UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the
quarterly period ended October 28, 2007
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 incorporation or
organization)
|
(IRS
employer identification no.)
|
440
East Commonwealth Boulevard, Martinsville,
VA 24112
(Address
of principal executive offices, zip code)
(276)
632-0459
(Registrant’s
telephone number, including area code)
N/A
(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
by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated Filer ¨ Accelerated
Filer x Non-accelerated
Filer ¨
Indicate
by
check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).
Yes
¨
No
x
Indicate
the
number of shares outstanding of each of the issuer’s classes of common stock as
of November 28, 2007.
|
Common
stock, no par value
|
11,864,983
|
|
(Class
of common stock)
|
(Number
of shares)
|
1
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED BALANCE SHEETS
(In
thousands, including share data)
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
|||||||
|
Assets
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash
equivalents
|
$ |
37,355
|
$ |
31,864
|
||||
|
Trade
accounts receivable, less
allowance for doubtful accounts
|
||||||||
|
of
$1,507 and $1,807 on each date
|
41,147
|
45,444
|
||||||
|
Inventories
|
51,321
|
68,139
|
||||||
|
Prepaid
expenses and other
current assets
|
2,941
|
4,357
|
||||||
|
Assets
held for
sale
|
2,272
|
|||||||
|
Total
current
assets
|
135,036
|
149,804
|
||||||
|
Property,
plant and equipment, net
|
25,737
|
29,215
|
||||||
|
Goodwill
|
2,396
|
2,396
|
||||||
|
Intangible
assets
|
4,796
|
4,415
|
||||||
|
Cash
surrender value of life insurance policies
|
12,419
|
11,458
|
||||||
|
Other
assets
|
3,432
|
4,011
|
||||||
|
Total
assets
|
$ |
183,816
|
$ |
201,299
|
||||
|
Liabilities
and Shareholders’ Equity
|
||||||||
|
Current
liabilities
|
||||||||
|
Trade
accounts
payable
|
$ |
11,899
|
$ |
11,251
|
||||
|
Accrued
salaries, wages and
benefits
|
6,191
|
6,189
|
||||||
|
Other
accrued
expenses
|
4,524
|
5,879
|
||||||
|
Current maturities of long-term debt
|
2,645
|
2,457
|
||||||
|
Total
current
liabilities
|
25,259
|
25,776
|
||||||
|
Long-term
debt, excluding current maturities
|
5,910
|
8,555
|
||||||
|
Deferred
compensation
|
5,051
|
3,924
|
||||||
|
Other
long-term liabilities
|
867
|
508
|
||||||
|
Total
liabilities
|
37,087
|
38,763
|
||||||
|
Shareholders’
equity
|
||||||||
|
Common
stock, no par value,
20,000 shares authorized,
|
||||||||
|
12,023
and
14,429 shares issued and outstanding on each
date
|
18,906
|
11,154
|
||||||
|
Unearned
ESOP shares, 2,377
shares on November 30, 2006
|
(14,835 | ) | ||||||
|
Retained
earnings
|
127,929
|
166,326
|
||||||
|
Accumulated
other comprehensive
loss
|
(106 | ) | (109 | ) | ||||
|
Total
shareholders’
equity
|
146,729
|
162,536
|
||||||
|
Total
liabilities and
shareholders’ equity
|
$ |
183,816
|
$ |
201,299
|
||||
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
2
HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands, except per share data)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
October
28,
|
November
30,
|
October
28,
|
November
30,
|
|||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Net
sales
|
$ |
83,768
|
$ |
90,987
|
$ |
234,503
|
$ |
264,687
|
||||||||
|
Cost
of
sales
|
57,132
|
63,017
|
162,788
|
186,451
|
||||||||||||
|
Gross
profit
|
26,636
|
27,970
|
71,715
|
78,236
|
||||||||||||
|
Selling
and administrative expenses
|
17,312
|
18,620
|
48,385
|
54,534
|
||||||||||||
|
Restructuring
and asset impairment charges
|
419
|
3,735
|
763
|
6,693
|
||||||||||||
|
Operating
income
|
8,905
|
5,615
|
22,567
|
17,009
|
||||||||||||
|
Other
income (expense), net
|
309
|
(261 | ) |
1,150
|
|
(90 | ) | |||||||||
|
Income
before income
taxes
|
9,214
|
5,354
|
23,717
|
16,919
|
||||||||||||
|
Income
taxes
|
3,303
|
1,818
|
8,662
|
6,341
|
||||||||||||
|
Net
income
|
$ |
5,911
|
$ |
3,536
|
$ |
15,055
|
$ |
10,578
|
||||||||
|
Earnings
per share:
|
||||||||||||||||
|
Basic
|
$ |
0.48
|
$ |
0.29
|
$ |
1.19
|
$ |
0.88
|
||||||||
|
Diluted
|
$ |
0.48
|
$ |
0.29
|
$ |
1.19
|
$ |
0.88
|
||||||||
|
Weighted
average shares outstanding:
|
||||||||||||||||
|
Basic
|
12,266
|
12,014
|
12,676
|
11,971
|
||||||||||||
|
Diluted
|
12,270
|
12,014
|
12,680
|
11,973
|
||||||||||||
|
Cash
dividends declared per share
|
$ |
0.10
|
$ |
0.08
|
$ |
0.30
|
$ |
0.24
|
||||||||
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
3
HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
|
Nine
Months Ended
|
||||||||
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Cash
received from
customers.
|
$ |
234,868
|
$ |
263,877
|
||||
|
Cash
paid to suppliers and employees
|
(192,939 | ) | (244,689 | ) | ||||
|
Income
taxes paid, net
|
(10,188 | ) | (8,442 | ) | ||||
|
Interest
received (paid), net
|
977
|
(10 | ) | |||||
|
Net
cash provided by
operating activities
|
32,718
|
10,736
|
||||||
|
Cash
flows from investing activities
|
||||||||
|
Acquisition
of Sam Moore
Furniture, net of cash acquired
|
(10,571 | ) | ||||||
|
Purchase
of property, plant and
equipment
|
(1,514 | ) | (3,716 | ) | ||||
|
Proceeds
from the sale of property and equipment
|
2,129
|
2,516
|
||||||
|
Net
cash used in
investing activities
|
(9,956 | ) | (1,200 | ) | ||||
|
Cash
flows from financing activities
|
||||||||
|
Purchases
and retirement of common stock
|
(26,785 | ) | ||||||
|
Cash
dividends paid
|
(3,847 | ) | (2,855 | ) | ||||
|
Payments
on long-term debt
|
(1,860 | ) | (1,727 | ) | ||||
|
Net
cash used in
financing activities
|
(32,492 | ) | (4,582 | ) | ||||
|
Net
(decrease) increase in cash and cash equivalents
|
(9,730 | ) |
4,954
|
|||||
|
Cash
and cash equivalents at beginning of period
|
47,085
|
26,910
|
||||||
|
Cash
and cash equivalents at end of period
|
$ |
37,355
|
$ |
31,864
|
||||
|
Reconciliation
of net income to net cash provided
|
||||||||
|
by
operating
activities
|
||||||||
|
Net
income
|
$ |
15,055
|
$ |
10,578
|
||||
|
Depreciation
and
amortization
|
2,530
|
3,424
|
||||||
|
Non-cash
ESOP cost and restricted
stock awards
|
33
|
2,023
|
||||||
|
Restructuring
and asset impairment charges
|
763
|
6,693
|
||||||
|
Loss
on disposal of
property
|
2
|
|||||||
|
Provision
for doubtful
accounts
|
834
|
1,855
|
||||||
|
Deferred
income tax expense (benefit)
|
3,203
|
(3,639 | ) | |||||
|
Changes
in assets and liabilities, net of effect from acquisition:
|
||||||||
|
Trade
accounts
receivable
|
(505 | ) | (3,017 | ) | ||||
|
Inventories
|
16,261
|
(3,623 | ) | |||||
|
Prepaid
expenses and other
assets
|
(1,160 | ) | (1,766 | ) | ||||
|
Trade
accounts
payable
|
937
|
(4,412 | ) | |||||
|
Accrued
salaries, wages and
benefits
|
(1,211 | ) | (292 | ) | ||||
|
Accrued
income
taxes
|
(4,728 | ) |
1,538
|
|||||
|
Other
accrued
expenses
|
(139 | ) |
620
|
|||||
|
Other
long-term
liabilities
|
845
|
752
|
||||||
|
Net
cash provided by operating activities
