Form 10-Q

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 May 31, 2005

 

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)

 


 

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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES  x    NO  ¨

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of July 8, 2005.

 

Common stock, no par value   14,425,300
(Class of common stock)   (Number of shares)

 



PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, including share data)

 

     May 31,
2005


   

November 30,

2004


 

Assets

                

Current assets

                

Cash and cash equivalents

   $ 10,388     $ 9,230  

Trade accounts receivable, less allowance for doubtful accounts of $1,273 and $1,341 on each date

     38,277       40,960  

Inventories

     74,632       69,735  

Prepaid expenses and other current assets

     3,183       3,540  

Assets held for sale

             5,376  
    


 


Total current assets

     126,480       128,841  

Property, plant and equipment, net

     43,228       44,142  

Goodwill

     2,396       2,396  

Intangible assets

     4,677       4,765  

Cash surrender value of life insurance policies

     9,850       8,474  

Other assets

     783       300  
    


 


Total assets

   $ 187,414     $ 188,918  
    


 


Liabilities and Shareholders’ Equity

                

Current liabilities

                

Trade accounts payable

   $ 15,577     $ 14,930  

Accrued salaries, wages and benefits

     6,026       7,090  

Other accrued expenses

     3,360       3,011  

Current maturities of long-term debt

     2,201       6,671  
    


 


Total current liabilities

     27,164       31,702  

Long-term debt, excluding current maturities

     12,174       16,495  

Deferred compensation

     2,970       2,775  

Other long-term liabilities

     1,289       1,361  
    


 


Total liabilities

     43,597       52,333  

Shareholders’ equity

                

Common stock, no par value, 20,000 shares authorized, 14,425 and 14,475 shares issued and outstanding on each date

     8,565       7,385  

Unearned ESOP shares, 2,627 and 2,708 shares on each date

     (16,417 )     (16,927 )

Retained earnings

     152,149       146,886  

Accumulated other comprehensive loss

     (480 )     (759 )
    


 


Total shareholders’ equity

     143,817       136,585  
    


 


Total liabilities and shareholders’ equity

   $ 187,414     $ 188,918  
    


 


 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

2


HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

 

    

Three Months

Ended May 31,


  

Six Months

Ended May 31,


     2005

   2004

   2005

   2004

Net sales

   $ 88,698    $ 91,490    $ 169,224    $ 169,712

Cost of sales

     64,459      66,004      124,054      123,814
    

  

  

  

Gross profit

     24,239      25,486      45,170      45,898

Selling and administrative expenses

     15,934      16,161      31,420      29,733

Restructuring and related asset impairment charge

                   366       
    

  

  

  

Operating income

     8,305      9,325      13,384      16,165

Other income, net

     155      84      288      252
    

  

  

  

Income before interest and income taxes

     8,460      9,409      13,672      16,417

Interest expense

     434      517      773      1,010
    

  

  

  

Income before income taxes

     8,026      8,892      12,899      15,407

Income taxes

     3,167      3,378      5,090      5,853
    

  

  

  

Net income

   $ 4,859    $ 5,514    $ 7,809    $ 9,554
    

  

  

  

Basic and diluted earnings per share

   $ .41    $ .47    $ .66    $ .82
    

  

  

  

Weighted average shares outstanding

     11,772      11,779      11,770      11,629
    

  

  

  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

3


HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Six Months Ended

 
     May 31,
2005


    May 31,
2004


 

Cash flows from operating activities

                

Cash received from customers.

   $ 172,198     $ 169,919  

Cash paid to suppliers and employees

     (157,662 )     (157,184 )

Income taxes paid, net

     (4,170 )     (5,877 )

Interest paid, net

     (648 )     (631 )
    


 


Net cash provided by operating activities

     9,718       6,227  
    


 


Cash flows from investing activities

                

Purchase of property, plant and equipment

     (2,652 )     (1,371 )

Proceeds from the sale of property

     5,457       912  
    


 


Net cash provided by (used in) investing activities

     2,805       (459 )
    


 


Cash flows from financing activities

                

Payments on long-term debt

     (8,791 )     (3,417 )

Cash dividends paid

     (1,644 )     (1,394 )

Repurchase of common stock

     (930 )        
    


 


Net cash used in financing activities

     (11,365 )     (4,811 )
    


 


Net increase in cash and cash equivalents

     1,158       957  

Cash and cash equivalents at beginning of period

     9,230       14,859  
    


 


Cash and cash equivalents at end of period

   $ 10,388     $ 15,816  
    


 


Reconciliation of net income to net cash provided by operating activities:

                

Net income

   $ 7,809     $ 9,554  

Depreciation and amortization

     3,670       3,838  

Non-cash ESOP cost

     1,718       2,030  

Restructuring and related asset impairment charge

     366          

Gain on disposal of property

     (15 )     (11 )

Provision for doubtful accounts

     275       378  

Deferred tax provision

     (52 )        

Changes in assets and liabilities:

                

Trade accounts receivable

     2,408       (365 )

Inventories

     (5,060 )     (10,423 )

Prepaid expenses and other assets

     (1,584 )     (2,028 )

Trade accounts payable

     647       784  

Accrued salaries, wages and benefits

     (1,132 )     761  

Other accrued expenses

     593       1,859  

Other long-term liabilities

     75       (150 )
    


 


    Net cash provided by operating activities

   $ 9,718     $ 6,227  
    


 


 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

4


HOOKER FURNITURE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in tables in thousands unless otherwise indicated)

For the Quarterly Period Ended May 31, 2005

1. Preparation of Interim Financial Statements

 

The consolidated 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 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 consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2004.

