SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------
FORM 10-Q
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[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 24, 1999
[ ] 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:
2,894,597 shares of common stock outstanding as of February 25, 1999
<PAGE>
Pulaski Furniture Corporation
Index
PART I: Financial Statements
Consolidated Condensed Balance Sheets as of
January 24, 1999 and November 1, 1998 . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Income
Three 4-week periods ended January 24, 1999
and January 25, 1998 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
Three 4-week periods ended January 24, 1999
and January 25, 1998 . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements . . . . . . 5
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income . . . . . . . . . . . 6
PART II: Other Information . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
Pulaski Furniture Corporation
Consolidated Condensed Balance Sheets
(in thousands)
January 24, November 1,
1999 1998
ASSETS ---------- ----------
Current assets:
Cash and cash equivalents $ 182 $ 1,452
Accounts receivable, net 32,036 38,411
---------- ----------
32,218 39,863
Inventories:
Raw materials 16,824 17,824
Work-in-process 8,329 8,253
Finished goods 30,496 29,024
---------- ----------
55,649 55,101
Less LIFO reserve (16,260) (16,111)
---------- ----------
39,389 38,990
Prepaid expenses 462 803
Deferred income taxes 687 687
---------- ----------
Total current assets 72,756 80,343
Property, plant and equipment, net 34,718 35,225
Cash surrender value of life insurance 2,053 2,049
Other 11 11
---------- ----------
Total assets $ 109,538 $ 117,628
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses:
Accounts payable $ 8,171 $ 7,685
Wages and commissions 1,012 3,948
Taxes withheld from employees 620 355
Other accrued liabilities 1,464 2,096
---------- ----------
11,267 14,084
Notes payable 6,000 12,000
Federal and state income taxes 663 754
Current portion of long-term debt 2,000 2,000
---------- ----------
Total current liabilities 19,930 28,838
Long-term notes payable 23,330 23,765
Deferred income taxes 3,509 3,532
Deferred compensation 2,792 2,875
Shareholders' equity
Common stock 6,964 6,328
Retained earnings 53,755 52,956
Unamortized restricted stock (742) (666)
---------- ----------
Total shareholders' equity 59,977 58,618
Total liabilities and shareholders' equity $ 109,538 $ 117,628
========== ==========
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
Jan 24, Jan 25, Incr
1999 1998 (Decr) %
--------- --------- -------- ----
Net sales $ 40,942 $ 36,310 $ 4,632 12.8 %
Costs and expenses
Cost of sales 32,997 29,215 3,782 12.9
Selling & administrative 5,690 5,092 598 11.7
---------- ---------- --------
Total 38,687 34,307 4,380 12.8
---------- ---------- --------
Operating income 2,255 2,003 252 12.6
Other income and expenses
Interest expense 471 446 25 5.6
Interest income (14) (4) (10) (250.0)
Miscellaneous income (198) 6 (204)(3400.0)
---------- ---------- --------
Total 259 448 (189) (42.2)
Income before income taxes 1,996 1,555 441 28.4
Provision for taxes on income 705 555 150 27.0
---------- ---------- --------
Net income $ 1,291 $ 1,000 $ 291 29.1
========== ========== ========
Weighted average number
of shares outstanding:
Basic 2,880,409 2,815,724
Diluted 2,891,096 2,824,204
Earnings per share:
Basic $0.45 $0.36
Diluted $0.45 $0.35
Cash dividends per share: $0.17 $0.17
See accompanying notes to financial statements.
<PAGE>
Pulaski Furniture Corporation
Consolidated Statements of Cash Flows
Three 4-week periods ended
January 24, January 25,
1999 1998
------------ ------------
OPERATING ACTIVITIES
Net income $ 1,291,326 $ 1,000,107
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation/amortization 1,101,201 1,152,624
Provision for deferred income taxes (22,500) (22,500)
Provision for deferred compensation (82,864) (52,582)
Changes in operating assets and liabilities:
Decrease in trade receivables 6,375,613 11,760,138
Increase (decrease) in inventories (399,681) 2,008,859
Decrease in prepaid expenses 340,861 412,946
Decrease in recoverable
income taxes 0 1,473,577
Decrease in accounts payable and
accrued expenses (2,816,193) (2,937,763)
Increase (decrease) in federal and state
income taxes payable (91,487) 102,361
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,696,276 14,897,767
INVESTING ACTIVITIES
Purchase of property, plant and equipment (669,820) (520,020)
Increase in cash surrender value (3,470) 0
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (673,290) (520,020)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 635,701 514,930
Repurchase of common stock 0 (96,250)
Payment of dividends (492,081) (477,925)
Decrease in notes payable (6,000,000) (10,000,000)
Payments on long-term debt (436,204) (435,979)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (6,292,584) (10,495,224)
------------ ------------
Increase (decrease) in cash and cash equivalents (1,269,598) 3,882,523
Cash and cash equivalents at beginning of period 1,452,166 2,702,339
------------ ------------
Cash and cash equivalents at end of period $ 182,568 $ 6,584,862
============ ============
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 1, 1998, 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 1, 1998.