|
$ |
32,718
|
$ |
10,736
|
||||
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
4
HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In
thousands, except per share data)
For
the
two-month transition period ended January 28, 2007 and nine months ended
October
28, 2007
|
Unearned
|
Accumulated
|
|||||||||||||||||||||||
|
ESOP
and
|
Other
|
Total
|
||||||||||||||||||||||
|
Common
Stock
|
Restricted
|
Retained
|
Comprehensive
|
Shareholders’
|
||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Earnings
|
Loss
|
Equity
|
|||||||||||||||||||
|
Balance
at November 30, 2006
|
14,429
|
$ |
11,154
|
$ | (14,835 | ) | $ |
166,326
|
$ | (109 | ) | $ |
162,536
|
|||||||||||
|
Net
loss
|
(18,415 | ) | (18,415 | ) | ||||||||||||||||||||
|
Unrealized
gain on interest rate swap
|
40
|
40
|
||||||||||||||||||||||
|
Total
comprehensive loss
|
(18,375 | ) | ||||||||||||||||||||||
|
Restricted
stock grants
|
5
|
|||||||||||||||||||||||
|
Restricted
stock compensation cost
|
8
|
8
|
||||||||||||||||||||||
|
ESOP
termination
|
(1,165 | ) |
9,678
|
14,835
|
(6,372 | ) |
18,141
|
|||||||||||||||||
|
Balance
at January 28, 2007
|
13,269
|
20,840
|
141,539
|
(69 | ) |
162,310
|
||||||||||||||||||
|
Net
income
|
15,055
|
15,055
|
||||||||||||||||||||||
|
Unrealized
loss on interest rate swap
|
(37 | ) | (37 | ) | ||||||||||||||||||||
|
Total
comprehensive income
|
15,018
|
|||||||||||||||||||||||
|
Cash
dividends ($0.30 per share)
|
(3,847 | ) | (3,847 | ) | ||||||||||||||||||||
|
Restricted
stock compensation cost
|
33
|
33
|
||||||||||||||||||||||
|
Repurchases
of common stock
|
(1,246 | ) | (1,967 | ) | (24,818 | ) | (26,785 | ) | ||||||||||||||||
|
Balance
at October 28,
2007
|
12,023
|
$ |
18,906
|
$ | $ |
127,929
|
$ | (106 |
)
|
$ |
146,729
|
|||||||||||||
The
accompanying notes are an integral part of the unaudited consolidated financial
statements.
5
HOOKER
FURNITURE CORPORATION AND SUBSIDIARIES
NOTES
TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar
and
share amounts in tables, except per share amounts, in thousands unless otherwise
indicated)
For
the
Quarterly Period Ended October 28, 2007
|
1.
|
Preparation
of Interim Financial
Statements
|
The
consolidated financial statements of Hooker Furniture Corporation and
subsidiaries (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 U.S. generally accepted accounting principles
(“GAAP”) 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 audited consolidated
financial statements and accompanying notes included in the Company’s annual
report on Form 10-K for the fiscal year ended November 30, 2006.
On
August 29,
2006, the Company approved a change in its fiscal year. After the
fiscal year that ended November 30, 2006, the Company’s fiscal years will end on
the Sunday nearest to January 31. The Company completed a two-month
transition period that began December 1, 2006 and ended January 28, 2007
and
filed a transition report on Form 10-Q for that period in March
2007. The financial statements contained herein are being filed as
part of a quarterly report on Form 10-Q covering the thirteen-week period
(also
referred to as “three months” or “three-month period”) that began July 30, 2007
and the thirty-nine week period (also referred to as “nine months,” “nine-month
period” or “first nine months”) that began January 29, 2007, both ending on
October 28, 2007. These financial statements also include the
three-month period that began September 1, 2006 and the nine-month period
that
began March 1, 2006, both ending on November 30, 2006. The Company
did not recast the financial statements for the three-month or the nine-month
periods ended November 30, 2006 principally because the financial reporting
processes in place at that time included certain procedures that were completed
only on a quarterly basis. Consequently, to recast those periods
would have been impractical and would not have been cost-justified.
References
to
the 2008 fiscal year and comparable terminology in the notes to the consolidated
financial statements mean the fiscal year that began January 29, 2007 and
will
end February 3, 2008. Certain items in the consolidated financial
statements and the notes to the consolidated financial statements for the
periods prior to the fiscal year 2008 have been reclassified to conform to
the
fiscal year 2008 method of presentation.
|
2.
|
Inventories
|
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
|||||||
|
Finished
furniture
|
$ |
52,667
|
$ |
68,396
|
||||
|
Furniture
in process
|
1,094
|
1,629
|
||||||
|
Materials
and supplies
|
8,686
|
9,130
|
||||||
|
Inventories
at FIFO
|
62,447
|
79,155
|
||||||
|
Reduction
to LIFO basis
|
11,126
|
11,016
|
||||||
|
Inventories
|
$ |
51,321
|
$ |
68,139
|
||||
6
3.
Property,
Plant and Equipment
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
|||||||
|
Buildings
and land improvements
|
$ |
23,076
|
$ |
33,523
|
||||
|
Machinery
and equipment
|
3,415
|
20,506
|
||||||
|
Furniture
and fixtures
|
27,325
|
24,917
|
||||||
|
Other
|
3,559
|
3,239
|
||||||
|
Total
depreciable property at
cost
|
57,375
|
82,185
|
||||||
|
Less
accumulated depreciation
|
33,652
|
56,675
|
||||||
|
Total
depreciable property,
net
|
23,723
|
25,510
|
||||||
|
Land
|
1,387
|
1,472
|
||||||
|
Construction
in progress
|
627
|
2,233
|
||||||
|
Property,
plant and equipment,
net
|
$ |
25,737
|
$ |
29,215
|
||||
4. Goodwill
and Intangible Assets
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
|||||||
|
Goodwill
|
$ |
2,396
|
$ |
2,396
|
||||
|
Non-amortizable
Intangible Assets
|
||||||||
|
Trademarks
and trade names – Bradington-Young
|
$ |
4,400
|
$ |
4,400
|
||||
|
Trademarks
and trade names – Sam Moore
|
396
|
|||||||
|
Total
trademarks and trade names
|
4,796
|
4,400
|
||||||
|
Amortizable
Intangible Assets
|
||||||||
|
Non-compete
agreements
|
700
|
700
|
||||||
|
Less
accumulated amortization
|
700
|
|
685
|
|||||
|
Net
carrying value
|
15
|
|||||||
|
Intangible
assets
|
$ |
4,796
|
$ |
4,415
|
||||
5. Acquisition
On
April 28,
2007, the Company completed its acquisition of substantially all of the
assets of Bedford, Virginia-based Sam Moore Furniture Industries, Inc., a
manufacturer of upscale occasional chairs with an emphasis on fabric-to-frame
customization in the upper-medium to high-end price niches. The
Company operates the business as Sam Moore Furniture LLC. The Company
acquired the Sam Moore operation for an aggregate purchase price of $12.1
million, consisting of $10.3 million in cash (net of cash acquired), $1.5
million in assumed liabilities and acquisition-related fees of
$330,000.
Based
on an
appraisal of the assets of Sam Moore, the fair value of those assets exceeded
the Company’s purchase price paid. This $3.6 million excess over
purchase price paid was allocated as a reduction to the fair value of property,
plant and equipment and intangible assets in determining their recorded
values.
