL 1995 DIVIDENDS
QUARTER HIGH LOW DECLARED 1995
First... $20.50 $16.00 $0.15
Second... 21.375 17.50 $0.15
Third... 20.00 17.00 $0.15
Fourth... 18.50 16.00 $0.15
[PICTURE] [PICTURE]
[Caption: 38214-ISLAND WORK STATION Kitchen Accents is an enticing new
collection of casual furniture for the kitchen area including display/storage
cabinets, bakers racks, butcher blocks, desks, shelves, wine carts, casual
dining and more. Gourmet styling in assorted woods, decorative tile, metal and
wicker. Shown here is an island work station featuring a slide out maple butcher
block with storage, food preparations surface, and pull through drawers.]
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
YEARS ENDED
NOVEMBER 3, OCTOBER 29, OCTOBER 30, OCTOBER 31, NOVEMBER 1,
1996 1995 1994 1993 1992
<S> <C>
Net Sales $166,646,062 $172,842,105 $148,698,029 $137,650,721 $123,918,019
Net Income 4,308,067 4,475,171 3,168,494 4,352,176 2,599,059
Earnings Per Share 1.51 1.56 1.10 1.53 0.91
Total Assets 124,335,635 118,675,813 112,750,099 99,336,183 91,075,577
Long-Term Debt 27,851,222 29,354,804 31,398,173 20,357,425 22,369,346
Cash Dividends Per Share 0.64 0.60 0.56 0.52 0.52
Book Value Per Share 20.72 19.78 18.69 18.29 17.38
Net Working Capital 52,771,424 51,787,988 47,203,234 44,291,637 43,682,801
Current Ratio 2.6 2.9 3.1 3.1 3.9
Quarterly Results of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of operations
for the fiscal years ended November 3, 1996 and October 29, 1995. (dollars in
thousands, except earnings per share).
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter (53 Weeks in
(12 Weeks in (12 Weeks in (12 Weeks in (17 Weeks in 1996 and 52
1996 and 1995) 1996 and 1995) 1996 and 1995) 1996 and 16 Weeks 1995)
Weeks in 1995)
<S> <C>
November 3, 1996
Net sales $36,585 $39,905 $30,173 $59,983 $166, 646
Gross Profit 7,114 7,475 5,329 14,788 34,706
Net Income 914 724 59 2,611 4,308
Earnings per share 0.32 0.25 0.02 0.92 1.51
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
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operation
1996 Compared to 1995
The increase in income before taxes of $106,396 from fiscal 1995 to fiscal 1996
is attributable mostly to the decrease in the cost of sales percentage and to a
decrease in other deductions, specifically, interest expense and bad debt
expense.
Net sales decreased 3.6% or $6,196,043 from fiscal 1995 to fiscal 1996. The
Corporation shipped approximately 4% fewer units in 1996 at an average unit
price of approximately 1.0% higher. Export sales for fiscal 1995 and 1996 were
approximately 6% of net sales.
The decrease in cost of products sold as a percentage of net sales in fiscal
1996 compared to fiscal 1995 was primarily due to decreases in costs of
materials used, factory labor, factory supplies and repairs. The decreases
primarily reflect more efficient performance in the operating divisions in the
1996 fiscal year.
The increase in selling, general and administrative expenses as a percentage of
net sales in fiscal 1996 from fiscal 1995, was due primarily to increases in
compensation expenses, advertising and marketing expenses and the cost of
employee insurance. The increase in advertising and marketing expenses was
directly related to the promotion and marketing of the Corporation's products.
The decrease in interest expense in fiscal 1996 from fiscal 1995 resulted from
lower average outstanding debt and lower interest rates. The Corporation's
average amount of outstanding indebtedness from borrowed money was $39,077,050
in fiscal 1996 and $41,675,218 in fiscal 1995. The weighted average borrowing
rates for the three fiscal years of 1994, 1995 and 1996 were 4.77%, 6.44% and
5.68% respectively. The weighted averages excluding the interest rate swap costs
would have been $3.74%, 5.94% and 5.41%. The interest rate swap costs increased
interest expense by $389,925, $206,595 and $103,992 in fiscal 1994, 1995 and
1996 respectively. The interest rate Conversion Agreement terminated April 15,
1996.