The Corporation has signed a Letter of Intent to purchase Dawson Heritage
Furniture Co., Inc., located in Southwest Missouri. The Corporation intends
to borrow approximately $17,000,000 in the next fiscal quarter to finance the
cost of the acquisition and the Corporation expects to service the new
debt with the earnings from operations of the acquired facility. No other
borrowings are contemplated by the Corporation at this time.
The Corporation has entered into a short-term agreement with Dawson Heritage
Furniture Company, Inc. which compensates the Corporation for marketing
related services. Accordingly, for the quarter ended January 24, 1999, the
Corporation has recognized miscellaneous other income in the amount of
$242,000 under the terms of this agreement.
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
January 24, 1999 and November 1, 1998, and the results of operations and
cash flows for the three 4-week periods ended January 24, 1999 and
January 25, 1998.
The results of operations for the three and nine 4-week periods ended
January 24, 1999 and January 25, 1998 are not necessarily indicative of the
results to be expected for the full year. See Management's Discussion and
Analysis for a discussion on the cyclical nature of the Corporation's
operating results.
The following table sets forth the computation of earnings per share:
Three 4-week periods ended
January 24, January 25,
1999 1998
------------ ------------
Numerator:
Net income $ 1,291,326 $ 1,000,107
Denominator:
Denominator for basic earnings per
share - weighted average shares 2,880,409 2,815,724
Effect of dilutive securities:
Stock options 7,183 4,800
Stock purchase plan 3,504 3,680
Denominator for diluted earnings per
share - adjusted weighted average shares 2,891,096 2,824,204
Basic earnings per share $0.45 $0.36
Diluted earnings per share $0.45 $0.35
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income
Comparison of First Quarter 1999 to First Quarter 1998 (See page 3 for dollar
and percent changes.)
- -----------------------------------------------------------------------------
A robust retail environment in the first quarter of 1999 resulted in an
increase in orders throughout the period and was the primary reason for the
sales increase compared with the 1998 quarter. The increase in net income was
due primarily to the sales increase. As discussed in Notes to the financial
statements, the Corporation recognized miscellaneous other income in the first
quarter of 1999 for marketing related services.
Seasonality
- -----------
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 22.30% 22.88% 18.37% 36.46%
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 36% 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 third quarter ended January 24, 1999, are reasonable in relation to
the historical pattern, considering the retail environment for household
furniture.
Year 2000
- ---------
The Corporation realizes that the year 2000 presents many challenges for
information systems and the overall exchange of business related information.
To address this event, management has embarked on a strategic plan to ensure
that the needs of the Year 2000 are met and that the costs are understood.
Based on the assessments made pursuant to the strategic plan, the Corporation
determined that it would be required to modify or replace significant portions
of its software so that its computer systems would properly reflect dates
beyond December 31, 1999. The Corporation realizes that if such modifications
were not made, or in the event they are not completed in a timely manner, the
Year 2000 issue could have a material impact on the operations of the Corp-
oration. The Corporation's Year 2000 remediation efforts progressed through
the selection phase into the testing phase in the beginning of the fourth
fiscal quarter of 1998, where both internal and external resources were
employed to modify and test new enterprise software. These efforts culminated
in the recent installation, as of the 1998 fiscal year end, of the necessary
equipment and software to assure that the computer systems are Year 2000
compliant. Additionally, the Corporation has undertaken to identify critical
areas outside of the information systems were the Year 2000 issue could have
an adverse impact on the Corporation.
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income (cont.)
Year 2000 (continued)
- ---------------------
The principal cost associated with the Year 2000 issue has been the purchase
of compliant enterprise software and the requisite hardware over which it
operates. Additional support applications have been purchased or developed
in-house as needed, and the total software costs to date have not exceeded,
nor are expected to exceed, $700,000. Compliant hardware was put into service
over the past three years in conjunction with the Corporation's migration to
a client-server network, which was a planned upgrade unrelated to the Year
2000 issue. Additional hardware has been purchased in 1998 relating specif-
ically to the Year 2000 enterprise software at a cost not exceeding $100,000.
No further hardware requirements have been identified with the Year 2000
issue. User education and training costs to date have amounted to less than
$100,000 and are not expected to exceed that amount in total. At the present
time, the Corporation believes there are no other material costs which relate
to the Year 2000 issue. Funding for the Year 2000 project has been provided
by cash generated from operations. The project expenditures are being cap-
italized or expensed as appropriate, and are not expected to have a material
effect on the results of operations.
The Corporation cannot fully assess the risks of the Year 2000 problem due to
numerous uncertainties surrounding the issue. Management believes that the
primary risks are external to the Corporation and relate solely to the Year
2000 readiness of the Corporation's business partners. 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 issue for products
already sold.
