MARTINSVILLE, Va., April 2, 2009 (GLOBE NEWSWIRE) -- Hooker Furniture (Nasdaq:HOFT) today reported net sales of $261.2 million and net income of $6.9 million, or $0.62 per share, for the fifty-two week annual period ended February 1, 2009.
Net sales for 2009 decreased $55.6 million, or 17.6%, compared to $316.8 million for the fifty-three week 2008 annual period. Net income for 2009 decreased $12.7 million, or 64.8%, compared to net income of $19.7 million, or $1.58 per share, for the 2008 annual period, principally as a result of lower net sales attributed to the economic recession and $4.9 million in pretax intangible asset impairment charges ($3.1 million after tax, or $0.28 per share) recorded in the 2009 fourth quarter.
"Hooker Furniture successfully navigated the economic crisis this year, delivered a modest profit, maintained a respectable operating margin and effectively managed our balance sheet," said Paul B. Toms Jr., chairman, chief executive officer and president. "We have a strong cash and credit availability position, no unutilized assets and little debt. In response to lower demand, we reduced costs and shaped a leaner, more efficient organization. Our financial strength has enabled us to invest in the business, continue to launch new product lines and pursue strategic initiatives that position us for maximum growth and profitability in the long term."
Net sales for the thirteen-week 2009 fourth quarter of $56.5 million declined $25.8 million, or 31.3% compared to net sales of $82.3 million recorded in the fourteen-week 2008 fourth quarter. "The fourth quarter was especially difficult with steepening year-over-year declines in sales and orders. Those declines impacted capacity utilization and profitability at our domestic upholstery manufacturing facilities," Toms said.
The Company reported a net loss for the 2009 quarterly period of $719,000, or $0.07 per share principally as a result of the non-cash impairment charges mentioned previously, compared with net income of $4.6 million or $0.39 per share in the same 2008 period.
Because the Company has adopted a fiscal year that ends on the Sunday closest to January 31st of each year, the 2008 annual and quarterly fiscal periods were one week longer than the comparable 2009 periods. In addition to the impact of the economy and the shorter operating periods, net sales also declined in each of the fiscal 2009 periods due to lower shipments of discontinued domestically-produced wood furniture. Based on operating days, net sales per day for the Company's ongoing businesses did not decline as sharply as aggregate net sales in each comparative period. Excluding discontinued domestically-produced wood furniture, net sales were $941,000 per day for the 2009 fourth quarter, a decline of 27.4%, compared to net sales of $1.3 million per day for the 2008 fourth quarter, and $1.0 million per day for the 2009 annual period, a decline of 15.1% from net sales of $1.2 million per day for the 2008 fiscal year.
"While our inability to stabilize sales and maintain historical profitability levels has been frustrating in the short-term, we remain confident in the ability of our business model to keep us competitive, well-positioned and profitable in the long-term," Toms said.
Operating profitability decreased in the 2009 annual and quarterly periods both including and excluding the effect of restructuring, asset impairment charges and the December 2007 donation of two showrooms located in High Point, N.C. to a local university. The following table reconciles operating income as a percentage of net sales ("operating margin") to operating margin excluding these special items ("restructuring and special charges") as a percentage of net sales for each period:
Thirteen Fourteen Fifty-Two Fifty-Three
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
February 1, February 3, February 1, February 3,
2009 2008 2009 2008
---- ---- ---- ----
Operating margin,
including restruc-
turing and special
charges (2.5)% 8.7% 4.0% 9.4%
Intangible asset
impairment charges 8.7 1.9
Donation of two
showrooms 1.3 0.3
Restructuring
(credits) charges (0.2) (0.6) (0.4) 0.1
----- ----- ----- -----
Operating margin,
excluding restruc-
turing and special
charges 6.0% 9.4% 5.5% 9.8%
===== ===== ===== =====
"In spite of the steepening decline in volume and an operating loss in our domestic upholstery operation for the year, we were still able to improve our overall operating margin excluding restructuring and special charges in the 2009 fourth quarter compared to the operating margin we reported through the first nine months of 2009," said Toms. " We accomplished this primarily by maintaining gross margins for our imported wood business and by lowering operating costs through the reductions we've implemented since late summer 2008 at all of our businesses," Toms said.