The
recorded
values of the assets acquired and liabilities assumed were:
|
April
28, 2007
|
||||
|
Current
assets
|
$ |
8,669
|
||
|
Property,
plant and equipment
|
3,072
|
|||
|
Intangible
assets
|
396
|
|||
|
Total
assets acquired
|
12,137
|
|||
|
Current
liabilities assumed
|
1,487
|
|||
|
Net
assets acquired
|
$ |
10,650
|
||
7
6. Long-Term
Debt
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
|||||||
|
Term
loan
|
$ |
8,555
|
$ |
11,012
|
||||
|
Less
current maturities
|
2,645
|
2,457
|
||||||
|
Long-term
debt, less current maturities
|
$ |
5,910
|
$ |
8,555
|
||||
7. Restructuring
and Asset Impairment Charges and Assets Held for Sale
|
Severance
and
Related
Benefits
|
Asset
Impairment
|
Other
|
Total
|
|||||||||||||
|
Accrued
balance at January 28, 2007
|
$ |
2,983
|
$ |
200
|
$ |
3,183
|
||||||||||
|
Restructuring charges
and asset impairment
|
||||||||||||||||
|
charges
accrued
|
63
|
$ |
263
|
437
|
763
|
|||||||||||
|
Non-cash
charges
|
(263 | ) | (263 | ) | ||||||||||||
|
Cash
payments
|
(1,923 | ) | (441 | ) | (2,364 | ) | ||||||||||
|
Balance
at October 28, 2007
|
$ |
1,123
|
$ | $ |
196
|
$ |
1,319
|
|||||||||
During the 2008 nine-month period, the Company recorded aggregate restructuring charges of $763,000 ($473,000 after tax, or $0.04 per share) consisting of $893,000 for additional severance, related benefits, asset impairment, disassembly and exit costs associated with the March 2007 closing of the Martinsville, Va. domestic wood manufacturing facility, partially offset by a restructuring credit of $130,000, principally for previously accrued health care benefits for the Pleasant Garden, N.C. facility that are not expected to be paid.
The
fair
value (net of expected selling costs) of the Martinsville, Va. facility real
and
personal property has been reclassified to “assets held for sale” in the
consolidated balance sheets. In October 2007, the Company sold the
machinery, equipment and certain other personal property located at that
facility for $2.1 million, net of related selling costs. The Company
has entered into an agreement to sell the real property located
there. The sale is expected to close by the end of December
2007. The Company expects to record an additional $50,000 to $150,000
in disassembly and similar exit costs as incurred in the fourth quarter of
fiscal 2008 related to the sale.
8.
Other
Comprehensive Income
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
October
28,
2007
|
November
30,
2006
|
|
October
28,
2007
|
November
30,
2006
|
||||||||||||
|
Net
income
|
$ |
5,911
|
$ |
3,536
|
$ |
15,055
|
$ |
10,578
|
||||||||
|
(Loss)
gain on interest rate swap
|
(79 | ) | (40 | ) | (92 | ) |
27
|
|||||||||
|
Portion
of swap agreement’s fair value reclassified to
|
||||||||||||||||
|
interest
expense
|
11
|
14
|
32
|
56
|
||||||||||||
|
Other
comprehensive (loss) income before tax
|
(68 | ) | (26 | ) | (60 | ) |
83
|
|||||||||
|
Income
tax benefit (expense)
|
26
|
8
|
23
|
(31 | ) | |||||||||||
|
Other
comprehensive (loss) income, net of tax
|
(42 | ) | (18 | ) | (37 | ) |
52
|
|||||||||
|
Comprehensive
net income
|
$ |
5,869
|
$ |
3,518
|
$ |
15,018
|
$ |
10,630
|
||||||||
8
9. Employee
Stock Ownership Plan (“ESOP”) Cost
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||
|
October
28,
|
November
30,
|
October
28,
|
November
30,
|
|||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||
|
Average
closing market price per share
|
$ |
14.41
|
$ |
16.10
|
||||||
|
Number
of shares committed to be
|
||||||||||
|
Released
(in whole shares)
|
38,278
|
124,759
|
||||||||
|
Non-cash
ESOP cost
|
$ |
551
|
$ |
2,009
|
||||||
|
Administrative
cost
|
22
|
46
|
||||||||
|
Total
ESOP cost
|
$ |
573
|
$ |
2,055
|
||||||
On
January
26, 2007, the Company terminated its ESOP. The termination resulted
in an $18.4 million, non-cash, non-tax deductible charge to earnings in January
2007 with a corresponding increase in shareholders’ equity. As a
result of the ESOP termination, approximately 1.2 million shares of Company
common stock held by the ESOP were released to be allocated to eligible
employees. To effect the termination of the ESOP, the Company
redeemed and retired an additional 1.2 million shares of Company common stock
held by the ESOP, with proceeds to the ESOP of $17.2 million (or $15.01 per
share). The ESOP used the proceeds to repay the outstanding balance on the
ESOP
loan. In connection with the ESOP termination, the Company wrote-off
the related deferred tax asset in the amount of $855,000.
10. Share-Based
Compensation
The
Company
issued restricted stock awards to non-employee members of the board of directors
in January 2006 and 2007 and expects to issue restricted stock or other forms
of
stock-based compensation awards to eligible directors and employees in the
future under the Hooker Furniture Corporation 2005 Stock Incentive Plan (“Stock
Plan”).
The
Stock
Plan permits incentive awards of restricted stock, restricted stock units,
stock
appreciation rights and performance grants to key employees and non-employee
directors. A maximum of 750,000 shares of the Company’s common stock
has been reserved for issuance under the Stock Plan. On January 15,
2007, a total of 4,875 shares of restricted common stock were granted to
the
five non-employee members of the board of directors at a grant-date fair
value
of $15.23 per share. On January 16, 2006, a total of 4,851 shares of
restricted common stock were granted to the six non-employee members of the
board of directors at a grant-date fair value of $15.31 per share. These
shares will vest if each director remains on the board through a 36-month
service period or may vest earlier in accordance with terms specified in
the
Stock Plan. Since January 2006, 784 shares were forfeited and 147 shares
vested
under these restricted stock awards.
The
Company
accounts for these awards as “non-vested equity shares.” These shares
have an aggregate grant-date fair value of approximately $137,000, after
taking
forfeitures into account. Through October 28, 2007, the Company has
recognized non-cash compensation expense of approximately $60,000 related
to
these non-vested awards. The remaining $77,000 of grant-date fair
value will be recognized over the remaining vesting periods for these
awards.
Restricted
shares awarded under the Stock Plan that have not yet vested are considered
when
computing diluted earnings per share. Basic and diluted earnings per
share are calculated using the following share data:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
October
28,
|
November
30,
|
October
28,
|
November
30,
|
|||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Weighted
average shares outstanding for computing
basic
earnings per share
|
12,266
|
12,014
|
12,676
|
11,971
|
||||||||||||
|
Dilutive
effect of restricted stock awards
|
4
|
4
|
2
|
|||||||||||||
|
Weighted
average shares
outstanding for computing
diluted
earnings per share
|
12,270
|
12,014
|
12,680
|
11,973
|
||||||||||||
9
11. Common
Stock
During
the
fiscal 2008 first and second quarters, the Company’s Board of Directors had
authorized the repurchase of up to an aggregate of $30 million of the
Company’s common stock. The Company completed the repurchase program
in November 2007. Since February 2007, the Company has
repurchased in open market transactions a total of 1.4 million shares of
Company
common stock under this authorization at an average price of $21.36 per share,
excluding commissions.
12.
Accounting
Pronouncements
On
January
29, 2007, the Company adopted Financial Accounting Standards Interpretation
No.
48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements in accordance with FASB Statement No. 109, Accounting
for
Income Taxes. FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosures and transition. The Company recorded no
adjustment upon adoption of FIN 48.
The
Company
had unrecognized tax benefits of $983,000 on January 29, 2007. As of
October 28, 2007, the Company’s unrecognized tax benefits declined to $308,000,
principally as a result of the settlement of a federal income tax audit for
the
Company’s 2003 and 2004 tax years. The remaining unrecognized tax benefits as of
October 28, 2007, (consisting of deductions claimed on previously
filed returns) are expected to be effectively settled within twelve months
with
the filing of amended federal and state income tax returns for the applicable
fiscal years through November 30, 2005. Consequently, the Company will not
recognize any benefit from the settlement of these previously unrecognized
tax
positions.
