SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities ---- Exchange Act of 1934 For the quarterly period ended February 28, 2001 or ----------------- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________. Commission file number 000-25349. HOOKER FURNITURE CORPORATION ---------------------------- (Exact name of registrant as specified in its charter) Virginia 54-0251350 ------------------------------- -------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 440 East Commonwealth Boulevard Martinsville, VA 24112 -------------------------------------------------------- (Address of principal executive offices, Zip Code) (540) 632-2133 ----------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of March 26, 2001. Class Number ----- ------ Common Stock, no par value 7,617,298 Shares
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HOOKER FURNITURE CORPORATION BALANCE SHEETS (In thousands, including share data) (Unaudited) February 28, November 30, 2001 2000 Assets Current assets Cash, primarily interest-bearing deposits............. $ 2,021 $ 1,243 Trade receivables, less allowances of $620 and $525... 28,358 31,019 Inventories........................................... 39,006 42,785 Prepaid expenses and other............................ 2,109 1,963 -------- -------- Total current assets.............................. 71,494 77,010 Property, plant and equipment, net..................... 49,652 48,767 Other assets........................................... 7,753 7,754 -------- -------- $128,899 $133,531 ======== ======== Liabilities and Stockholders' Equity Current liabilities Trade accounts payable............................... $ 1,749 $ 5,406 Accrued salaries, wages and benefits................. 3,831 6,470 Other accrued expenses............................... 2,378 2,884 Current maturities of long-term debt................ 1,877 1,581 -------- -------- Total current liabilities.......................... 9,835 16,341 Long-term debt......................................... 27,646 27,919 Deferred liabilities................................... 3,224 3,300 -------- -------- Total liabilities..................................... 40,705 47,560 -------- -------- Common stock held by ESOP.............................. 10,289 10,412 Stockholders' Equity Common stock, no par value, 10,000 shares authorized, 7,617 shares issued and outstanding................... 2,684 2,605 Unearned ESOP shares (1,741 and 1,761 shares).......... (21,759) (22,009) Retained earnings...................................... 96,980 94,963 -------- -------- Total stockholders' equity............................ 77,905 75,559 -------- -------- $128,899 $133,531 ======== ======== The accompanying notes are an integral part of the financial statements. 2
HOOKER FURNITURE CORPORATION STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) Three Months Ended February 28, February 29, 2001 2000 Net sales............................ $55,924 $56,680 Cost of sales........................ 42,324 42,438 ------- ------- Gross profit..................... 13,600 14,242 Selling and administrative expenses.. 9,461 9,082 ------- ------- Operating income................. 4,139 5,160 Other expense, net................... 200 50 ------- ------- Income before taxes............. 3,939 5,110 Income taxes........................ 1,496 1,941 ------- ------- Net income...................... $ 2,443 $ 3,169 ======= ======= Earnings per share: Basic and diluted............... $.42 $.42 ======= ======= Weighted average shares outstanding.. 5,857 7,617 ======= ======= The accompanying notes are an integral part of the financial statements. 3
HOOKER FURNITURE CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended February 28, February 29, 2001 2000 Cash flows from operating activities: Cash received from customers.............................. $ 58,867 $ 55,603 Cash paid to suppliers and employees...................... (53,466) (54,729) Income taxes paid, net.................................... (1,065) (492) Interest paid, net........................................ (417) (106) -------- -------- Net cash provided by operating activities............... 3,919 276 -------- -------- Cash flows from investing activities: Purchase of property, plant and equipment, net............ (2,615) (3,770) -------- -------- Net cash absorbed by investing activities............... (2,615) (3,770) -------- -------- Cash flows from financing activities: Proceeds from long-term debt.............................. 2,500 5,500 Payments on long-term debt................................ (2,477) Cash dividends paid....................................... (549) (648) -------- -------- Net cash provided (absorbed) by financing activities.... (526) 4,852 -------- -------- Net increase in cash........................................ 778 1,358 Cash at beginning of year................................... 1,243 157 -------- -------- Cash at end of period....................................... $ 2,021 $ 1,515 ======== ======== Reconciliation of net income to net cash provided by operating activities: Net income............................................... $ 2,443 $ 3,169 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................... 1,730 1,342 Non-cash ESOP cost................................. 329 Gain on disposal of property, plant and equipment.. (2) Changes in assets and liabilities: Trade receivables............................... 2,661 (1,285) Inventories..................................... 3,779 (1,431) Prepaid expenses and other assets............... (145) 347 Trade accounts payable.......................... (3,657) (2,065) Other accrued expenses.......................... (3,145) 223 Deferred liabilities............................ (76) (22) -------- -------- Net cash provided by operating activities............... $ 3,919 $ 276 ======== ======== The accompanying notes are an integral part of the financial statements. 4