Excluding restructuring and special charges, the declines in profitability for the 2009 quarterly and annual periods compared to the 2008 periods were due principally to:
* Lower gross profit margin on the Company's products due to:
- underutilized capacity as a result of lower sales rates and
its effect on overhead absorption principally for
domestically produced upholstered furniture,
- the rising cost of imported wood products and higher raw
material costs for upholstered products, although these cost
increases were partially mitigated by a mid-year price
increase to the Company's customers,
- substantial discounting on the sale of remaining
domestically-produced wood furniture, and
- increased warehousing and distribution expenses to operate
three new distribution centers, one located in California,
and two in China. The California facility opened in January
2008 and the two China facilities opened in May and November
of 2008. All three of the facilities are owned and operated
by third parties.
* Higher selling and administrative expenses as a percentage of net
sales through the effect of lower net sales. However, these
expenses declined year-over-year by $4.1 million, or 28.2% during
the 2009 fourth quarter and by $5.8 million, or 11.1% during the
2009 annual period due to:
- lower selling expenses on lower sales,
- lower compensation, benefits and other expenses principally
as a result of workforce reductions at the Company's wood
and upholstery operations during the second half of the year
and actions taken throughout the year to curtail spending,
and
- lower charitable contributions. Contributions were higher in
the 2008 quarterly and annual periods principally as a
result of the December 2007 donation of two showrooms valued
at $1.1 million
These declines were partially offset by higher bad debt expense recorded in the 2009 periods.
(Note that in the consolidated financial statements contained in this release warehousing, distribution and certain supply chain and operations management expenses for periods prior to 2009 have been reclassified from selling and administrative expenses to cost of goods sold in order to conform to the 2009 method of presentation.)
Commenting on the 2009 fourth quarter intangible asset impairment charges, E. Larry Ryder, executive vice president and chief financial officer said, "Our profitability for the fiscal 2009 quarterly and annual periods was significantly impacted by these charges. The decline in our share price, which mirrored the declines experienced by other companies in our industry and the overall stock market resulted in a decline in our market capitalization below book value. In completing our annual asset impairment testing, that decline resulted in the total write off of the $3.8 million in goodwill related to the acquisitions of Bradington-Young and the Opus Designs youth bedroom line. Additionally, we wrote down the value of our Bradington-Young trademark by $1.1 million."
During the 2009 fourth quarter the Company recorded a restructuring credit of $132,000 ($82,000 after tax, or $0.01 per share) compared to a net restructuring credit of $454,000 ($279,000 after tax, or $0.02 per share) in the 2008 quarterly period. Additionally, for fiscal year 2009 the Company also recorded a restructuring credit of $951,000 ($592,000 after tax, or $0.05 per share) compared to a restructuring charge of $309,000 ($190,000 after tax, or $0.02 per share) for fiscal 2008.
Cash, Inventory and Debt Levels
Cash and cash equivalents declined by $21.3 million to $11.8 million as of February 1, 2009 from $33.1 million on February 3, 2008. The Company repurchased approximately 800,000 shares of its common stock during 2009 for $14.1 million under authorizations approved by its Board of Directors. Repurchases under those authorizations were completed early in the 2009 third quarter.
For the year, inventories increased to $60.2 million as of February 1, 2009 compared to $50.6 million one year ago. Also, inventory levels increased during the 2009 fourth quarter by $4.2 million as a result of the steepening decline in orders and sales experienced during the period and the receipt of inventory for new products introduced at the October 2008 furniture market. "Forecasting demand continues to be a challenge in this economic environment," Toms said. "Additionally, we intentionally scheduled production on new introductions from last October's furniture market ahead of the Chinese New Year holiday. We continue to modify our inventory plan in reaction to the steepening decline in demand, and expect to bring inventory levels down over the next two to three months," he added.