The
Company
elected upon adoption of FIN 48 to classify interest or penalties recognized
in
accordance with FIN 48 as income tax expense. Accrued interest and
penalties included with these unrecognized tax benefits discussed above were
$87,000 as of January 29, 2007 and $29,000 as of October 28, 2007.
The
Company
believes that the statute of limitations for all major jurisdictions has
expired
for tax periods ending on or before November 30, 2003.
13.
Subsequent
Events
On
October 24, 2007, the Company
announced that it had signed a letter of intent to purchase the assets of
Opus
Designs Furniture, LLC, a specialist in moderately priced youth bedroom
furniture. The transaction is expected to close by the end of January 2008,
subject to, among other things, completion of due diligence and negotiation
of a
definitive acquisition agreement.
On
December
5, 2007, the Company announced that its Board of Directors had approved
a new
authorization to repurchase up to $10 million of the Company’s common
stock. There is no expiration date for this authorization, but the
Company expects the purchases to be completed within the next six
months. Repurchases may be made from time-to-time in the open market,
or in privately negotiated transactions at prevailing market prices that
the
Company deems appropriate. The Company plans to enter into a trading
plan under Rule 10b5-1 of the Securities Exchange Act of 1934 for effecting
some
or all of the purchases under this repurchase authorization. The
trading plan will contain certain provisions that could restrict the amount
and
timing of purchases. The Company will be able to terminate this plan
at any time.
Item
2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
On
August 29,
2006, the Company approved a change in its fiscal year. After the
fiscal year that ended November 30, 2006 (“fiscal 2006”), the Company’s fiscal
years will end on the Sunday nearest to January 31. The Company completed
a
two-month transition period that began December 1, 2006 and ended January
28,
2007 and filed a transition report on Form 10-Q for that period in March
2007. This quarterly report on Form 10-Q includes the Company’s
unaudited consolidated financial statements for the thirteen week (also referred
to as “three months,” “three-month period,” “quarter” or “quarterly period”) and
thirty-nine week (also referred to as “nine months,” “nine-month period” or
“first nine months”) periods ended October 28, 2007 and discusses the Company’s
results of operations for each respective period compared with the most directly
comparable prior fiscal year three and nine-month periods, which ended November
30, 2006. This report also discusses the Company’s financial
condition as of October 28, 2007. References in this report to the
2008 fiscal year or comparable terminology refer to the Company’s fiscal year
10
that
began
January 29, 2007 and will end February 3, 2008. The Company did not
recast the financial statements for the three-month or the nine-month periods
ended November 30, 2006, principally because the financial reporting processes
in place at that time included certain procedures that were completed only
on a
quarterly basis. Consequently, to recast those periods would have been
impractical and would not have been cost-justified.
Overview
Results
of
operations for the thirteen weeks ended October 28, 2007 reflect the Company’s
transformation into a home furnishings design, marketing and logistics company
with world-wide sourcing capabilities. With the closing of its last
domestic wood furniture plant during the fiscal 2008 first quarter, the Company
is now focused on imported wood and metal and domestically produced and imported
upholstered home furnishings. On April 28, 2007, the Company
completed the acquisition of Sam Moore Furniture Industries, Inc., a Bedford,
Virginia manufacturer of upscale occasional chairs with an emphasis on
fabric-to-frame customization in the upper-medium to high-end price
niches. The Company began operating the business as Sam Moore
Furniture LLC during the fiscal 2008 second quarter.
Because
the
fiscal 2008 third quarter does not completely correspond to the fiscal 2006
fourth quarter, management’s discussion of results of operations includes
information regarding daily average sales rates and profitability performance
as
a percentage of net sales.
Following
are
the principal factors that impacted the Company’s results of operations during
the quarterly period ended October 28, 2007:
|
·
|
Based
on actual shipping days in each period, average daily net sales
declined
9.4% during the 64-day fiscal 2008 third quarter compared to the
63-day
fiscal 2006 fourth quarter. The decline in average daily net
sales continues to mirror the year-over-year decline in incoming
order
rates the Company has experienced since the fiscal 2006 third quarter
resulting from the industry-wide slow down in business at
retail.
|
|
·
|
Operating
margin during the fiscal 2008 third quarter compared with the fiscal
2006
fourth quarter was favorably impacted
by:
|
|
§
|
a
$3.3
million, or 88.8%, decline in restructuring and asset impairment
related
charges;
|
|
§
|
an
improvement in gross profit margin to 31.8% of net sales compared
with
30.7% in the prior year quarter, principally as a result of the
higher
proportion of imported wood and metal products sold and lower delivered
cost of those imported products (primarily lower inbound freight
and
delivery costs) as a percentage of net sales; partially offset
by
|
|
§
|
an
increase in selling and administrative costs as a percentage of
net sales,
due to the decline in net sales. These expenses actually
declined by $1.3 million, or 7.0%, driven primarily by reductions
in temporary warehousing and storage costs for imported wood
furniture products, lower early retirement and non-cash employee
stock
ownership plan (“ESOP”) costs (the ESOP was terminated in January 2007)
and lower selling expenses, partially offset by the selling and
administrative expenses incurred by Sam Moore.
|
|
·
|
The
operations of Sam Moore Furniture are included in the Company’s results of
operations as of the beginning of the fiscal 2008 second
quarter.
|
11
Results
of Operations
The
following
table sets forth the percentage relationship to net sales of certain items
included in the consolidated statements of operations.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
October
28,
|
November
30,
|
October
28,
|
November
30,
|
|||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Cost
of
sales
|
68.2
|
69.3
|
69.4
|
70.4
|
||||||||||||
|
Gross
profit
|
31.8
|
30.7
|
30.6
|
29.6
|
||||||||||||
|
Selling
and administrative expenses
|
20.7
|
20.5
|
20.6
|
20.6
|
||||||||||||
|
Restructuring
and asset impairment charges
|
0.5
|
4.1
|
0.3
|
2.5
|
||||||||||||
|
Operating
income
|
10.6
|
6.2
|
9.6
|
6.4
|
||||||||||||
|
Other
income (expense), net
|
0.4
|
(0.3 | ) |
0.5
|
0.0
|
|||||||||||
|
Income
before income taxes
|
11.0
|
5.9
|
10.1
|
6.4
|
||||||||||||
|
Income
taxes
|
3.9
|
2.0
|
3.7
|
2.4
|
||||||||||||
|
Net
income
|
7.1
|
3.9
|
6.4
|
4.0
|
||||||||||||
Fiscal
2008 Third Quarter Compared to the Fiscal 2006 Fourth Quarter
Net
sales for
the fiscal year 2008 third quarter declined to $83.8 million compared to
$91.0
million for the fiscal 2006 fourth quarter, principally due to lower unit
volumes attributed to the industry-wide slow down in business at
retail. Based on actual shipping days in each period, average daily
net sales declined 9.4% to $1.3 million per day during the 64-day fiscal
2008
third quarter compared to $1.4 million per day during the 63-day fiscal 2006
fourth quarter.
Net
sales
rates (i.e. average daily net sales) decreased for Hooker imported and
domestically produced wood and metal furniture and Bradington-Young domestic
and
imported leather upholstered furniture for the fiscal 2008 third quarter
compared to the fiscal 2006 fourth quarter, principally due to lower unit
volume. These declines in unit volume were partially offset by $7.2 million
in
net sales of Sam Moore Furniture fabric upholstered furniture.
Overall,
average selling prices increased slightly during the fiscal 2008 third quarter
compared to the fiscal 2006 fourth quarter principally due to higher average
selling prices for imported wood and metal furniture and domestic leather
upholstered furniture, offset by a slight decline in average selling prices
for
imported leather upholstered furniture and a sharp decline in domestic wood
furniture average selling prices. Imported wood and metal furniture
average selling prices for the fiscal 2008 third quarter increased principally
due to the mix of products shipped, compared to the fiscal 2006 fourth
quarter. Domestic leather upholstered furniture average
selling prices increased principally due to an overall increase in per unit
pricing. The decline in imported leather upholstered prices was due
to the mix of products shipped and higher discounting on slower-moving
products. The decline in domestically produced wood furniture selling
prices was principally due to sharp discounting offered on discontinued
products.