1995 Compared to 1994
The improvement in earnings from 1994 to 1995 and in the fourth quarter of 1995
was primarily attributed 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 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, 1995 were 5.13%, 4.77%
and 6.44% respectively. The weighted averages excluding the interest rate swap
costs wold 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 in fiscal 1995 and $10,000 in
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.
Miscellaneous other income for fiscal 1995 included a gain of $691,000 from
insurance proceeds related to storm damage of the contents of a finished goods
warehouse.
<PAGE>
Capital Resources, Liquidity and Effects of Inflation
Net Cash from Operating Activities for the year totaled approximately
$5,317,000. Trade receivables increased approximately $3,799,000 and
Management's Discussion and Analysis of Financial Condition and Results of
Operation 4 inventories increased approximately $1,370,000. These increases were
the primary reasons for the additional short-term borrowings during the year.
The Corporation has short-term lines of credit totaling $16,000,000 with
interest not to exceed prime rates. At November 3, 1996, which was approximately
the middle of the Corporation's heaviest shipping season, the Corporation had
$16,000,000 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 1996 by approximately $202,000, the effect of which decreased net
income by approximately $140,000 or 5 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
1996 was approximately $5,108,000.
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 decrease in sales in the fourth quarter ended November 3, 1996, was due
primarily to the decreased demand for the Corporation's furniture. The higher
pre-tax income was due primarily to better performance in the operating
divisions in the 1996 fiscal quarter. The higher income tax was primarily the
result of the expiration of the Target Jobs Tax Credits in 1996. The 1996 fiscal
year contained 53 weeks, whereby the 1995 fiscal year contained 52 weeks.
The Board of Directors at its December 13, 1996, meeting declared a dividend of
17 cents per common share payable on January 2, 1997 to stockholders of record
December 20, 1996, and authorized the purchase by the Corporation of up to
200,000 shares of its common stock presently outstanding.
[Picture]
[Caption: 1822-DOUGLAS POSTER BED Craftique Furniture's newest collection of
fine furniture, the Thomas Day Collection, features reproductions of classic
mahogany pieces and designs created by free, black cabinetmaker and master
mahogany craftsman Thomas Day in 19th Century North Carolina. The styling
ranges from Empire to Federal, and includes selected pieces of bedroom dining
room and occasional. One of the most outstanding pieces in the collection is
the heirloom four-poster bed now in the home of the great grandson of Senator
Stephan A. Douglas, famous for the Lincoln/Douglas debates.]
<PAGE>
<PAGE>
Consolidated Balance Sheets
................................................................................
<TABLE>
<CAPTION>
NOVEMBER 3, OCTOBER 29,
1996 1995
------------ ------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 2,396,850 $ 1,721,546
Short-term investments............................................................ 11,015 14,615
Trade receivables, less allowance of
$900,000 in 1996 and $1,000,000 in 1995........................................ 39,473,038 35,674,329
Inventories:
Finished furniture............................................................. 24,130,243 22,936,830
Furniture in process........................................................... 4,877,427 4,422,309
Lumber and purchased veneers................................................... 5,036,865 5,260,981
Manufacturing supplies......................................................... 7,733,909 7,788,751
------------ ------------
41,778,444 40,408,871
Prepaid expenses.................................................................. 654,812 407,186
Deferred income taxes............................................................. 599,835 578,727
------------ ------------
TOTAL CURRENT ASSETS 84,913,994 78,805,274
PROPERTY, PLANT AND EQUIPMENT:
Land.............................................................................. 620,287 640,979
Buildings......................................................................... 32,485,937 31,179,684
Machinery and equipment........................................................... 51,367,337 49,029,973
Furniture, fixtures and office equipment.......................................... 4,045,138 3,510,526
Vehicles.......................................................................... 667,804 651,732
------------ ------------
89,186,503 85,012,894
Less allowances for depreciation.................................................. 50,846,353 46,118,654
------------ ------------
38,340,150 38,894,240
OTHER ASSETS:
Cash surrender value of life insurance, less loans of
$766,100 in 1996 and $728,408 in 1995.......................................... 1,081,491 976,299
------------ ------------
$124,335,635 $118,675,813
------------ ------------
------------ ------------
</TABLE>
6
<PAGE>
................................................................................