 

2. Inventories

 

     May 31,
2005


   November 30,
2004


Finished furniture

   $ 72,826    $ 66,922

Furniture in process

     1,965      2,258

Materials and supplies

     11,221      11,879
    

  

Inventories at FIFO

     86,012      81,059

Reduction to LIFO basis

     11,380      11,324
    

  

Inventories

   $ 74,632    $ 69,735
    

  

 

3. Property, Plant and Equipment

 

     May 31,
2005


   November 30,
2004


Buildings and land improvements

   $ 45,772    $ 44,948

Machinery and equipment

     42,412      42,313

Furniture and fixtures

     26,080      24,569

Other

     3,335      3,647
    

  

Total depreciable property at cost

     117,599      115,477

Less accumulated depreciation

     78,527      73,916
    

  

Total depreciable property, net

     39,072      41,561

Land

     1,771      1,771

Construction in progress

     2,385      810
    

  

Property, plant and equipment, net

   $ 43,228    $ 44,142
    

  

 

During the 2005 first quarter, the Company recorded a one-time charge to depreciation expense of $520,000 ($322,000 after tax, or $0.03 per share) to correct an error in the application of GAAP related to amortizing leasehold improvements (the Company reduced the estimated useful lives of certain leasehold improvements at its High Point, N.C. showroom to correspond with the remaining term of the related lease). The impact of this charge was immaterial to results in each of the prior periods in which the error arose, and is expected to be immaterial to 2005 results.

 

5


4. Goodwill and Intangible Assets

 

     May 31,
2005


   November 30,
2004


Goodwill

   $ 2,396    $ 2,396
    

  

Non-amortizable Intangible Assets

             

Trademarks and trade names

   $ 4,400    $ 4,400
    

  

Amortizable Intangible Assets

             

Non-compete agreements

     700      700

Less accumulated amortization

     423      335
    

  

Net carrying value

     277      365
    

  

Intangible assets

   $ 4,677    $ 4,765
    

  

 

5. Long-Term Debt

 

     May 31,
2005


   November 30,
2004


Term Loan A

   $ 14,375    $ 15,416

Term Loan B

            2,150

Revolving credit facility

            1,000

Industrial revenue bonds

            4,600
    

  

Total long-term debt outstanding

     14,375      23,166

Less current maturities

     2,201      6,671
    

  

Long-term debt, less current maturities

   $ 12,174    $ 16,495
    

  

 

In May 2005, the Company completed the early redemption of the industrial revenue bonds for $4.6 million in cash.

 

6. Restructuring Charges and Assets Held for Sale

 

     Severance and
Related Benefits


    Asset
Impairment


    Other

    Total

 

Balance at November 30, 2004

   $ 368             $ 225     $ 593  

Restructuring charges accrued and accrual adjustments

     176     $ 180       10       366  

Non-cash charges

             (180 )             (180 )

Cash payments

     (199 )             (166 )     (365 )
    


 


 


 


Balance at May 31, 2005

   $ 345     $       $ 69     $ 414  
    


 


 


 


 

During the 2005 first quarter, the Company recorded an additional pretax restructuring and asset impairment charge of $366,000 ($227,000 after tax, or $0.02 per share) related to the closing and sale of its Maiden, N.C. manufacturing facility. The charge consisted principally of factory disassembly costs, additional health care benefits for terminated employees and an additional asset impairment charge based on the final sale and valuation of the Maiden, N.C. real property and equipment.

 

During the 2005 six-month period, the Company completed the sale of all of its Maiden, N.C. real property, machinery and equipment for an aggregate consideration of $5.5 million in cash, net of selling expenses.

 

6


7. Other Comprehensive Income

 

     Three Months Ended
May 31,


   Six Months Ended
May 31,


     2005

    2004

   2005

   2004

Net income

   $ 4,859     $ 5,514    $ 7,809    $ 9,554
    


 

  

  

Gain (loss) on interest rate swaps

     (84 )     586      41      122

Portion of swap agreements’ fair value reclassified to interest expense

     243       157      409      481
    


 

  

  

Other comprehensive gain before tax

     159       743      450      603

Income tax expense

     60       282      171      229
    


 

  

  

Other comprehensive income, net of tax

     99       461      279      374
    


 

  

  

Comprehensive income

   $ 4,958     $ 5,975    $ 8,088    $ 9,928
    


 

  

  

 

In connection with the redemption of the industrial revenue bonds, the Company decided not to terminate the related swap agreement. Consequently, that swap agreement is no longer effective as a cash flow hedge. Accordingly, the Company reclassified the fair market value of that swap agreement (a pretax loss of $103,000) to interest expense in the second quarter of 2005. As a result, the portion of the swap agreements’ fair value reclassified to interest expense includes a loss of $103,000 for the 2005 three-month period, a gain of $14,000 for the 2004 three-month period, a loss of $100,000 for the 2005 six-month period and a gain of $16,000 for the 2004 six-month period related to the ineffective portion of that interest rate swap agreement.