Long-term debt of $5.2 million declined during the year by $2.7 million as a result of scheduled repayments. "Our debt to total capitalization ratio stands at 3.9% as of year-end," said Ryder. "Having a low level of debt in this tough economic environment enhances our financial flexibility and results in a relatively low interest burden during times when operating profits are under pressure," he added.
Business Outlook
"As the economy has worsened over the past several months, we've experienced a steepening decline in year over year incoming order rates and believe we're in for another quarter or two of challenging conditions," Toms said. "However, we believe the economy may have hit the trough and are encouraged by a pickup in housing activity over the last two months and steady gains in the stock market over the last few weeks. We expect to see a slight increase in consumer confidence by the third or fourth quarter, if home values stabilize and the stock market continues to rebound from its low point earlier this year. This would be good news for furniture and other large-ticket consumer durable purchases."
Toms continued, "We are approaching our forecast and inventory planning with expectations for a marginal improvement in business this fall, and will time orders of our strongest introductions from the upcoming April 2009 High Point Market for late summer delivery. We are excited about the new products and merchandising programs we will be introducing at the upcoming market and are optimistic that our dealers will see these product line expansions as opportunities to stimulate business and engage consumers. We believe our financial strength has become a key differentiator that is increasingly important to our customers and suppliers, who want to be aligned with partners who can survive the current downturn, continue to invest for the future and help them emerge successfully."
Conference Call Details
Hooker Furniture will present its fiscal 2009 fourth quarter and annual earnings via teleconference and live internet web cast on Wednesday morning April 15th, 2009 at 9:00 AM Eastern Time. The dial-in number for domestic callers is 877-545-1409, and 719-325-4908 is the number for international callers. The call will be simultaneously web cast and archived for replay on the Company's web site at www.hookerfurniture.com in the Investor Relations section.
Ranked among the nation's top 10 largest publicly traded furniture sources based on 2007 shipments to U.S. retailers, Hooker Furniture Corporation is an 84-year old residential wood, metal and upholstered furniture resource. Major wood furniture product categories include home entertainment, home office, accent, dining, bedroom and bath furniture under the Hooker Furniture brand and youth bedroom furniture sold under the Opus Designs brand. Hooker's residential upholstered seating companies include Cherryville, N.C.-based Bradington-Young LLC, a specialist in upscale motion and stationary leather furniture, and Bedford, Va.-based Sam Moore Furniture LLC, a specialist in upscale occasional chairs with an emphasis on cover-to-frame customization. Please visit our websites at www.hookerfurniture.com, www.bradington-young.com, www.sammoore.com and www.opusdesigns.com.
The Hooker Furniture Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4305
Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements. 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: current economic conditions and instability in the financial and credit markets including their potential impact on the Company's (i) sales and operating costs and access to financing and, (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their business; general economic or business conditions, both domestically and internationally; price competition in the furniture industry; changes in domestic and international monetary policies and fluctuations in foreign currency exchange rates affecting the price of the Company's imported products; the cyclical nature of the furniture industry which is particularly sensitive to changes in consumer confidence, the amount of consumers' income available for discretionary purchases and the availability and terms of consumer credit; risks associated with the cost of imported goods, including fluctuation in the prices of purchased finished goods and transportation and warehousing costs; supply, transportation and distribution disruptions, particularly those affecting imported 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; risks associated with domestic manufacturing operations, including fluctuations in capacity utilization and the prices of key raw materials, transportation and warehousing costs, domestic labor costs and environmental compliance and remediation costs; the Company's ability to successfully implement its business plans; achieving and managing growth and change, and the risks associated with acquisitions, restructurings, strategic alliances and international operations; risks associated with distribution through retailers, such as non-binding dealership arrangements; capital requirements and costs; competition from non-traditional outlets, such as catalogs, internet and home improvement centers; changes in consumer preferences, including increased demand for lower quality, lower priced furniture due to declines in consumer confidence and/or discretionary income available for furniture purchases and the availability of consumer credit; and 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. Any forward looking statement that the Company makes speaks only as of the date of that statement, and the Company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise.