HOOKER FURNITURE CORPORATION NOTES TO FINANCIAL STATEMENTS (In thousands, except share and per share data) 1. Preparation of Interim Financial Statements The financial statements of Hooker Furniture Corporation (referred to as "Hooker" or the "Company") have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with generally accepted accounting principles are condensed or omitted pursuant to SEC rules and regulations. However, management believes that the disclosures made are adequate for a fair presentation of results of operations and financial position. Operating results for the interim periods reported herein may not be indicative of the results expected for the year. These financial statements should be read in conjunction with the financial statements and accompanying notes included in Hooker's Annual Report on Form 10K for the fiscal year ended November 30, 2000. Certain items in the financial statements for periods prior to 2001 have been reclassified to conform to the 2001 method of presentation. 2. Inventories (Unaudited) February 28, November 30, 2001 2000 Finished furniture....... $33,877 $38,408 Furniture in process..... 2,460 2,647 Materials and supplies... 14,048 12,883 ------- ------- 50,385 53,938 Reduction to LIFO basis.. 11,379 11,153 ------- ------- $39,006 $42,785 ======= ======= 3. Property, Plant and Equipment (Unaudited) February 28, November 30, 2001 2000 Buildings................................. $ 43,494 $ 43,285 Machinery and equipment .................. 47,888 46,235 Office fixtures and equipment............. 10,888 10,292 Construction in progress and other........ 3,084 2,927 -------- -------- Property, plant and equipment, at cost.. 105,354 102,739 Less accumulated depreciation .......... 56,988 55,258 -------- -------- 48,366 47,481 Land...................................... 1,286 1,286 -------- -------- $ 49,652 $ 48,767 ======== ======== 5
Notes to Financial Statements - Continued 4. Long-Term Debt (Unaudited) February 28, November 30, 2001 2000 Term loan.......................... $22,023 $22,500 Industrial revenue bonds due 2006.. 7,000 7,000 Revolving line of credit........... 500 ------- ------- 29,523 29,500 Less current maturities............ 1,877 1,581 ------- ------- $27,646 $27,919 ======= ======= 6
HOOKER FURNITURE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - First Quarter 2001 Compared to First Quarter 2000 Net sales decreased $756,000 or 1.3% for the three-month period ended February 28, 2001, from the comparable 2000 period. Unit volume in the 2001 period approximated the year ago period but average selling prices declined as the Company became more aggressive in discounting its products in response to the slower business environment. Gross profit margin declined to 24.3% in the 2001 period compared to 25.1% for the three-month period ended February 29, 2000, principally due to heavier promotional discounting in the current year period. During the first quarter of 2001, the Company cut production schedules at all of its factories to 35 hours per week in order to reduce inventories and better match the incoming order rate. The Company reduced inventory levels by $3.8 million during the three months since November 30, 2000, while improving delivery times to customers. The Company expects to continue reducing inventory levels during the second quarter as well. Selling and administrative expenses increased $379,000 to $9.5 million during the first quarter ended February 28, 2001 from the comparable 2000 period. During the 2001 period, the Company incurred higher depreciation expense for new technology placed in service last year, additional expenses related to the addition of 14,000 square feet to its High Point, NC showroom space that will debut at the upcoming April 2001 international furniture market, and higher advertising costs. These cost increases were partially offset by cost reductions in other areas of the business. As a percentage of net sales, selling and administrative expenses increased to 16.9% in the 2001 period from 16.0% in the comparable 2000 period. As a result of the above, operating income decreased to 7.4% of net sales in the 2001 period from 9.1% in the comparable 2000 period. The Company's effective tax rate was 38.0% in both first quarter periods. Financial Condition, Liquidity and Capital Resources As of February 28, 2001, assets totaled $128.9 million, down from $133.5 million at November 30, 2000. Stockholders' equity at February 28, 2001, was $77.9 million, rising from $75.6 million at November 30, 2000. The Company's long-term debt, including current maturities, was $29.5 million at February 28, 2001 and