The failure to correct a material Year 2000 problem could result in an inter-
ruption, or failure of certain normal business activities or operations, which
could materially and adversely affect the Corporation's results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the Year 2000 problem, resulting in part from the uncertainty of the Year 2000
readiness of third-party suppliers and customers, the Corporation is unable at
this time whether the consequences of the Year 2000 problems will have a
material impact on the Corporation's results of operations, liquidity or
financial condition.
This discussion of the Corporation's readiness for the Year 2000, including
statements regarding anticipated completion dates for various phases of the
Corporation's Year 2000 strategic plan, estimated costs for the Year 2000
readiness, the determination of likely worst case scenarios, actions to be
taken in the event of such worst case scenarios and the impact on the
Corporation of any delays or problems in the implementation of Year 2000
initiatives by the Corporation and/or any suppliers, service providers, and
customers involve forward looking information which is subject to known and
unknown risks, uncertainties, and contingencies which could cause actual
results, performance or achievements to differ materially from those which
are anticipated. Such risks, uncertainties and contingencies, many of which
are beyond the control of the Corporation, include but are not limited to,
government regulations and/or legislative initiative, variation in costs or
expenses relating to the implementation of the Year 2000 initiatives, changes
<PAGE>
Pulaski Furniture Corporation
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income (cont.)
in the scope of improvements to Year 2000 initiatives and delays or problems
in the implementation of Year 2000 initiatives by the Corporation and/or any
public or private sector suppliers and service providers and customers.
Capital Resources and Liquidity
- --------------------------------
Working capital provided by operations was $2,287,000 for the quarter ended
January 24, 1999 compared to $2,100,000 for the quarter ended January 25,
1998. Net working capital increased by $1,321,000 during the first quarter
of 1999 compared with an increase of $1,063,000 in the first quarter of 1998.
During the first quarter of 1999, the Corporation's average amount of
outstanding indebtedness for borrowed money was $35,751,093. The weighted
average rate of interest on such indebtedness was approximately 5.71% per
annum.
Cautionary Factors
- ------------------
Some of the information presented in this report, constitutes forward looking
comments within the meaning of the Private Securities Litigation Reform Act
of 1995. Although the Corporation believes its expectations are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not differ
materially from its expectations. Factors which could cause actual results to
differ from expectations include, without limitation, the timing of orders
received from customers, the gain or loss of significant customers, comp-
etition from other manufacturers, changes in the demand for the Corporation's
products, increases in the cost of the product, changes in the market in
general, fluctuations in currencies, and possible problems incurred in the
Year 2000 strategic plan.
<PAGE>
Pulaski Furniture Corporation
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On February 12, 1999, the Corporation held its annual meeting of share-
holders, at which the following business was transacted:
Bernard C. Wampler, Harry J.G. van Beek, and Harry H. Warner were elected
to serve as Class III directors of the Corporation, each for a term of
three years.
The votes for the election of the directors were as follows:
FOR AGAINST ABSTAIN
---------- ---------- ----------
Mr. Wampler 2,735,197 0 11,546
Mr. Van Beek 2,735,197 0 11,546
Mr. Warner 2,735,197 0 11,546
The terms of the following directors continued beyond the 1999 annual
meeting: Hugh V. White, Jr., O. Kenton McCartney, III, Robert C.
Greening, Jr., and John G. Wampler.
Item 5. Other Information
All other information called for by other items of Part II of the Form 10-Q
is either inapplicable or the response to the items would be negative.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule*
(b) Reports on Form 8-K
A Form 8-K, dated November 4, 1998 and filed with the Securities
and Exchange Commission on November 6, 1998, containing in Item 5
thereof the announcement of a signed letter of intent to purchase
substantially all of the assets of Dawson Heritage Furniture
Company, Inc.
* Filed herewith.
<PAGE>
Pulaski Furniture Corporation
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: February 25, 1999 /s/ John G. Wampler
---------------------------------------
John G. Wampler
President and Chief Executive Officer
(Principal Accounting Officer)
/s/ Carl W. Hoffman
---------------------------------------
Carl W. Hoffman
Treasurer
<PAGE>
Pulaski Furniture Corporation
Exhibit Index
Exhibit
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-24-1999
<CASH> 182
<SECURITIES> 0
<RECEIVABLES> 32,036
<ALLOWANCES> 0
<INVENTORY> 39,389
<CURRENT-ASSETS> 72,756
<PP&E> 95418
<DEPRECIATION> 60700
<TOTAL-ASSETS> 109538
<CURRENT-LIABILITIES> 19930
<BONDS> 23330
0
0
<COMMON> 6964
<OTHER-SE> 53013
<TOTAL-LIABILITY-AND-EQUITY> 109538
<SALES> 40942
<TOTAL-REVENUES> 40942
<CGS> 32997
<TOTAL-COSTS> 38687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 471
<INCOME-PRETAX> 1996
<INCOME-TAX> 705
<INCOME-CONTINUING> 1291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1291
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