<TABLE>
<CAPTION>
NOVEMBER 3, OCTOBER 29,
1996 1995
------------ ------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses:
Accounts payable............................................................... $ 9,379,508 $ 9,764,380
Wages and commissions.......................................................... 2,731,462 2,213,933
Payroll taxes and taxes withheld from employees................................ 682,915 733,928
------------ ------------
12,793,885 12,712,241
Notes Payable..................................................................... 16,000,000 12,000,000
Current portion of long-term debt................................................. 2,000,000 2,047,618
Federal and state income taxes.................................................... 1,348,685 257,427
------------ ------------
TOTAL CURRENT LIABILITIES 32,142,570 27,017,286
DEFERRED COMPENSATION............................................................... 2,518,579 2,268,749
DEFERRED INCOME TAXES............................................................... 4,144,832 4,094,245
LONG-TERM DEBT...................................................................... 27,851,222 29,354,804
STOCKHOLDERS' EQUITY:
Common Stock (authorized 10,000,000 shares, issued shares,
2,783,579 in 1996 and 2,827,882 in 1995)....................................... 5,031,402 5,827,093
Retained earnings................................................................. 52,804,294 50,296,885
Unamortized restricted stock...................................................... (157,264) (183,249)
------------ ------------
Total stockholders' equity........................................................ 57,678,432 55,940,729
------------ ------------
$124,335,635 $118,675,813
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
Consolidated Statements of Income and Retained Earnings
................................................................................
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------------
NOVEMBER 3, OCTOBER 29, OCTOBER 30,
1996 1995 1994
------------ ------------ ------------
<S> <C>
Net sales........................................................ $166,646,062 $172,842,105 $148,698,029
Cost of products sold............................................ 131,939,252 138,845,650 121,397,370
------------ ------------ ------------
34,706,810 33,996,455 27,300,659
Selling, general and administrative expenses..................... 25,776,676 25,122,493 22,223,313
------------ ------------ ------------
8,930,134 8,873,962 5,077,346
Other income:
Interest....................................................... 36,692 27,940 134,866
Miscellaneous.................................................. 158,059 600,559 698,291
------------ ------------ ------------
194,751 628,499 833,157
------------ ------------ ------------
9,124,885 9,502,461 5,910,503
Other deductions:
Interest expense............................................... 2,343,123 2,738,021 1,748,330
Miscellaneous.................................................. 42,695 68,613 39,693
Proportionate share of loss in investee company................ 63,156 10,078
------------ ------------ ------------
2,385,818 2,869,790 1,798,101
------------ ------------ ------------
Income before income taxes and cumulative effect
of accounting change........................................... 6,739,067 6,632,671 4,112,402
Income taxes..................................................... 2,431,000 2,157,500 1,340,000
------------ ------------ ------------
Income before cumulative effect of accounting change............. 4,308,067 4,475,171 2,772,402
Cumulative effect of accounting change........................... 396,092
------------ ------------ ------------
Net income....................................................... 4,308,067 4,475,171 3,168,494
Retained earnings at beginning of year........................... 50,296,885 47,529,123 45,959,916
Cash dividends (per share: 1996-$.64
1995-$.60; 1994-$.56).......................................... (1,800,658) (1,707,409) (1,599,287)
------------ ------------ ------------
Retained earnings at end of year................................. $ 52,804,294 $ 50,296,885 $ 47,529,123
------------ ------------ ------------
------------ ------------ ------------
EARNINGS PER SHARE
Income before cumulative effect of accounting change............. $ 1.51 $ 1.56 $ 0.96
Cumulative effect of accounting change........................... $ 0.14
------------ ------------ ------------
Net income....................................................... $ 1.51 $ 1.56 $ 1.10
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE>
Consolidated Statements of Cash Flows
................................................................................