November 30, 2000. Working capital increased to $61.7 million as of February 28, 2001 from $60.7 million at the end of the 2000 period, reflecting the Company's improved cash position and lower levels of accounts payable and accrued expenses. Incoming orders slowed slightly during the first quarter as furniture retailers felt the impact of unstable financial markets and declining consumer confidence. The Company expects shipments during the fiscal second quarter of 2001 to approximate or reflect a slight decline from the strong second quarter experienced in 2000, but remains guardedly optimistic about improved business prospects for the second half of the year. Production schedules are expected to remain at 35 hours per week through April 2001. The Company will evaluate the need for further reduced work schedules prior to the end of April, but does not expect work schedules to fall below 35 hours per week. During the three-month period ended February 28, 2001, cash generated from operations ($3.9 million) funded capital expenditures ($2.6 million), an increase in available cash ($778,000), and dividend payments ($549,000). During the comparable 2000 period, cash generated from operations ($276,000) and borrowings from the Company's revolving credit line ($5.5 million) funded 7
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued capital expenditures ($3.8 million), an increase in available cash ($1.4 million) and dividend payments ($648,000). Cash generated from operations of $3.9 million during the 2001 period increased from $276,000 in the comparable 2000 period. Higher levels of cash received from customers ($3.3 million), resulting in lower trade receivables, and lower payments to suppliers and employees ($1.3 million) resulting from reduced production schedules and lower inventory levels were partially offset by higher tax and interest payments (increases of $573,000 and $311,000, respectively) in the 2001 period compared with the prior year quarter. Investing activities consumed $2.6 million during the 2001 period compared to $3.8 million in the comparable 2000 period. Capital expenditures were higher in the 2000 period as the Company completed the addition to its Central Distribution Center and continued its construction of raw lumber grading, storage and drying facilities at the Maiden, North Carolina plant. The Company used cash of $526,000 (principally dividend payments) for financing activities in the 2001 period compared to generating cash of $4.9 million from financing activities in the 2000 period. During the 2000 period, the Company borrowed $5.5 million from its revolving line of credit to fund capital expenditures ($3.8 million), dividend payments ($648,000) and an increase in available cash ($1.4 million). In December 2000, the Company declared a quarterly dividend of $.085 per share that was paid in February 2001. At February 28, 2001, the Company had $9.3 million available under its revolving line of credit (net of $206,000 of outstanding letters of credit) and $6.1 million of availability under additional lines of credit to fund working capital needs. The Company believes it has the financial resources needed to meet business requirements in the foreseeable future, including capital expenditures for the expansion of manufacturing capacity, working capital requirements, and the Company's dividend program. Forward-Looking Statements Certain statements made in this report are not based on historical facts, but are forward-looking statements. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These statements reflect the Company's reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include the cyclical nature of the furniture industry, fluctuations in the price of lumber which is the most significant raw material used by the Company, competition in the furniture industry, capital costs and general economic or business conditions, either nationally or internationally. 8
Item 3. Quantitative And Qualitative Disclosures About Market Risk The Company's obligations under its lines of credit, industrial revenue bonds, and term loan bear interest at variable rates. The Company has entered into interest rate swap agreements that, in effect, fix the rate of interest on the industrial revenue bonds at 4.71% through 2006 and on the term loan at 7.4% through 2010. At February 28, 2001, the Company had $500,000 outstanding under its lines of credit. A 10% fluctuation in market interest rates would not have a material impact on the Company's results of operations or financial condition. 9
HOOKER FURNITURE CORPORATION PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K Form 8-K filed December 20, 2000, announcing the retirement of J. Clyde Hooker, Jr. as Chief Executive Officer and Chairman of the Board and the promotions of Paul B. Toms, Jr. to Chief Executive Officer and Chairman of the Board, Douglas C. Williams to President and Chief Operating Officer, and E. Larry Ryder to Executive Vice President - Finance and Administration. 10
SIGNATURE 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. HOOKER FURNITURE CORPORATION Date: March 28, 2001 By: /s/ E. Larry Ryder ------------------------- E. Larry Ryder Executive Vice President - Finance and Administration (Principal Financial and Accounting Officer) 11