 

8. Employee Stock Ownership Plan

 

The Company records non-cash Employee Stock Ownership Plan (“ESOP”) cost for the number of shares that it commits to release to eligible employees at the average closing market price of the Company’s common stock during each period. The number of shares the Company commits to release is based on annual principal and interest payments made on the loan between the Company and the ESOP trust. “Unearned ESOP shares” in shareholders’ equity is reduced by the Company’s aggregate cost basis in the shares committed to be released. Those shares have a cost basis of $6.25 per share. “Common stock” is increased by the aggregate difference between the average market price and the cost basis of those shares.

 

The Company committed to release approximately:

 

    43,600 shares during the second quarter of fiscal 2005, having an aggregate market value of $821,000, or $18.84 per share;

 

    44,860 shares during the 2004 second quarter having an aggregate market value of $1.0 million, or $22.64 per share;

 

    81,650 shares during the 2005 first half having an aggregate fair market value of $1.7 million, or $21.04 per share; and

 

    89,700 shares during the 2004 six-month period having an aggregate market value of $2.0 million, or $22.63 per share.

 

The cost of the plan is allocated to cost of goods sold and selling and administrative expenses based on employee compensation. Substantially all employees participate in the ESOP.

 

9. Common Stock

 

In April 2005, the Company repurchased 50,000 shares of common stock for $930,000 in cash, or $18.60 per share, under a Board-authorized stock repurchase program.

 

7


Item 2. Management’s Discussion and Analysis

 

Overview

 

The Company’s results of operations during the 2005 second quarter were principally impacted by the following factors:

 

    A 23.0% decline in net sales for domestically produced wood furniture compared to the 2004 second quarter, resulting from lower incoming order rates and higher sales discounting.

 

    A 16.4% increase in net sales for upholstered furniture compared to the 2004 second quarter, driven by expanded product lines and an expanded sales force and distribution network.

 

    A 2.2% increase in net sales for imported wood and metal furniture compared to the 2004 second quarter, resulting from higher average selling prices partially offset by slightly lower unit volume.

 

    A slight decrease in gross profit margin to 27.3% compared to 27.9% in the 2004 second quarter as a decline in gross profit margin for domestically produced wood furniture offset increases in gross profit margin for imported wood and metal furniture and for upholstery.

 

    A slight decrease in selling and administrative expenses. As a percent of net sales, these expenses increased slightly to 18.0% in the 2005 second quarter versus 17.7% in the 2004 period through the effect of the decline in net sales.

 

Results of Operations

 

The following table sets forth the percentage relationship to net sales of certain items included in the statements of income:

 

     Three Months
Ended May 31,


   

Six Months

Ended May 31,


 
     2005

    2004

    2005

    2004

 

Net sales

   100.00 %   100.00 %   100.00 %   100.00 %

Cost of sales

   72.67     72.14     73.31     72.96  
    

 

 

 

Gross profit

   27.33     27.86     26.69     27.04  

Selling and administrative expenses

   17.97     17.67     18.56     17.52  

Restructuring and related asset impairment charge

               0.22        
    

 

 

 

Operating income

   9.36     10.19     7.91     9.52  

Other income, net

   0.18     0.09     0.17     0.15  
    

 

 

 

Income before interest and income taxes

   9.54     10.28     8.08     9.67  

Interest expense

   0.49     0.56     0.46     0.59  
    

 

 

 

Income before income taxes

   9.05     9.72     7.62     9.08  

Income taxes

   3.57     3.69     3.01     3.45  
    

 

 

 

Net income

   5.48 %   6.03 %   4.61 %   5.63 %
    

 

 

 

 

Net sales for the 2005 second quarter of $88.7 million declined $2.8 million, or 3.1%, compared to 2004 record second quarter net sales of $91.5 million. During the second quarter, sales of Bradington-Young upholstered leather furniture increased $2.5 million, or 16.4%, to $17.8 million from $15.3 million during the prior year period due to higher unit volume.

 

8


Sales of Hooker’s imported wood and metal furniture increased $1.1 million, or 2.2%, to $49.6 million in the 2005 second quarter from $48.5 million in the prior year second quarter as a result of higher average selling prices (resulting principally from the mix of products shipped) partially offset by lower unit volume. The unit volume decline during the 2005 second quarter was due to a temporary inventory imbalance, as orders (including new product orders) and backlog for imported products increased during the quarter. While inventory levels increased during the 2005 second quarter, principally to support the Company’s multi-category “whole-home” collections, the Company is out of stock on certain imported products offered in these collections. These inventory stock-outs have delayed fulfillment of orders for these collections. This situation should be rectified during the 2005 second half, which should enable the Company to fill orders currently in backlog.