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
NOVEMBER 3, OCTOBER 29, OCTOBER 30,
1996 1995 1994
----------- ----------- ------------
<S> <C>
OPERATING ACTIVITIES
Net income............................................................... $4,308,067 $4,475,171 $ 3,168,494
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for depreciation and amortization........................... 5,108,000 5,242,754 4,495,436
Provision for deferred income taxes................................... 29,479 137,251 (196,084)
Provision for deferred compensation................................... 249,830 330,826 139,470
Proportionate share of loss in investee company....................... 63,156 10,078
Gain on sale of investee company...................................... (327,986)
Loss on sale of property, plant and equipment......................... 7,721 28,370 13,636
Cumulative effect of accounting change................................ (396,092)
Changes in operating assets and liabilities:
Increase in trade receivables......................................... (3,798,709) (2,246,388) (2,597,950)
Increase in inventories............................................... (1,369,573) (6,465,735) (3,165,285)
Increase in accounts payable and accrued expenses..................... 81,644 1,194,035 661,436
Increase (decrease) in federal income taxes payable................... 1,091,258 (499,266) (618,516)
Other................................................................. (390,773) 148,267 (54,636)
----------- ----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,316,944 2,080,455 1,459,987
INVESTING ACTIVITIES
Purchases of property, plant and equipment............................... (4,215,586) (2,950,513) (13,554,857)
Proceeds from sale of property, plant and equipment...................... 14,340 20,772 27,246
Proceeds from sale of investee stock and
collection of advances................................................ 1,500,000
Sale of investments...................................................... 3,600 50,000 142,000
----------- ----------- ------------
NET CASH USED IN INVESTING ACTIVITIES (4,197,646) (1,379,741) (13,385,611)
FINANCING ACTIVITIES
Issuance of common stock................................................. 440,722 422,632 590,278
Repurchase of common stock............................................... (1,570,813) (679,750) (656,891)
Payment of dividends..................................................... (1,800,658) (1,707,409) (1,599,287)
Proceeds from long-term debt............................................. 500,000 13,000,000
Payments on long-term debt............................................... (2,051,200) (2,000,000) (2,001,203)
Increase in notes payable................................................ 4,000,000 4,000,000 1,000,000
Other.................................................................... 37,955 (102,963) (16,658)
----------- ----------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (443,994) (67,490) 10,316,239
----------- ----------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 675,304 633,224 (1,609,385)
Cash and cash equivalents at beginning of year........................... 1,721,546 1,088,322 2,697,707
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $2,396,850 $1,721,546 $ 1,088,322
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
9
<PAGE>
Notes to Consolidated Financial Statements
................................................................................
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND CREDIT RISK: Pulaski Furniture Corporation 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.
FISCAL YEAR: The Corporation uses a 52-53 week year. The fiscal year ended
November 3, 1996, includes 53 weeks. All other 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 was 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS: At November 3, 1996, the carrying amounts
of the Corporation's financial instruments, including cash and cash equivalents,
short-term investments, trade receivables and accounts payable, approximated
their fair values. Management believes that the estimated fair value of the
Corporation's long-term debt approximated its carrying value at November 3,
1996. Fair value is determined based on expected future cash flows, discounted
at market interest rates, and other appropriate valuation methodologies.
STOCK-BASED COMPENSATION: 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 adoption of SFAS 123 is not
expected to have significant impact on the Corporation's financial position or
results of operations.
LONG-LIVED ASSETS: In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which the Corporation will adopt prospectively as required in fiscal 1997.
Pursuant to this Statement, companies are required to investigate potential
impairments of long-lived assets, certain identifiable intangibles and
associated goodwill, on an exception basis, when there is evidence that events
or changes in circumstances have made the recovery of an asset's carrying value
unlikely. An impairment loss would be recognized when the sum of the
undiscounted future net cash flows is less than the carrying amount of the
asset. The adoption of SFAS 121 is not expected to have significant impact on
the Corporation's financial position or results of operations.
USE OF ESTIMATES: The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
10
<PAGE>
................................................................................
reporting period. Actual results could differ from those estimates.
ADVERTISING COSTS: The Corporation expenses advertising costs when the
liabilities arise.
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 year financial
statements to conform to the 1996 presentation.
NOTE 2. INVENTORIES
Current cost of the LIFO inventories exceeded the carrying amount by
approximately $15,054,000 and $14,852,000 at November 3, 1996 and October 29,
1995, respectively.
