SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------
FORM 10-Q
---------
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 19, 1998
[ ] 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
(State or other jurisdiction of incorporation)
54-0594965
(IRS employer identification number)
P.O. Box 1371, Pulaski, Virginia
(Address of principal executive offices)
24301
(Zip Code)
540-980-7330
(Registrant's telephone number)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
2,823,339 shares of common stock outstanding as of May 28, 1998
<PAGE>
Pulaski Furniture Corporation
Index
PART I: Financial Statements
Consolidated Condensed Balance Sheets as of
April 19, 1998 and November 2, 1997 . . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Income
Three 4-week periods ended April 19, 1998
and April 20, 1997 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Income
Six 4-week periods ended April 19, 1998
and April 20, 1997 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Six 4-week periods ended April 19, 1998
and April 20, 1997 . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . . 6
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income . . . . . . . . . . . 7
PART II: Other Information . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Pulaski Furniture Corporation
Consolidated Condensed Balance Sheets
(in thousands)
April 19, November 2,
1998 1997
ASSETS ---------- ----------
Current assets:
Cash and cash equivalents $ 1,080 $ 2,702
Accounts receivable, net 26,613 36,726
---------- ----------
27,693 39,428
Inventories:
Raw materials 15,447 13,270
Work-in-process 6,966 5,220
Finished goods 27,612 27,612
---------- ----------
50,025 46,102
Less LIFO reserve (16,455) (14,758)
---------- ----------
33,570 31,344
Prepaid expenses 880 874
Recoverable income taxes 0 1,474
Deferred income taxes 1,277 1,277
---------- -----------
Total current assets 63,420 74,397
Property, plant and equipment, net 34,050 35,248
Cash surrender value of life insurance 1,240 1,223
Other 11 11
---------- -----------
Total assets $ 98,721 $ 110,879
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses:
Accounts payable $ 6,742 $ 6,222
Wages and commissions 1,457 2,902
Taxes withheld from employees 467 400
Other accrued liabilities 1,804 1,889
---------- ----------
10,470 11,413
Notes payable 0 12,000
Federal and state income taxes 18 0
Current portion of long-term debt 2,000 2,000
---------- ----------
Total current liabilities 12,488 25,413
Long-term notes payable 24,898 25,774
Deferred income taxes 3,697 3,742
Deferred compensation 2,675 2,681
Shareholders' equity
Common stock 5,434 4,989
Retained earnings 49,677 48,479
Unamortized restricted stock (148) (199)
---------- ----------
Total shareholders' equity 54,963 53,269
Total liabilities and shareholders' equity $ 98,721 $ 110,879
========== ==========
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Consolidated Condensed Statements of Income
(in thousands, except for per share data)
Three 4-week periods ended
Apr. 19, Apr. 20, Incr
1998 1997 (Decr) %
--------- --------- -------- ----
Net sales $ 39,268 $ 35,322 $ 3,946 11.2 %
Costs and expenses
Cost of sales 31,505 27,931 3,574 12.8
Selling & administrative 5,630 5,599 31 0.6
---------- ---------- --------
Operating income 2,133 1,792 341 19.0
Other income and expenses
Interest expense 343 464 (121) (26.1)
Interest income (11) (5) (6) (120.0)
---------- ---------- --------
Total 332 459 (127) (27.7)
Income before income taxes 1,801 1,333 468 35.1
Provision for taxes on income 643 481 162 33.7
---------- ---------- --------
Net income $ 1,158 $ 852 $ 306 35.9
========== ========== ========
Weighted average number
of shares outstanding:
Basic 2,815,736 2,797,637
Diluted 2,832,942 2,812,316
Earnings per share:
Basic $0.41 $0.30
Diluted $0.41 $0.30
Cash dividends per share: $0.17 $0.17
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Consolidated Condensed Statements of Income
(in thousands, except for per share data)
Six 4-week periods ended
Apr. 19, Apr. 20, Incr
1998 1997 (Decr) %
--------- --------- -------- ----
Net sales $ 75,578 $ 70,744 $ 4,834 6.8 %
Costs and expenses
Cost of sales 60,720 56,418 4,302 7.6
Selling & administrative 10,728 10,914 (186) (1.7)
---------- ---------- --------
Operating income 4,130 3,412 718 21.0
Other income and expenses
Interest expense 789 1,049 (260) (24.8)
Interest income (15) (9) (6) (66.7)
---------- ---------- --------
Total 774 1,040 (266) (25.6)
Income before income taxes 3,356 2,372 984 41.5
Provision for taxes on income 1,198 856 342 40.0
---------- ---------- --------
Net income $ 2,158 $ 1,516 $ 642 42.3
========== ========== ========
Weighted average number
of shares outstanding:
Basic 2,815,732 2,805,377
Diluted 2,828,085 2,815,884
Earnings per share:
Basic $0.77 $0.54
Diluted $0.76 $0.54
Cash dividends per share: $0.34 $0.34
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Consolidated Statements of Cash Flows
Six 4-week periods ended
April 19, April 20,
1998 1997
------------ ------------
OPERATING ACTIVITIES
Net income $ 2,157,625 $ 1,515,580
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation/amortization 2,286,625 2,437,046
Provision for deferred income taxes (45,000) (45,000)
Provision for deferred compensation (5,402) 35,239
Changes in operating assets and liabilities:
Decrease in trade receivables 10,113,288 12,798,212
Increase in inventories (2,226,660) (4,520,316)