Table 1
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Thirteen Fourteen Fifty-Two Fifty-Three
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Feb. 1, Feb. 3, Feb. 1, Feb. 3,
2009 2008 2009 2008
-------- -------- --------- ---------
Net sales $ 56,511 $ 82,298 $ 261,162 $ 316,801
Cost of sales (a) 42,767 61,145 200,878 235,057
-------- -------- --------- ---------
Gross profit 13,744 21,153 60,284 81,744
Selling and
administrative
expenses (a) 10,400 14,477 45,980 51,738
Intangible asset
impairment
charges (b) 4,914 4,914
Restructuring and asset
impairment (credits)
charges (c) (132) (454) (951) 309
-------- -------- --------- ---------
Operating (loss) income (1,438) 7,130 10,341 29,697
Other (expense) income,
net (68) 322 323 1,472
-------- -------- --------- ---------
(Loss) income before
income taxes (1,506) 7,452 10,664 31,169
Income tax (benefit)
expense (787) 2,852 3,754 11,514
-------- -------- --------- ---------
Net (loss) income $ (719) $ 4,600 $ 6,910 $ 19,655
======== ======== ========= =========
(Loss) earnings per
share:
Basic and diluted $ (0.07) $ 0.39 $ 0.62 $ 1.58
======== ======== ========= =========
Weighted average shares
outstanding:
Basic 10,749 11,789 11,060 12,442
======== ======== ========= =========
Diluted 10,756 11,794 11,066 12,446
======== ======== ========= =========
Cash dividends declared
per share $ 0.10 $ 0.10 $ 0.40 $ 0.40
======== ======== ========= =========
(a) Warehousing, distribution and certain supply chain and operations
management expenses for periods prior to 2009 have been
reclassified from selling and administrative expenses to cost of
goods sold to conform to the 2009 method of presentation. Amounts
reclassified in each period presented were $4.0 million for the
2009 fourth quarter, $4.4 million for the 2008 fourth quarter,
$16.8 million for the 2009 annual period and $15.5 for the 2008
annual period.
(b) During the 2009 fourth quarter, in connection with its annual
asset impairment testing, the Company wrote off the $3.8 million
in goodwill related to its acquisitions of Bradington-Young and
Opus Designs Youth Bedroom. In addition, the Company recorded a
$1.1 million impairment charge to write down the value of its
Bradington-Young trade name.
(c) In connection with its exit from the domestic production of wood
furniture, the Company has recorded restructuring (credits)
charges, principally for severance and asset impairment in
connection with its closure of facilities:
(1) During the fiscal 2009 fourth quarter, the Company recorded
a restructuring credit of $132,000 ($82,000 after tax, or
$0.01 per share) for previously accrued health care benefits
for the Martinsville, Va. and Roanoke, Va. facilities which
are not expected to be paid.
(2) During the fiscal 2008 fourth quarter, the Company recorded
a restructuring credit of $454,000 ($279,000 after tax, or
$0.02 per share) principally for previously accrued health
care benefits for terminated employees at the former
Martinsville, Va., Roanoke, Va. and Pleasant Garden, N.C.
facilities that are not expected to be paid ($315,000) and
the reversal of previously accrued asset impairment charges
for the Martinsville, Va. facility ($238,000); net of exit
costs related to the sale of the Martinsville, Va. facility
in December 2007 ($99,000).
(3) During fiscal 2009, the Company recorded restructuring
credits of $951,000 ($592,000 after tax, or $0.05 per share)
for previously accrued health care benefits for the
Martinsville, Va. and Roanoke, Va. facilities which are not
expected to be paid.
(4) During fiscal 2008, the Company recorded $309,000
($190,000 after tax, or $0.02 per share) in aggregate
restructuring and asset impairment charges, net,
principally related to additional asset impairment,
disassembly and exit costs associated with the closing
of the Martinsville, Va. domestic wood manufacturing
facility in March 2007 ($553,000), net of a
restructuring credit principally for previously accrued
health care benefits for terminated employees at the
former Pleasant Garden, N.C., Martinsville, Va. and
Roanoke, Va. facilities that are not expected to be
paid ($244,000).