 

These sales gains in upholstered and imported furniture were more than offset by a decline in net sales of the Company’s domestically produced wood furniture of $6.4 million or 23.0%, to $21.3 million in the 2005 second quarter from $27.7 million in the prior year period due to lower unit volume.

 

For the 2005 six-month period, the Company reported net sales of $169.2 million, a decrease of $488,000 or 0.3%, compared to $169.7 million in the 2004 six-month period. Shipments of Bradington-Young upholstered furniture increased $6.2 million or 22.1%, to $33.7 million during the first six months of 2005 compared to $27.5 million during the prior year period due to higher unit volume. Imported wood furniture shipments increased $5.9 million, or 6.8%, to $93.0 million in the 2005 six-month period compared to $87.1 million in the 2004 six-month period. The increase in net sales of imported wood furniture for the 2005 six-month period compared to the same 2004 period is due to higher unit volume and higher average selling prices. Shipments of the Company’s domestically produced wood furniture declined $12.5 million, or 22.7%, to $42.6 million during the 2005 six-month period from $55.1 million in the same 2004 period, principally due to lower unit volume.

 

For the 2005 second quarter and six months compared with the same 2004 periods, average selling prices increased for imported wood and metal products due to the mix of products shipped. For domestically manufactured wood products, average selling prices increased for the 2005 second quarter due to the mix of products shipped. Average selling prices for domestic products declined for the 2005 six-month period principally due to higher sales discounts. Average selling prices declined for upholstered products for the 2005 second quarter and six months due to the mix of products shipped. Overall, average selling prices increased during both the 2005 second quarter and six-month period compared to the same 2004 periods.

 

Gross profit margin decreased to 27.3% of net sales in the 2005 second quarter compared to 27.9% in the 2004 second quarterly period, as a result of a decline in gross profit margin for domestically produced wood furniture and upholstered furniture, partially offset by an increase in gross profit margin for imported wood and metal furniture. For the 2005 fiscal year-to-date period, gross profit margin decreased to 26.7% of net sales compared to 27.0% in the comparative 2004 period, as a result of a decline in gross profit margin for domestically produced wood furniture, partially offset by gross profit margin improvements for upholstered and imported wood and metal furniture.

 

The 2005 second quarter and six month gross profit margin improvement for imported wood and metal furniture versus the comparable prior year period was principally a result of a decline in the delivered cost of those products as a percentage of net sales. During the 2005 three and six-month periods, domestic wood furniture gross margin has been impacted by higher discounting, principally for the sale of discontinued and slow moving products. Bradington-Young’s gross profit margin improvement for the

 

9


2005 six-month period versus the same period a year ago was driven primarily by lower labor and overhead costs as a percentage of net sales resulting from efficiencies gained by operating at higher production levels, partially offset by higher material costs. Higher material costs, resulting from the mix of products shipped, led to a decline in the 2005 second quarter gross margin for upholstered products.

 

Selling and administrative expenses decreased $227,000 to $15.93 million in the second quarter of 2005 from $16.16 million in the 2004 period. The decline in the 2005 second quarter is principally due to lower selling costs resulting from lower net sales (principally commissions and warehousing and distribution expenses). As a percentage of net sales, selling and administrative expenses in the 2005 second quarter increased slightly to 18.0% versus 17.7% in the 2004 period through the effect of lower net sales in the 2005 period.

 

For the 2005 six-month period, selling and administrative expenses increased $1.7 million to $31.4 million compared with $29.7 million for the same 2004 period. As a percentage of net sales, these expenses increase to 18.6% from 17.5% in the same prior year period. The year-to-date 2005 increase is principally due to the following factors:

 

  Increased trade advertising costs principally related to the Company’s introduction of multi-category “whole home” collections.

 

  Higher information technology costs principally to support operations such as the warehouse located in China (owned and operated by vendors) and the new initiatives in supply chain management.

 

  A one-time charge to depreciation expense of $520,000 ($322,000 after tax, or $0.03 per share) to correct an error in the application of GAAP related to amortizing leasehold improvements (the Company reduced the estimated useful lives of certain leasehold improvements at its High Point, N.C. showroom to correspond with the remaining term of the related lease). The impact of this charge was immaterial to results in each of the prior periods in which the error arose, and is expected to be immaterial to 2005 results.

 

  An increase in the cost of complying with Sarbanes-Oxley regulations during the first six months of 2005 compared with the prior year period. These costs declined in the 2005 second quarter versus the same 2004 period. The Company expects these compliance costs to continue declining during the 2005 second half compared to the same 2004 second half.