Increase in prepaid expenses (5,876) (465,438)
Decrease in recoverable income taxes 1,473,577 0
Decrease in accounts payable and
accrued expenses (942,971) (576,193)
Increase (decrease) in federal and state
income taxes payable 17,805 (1,047,074)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 12,823,011 10,132,056
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,037,473) (1,995,935)
Increase in cash surrender value (16 674) (14,191)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,054,147) (2,010,126)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 540,591 486,219
Repurchase of common stock (96,250) (920,000)
Payment of dividends (959,964) (957,113)
Decrease in notes payable (12,000,000) (7,000,000)
Payments on long-term debt (875,730) (944,272)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (13,391,353) (9,335,166)
------------ ------------
Decrease in cash and cash equivalents (1,622,489) (1,213,236)
Cash and cash equivalents at beginning of period 2,702,339 2,396,850
------------ ------------
Cash and cash equivalents at end of period $ 1,079,850 $ 1,183,614
============ ============
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Notes to Consolidated Condensed Financial Statements
See notes to financial statements included in the Corporation's 10-K for the
year ended November 2, 1997, for information concerning accounting policies,
long-term debt, stock options and other financial matters. There have been
no material changes in financial matters since November 2, 1997.
In the opinion of the Corporation, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial position as of
April 19, 1998 and November 2, 1997, and the results of operations and
cash flows for the three and six 4-week periods ended April 19, 1998 and
April 20, 1997.
The results of operations for the three and six 4-week periods ended April 19,
1998 and April 20, 1997 are not necessarily indicative of the results to be
expected for the full year. See Management's Discussion and Analysis for a
detailed discussion on the cyclical nature of the Corporation's operating
results.
In 1997, the Financial Accounting Standards Board issued Statement of Finan-
cial Accounting Standards No. 128, "Earnings per Share." Statement 128 re-
placed the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
The following table sets forth the computation of earnings per share:
Three 4-week periods ended Six 4-week periods ended
Apr 19, 1998 Apr 20, 1997 Apr 19, 1998 Apr 20, 1997
------------ ------------ ------------ ------------
Numerator:
Net income $ 1,157,518 $ 851,739 $ 2,157,625 $ 1,515,580
Denominator:
Denominator for basic
earnings per share -
weighted average
shares 2,815,736 2,797,637 2,815,732 2,805,377
Dilutive securities:
Stock options 8,156 1,737 5,988 1,861
Stock purchase plan 9,050 12,942 6,365 8,646
Denominator for diluted
earnings per share -
adjusted weighted
average shares 2,832,942 2,812,316 2,828,085 2,815,884
Basic earnings per share $0.41 $0.30 $0.77 $0.54
Diluted earnings per share $0.41 $0.30 $0.76 $0.54
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income
Comparison of Second Quarter 1998 to Second Quarter 1997 and Two Quarters of
1998 to Two Quarters of 1997 (See pages 3 & 4 for dollar and percent changes.)
- ------------------------------------------------------------------------------
Sales increased 11% in the second quarter and 7% in the two quarters of 1998
as compared to 1997, reflecting an increased demand for the Corporation's
product due largely to the strong retail environment for household furniture.
More units were sold in the second quarter and two quarters of 1998, while
average selling prices declined slightly below the same periods of 1997.
Cost of sales, as a percentage of sales, were higher in the second quarter
and two quarters of 1998 due primarily to the lower selling prices.
Selling and administrative expenses, as a percentage of sales, dropped from
15.9% to 14.3% in the second quarter of 1998, and from 15.4% to 14.2% in the
two quarters of 1998 as compared to 1997 due mainly to reductions in product
development costs and advertising and promotional expenses. Interest expense
decreased due to lower outstanding debt in 1998. Net income was higher, as a
percentage of sales, in the 1998 quarter and two quarters due mostly to the
higher sales volume.
Historically, the quarterly results of the Corporation have reflected a cyc-
lical pattern, as indicated below:
QTR 1 QTR 2 QTR 3 QTR 4
4-year average of net sales volume 22.4% 22.7% 18.3% 36.6%
This pattern reveals that the Corporation's first quarter, ending in January,
has accounted for approximately 22% of net sales volume. The second quarter,
ending in April, is roughly equivalent in sales volume to the first quarter,
while the third quarter, ending in July, shows a drop in volume to 18%. The
remainder, or 37% of sales volume, is recorded in the fourth quarter, which
comprises four 4-week reporting periods and which also includes the strongest
selling season for certain product lines. However, due to a number of risks
and uncertainties beyond the Corporation's control, including economic condi-
tions and consumer confidence, historical trends should not be viewed as an
accurate predictor of future results. The Corporation believes the results
of the second quarter ended April 19, 1998, are reasonable in relation to
the historical pattern, considering the retail environment for household
furniture.