NOTE 3. FINANCING ARRANGEMENTS AND COMMITMENTS
Long-term debt consists of the following:
NOVEMBER 3, OCTOBER 29,
1996 1995
----------- -----------
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
Note payable to bank, due in
quarterly installments of
$428,572 through December,
2002............................. 10,285,714 12,000,000
Note payable at 3% interest to the
Town of Pulaski, Virginia, due in
monthly installments of $4,831
through October 1, 2006,
collateralized by deed of
trust............................ 496,419 --
Notes payable to banks, due in
varying quarterly installments
through October, 2000............ 69,089 402,422
----------- -----------
29,851,222 31,402,422
Less current maturities............ 2,000,000 2,047,618
----------- -----------
$27,851,222 $29,354,804
----------- -----------
----------- -----------
Future maturities of long-term debt at November 3, 1996 are as follows:
1997.............................................. $ 2,000,000
1998.............................................. 10,759,000*
1999.............................................. 2,000,000
2000.............................................. 2,000,000
2001.............................................. 2,000,000
2002 and thereafter............................... 11,092,222
-----------
$29,851,222
-----------
-----------
* 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 4.12% during 1996. 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 5.28% in 1996) 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 $10,285,714 at November 3, 1996. The note bears interest at a variable
rate not to exceed LIBOR plus 3/8% (averaged 6.22% in 1996). 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 6.73%.
To manage the interest rate exposure under its long-term obligations, the
Corporation 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 made payments at a fixed rate (8.87%) and received payments at
variable rates based on LIBOR, the net of which is included as an adjustment to
interest expense. The swap agreement expired in 1996 and was not renewed. The
weighted average variable rate received by the Corporation was 1.30%, 2.58%, and
4.00% for 1996, 1995 and 1994,
11
<PAGE>
................................................................................
respectively. The increase to interest expense totaled $103,992, $206,595 and
$389,925 for 1996, 1995 and 1994, 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 November 3, 1996. At November 3, 1996, retained earnings
available for payment of dividends amounted to approximately $25,536,000.
Under short term line of credit arrangements, the Corporation may borrow up to
$16 million at November 3, 1996 which would bear interest at rates not to exceed
the prime rate. At November 3, 1996, the Corporation had $16 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
$4.7 million outstanding at November 3, 1996.
Interest paid in 1996, 1995, and 1994 was $2,386,425, $2,715,441, and
$1,691,686, respectively. Of these amounts, $104,399 was capitalized in 1994.
NOTE 4. COMMON STOCK
Changes in Common Stock for the two years in the period ended 1996 were as
follows:
COMMON STOCK
SHARES AMOUNT
--------- -----------
BALANCE AT OCTOBER 30, 1994.......... 2,849,159 $ 6,084,210
Shares issued under Salaried
Employee Stock Purchase Plan..... 19,923 405,633
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 $ 5,827,093
Shares issued under Salaried
Employee Stock Purchase Plan..... 25,297 423,472
Common Stock acquired and
retired.......................... (91,500) (1,570,813)
Restricted shares issued under
Stock Incentive Plan............. 20,900 334,400
Shares issued under Stock Incentive
Plan for Non-Employee
Directors........................ 1,000 17,250
--------- -----------
BALANCE AT NOVEMBER 3, 1996.......... 2,783,579 $ 5,031,402
--------- -----------
--------- -----------
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 1996, 1995, and 1994 related to the Plan was $198,458,
$179,003, and $171,554, respectively. At November 3, 1996, 29,473 shares are to
be issued pursuant to the Plan's provisions, after which there will remain 6,693
shares available for purchase in the future.
12
<PAGE>
................................................................................
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 November 3, 1996, outstanding options and SARs under the Stock Incentive Plan
were as follows:
NUMBER OF
SHARES AND OPTION PRICE OR
SARS UNDER FAIR MARKET VALUE
DATE GRANTED OPTION AT GRANT 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 November 3, 1996 are exercisable. All shares issued
upon exercise of options during the three years ended November 3, 1996 related
to options granted between December 6, 1986 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
$360,385, $166,560 and $291,321 was recorded in fiscal 1996, 1995 and 1994
respectively. At November 3, 1996, there are 135,100 shares available for future
issuance.