 

The non-cash cost of the Company’s ESOP for the 2005 second quarter decreased $195,000 to $821,000 compared to $1.0 million in the second quarter of 2004. For the 2005 six-month period non-cash ESOP cost decreased $312,000 to $1.7 million compared to $2.0 million in the same 2004 period. Non-cash ESOP cost decreased in the 2005 periods compared to the 2004 periods principally due to declines in the market price of the Company’s common stock. The Company records non-cash ESOP cost for the number of shares that it commits to release to eligible employees at the average closing market price of the Company’s common stock during each respective period.

 

The Company committed to release approximately:

 

    43,600 shares during the second quarter of fiscal 2005, having an aggregate market value of $821,000, or $18.84 per share;

 

    44,860 shares during the 2004 second quarter having an aggregate market value of $1.0 million, or $22.64 per share;

 

    81,650 shares during the 2005 first half having an aggregate fair market value of $1.7 million, or $21.04 per share; and

 

10


    89,700 shares during the 2004 six-month period having an aggregate market value of $2.0 million, or $22.63 per share.

 

The cost of the plan is allocated to cost of goods sold and selling and administrative expenses based on employee compensation.

 

During the 2005 first quarter, the Company recorded an additional pretax restructuring and asset impairment charge of $366,000 ($227,000 after tax, or $0.02 per share) related to the closing and sale of its Maiden, N.C. manufacturing facility. The charge consisted principally of factory disassembly costs, additional health care benefits for terminated employees and an additional asset impairment charge based on the final sale and valuation of the Maiden, N.C. real property and equipment.

 

Principally as a result of lower gross margin, operating income as a percentage of net sales declined to 9.4% in the 2005 quarterly period, compared to 10.2% for the 2004 second quarter. For the year-to-date period, operating income margin declined to 7.9% from 9.5% in the comparable 2004 period principally as a result of higher selling and administrative expenses as a percentage of sales, lower gross margin and the additional restructuring charge.

 

Other income, net increased $71,000, or 84.5%, to $155,000 in the 2005 three-month period from $84,000 in the same 2004 period and increased $36,000, or 14.3%, to $288,000 in the 2005 six-month period from $252,000 in the 2004 six-month period. These increases are due to increased interest income.

 

Interest expense decreased $83,000 to $434,000 during the second quarter of 2005 from $517,000 in the 2004 period. For the 2005 six-month period, interest expense decreased $237,000 to $773,000 from $1.0 million in the same 2004 period. The decreases in the 2005 periods are principally due to lower debt levels resulting from principal repayments, partially offset by higher weighted average interest rates on outstanding borrowings.

 

The Company’s effective tax rate increased to 39.5% for both 2005 periods compared to 38.0% in the 2004 periods. The increase is principally attributed to the estimated impact of non-cash ESOP cost for 2005, which is expected to constitute a higher proportion of income before income taxes than in 2004.

 

Second quarter 2005 net income declined to $4.9 million, or $0.41 per share, compared to $5.5 million, or $0.47 per share, in the comparable 2004 period. As a percent of net sales, net income declined to 5.5% in the 2005 quarterly period, compared to 6.0% for the 2004 second quarter. During the 2005 six months, net income fell $1.8 million, or $0.16 per share, to $7.8 million, or $0.66 per share, from $9.6 million, or $0.82 per share, in the same prior year period. As a percent of net sales, net income declined to 4.6% in the 2005 six months, compared to 5.6% for the 2004 six months.

 

Outlook

 

Industry-wide, lethargic retail business conditions persisted throughout the second quarter. As a result, the Company posted its first quarterly sales decline following thirteen consecutive quarters of year over year sales growth. The Company expects continuing strength in demand for its imported products, a slowdown in upholstery orders in a stagnating retail environment, and continuing challenges for domestic wood furniture orders. The Company continues to manage work and production schedules for its factories and to evaluate its domestic wood furniture manufacturing capacity in order to match demand.

 

11


In order to drive additional new business for wood, metal and upholstered furniture, the Company has implemented the following:

 

    The addition of new product categories, such as game tables, as well as multi-category and blended “whole home” collections that leverage the Company’s product development expertise by combining its domestic manufacturing strength and skill with the additional value and variety offered by imported products;

 

    The continued introduction of new technology-taming innovations in the home entertainment and home office categories, produced both domestically and offshore;

 

    The upgrade of wood finishes and incorporation of additional metals, glass and fixtures, that provide a more sophisticated look and feel to enhance value and appeal to consumers;

 

    Expanded trade advertising and the addition of special promotional events;

 

    More product display space with its existing dealers through “store within a store” display galleries dedicated exclusively to multi-category and whole-home collections under the Hooker and Bradington-Young brands; and

 

    The utilization of new channels of distribution, such as electronics retailers.

 

Earlier this year, Hooker Furniture announced the creation of a new department of supply chain planning and management, and is continuing to make key investments to refine its business in the areas of logistics, personnel and systems. The Company expects that these initiatives will improve inventory turnover and logistics efficiency, and will position it to provide significant enhancements in inventory availability and customer service at lower cost.