Gross
profit
margin increased to 31.8% of net sales in the fiscal 2008 third quarter compared
to 30.7% in the fiscal 2006 fourth quarter, driven principally by the higher
proportion of imported wood and metal products sold and the lower delivered
cost
of those products (primarily lower inbound freight and delivery costs) as
a
percentage of net sales, partially offset by a sharp
decline in gross margin for domestically produced wood furniture. The
decline in gross margin on domestically produced wood furniture was primarily
due to aggressive price discounting during the fiscal 2008 third quarter
on
these discontinued products. Gross margins for leather upholstered
furniture were flat compared to the prior year period. Gross profit
margin for Sam Moore’s fabric upholstered products amounted to 21.0% of Sam
Moore’s sales during the current year quarter.
12
Selling
and
administrative expenses declined to $17.3 million for the fiscal 2008 third
quarter, compared to $18.6 million for the fiscal 2006 fourth quarter, but
increased slightly as a percentage of net sales to 20.7% from 20.5% due to
lower
net sales in the current year quarter. The decrease in selling and
administrative expenses was principally due to reductions in temporary
warehousing and storage costs for imported wood furniture products, as well
as
lower non-cash ESOP costs and lower selling expenses, partially offset by
the
selling and administrative expenses incurred by Sam Moore.
During
the
fiscal year 2008 third quarter, the Company recorded restructuring charges
of
$419,000 ($260,000 after tax, or $0.02 per share) principally for additional
asset impairment, disassembly and exit costs associated with the March 2007
closing of the Martinsville, Va. domestic wood manufacturing
facility.
During
the
fiscal 2006 fourth quarter, the Company recorded $3.7 million ($2.3 million
after tax, or $0.19 per share) in restructuring charges (net of restructuring
credits) principally related to:
|
·
|
an
asset impairment charge to write down the real and personal property
at
the Martinsville, Va. manufacturing facility to its estimated fair
value
($4.2 million); net of
|
|
·
|
a
restructuring credit, principally related to the reversal of previously
accrued health care benefits for terminated employees at the former
Roanoke, Va. facility that were not expected to be paid
($448,000).
|
Operating
income for the fiscal 2008 third quarter increased to $8.9 million, or 10.6%
of
net sales, compared to operating income of $5.6 million, or 6.2% of net sales,
in the fiscal 2006 fourth quarter, principally due to:
|
·
|
the
$3.3 million, or 88.8% decrease in restructuring and asset impairment
costs; and
|
|
·
|
the
increase in gross profit margin to 31.8% from 30.7%; partially
offset
by
|
|
·
|
the
$1.3 million, or 7.0% decrease in selling and administrative costs;
however, these expenses increased as a percentage of net sales
due to the
decline in net sales.
|
Other
income,
net was $309,000, or 0.4% of net sales, for the fiscal 2008 third quarter
compared to other expense, net of $261,000, or 0.3% of net sales, for the
fiscal
2006 fourth quarter. This improvement was the result of an increase
in interest income, due to higher cash and cash equivalent balances, and
a
decrease in interest expense, due to lower debt levels.
The
Company
recorded income tax expense of $3.3 million for the fiscal 2008 third quarter
and $1.8 million for the fiscal 2006 fourth quarter. The Company’s effective tax
rate increased to 35.9% for the fiscal 2008 third quarter from 34.0% during
the
fiscal 2006 fourth quarter. The Company’s effective tax rate in the
2006 fiscal fourth quarter was lower principally as a result of the correction
of an error related to its accounting for the tax treatment of the
ESOP. See Note 11 – Income Taxes included in the Notes to
the Consolidated Financial Statements contained in the Company’s
Annual Report on Form 10-K for the fiscal year ended November 30,
2006.
Fiscal
year
2008 third quarter net income was $5.9 million, or $0.48 per share, compared
to
net income of $3.5 million, or $0.29 per share, in the fiscal 2006 fourth
quarter. Earnings per share improvements resulting from higher net
income were reduced by a net increase in weighted average shares outstanding
resulting from: 1) 1.2 million shares released to employees in the
January 2007 termination of the ESOP, partially offset by 2) the
weighted average effect of common stock repurchases since February.
13
Fiscal
2008 First Nine Months Compared to the Fiscal 2006 Nine-Month Period ended
November 30, 2006
Year-to-date,
the Company reported net sales of $234.5 million, a decrease of $30.2 million
or
11.4%, compared to $264.7 million in the nine-month period ended November
30,
2006, principally due to lower unit volume attributed to the industry-wide
slow
down in business at retail. Based on actual shipping days in each
period, average daily net sales declined 11.9% to $1.2 million per day during
the 192 day fiscal 2008 nine-month period compared to $1.4 million per day
during the 191 day fiscal 2006 nine-month period. The Company
experienced lower average daily unit volume shipments overall, and in every
product category except import upholstery, which experienced a slight increase,
comparing the fiscal 2008 first nine months to the nine-month period ended
November 30, 2006. Sam Moore fabric upholstery sales amounted to
$13.9 million for the two quarters since it was acquired at the beginning
of the
fiscal 2008 second quarter.
Overall,
average selling prices for the Company increased slightly. The
Company experienced slight increases in average selling prices for imported
wood
and metal and domestically produced leather upholstered furniture, offset
by a
slight decline in imported leather upholstered furniture average selling
prices
and a sharp decline in domestically produced wood furniture average selling
prices. Imported wood and metal furniture average selling prices for
the fiscal 2008 first nine months increased in part due to the mix of products
shipped and lower discounting, compared to the fiscal 2006 nine-month
period. The increase in domestically produced leather upholstered
furniture average selling prices was principally due to an overall increase
in
per unit pricing combined with the mix of products shipped. The
decline in imported leather upholstered furniture average selling prices
was due
to the mix of products shipped and higher discounting on slow-moving products.
The decline in domestically produced wood furniture average selling prices
was
due to sharp discounting offered on discontinued domestically produced wood
furniture products.
Year-to-date,
gross profit margin increased to 30.6% of net sales compared to 29.6% in
the
comparable 2006 period due to the larger proportion of sales of higher margin
imported products and the lower delivered cost of those products (primarily
lower inbound freight and delivery costs) as a percentage of net
sales.
In
the first
nine months of fiscal 2008, selling and administrative expenses decreased
$6.1
million, or 11.3%, to $48.4 million compared with $54.5 million in the fiscal
2006 nine-month period. The decline is principally due to reductions
in temporary warehousing and storage costs for imported wood furniture products,
lower early retirement and non-cash ESOP costs, lower selling expenses and
a
gain on the settlement of a corporate-owned life insurance policy in connection
with the death of a former executive of the company, partially offset by
the
selling and administrative expenses incurred by Sam Moore. As a
percentage of net sales, selling and administrative expenses approximated
20.6%
in each period.