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:
NOVEMBER 3, OCTOBER 29,
1996 1995
----------- -----------
Actuarial present value of benefit
obligation:
Accumulated benefit obligation,
including vested benefits of
$8,990,455 and $8,689,660 in 1996
and 1995, respectively........... $ 9,181,517 $ 8,852,453
----------- -----------
----------- -----------
Projected benefit obligation for
service rendered to date......... $12,477,624 $11,964,876
Plan assets at fair value.......... 13,171,961 11,801,453
----------- -----------
Projected benefit obligation less
(greater) than plan assets....... 694,337 (163,423)
Unrecognized net loss (gain) from
past experience different from
that assumed..................... (628,607) 190,308
Unrecognized net asset at November
2, 1987.......................... (300,548) (350,639)
----------- -----------
Net pension liability recognized
in balance sheet................. $ (234,818) $ (323,754)
----------- -----------
----------- -----------
Net pension cost included the following components:
1996 1995 1994
----------- ----------- ---------
Service cost............ $ 563,784 $ 513,188 $ 458,138
Interest cost on
projected benefit
obligation............ 879,694 814,413 690,469
Actual gain on plan
assets................ (1,227,984) (1,948,326) (86,444)
Net amortization and
deferral.............. 295,855 1,104,832 (699,131)
----------- ----------- ---------
Net periodic pension
cost.................. $ 511,349 $ 484,107 $ 363,032
----------- ----------- ---------
----------- ----------- ---------
Assumptions used in accounting for the pension plan were:
1996 1995 1994
------ ------ ------
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 97.5% of plan assets at November 3, 1996 are invested in listed
stocks and bonds, and the remaining plan assets are held in
13
<PAGE>
................................................................................
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 1996, 1995, and
1994 related to the SERP was $306,482, $305,652, and $247,173, respectively. At
November 3, 1996, the projected benefit obligation for this plan totaled
$2,697,031, of which an unrecognized net obligation of $148,939 and unamortized
prior service cost of $330,562 are subject to later amortization. The remaining
$2,213,848 is an additional pension liability recognized in the balance sheet at
November 3, 1996.
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
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.
As permitted by SFAS 109, the Corporation 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 provision for income taxes consisted of the following:
1996 1995 1994
---------- ---------- ----------
Current:
Federal............... $2,150,912 $1,871,828 $1,495,441
Tax credits........... (86,583) (97,467)
---------- ---------- ----------
2,150,912 1,785,245 1,397,974
State................. 250,609 235,004 138,110
---------- ---------- ----------
2,401,521 2,020,249 1,536,084
Deferred:
Federal............... 1,088 108,755 (175,974)
State................. 28,391 28,496 (20,110)
---------- ---------- ----------
29,479 137,251 (196,084)
---------- ---------- ----------
$2,431,000 $2,157,500 $1,340,000
---------- ---------- ----------
---------- ---------- ----------
The total provision for income taxes varied from the U.S. federal statutory rate
for the following reasons:
1996 1995 1994
----- ----- -----
Statutory federal income tax rate....... 34.0 % 34.0 % 34.0 %
Tax credits............................. (1.3) (1.6)
State income tax, net of federal tax
benefit............................... 2.7 2.6 1.9
Change in valuation allowance........... (3.8)
Other................................... (.6) 1.0 (1.7)
----- ----- -----
Effective tax rate...................... 36.1 % 32.5 % 32.6 %
----- ----- -----
----- ----- -----
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:
NOVEMBER 3, OCTOBER 29, OCTOBER 30,
1996 1995 1994
----------- ----------- -----------
Deferred tax
liabilities:
Depreciation......... $(5,093,334) $(4,914,903) $(4,584,441)
Inventory valuation.. (15,103) (31,487)
----------- ----------- -----------
Total deferred tax
liabilities........ (5,093,334) (4,930,006) (4,615,928)
Deferred tax assets:
Deferred
compensation........ 927,793 835,761 744,597
Receivable
allowance........... 331,542 368,380 368,380
Investment and
advances to investee
company............. 250,442
Net operating loss
carryforwards....... 70,284 132,522 166,944
Inventory valuation.. 20,709
Other................ 268,293 210,347 124,684
----------- ----------- -----------
Total deferred tax
assets............. 1,618,621 1,547,010 1,655,047
Valuation allowance
for deferred tax
assets.............. (70,284) (132,522) (417,386)
----------- ----------- -----------
Net deferred tax
assets............. 1,548,337 1,414,488 1,237,661
----------- ----------- -----------
Net deferred
liabilities........ $(3,544,997) $(3,515,518) $(3,378,267)
----------- ----------- -----------
----------- ----------- -----------
Deferred tax
liability.......... $(4,144,832) $(4,094,245) $(3,871,331)
Deferred tax
assets............. 599,835 578,727 493,064
----------- ----------- -----------
Net deferred tax
liability.......... $(3,544,997) $(3,515,518) $(3,378,267)
----------- ----------- -----------
----------- ----------- -----------
14
<PAGE>
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 November 3, 1996, the Corporation has net operating tax loss carryforwards of
approximately $1,400,000 for state income tax purposes that expire in years 1997
through 2001.