 

The improved supply chain management initiative also will help Hooker Furniture execute its long term growth strategy by expanding from its historical niche strengths in home entertainment, home office and occasional furniture to expanded offerings in multi-category and whole-home collections. These collections are requiring the Company to better coordinate availability of inventory.

 

New product introductions at the April 2005 International Home Furnishings Market were very well accepted, and as a result the Company’s backlog of orders has grown. However, the Company’s outlook entering the third quarter is mixed due to the uncertainties of inconsistent business at retail. The Company expects net sales for the 2005 third quarter to decline 3-7% versus the prior year quarter.

 

Financial Condition, Liquidity and Capital Resources

 

Balance Sheet and Working Capital

 

As of May 31, 2005, assets totaled $187.4 million, decreasing from $188.9 million at November 30, 2004, principally as a result of the sale of the Maiden, N.C. manufacturing facility and lower accounts receivable. Shareholders’ equity at May 31, 2005 was $143.8 million, compared to $136.6 million at November 30, 2004. The Company’s long-term debt, including current maturities, was $14.4 million at May 31, 2005, decreasing from $23.2 million at November 30, 2004 as a result of the early redemption of the industrial revenue bonds ($4.6 million) and scheduled debt repayments.

 

Working capital increased $2.2 million, or 2.2%, to $99.3 million as of May 31, 2005, from $97.1 million at the end of fiscal 2004, reflecting a $4.5 million decrease in current liabilities partially offset by a $2.3 million decrease in current assets. The decline in current liabilities is due to decreases of $4.5 million in current maturities of long-term debt and $1.1 million in accrued salaries, wages and benefits, partially offset by increases in trade accounts payable and accrued expenses. The decline in current assets is

 

12


principally attributed to decreases of $5.4 million in assets held for sale and $2.7 million in trade accounts receivable, partially offset by a $4.9 million increase in inventories and a $1.2 million increase in cash and cash equivalents. Inventories increased 7.0%, to $74.6 million as of May 31, 2005 from $69.7 million at November 30, 2004, principally to support expanded product offerings in multi-category collections.

 

Cash Flows – Operating, Investing and Financing Activities

 

During the six months ended May 31, 2005, cash generated from operations ($9.7 million) and proceeds from the sale of property and equipment ($5.5 million), funded the repayment of long-term debt ($8.8 million), capital expenditures ($2.7 million), dividend payments ($1.6 million), an increase in available cash and cash equivalents ($1.2 million) and the repurchase of common stock ($930,000).

 

During the six months ended May 31, 2004, cash generated from operations ($6.2 million) and the proceeds from the sale of property and equipment ($912,000), funded the repayment of long-term debt ($3.4 million), dividend payments ($1.4 million), capital expenditures ($1.4 million) and an increase in available cash and cash equivalents ($957,000).

 

Cash generated from operations of $9.7 million during the 2005 six-month period increased $3.5 million from $6.2 million in the 2004 period. The increase was principally due to higher payments received from customers and lower income tax payments. Cash received from customers increased $2.3 million in 2005 compared to 2004. Trade accounts receivable (excluding the allowance for doubtful accounts) declined $2.4 million, principally as a result of increased collections from customers. Payments to suppliers and employees increased $478,000, principally to fund higher selling and administrative expenses compared to the prior year. Tax payments declined $1.7 million in the 2005 period due to lower levels of taxable income than in the 2004 period.

 

The Company generated cash of $2.8 million from investing activities during the 2005 six months as a result of the sale of the Maiden, N.C. property for an aggregate consideration of $5.5 million. Purchases of plant, equipment and other assets to maintain and enhance the Company’s facilities and business operating systems increased $1.3 million to $2.7 million in the 2005 period compared with $1.4 million in the same 2004 period.

 

The Company used cash of $11.4 million for financing activities during the 2005 six months compared to using cash of $4.8 million for financing activities in the 2004 period. During 2005, the Company repaid long-term debt in the amount of $8.8 million (including the early redemption of the industrial revenue bonds for $4.6 million in cash), paid cash dividends of $1.6 million and repurchased 50,000 shares of common stock for $930,000, or $18.60 per share. During 2004, the Company repaid long-term debt in the amount of $3.4 million and paid dividends of $1.4 million.

 

Swap Agreements

 

The aggregate fair market value of the Company’s swap agreements decreases when interest rates decline and increases when interest rates rise. Overall, interest rates have declined since the inception of the Company’s swap agreements but have increased since May 2003 through the 2005 second quarter. The decrease in the aggregate fair market value of the effective portion of these agreements of $480,000 after tax ($774,000 pretax) as of May 31, 2005, and $759,000 after tax ($1.2 million pretax) as of November 30, 2004, is reflected under the caption “accumulated other comprehensive loss” in the consolidated balance sheets. Approximately $359,000 of the aggregate pretax decrease in fair market value of the agreements is expected to be reclassified into interest expense during the next twelve months. In connection with the

 

13


redemption of the industrial revenue bonds, the Company decided not to terminate the related swap agreement. Consequently, that swap agreement is no longer effective as a cash flow hedge. Accordingly, the Company reclassified the fair market value of that swap agreement (a pretax loss of $103,000) to interest expense in the 2005 three-month period. As a result, the portion of the swap agreements’ fair value reclassified to interest expense includes a loss of $103,000 for the 2005 three-month period, a gain of $14,000 for the 2004 three-month period, a loss of $100,000 for the 2005 six-month period and a gain of $16,000 for the 2004 six-month period related to the ineffective portion of that interest rate swap agreement.