Table II
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, including share data)
Feb. 1, Feb. 3,
2009 2008
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 11,804 $ 33,076
Trade accounts receivable, less
allowance for doubtful accounts of
$2,207 and $1,750 on each date 30,261 38,229
Inventories 60,248 50,560
Prepaid expenses and other current assets 4,736 3,552
--------- ---------
Total current assets 107,049 125,417
Property, plant and equipment, net 24,596 25,353
Goodwill 3,774
Intangible assets 4,805 5,892
Cash surrender value of life insurance
policies 13,513 12,173
Other assets 3,504 2,623
--------- ---------
Total assets $ 153,467 $ 175,232
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 8,392 $ 13,025
Accrued salaries, wages and benefits 2,218 3,838
Other accrued expenses 2,279 3,553
Current maturities of long-term debt 2,899 2,694
--------- ---------
Total current liabilities 15,788 23,110
Long-term debt, excluding current maturities 2,319 5,218
Deferred compensation 5,606 5,369
Other long-term liabilities 44 709
--------- ---------
Total liabilities 23,757 34,406
Shareholders' equity
Common stock, no par value, 20,000 shares
authorized, 10,772 and 11,561 shares issued
and outstanding on each date 16,995 18,182
Retained earnings 112,450 122,835
Accumulated other comprehensive loss 265 (191)
--------- ---------
Total shareholders' equity 129,710 140,826
--------- ---------
Total liabilities and
shareholders' equity $ 153,467 $ 175,232
========= =========
Table III
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fifty-Two Fifty-Three
Weeks Ended Weeks Ended
Feb. 1, Feb. 3,
2009 2008
--------- ---------
Cash flows from operating activities
Cash received from customers $ 269,483 $ 321,189
Cash paid to suppliers and employees (260,029) (266,009)
Income taxes paid, net (7,219) (12,717)
Interest received (paid), net 167 1,195
--------- ---------
Net cash provided by operating activities 2,402 43,658
--------- ---------
Cash flows from investing activities
Acquisitions, net of cash acquired (181) (15,826)
Purchase of property, plant and equipment (2,271) (1,942)
Proceeds from the sale of property
and equipment 28 3,668
--------- ---------
Net cash used in investing activities (2,424) (14,100)
--------- ---------
Cash flows from financing activities
Purchases and retirement of common stock (14,097) (36,028)
Cash dividends paid (4,459) (5,036)
Payments on long-term debt (2,694) (2,503)
--------- ---------
Net cash used in financing activities (21,250) (43,567)
--------- ---------
Net decrease in cash and cash equivalents (21,272) (14,009)
Cash and cash equivalents at beginning
of year 33,076 47,085
--------- ---------
Cash and cash equivalents at end of year $ 11,804 $ 33,076
========= =========
Reconciliation of net income to net cash
provided by operating activities
Net income $ 6,910 $ 19,655
Depreciation and amortization 2,912 3,352
Restricted stock compensation cost 74 47
Impairment of intangibles 4,914
Restructuring and asset impairment
(credits) charges (951) 309
Loss (gain) on disposal of property 154 (100)
Donation of showroom facilities 1,082
Provision for doubtful accounts 2,245 1,313
Deferred income tax (benefit) expense (2,005) 2,624
Changes in assets and liabilities, net
of effect from acquisitions:
Trade accounts receivable 5,767 2,972
Inventories (9,629) 18,757
Prepaid expenses and other assets (1,963) (1,141)
Trade accounts payable (4,633) 2,063
Accrued salaries, wages and benefits (669) (3,256)
Accrued income taxes (1,274) (3,826)
Other accrued expenses 79 (1,198)
Other long-term liabilities 471 1,005
--------- ---------
Net cash provided by
operating activities $ 2,402 $ 43,658
========= =========