The Corporation made income tax payments of $1,310,000, $2,520,000, and
$2,155,000, in 1996, 1995, and 1994, respectively.
NOTE 8. 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 received insurance proceeds
equal to the wholesale value of the inventory destroyed. Accordingly, a gain of
$691,000 on the insurance settlement was 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 November 3, 1996 and October 29,
1995, and the related consolidated statements of income and retained earnings
and cash flows for each of the three years in the period ended November 3, 1996.
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 November 3, 1996 and October 29, 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended November 3, 1996 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/ ERNST & YOUNG LLP
Winston-Salem, North Carolina
November 27, 1996
15
[PICTURE]
[CAPTION: 13238-CURIO This stylish transitional curio is one of the many new
Pulaski accent display cabinets designed to compliment today's casual,
contemporary interiors. It can be used alone of bunched for a dramatic look.
The halogen lighting and mirrored back highlight the exquisite grooved glass
atrium top.]
<PAGE>
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
ALBERT J. KINCEL
Vice President-Chief Information
Officer
JASON A. GIBBS
Vice President-Chief Financial
Officer; Treasurer; Assistant
Secretary
JAMES W. STOUT
Vice President-Manufacturing
Directors
BERNARD C. WAMPLER
Chairman of the Board and
Chief Executive Officer
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.
HARRY J.G. VAN BEEK*
President, Klockner Capital
Corporation, Gordonsville, 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
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
230 South Tryon St., 11th Floor
Charlotte, NC 28288-1153
(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 14, 1997
at 10 a.m. at the Hotel Roanoke,
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.
[PICTURE]
[CAPTION: 74000-COLLECTION American Restoration is a collection of classic turn
of the century styling, inspired by 18th century designs, crafted from selected
cherry veneers enhanced by a rich burnished patina cherry finish. It features
meticulously carved ball and claw feet, serpentine drawers, ornately crafted
pilasters and regency antiqued brass hardware. American Restoration is so unique
and handsome that it is destined to become a classic in quality nostalgic.]
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 27, 1996 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 November 3, 1996.
Ernst & Young LLP
Winston-Salem, North Carolina
January 22, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-03-1996
<PERIOD-END> NOV-03-1996
<CASH> 2,397
<SECURITIES> 11
<RECEIVABLES> 39,473
<ALLOWANCES> 0
<INVENTORY> 41,778
<CURRENT-ASSETS> 84,914
<PP&E> 89,186
<DEPRECIATION> 50,846
<TOTAL-ASSETS> 124,336
<CURRENT-LIABILITIES> 32,143
<BONDS> 27,851
0
0
<COMMON> 5,031
<OTHER-SE> 52,647
<TOTAL-LIABILITY-AND-EQUITY> 124,336
<SALES> 166,646
<TOTAL-REVENUES> 166,646
<CGS> 131,939
<TOTAL-COSTS> 157,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 215
<INTEREST-EXPENSE> 2,343
<INCOME-PRETAX> 6,739
<INCOME-TAX> 2,431
<INCOME-CONTINUING> 4,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,308
<EPS-PRIMARY> 1.51
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</TABLE>