 

Debt Covenant Compliance

 

The credit facility for the Company’s revolving credit line and Term Loan A contains, among other things, 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 May 31, 2005.

 

Liquidity and Capital Expenditures

 

As of May 31, 2005, the Company had $13.6 million available under its revolving credit line to fund working capital needs and $18.9 million available under additional committed lines of credit to support the issuance of letters of credit. The Company believes it has the financial resources (including available cash, expected cash flow from operations, and lines of credit) needed to meet business requirements for the foreseeable future, including capital expenditures, working capital, purchases under the stock repurchase program, and dividends on the Company’s common stock. Cash flow from operations is highly dependent on order rates and the Company’s operating performance. The Company expects to spend an aggregate of $1.8 to $2.3 million in capital expenditures during the remainder of fiscal 2005 to maintain and enhance its facilities and operating systems, principally supporting growth in imported products and logistics.

 

In May 2005, the Company completed the early redemption of the industrial revenue bonds for $4.6 million in cash. Prior to this redemption, scheduled principal payments on these bonds were $2.4 million on November 1, 2005, and $2.2 million on November 1, 2006.

 

Dividends and Purchases of Common Stock

 

At its June 29th, 2005 meeting, the Board of Directors of the Company declared a cash dividend of $0.07 per share, payable on August 31, 2005 to shareholders of record August 16, 2005. In April 2005, the Company repurchased 50,000 shares of its common stock under a Board-authorized stock repurchase program for an aggregate consideration of $930,000, or $18.60 per share.

 

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,” “projects,” “may,” “will,” “should,” “would,” 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. Those risks and uncertainties include but are not limited to:

 

    Domestic and international competition in the furniture industry, including price competition from lower-priced imports;

 

14


    General economic or business conditions, both domestically and internationally;

 

    The cyclical nature of the furniture industry;

 

    Achieving and managing growth and change, and the risks associated with acquisitions, restructurings, strategic alliances and international operations;

 

    Risks associated with manufacturing operations, such as fluctuations in the price of key raw materials, including lumber and leather, and environmental matters;

 

    Supply, transportation and distribution disruptions or delays affecting imported and domestic products;

 

    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;

 

    Risks associated with distribution through retailers, such as non-binding dealership arrangements; 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 lines of credit and term loans all bear interest at variable rates. The Company’s outstanding debt (including current maturities) as of May 31, 2005, amounted to $14.4 million under Term Loan A. As of May 31, 2005, no balance was outstanding under the Company’s revolving credit line. The Company has entered into an interest rate swap agreement that, in effect, fixes the rate of interest on Term Loan A at 4.1% through 2010 (7.4% when the effect of a previously terminated swap agreement is taken into account).

 

In connection with the redemption of the industrial revenue bonds, the Company decided not to terminate the related swap agreement. Consequently, the future cash flows related to this swap agreement will continue to fluctuate with changes in the benchmark interest rate without an offsetting fluctuation in the interest that would have been paid on the underlying variable interest rate debt. The Company will continue to consider the early termination of this swap agreement, which is scheduled to terminate November 1, 2006, in light of changes in the benchmark interest rate.

 

15


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 agreements 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 with its foreign suppliers, for periods typically 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 countries such as China, whose currencies have been pegged to the U.S. Dollar, negating much of the Company’s exposure to foreign currency fluctuation. There is continued market speculation that China may take steps to adopt a market-oriented currency and allow the Yuan to fluctuate in value relative to the U.S. Dollar.

 

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 cost of the Company’s imported products and adversely impact sales volume and profit margin during affected periods. However, the Company generally expects to reflect substantially all of the effect of any price changes from suppliers in the price it charges for its imported products.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Based on their most recent review, which was made as of the end of the Company’s fiscal quarter ended May 31, 2005, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective 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 for the Company’s quarter ended May 31, 2005, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

16


PART II. OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Purchases of Equity Securities by the Issuer or Affiliated Purchasers

 

The following table provides information about common stock repurchases by or on behalf of the Company during the quarter ended May 31, 2005:

 

     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


March 1 – March 31, 2005

                       

April 1 – April 30, 2005

   50,000    $ 18.60    50,000    $ 1.7 million

May 1 – May 31, 2005

                       

Total

   50,000    $ 18.60    50,000    $ 1.7 million

 

In June 2001, the Company announced that its board of directors had authorized the repurchase of up to $3.0 million of the Company’s common stock and announced an increase in that authorization of $2.2 million in October 2001, for an aggregate authorization of $5.2 million. There is no expiration date for this authorization. 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. Through May 31, 2005, the Company had repurchased approximately 634,000 shares at a total cost of $3.4 million or an average of $5.42 per share. Based on the market value of the common stock as of May 31, 2005, the remaining $1.7 million of the authorization would allow the Company to repurchase approximately 117,000 shares, or 0.8%, of the 14.4 million shares outstanding, or 1.1% of the Company’s outstanding shares excluding the 3.9 million shares held by the ESOP.