During
the
first nine months of fiscal 2008, the Company recorded aggregate restructuring
charges (net of restructuring credits) of $763,000 ($473,000 after tax, or
$0.04
per share) consisting of:
|
·
|
$893,000
for additional severance and related benefit costs, asset impairment,
disassembly and exit costs associated with the closing of the
Martinsville, Va. domestic wood manufacturing facility in March
2007; net
of
|
|
·
|
a
restructuring credit of $130,000 principally for previously
accrued health care benefits for the Pleasant Garden, N.C. facility
that
are not expected to be paid.
|
During
the
fiscal 2006 nine-month period, the Company recorded $6.7 million ($4.1 million
after tax or $0.35 per share) in restructuring charges,
net principally related to:
|
·
|
an
asset impairment charge to write down the real and personal property
at
the Martinsville, Va. manufacturing facility to its estimated fair
value
($4.2 million);
|
|
·
|
severance
and related benefits and asset impairment charges related to the
August
2006 closing of the Company’s Roanoke, Va. manufacturing facility ($2.7
million); and
|
|
·
|
asset
impairment charges related to two former Bradington-Young showrooms
($140,000); net of
|
|
·
|
a
restructuring credit, principally for previously accrued health
care
benefits for terminated employees at the former Pleasant Garden,
N.C.
facility that were not expected to be paid
($322,000).
|
14
The
Company’s
operating income for the first nine months of fiscal 2008 increased to $22.6
million, or 9.6% of net sales, compared to operating income of $17.0 million,
or
6.4% of net sales, in the first nine months of fiscal 2006, principally due
to:
|
·
|
the
$5.9 million, or 88.6%, decrease in restructuring and asset impairment
costs;
|
|
·
|
the
increase in gross profit margin to 30.6% from 29.6%;
and
|
|
·
|
the
$6.1 million, or 11.3%, decline in selling and administrative costs;
although these costs were 20.6% of net sales in both
periods.
|
Other
income,
net was $1.2 million, or 0.5% of net sales for the first nine months of fiscal
2008 compared to other expense, net of $90,000 for the fiscal 2006 nine-month
period. This improvement was the result of an increase in interest
income due to higher cash and cash equivalent balances and a decrease in
interest expense on lower debt levels.
The
Company
recorded income tax expense of $8.7 million for the first nine months of
fiscal
2008 and $6.3 million for fiscal 2006 nine-month period. The Company’s effective
tax rate decreased to 36.5% for the first nine months of fiscal 2008 from
37.5%
for the fiscal 2006 nine-month period. The effective rate
declined in the fiscal 2008 first nine months principally due to the tax
effect
of the ESOP. The Company recorded no ESOP compensation cost during
the current year period due to the termination of the ESOP in January
2007. The effective rate also declined during the current year period
partly due to the non-taxable gain recorded on the settlement of a corporate
owned life insurance policy discussed previously.
Year-to-date
net income rose by 42.3%, or $4.5 million, to $15.1 million or $1.19 per
share,
from $10.6 million, or $0.88 per share, in the fiscal 2006 nine-month
period. As a percent of net sales, net income increased to 6.4% in
the 2008 nine-month period compared to 4.0% for the fiscal 2006 nine-month
period. Earnings per share improvements resulting from higher net
income were reduced by a net increase in weighted average shares outstanding
resulting from: 1) 1.2 million shares released to employees in the
January 2007 termination of the ESOP, partially offset by 2) the weighted
average effect of common stock repurchases since February 2007.
Outlook
The
Company
continued to experience declines in incoming orders during the fiscal 2008
third
quarter. The Company expects that retail conditions will continue to
be sluggish well into next year. However, financial performance for
the remainder of fiscal 2008 should continue to show year-over-year improvement
even in the face of weak sales, due to:
|
·
|
the
cost-cutting measures implemented by the
Company;
|
|
·
|
continued
progress in managing the Company’s supply chain, warehousing and
distribution operations; and
|
|
·
|
the
elimination of costs associated with the closing of the Company’s wood
furniture manufacturing facilities.
|
A
number of
expenses that occurred in the fiscal 2006 fourth quarter and fiscal 2007
two-month transition period are not expected to recur in the fourth quarter
of
fiscal 2008, including temporary port storage costs, early retirement costs
and
costs related to the termination of the ESOP. The Company also
expects to incur substantially less in restructuring and asset impairment
costs
during the fiscal 2008 fourth quarter.
During
the
fiscal 2008 second quarter, the Company successfully integrated the Sam Moore
operations into the Company’s overall operations. While Sam Moore has
operated at a slight loss since acquired in April 2007, the Company is taking
steps, including expanding the Sam Moore sales team and investigating additional
distribution channels that the Company believes will help to generate sales
growth and reducing operating expenses for the Sam Moore product
lines. As a result, the Company anticipates marginal profitability
from Sam Moore in the 2009 fiscal year.
On
October
24, 2007, the Company announced it signed a letter of intent to purchase
the
assets of Opus Designs Furniture, LLC, a specialist in moderately priced
youth
bedroom furniture. The transaction is expected to close by the end of January
2008, subject to, among other things, completion of due diligence and
negotiation of a definitive acquisition agreement. The acquisition
would provide a solid foundation for the
15
Company
to
build a strong youth bedroom program at more moderate price points, with
a more
comprehensive product line and with superior sourcing arrangements compared
to
the Company’s current SmartKids youth furniture line.
In
the fiscal
2008 fourth quarter, the Company plans to begin using a distribution facility
located in the port area of Southern California. As a result, the
Company expects to improve its service and further reduce inbound and outbound
freight cost to its dealers principally located on the U.S. West Coast, for
certain imported wood and upholstered furniture products.
Financial
Condition, Liquidity and Capital Resources
Balance
Sheet and Working Capital
As
of October
28, 2007, assets totaled $183.8 million, decreasing from $201.3 million at
November 30, 2006, due to decreases in inventories, accounts receivable,
property, plant and equipment, prepaid expenses and other current
assets, and other long-term assets, partially offset by increases in cash
and
cash equivalents, assets held for sale, cash surrender value of life insurance
policies and intangible assets. Shareholders’ equity at October 28,
2007 declined to $146.7 million, compared to $162.5 million at November 30,
2006, principally due to repurchases of common stock. The Company’s
long-term debt, including current maturities decreased to $8.6 million at
October 28, 2007, from $11.0 million at November 30, 2006, as a result of
scheduled debt repayments.
Working
capital decreased $14.3 million or 11.5%, to $109.8 million as of October
28,
2007, from $124.0 million at the end of fiscal 2006, reflecting a $14.8 million
decrease in current assets, partially offset by a $517,000 decrease in current
liabilities.
The
decrease
in current assets is principally due to decreases of $16.8 million in
inventories, $4.3 million in accounts receivable and $1.4 million in prepaid
expenses and other current assets, offset by increases of $5.5 million in
cash
and cash equivalents and $2.3 million in assets held for
sale. Accounts receivable decreased principally due to lower
sales.
Inventories
decreased 24.7%, to $51.3 million as of October 28, 2007, from $68.1 million
at
November 30, 2006, principally due to:
|
·
|
declines
in manufactured finished goods and work in process, principally
due to the
Company’s exit from domestic wood manufacturing;
and,
|
|
·
|
a
decline in purchases of imported wood inventories, resulting principally
from lower sales volume and a continued refinement in supply
chain initiatives; partially offset
by
|
|
·
|
an
increase in raw materials, principally related to Sam Moore fabric
upholstery lines.
|
The
decrease
in current liabilities is attributed to a decrease of $1.4 million in other
accrued expenses, offset by increases of $648,000 in accounts payable and
$188,000 in current maturities of long-term debt.
Cash
Flows
– Operating, Investing and Financing Activities
During
the
nine months ended October 28, 2007, cash generated from operations ($32.7
million), a decrease in cash and cash equivalents ($9.7 million) and proceeds
from the sale of property, plant and equipment ($2.1 million) funded the
purchase and retirement of common stock ($26.8 million), the acquisition
of Sam
Moore Furniture (net of cash acquired) ($10.6 million), cash dividends ($3.8
million), principal payments on long-term debt ($1.9 million) and capital
expenditures to maintain and enhance the Company’s business operating systems
and facilities ($1.5 million).
During
the
nine months ended November 30, 2006, cash generated from operations ($10.7
million) and proceeds from the sale of property and equipment ($2.5 million)
funded an increase in cash and cash equivalents ($5.0 million), the purchase
of
property, plant and equipment ($3.7 million), cash dividends ($2.9 million)
and
principal payments on long-term debt ($1.7 million).