The Corporation recognizes that the year 2000 presents many challenges for
information systems. In light of this recognition, management has enacted a
strategic business plan to ensure the needs of the year 2000 are met and that
the costs of preparing for this challenge are both understood and manageable.
Based on recent assessments, the Corporation has determined that it will be
required to modify or replace significant portions of its software so that
its computer systems will properly reflect dates beyond December 31, 1999. If
such modifications are not made, or are not completed timely, the Year 2000
Issue could have a material impact on the operations of the Corporation. The
Corporation expects to complete the modifications timely. The Corporation
will use both internal and external resources to reprogram, or replace, and
test the software for the Year 2000 modifications. The Corporation is funding
the Year 2000 project with cash generated from operations. The project will
be expensed or capitalized as appropriate over the next two years, and is not
expected to have a material effect on the results of operations.
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income (cont.)
Formal communications with all significant suppliers, customers and financial
service organizations of the Corporation is currently underway to determine
the extent to which the Corporation might be made vulnerable by those third
parties' failure to remediate their own Year 2000 Issue. The Corporation has
determined that it has no exposure to contingencies related to the Year 2000
for the products already sold.
Capital Resources and Liquidity
- --------------------------------
Working capital provided by operations was $4,394,000 for the two quarters
ended April 19, 1998 compared to $3,943,000 for the two quarters ended April
20, 1997. Net working capital increased by $1,948,000 during the first two
quarters of 1998 compared with a decrease of $3,402,000 in the first two
quarters of 1997.
During the first two quarters of 1998, the Corporation's average amount of
outstanding indebtedness for borrowed money was $30,801,141. The weighted
average rate of interest on such indebtedness was approximately 5.42% per
annum.
<PAGE>
Pulaski Furniture Corporation
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule*
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended April 19, 1998.
* Filed herewith.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PULASKI FURNITURE CORPORATION
Date: May 28, 1998 /s/ John G. Wampler
---------------------------------------
John G. Wampler
President and Chief Executive Officer
/s/ Jason A. Gibbs
---------------------------------------
Jason A. Gibbs
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
Pulaski Furniture Corporation
Exhibit Index
Exhibit
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-01-1998
<PERIOD-END> APR-19-1998
<CASH> 1080
<SECURITIES> 0
<RECEIVABLES> 26613
<ALLOWANCES> 0
<INVENTORY> 33570
<CURRENT-ASSETS> 63420
<PP&E> 90765
<DEPRECIATION> 56715
<TOTAL-ASSETS> 98721
<CURRENT-LIABILITIES> 12488
<BONDS> 24898
0
0
<COMMON> 5286
<OTHER-SE> 49677
<TOTAL-LIABILITY-AND-EQUITY> 98721
<SALES> 75578
<TOTAL-REVENUES> 75578
<CGS> 60720
<TOTAL-COSTS> 71448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 789
<INCOME-PRETAX> 3356
<INCOME-TAX> 1198
<INCOME-CONTINUING> 2158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2158
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.76
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> NOV-02-1997 NOV-02-1997 NOV-02-1997
<PERIOD-END> JAN-26-1997 APR-20-1997 JUL-13-1997
<CASH> 276 1184 239
<SECURITIES> 11 11 11
<RECEIVABLES> 27827 26675 26845
<ALLOWANCES> 0 0 0
<INVENTORY> 43334 46299 39531
<CURRENT-ASSETS> 72925 75889 71679
<PP&E> 90035 91182 90829
<DEPRECIATION> 51970 53105 53871
<TOTAL-ASSETS> 112079 115063 109162
<CURRENT-LIABILITIES> 23067 23520 23740
<BONDS> 24343 26907 26896
0 0 0
0 0 0
<COMMON> 5493 4990 4990
<OTHER-SE> 52542 52992 46849
<TOTAL-LIABILITY-AND-EQUITY> 112079 115063 109162
<SALES> 35422 70744 100798
<TOTAL-REVENUES> 35422 70744 100798
<CGS> 28487 56418 89640
<TOTAL-COSTS> 33802 67332 105856
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 50
<INTEREST-EXPENSE> 585 1049 1579
<INCOME-PRETAX> 1039 2372 (6619)
<INCOME-TAX> 375 856 (2390)
<INCOME-CONTINUING> 664 1516 (4229)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 664 1516 (4229)
<EPS-PRIMARY> 0.23 0.54 (1.51)
<EPS-DILUTED> 0.23 0.54 (1.51)
</TABLE>