 

17


Item 4. Submission of Matters to a Vote of Security Holders.

 

On March 30, 2005 the Company held its Annual Meeting of Shareholders. At the meeting, the following business was transacted:

 

The following directors of the Company were elected for a term of one year. The votes cast for the election of each director were:

 

Director


   For

   Withheld

Paul B. Toms, Jr.

   13,321,476    121,467

Douglas C. Williams

   13,321,034    121,909

W. Christopher Beeler, Jr.

   12,947,556    495,387

John L. Gregory, III

   10,374,166    3,068,777

Mark F. Schreiber

   13,328,378    114,565

Robert A. Taylor

   13,301,027    141,916

L. Dudley Walker

   13,303,400    139,543

Henry G. Williamson, Jr.

   13,406,058    36,885

 

The shareholders approved the Hooker Furniture Corporation 2005 Stock Incentive Plan. The votes cast were:

 

For – 11,266,223   Against – 548,446   Abstain – 10,349

 

 

18


Item 5. Other Information

 

EBIT and EBITDA

 

Set forth below is the Company’s earnings before interest and income taxes, or EBIT, and earnings before interest, income taxes, depreciation and amortization, or EBITDA, for the three and six-month periods ended May 31, 2005 and May 31, 2004. This information has been derived from the Company’s unaudited consolidated financial statements. For each period presented, EBIT and EBITDA have been reconciled to the Company’s net cash provided by operating activities. The Company provides these non-GAAP measures because it believes they are widely accepted financial indicators of the Company’s liquidity. This information should be read in conjunction with the consolidated financial statements, including the related Notes, and Management’s Discussion and Analysis included elsewhere in this quarterly report on Form 10-Q and in the Company’s annual report on Form 10-K for the year ended November 30, 2004.

 

    

For the Three Months

Ended May 31,


    For the Six Months
Ended May 31,


 
     2005

    2004

    2005

    2004

 

Net cash provided by operating activities

   $ 226     $ 1,681     $ 9,718     $ 6,227  

Net increase in assets and liabilities

     7,069       6,951       4,053       9,562  

Gain on disposal of property

     14               15       11  

Restructuring and related asset impairment charge

                     (366 )        

Provision for doubtful accounts

     (61 )     (158 )     (275 )     (378 )

Deferred taxes

     (74 )             52          

Non-cash ESOP cost

     (821 )     (1,015 )     (1,718 )     (2,030 )

Depreciation and amortization

     (1,494 )     (1,945 )     (3,670 )     (3,838 )
    


 


 


 


Net income

     4,859       5,514       7,809       9,554  

Income taxes

     3,167       3,378       5,090       5,853  

Interest expense

     434       517       773       1,010  
    


 


 


 


Earnings before interest and income taxes (EBIT)

     8,460       9,409       13,672       16,417  

Depreciation and amortization

     1,494       1,945       3,670       3,838  
    


 


 


 


Earnings before interest, income taxes, depreciation, and amortization (EBITDA)

   $ 9,954     $ 11,354     $ 17,342     $ 20,255  
    


 


 


 


 

19


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 3.3 to the Company’s Registration Statement on Form 10 (SEC File No. 000-25349))
  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

 

20


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: July 11, 2005   By:  

/s/ R. Gary Armbrister


        R. Gary Armbrister
        Chief Accounting Officer
        (Principal Accounting Officer)

 

21


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 3.3 to the Company’s Registration Statement on Form 10 (SEC File No. 000-25349))
 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
Section 302 CEO Certification

Exhibit 31.1

 

Form 10-Q for the Quarterly Period Ended May 31, 2005

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 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 controls over financial reporting.

 

Date: July 11, 2005

 

/s/ Paul B. Toms, Jr.


   

Paul B. Toms, Jr.

   

Chairman and Chief Executive Officer

 

 

Section 302 CFO Certification

Exhibit 31.2

 

Form 10-Q for the Quarterly Period Ended May 31, 2005

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 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 controls over financial reporting.

 

Date: July 11, 2005

 

/s/ E. Larry Ryder


   

E. Larry Ryder

   

Executive Vice President - Finance and

   

Administration and Chief Financial Officer

 

 

Section 906 CEO Certification

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 May 31, 2005 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 (“Section 906”), 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: July 11, 2005

 

By:

 

/s/ Paul B. Toms, Jr.


       

Paul B. Toms, Jr.

       

Chief Executive Officer

 

 

Section 906 CFO Certification

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 May 31, 2005 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 (“Section 906”), 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: July 11, 2005

 

By:

 

/s/ E. Larry Ryder


       

E. Larry Ryder

       

Chief Financial Officer