16
Cash
generated from operations during the first nine months of fiscal 2008 increased
to $32.7 million compared with $10.7 million generated during the nine-month
period ended November 30, 2006. The increase was primarily due to
lower payments made to suppliers and employees, increased interest income
earned
on larger cash and cash equivalent balances, and reduced interest payments
on
debt, partially offset by a decrease in cash received from customers and
an
increase in income tax payments. The decline in payments to suppliers
and employees in the first nine months of fiscal 2008 compared to the nine-month
period ended November 30, 2006 is primarily due to a reduction in inventory
levels and lower employee headcount. The decline in cash received
from customers for the first nine months of fiscal 2008 compared to the
nine-month period ended November 30, 2006 is principally attributed to lower
net
sales.
The
Company
used $10.0 million of cash for investing activities during the first nine
months
of fiscal year 2008 compared to $1.2 million during the nine-month period
ended
November 30, 2006. The Company acquired the assets of Sam Moore
Furniture for $10.6 million in April 2007 (net of cash acquired) and invested
$1.5 million to purchase property, plant and equipment during the fiscal
2008
nine-month period. The Company also received $2.1 million in proceeds
principally from the sale of machinery and other property located at the
closed
Martinsville, Va. manufacturing facility. During the nine-month
period ended November 30, 2006, the Company invested $3.7 million in purchases
of property, plant and equipment. The Company also received $2.5
million in proceeds during the fiscal 2006 period from the sale of property,
plant and equipment (principally from the sale of the Roanoke, Va. and Pleasant
Garden, N.C. facilities).
The
Company
used $32.5 million of cash for financing activities during the first nine
months
of fiscal 2008 compared to $4.6 million in the nine month period ended November
30, 2006. During the first nine months of fiscal year 2008, the
Company used $26.8 million to purchase and retire common stock, paid cash
dividends of $3.8 million and made scheduled principal repayments of $1.9
million on the Company’s term loan. In the nine-month period ended
November 30, 2006, the Company paid cash dividends of $2.9 million and made
scheduled principal repayments of $1.7 million on its term loan.
Swap
Agreements
The
aggregate
fair market value of the Company’s interest rate swap agreement decreases when
interest rates decline and increases when interest rates rise. While
interest rates have increased since the fiscal 2003 second quarter through
the
fiscal 2008 third quarter that ended October 28, 2007, overall, interest
rates
have declined since the original inception of the Company’s swap agreement in
September 2000. The aggregate decrease in the fair market value of
the effective portion of this agreement of $106,000 ($171,000 pre-tax) as
of
October 28, 2007, and $109,000 ($175,000 pre-tax) as of November 30, 2006,
is
reflected under the caption “accumulated other comprehensive loss” in the
consolidated balance sheets. Substantially all of the aggregate
pre-tax decrease in fair market value of the agreement is expected to be
reclassified into interest expense during the next twelve months.
Debt
Covenant Compliance
The
credit
agreement for the Company’s revolving credit facility and outstanding term loan
contains, among other requirements, financial covenants as to minimum tangible
net worth, debt service coverage, the ratio of funded debt to earnings before
interest, taxes, depreciation and amortization and maximum capital
expenditures. The Company was in compliance with these covenants as
of October 28, 2007.
Liquidity
and Capital Expenditures
As
of October
28, 2007, the Company had an aggregate $13.6 million available under its
revolving credit facility to fund working capital needs. Standby
letters of credit in the amounts of: 1) $1.2 million, used exclusively to
collateralize certain insurance arrangements and 2) $200,000 related to the
Company’s imported product purchases, were outstanding under the Company’s
revolving credit facility as of October 28, 2007. There were no
additional borrowings outstanding under the revolving credit line on October
28,
2007. Any principal outstanding under the credit line is due March 1,
2008. Apart from its revolving credit facility, the Company also has an
additional standby letter of credit outstanding in the amount of $80,000
related
to its imported product purchases.
17
The
Company
believes it has the financial resources (including available cash and cash
equivalents, expected cash flow from operations, and lines of credit) needed
to
meet business requirements for the foreseeable future, including working
capital, dividends on the Company’s common stock, capital expenditures and
repayments of outstanding debt. Cash flow from operations is highly
dependent on incoming order rates and the Company’s operating
performance. The Company plans to spend $250,000 to $750,000 in
capital expenditures during the remainder of fiscal 2008, to maintain and
enhance its operating systems and facilities.
During
the
nine months that ended October 28, 2007, the Company reduced outstanding
long-term debt, including current maturities by $1.9 million, through scheduled
debt payments.
Dividends
At
its
December 5, 2007 meeting, the board of directors of the Company declared
a
quarterly cash dividend of $0.10 per share, payable on February 28, 2008
to
shareholders of record February 14, 2008.
Accounting
Pronouncements
On
January
29, 2007, the Company adopted Financial Accounting Standards Interpretation
No.
48, Accounting for Uncertainty in Income Taxes (“FIN 48”). See Note
12 – Accounting Pronouncements included in the Notes to Unaudited Consolidated
Financial Statements.
Forward-Looking
Statements
Certain
statements made in this report, including certain statements under Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, are not historical facts, but are forward-looking
statements. These statements reflect the Company’s reasonable
judgment and outlook with respect to future events and can be identified
by the
use of forward-looking terminology such as “believes,” “expects,” “projects,”
“may,” “will,” “should,” “would,” “could,” or “anticipates,” or the negative
thereof, or other variations thereon, or comparable terminology, or by
discussions of strategy. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
in
the forward-looking statements, including but not limited to:
|
·
|
general
economic or business conditions, both domestically and
internationally;
|
|
·
|
the
cyclical nature of the furniture
industry;
|
|
·
|
competition
from non-traditional outlets, such as catalogs, internet and home
improvement centers;
|
|
·
|
price
competition in the furniture
industry;
|
|
·
|
the
Company’s ability to successfully implement its business plan to increase
Sam Moore Furniture’s sales and improve its financial performance;
|
|
·
|
whether
the Company will be able to consummate the proposed acquisition
of Opus
Designs and successfully integrate its business operations, increase
its
sales and improve its financial
performance;
|
|
·
|
achieving
and managing growth and change, and the risks associated with
acquisitions, restructurings, strategic alliances and international
operations;
|
|
·
|
adverse
political acts or developments in, or affecting, the international
markets
from which the Company imports products, including duties or tariffs
imposed on products imported by the
Company;
|
|
·
|
changes
in domestic and international monetary policies and fluctuations
in
foreign currency exchange rates affecting the price of the Company’s
imported products;
|
|
·
|
supply,
transportation and distribution disruptions, particularly those
affecting
imported products;
|
|
·
|
risks
associated with the cost of imported goods, including fluctuation
in the
prices of purchased finished goods and transportation and warehousing
costs;
|
18
|
·
|
risks
associated with domestic manufacturing operations, including fluctuations
in the prices of key raw materials, transportation and warehousing
costs,
domestic labor costs and environmental compliance and remediation
costs;
|
|
·
|
higher
than expected costs associated with product quality and safety,
including
regulatory compliance costs related to the sale of consumer products
and
costs related to defective
products;
|
|
·
|
risks
associated with distribution through retailers, such as non-binding
dealership arrangements;
|
|
·
|
the
Company’s ability to implement successfully its cost-saving strategies
and
warehousing, distribution and supply chain initiatives;
and
|
|
·
|
capital
requirements and costs.
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
The
Company
is exposed to market risk from changes in interest rates and foreign currency
exchange rates, which could impact its results of operations and financial
condition. The Company manages its exposure to these risks through
its normal operating and financing activities and through the use of interest
rate swap agreements with respect to interest rates.
The
Company’s
obligations under its revolving line of credit and term loan bear interest
at
variable rates. The outstanding balance under the Company’s term
loan, including current maturities, amounted to $8.6 million as of October
28,
2007. The Company has entered into an interest rate swap agreement
that, in effect, fixes the rate of interest on its term loan at 4.1% through
2010 (7.4% when the effect of a previously terminated swap agreement is taken
into account when determining interest expense). The notional
principal value of the swap agreement is substantially equal to the outstanding
principal balance of the term loan. A fluctuation in market interest
rates of one percentage point (or 100 basis points) would not have a material
impact on the Company’s results of operations or financial
condition. For additional discussion of the Company’s swap agreement
see “Swap Agreements” in Management’s Discussion and Analysis in the Company’s
annual report on Form 10-K and this quarterly report.
For
imported
products, the Company generally negotiates firm pricing denominated in U.S.
Dollars with its foreign suppliers, typically for periods of up to one
year. The Company accepts the exposure to exchange rate movements
beyond these negotiated periods without using derivative financial instruments
to manage this risk. The majority of the Company’s imports are
purchased from China. The Chinese currency, formerly pegged to the
U.S. Dollar, now floats within a limited range in relation to the U.S. Dollar,
resulting in additional exposure to foreign currency exchange rate
fluctuations.
Since
the
Company transacts its imported product purchases in U.S. Dollars, a relative
decline in the value of the U.S. Dollar could increase the price the Company
pays for imported products beyond the negotiated periods. The Company generally
expects to reflect substantially all of the effect of any price increases
from
suppliers in the prices it charges for imported products. However,
these changes could adversely impact sales volume and profit margin during
affected periods.
19
Item
4. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
The
Company’s
management, with the participation of the Company’s principal executive officer
and principal financial officer, evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the Company’s fiscal quarter
ended October 28, 2007. Based on this evaluation, the Company’s
principal executive officer and principal financial officer have concluded
that
the Company’s disclosure controls and procedures were effective as of the end of
the period covered by this quarterly report to provide reasonable assurance
that
information required to be disclosed by the Company in the reports that it
files
or submits under the Securities Exchange Act of 1934, as amended, is accumulated
and communicated to the Company’s management, including its principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure and are effective to provide reasonable
assurance that such information is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms.
Changes
in Internal Controls
There
have
been no changes in the Company’s internal control over financial reporting
during the Company’s quarter ended October 28, 2007, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
PART
II. OTHER INFORMATION
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
The
following
table provides information about common stock purchases by or on behalf of
the
Company during the quarter ended October 28, 2007:
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
per
Share
|
Total Number
of
Shares
Purchased
as
Part of Publicly
Announced
Program
|
Maximum
Dollar
Value
of Shares That
May
Yet Be
Purchased
Under the
Program
|
||||||||||
|
July
30, 2007 – September 2, 2007
|
87,650
|
$ |
19.02
|
87,650
|
$10.0
million
|
||||||||
|
September
3, 2007 – September 30, 2007
|
143,295
|
20.19
|
143,295
|
7.1
million
|
|||||||||
|
October
1, 2007 – October 28, 2007
|
182,800
|
20.95
|
182,800
|
3.3
million
|
|||||||||
|
Total
|
413,745
|
$ |
20.28
|
413,745
|
|||||||||
On
February
7, 2007, the Company announced that its Board of Directors had authorized
the
repurchase of up to $20 million of the Company’s common stock. On
June 6, 2007, the Company announced that its Board of Directors increased
this
stock repurchase authorization by $10 million to $30 million. This
authorization had no expiration date, but the Company completed the repurchase
program in November 2007. Since February 2007, the Company
repurchased in open market transactions 1.4 million shares of Company common
stock under this authorization at an average price of $21.36 per share,
excluding commissions.
On
December
5, 2007, the Company announced that its Board of Directors had approved
a new
authorization to repurchase up to $10 million of the Company’s common
stock. There is no expiration date for this authorization, but the
Company expects the purchases to be completed within the next six
months. Repurchases may be made from time-to-time in the open market,
or in privately negotiated transactions at prevailing market prices that
the
Company deems appropriate. The Company plans to enter into a trading
plan under Rule 10b5-1 of the Securities Exchange Act of 1934 for effecting
some
or all of the purchases under this repurchase authorization. The
trading plan will contain certain provisions that could restrict the amount
and
timing of purchases. The Company will be able to terminate this plan
at any time.
20
Item
6. Exhibits
|
3.1
|
Amended
and Restated Articles of Incorporation of the Company, as amended
March
28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form
10-Q (SEC File No. 000-25349) for the quarter ended February 28,
2003)
|
|
3.2
|
Amended
and Restated Bylaws of the Company (incorporated by reference to
Exhibit
3.2 to the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter
ended August 31, 2006)
|
|
4.1
|
Amended
and Restated Articles of Incorporation of the Company (See Exhibit
3.1)
|
|
4.2
|
Amended
and Restated Bylaws of the Company (See Exhibit
3.2)
|
|
31.1*
|
Rule
13a-14(a) Certification of the Company’s principal executive
officer
|
|
31.2*
|
Rule
13a-14(a) Certification of the Company’s principal financial
officer
|
|
32.1*
|
Rule
13a-14(b) Certification of the Company’s principal executive officer
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
|
32.2*
|
Rule
13a-14(b) Certification of the Company’s principal financial officer
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
_________________
*Filed
herewith
21
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: December 6, 2007 | By: | /s/ R. Gary Armbrister |
|
R.
Gary
Armbrister
Chief
Accounting Officer
(Principal
Accounting Officer)
|
||
22
Exhibit
Index
Exhibit
No. Description
|
3.1
|
Amended
and Restated Articles of Incorporation of the Company, as amended
March
28, 2003 (incorporated by reference to Exhibit 3.1 of the Company’s Form
10-Q (SEC File No. 000-25349) for the quarter ended February
28,
2003)
|
|
3.2
|
Amended
and Restated Bylaws of the Company (incorporated by reference
to Exhibit
3.2 to the Company’s Form 10-Q (SEC File No. 000-25349) for the quarter
ended August 31, 2006)
|
|
4.1
|
Amended
and Restated Articles of Incorporation of the Company (See Exhibit
3.1)
|
|
4.2
|
Amended
and Restated Bylaws of the Company (See Exhibit
3.2)
|
|
31.1*
|
Rule
13a-14(a) Certification of the Company’s principal executive
officer
|
|
31.2*
|
Rule
13a-14(a) Certification of the Company’s principal financial
officer
|
|
32.1*
|
Rule
13a-14(b) Certification of the Company’s principal executive officer
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of
the Sarbanes-Oxley Act of 2002
|
|
32.2*
|
Rule
13a-14(b) Certification of the Company’s principal financial officer
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
_________________
*Filed
herewith
23
Exhibit
31.1
Form
10-Q for the Quarterly Period Ended October 28, 2007
SECTION
13a-14(a) CERTIFICATION
I,
Paul B.
Toms, Jr., certify that:
|
1.
|
I
have
reviewed this quarterly report on Form 10-Q of Hooker Furniture
Corporation;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of
the period covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date: December
6,
2007 /s/
Paul B. Toms,
Jr.
Paul
B. Toms, Jr.
Chairman
and Chief Executive
Officer
Exhibit
31.2
Form
10-Q for the Quarterly Period Ended October 28, 2007
SECTION
13a-14(a) CERTIFICATION
I,
E. Larry
Ryder, certify that:
|
1.
|
I
have
reviewed this quarterly report on Form 10-Q of Hooker Furniture
Corporation;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date: December
6,
2007
/s/ E. Larry
Ryder
E.
Larry
Ryder
Executive
Vice President - Finance and
Administration
and Chief Financial Officer
Exhibit
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection
with the Hooker Furniture Corporation (the “Company”) Quarterly Report on Form
10-Q for the period ending October 28, 2007 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Paul B. Toms, Jr.,
Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge:
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d)
of
the Securities Exchange Act of 1934, as amended;
and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
Date: December
6, 2007
|
By: /s/
Paul B. Toms, Jr.
Paul
B. Toms, Jr.
Chairman and Chief Executive
Officer
|
Exhibit
32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection
with the Hooker Furniture Corporation (the “Company”) Quarterly Report on Form
10-Q for the period ending October 28, 2007 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, E. Larry Ryder, Chief
Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the
best of my knowledge:
|
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d)
of
the Securities Exchange Act of 1934, as amended;
and
|
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
Date:
|
December
6, 2007
|
By:
/s/ E. Larry
Ryder
E.
Larry Ryder
Executive Vice President - Finance and Administration and Chief Financial Officer |
|