Hooker Brands’ Revenue Helps Lift First Quarter Results for Hooker Furniture Corporation
Double-digit sales gains for Hooker Branded Casegoods and Upholstery, along with the inclusion of Shenandoah Furniture’s net sales in the quarter, drove the revenue and income increases. “Beginning with the 4th quarter last year, Hooker Casegoods and Upholstery have out-performed other divisions and overall industry growth,” said
The strong top and bottom line performance for the quarter was partially offset by a 4.2% net sales decrease and lower operating profit in the Home Meridian (HMI) segment, both attributed to short-term and temporary production and shipping delays from three major product vendors following
“The robust consolidated performance, despite a weak quarter for Home Meridian, validates our strategy to build a diverse portfolio of companies spanning multiple channels of distribution, products and price points,” said Toms.
During the first quarter, consolidated gross profit increased 13.6%, or
Consolidated operating income increased
Segment Reporting: Hooker Branded
Hooker Branded segment sales grew
The 12% sales surge in Casegoods continued positive momentum sequentially from the fourth quarter of fiscal 2018. “Our focus on both winning and emerging channels of distribution and product categories, along with a strong inventory position on best-selling collections, have had a positive impact on sales for the last two quarters,” Toms said.
Segment operating margin increased to 15.7% from 13.2% for the fiscal quarter, reflecting the leverage gained from the uptick in sales and the previously mentioned life insurance proceeds.
Segment Reporting: Home Meridian
For the first quarter, HMI net sales declined 4.2% versus the prior year period, with decreases in both casegoods and upholstery. “During
Orders in the first quarter were up 19.4% compared to the prior year quarter, and the quarter-end backlog is up 16.4%. “As we head into the second quarter, our May shipments were strong and are supported by large seasonal shipments to our Club Channel. In addition, the
Segment Reporting: All Other
“All Other, which includes our domestic upholstery operations Bradington-Young,
Cash, Debt and Inventory
The Company finished the fiscal 2019 first quarter with
“To support the double-digit growth at
Outlook
“Retail business in the first quarter can best be described as choppy,” Toms said. “Overall, incoming orders vary by business unit but generally exceeded shipments. Generally, economic trends are favorable to the furniture industry, and we entered the second quarter with a good bit of momentum. Given the positive economic indicators and the diverse nature of our businesses, products, price points and distribution channels, we are strongly positioned and expect to continue to outperform the industry.”
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Certain statements made in this release, other than those based on historical facts, may be forward-looking statements. Forward-looking statements reflect our reasonable judgment with respect to future events and typically can be identified by the use of forward-looking terminology such as “believes,” “expects,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “would,” “could” or “anticipates,” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of strategy. Forward-looking statements 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: (1) general economic or business conditions, both domestically and internationally, and instability in the financial and credit markets, including their potential impact on our (i) sales and operating costs and access to financing or (ii) customers and suppliers and their ability to obtain financing or generate the cash necessary to conduct their respective businesses; (2) the risks specifically related to the concentrations of a material part of our of sales and accounts receivable in only a few customers; (3) achieving and managing growth and change, including the recent Shenandoah acquisition, and the risks associated with new business lines, acquisitions, restructurings, strategic alliances and international operations; (4) risks associated with our reliance on offshore sourcing and the cost of imported goods, including fluctuation in the prices of purchased finished goods and transportation and warehousing costs; (5) adverse political acts or developments in, or affecting, the international markets from which we import products, including duties or tariffs imposed on those products by foreign governments or the U.S. government, including the implementation of a possible border-adjustment tax; (6) our ability to successfully implement our business plan to increase sales and improve financial performance; (7) changes in actuarial assumptions, the interest rate environment, the return on plan assets and future funding obligations related to the Home Meridian segment’s legacy Pension Plan, which can affect future funding obligations, costs and plan liabilities; (8) the possible impairment of our long-lived assets, which can result in reduced earnings and net worth; (9) the cost and difficulty of marketing and selling our products in foreign markets; (10) disruptions involving our vendors or the transportation and handling industries, particularly those affecting imported products from
Table I | ||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||
(In thousands, except per share data) | ||||||
Thirteen Weeks Ended | ||||||
April 29, | April 30, | |||||
2018 | 2017 | |||||
Net sales | $ | 142,892 | $ | 130,872 | ||
Cost of sales | 110,926 | 102,729 | ||||
Gross profit | 31,966 | 28,143 | ||||
Selling and administrative expenses | 21,990 | 20,570 | ||||
Intangible asset amortization | 596 | 334 | ||||
Operating income | 9,380 | 7,239 | ||||
Other income, net | 5 | 92 | ||||
Interest expense, net | 382 | 251 | ||||
Income before income taxes | 9,003 | 7,080 | ||||
Income tax expense | 1,849 | 2,334 | ||||
Net income | $ | 7,154 | $ | 4,746 | ||
Earnings per share: | ||||||
Basic | $ | 0.61 | $ | 0.41 | ||
Diluted | $ | 0.61 | $ | 0.41 | ||
Weighted average shares outstanding: | ||||||
Basic | 11,750 | 11,543 | ||||
Diluted | 11,774 | 11,578 | ||||
Cash dividends declared per share | $ | 0.14 | $ | 0.12 | ||
Table II | ||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(In thousands) | ||||||||
Thirteen Weeks Ended | ||||||||
April 29, | April 30, | |||||||
2018 | 2017 | |||||||
Net Income | $ | 7,154 | $ | 4,746 | ||||
Other comprehensive income: | ||||||||
Amortization of actuarial loss | 43 | 15 | ||||||
Income tax effect on amortization | (11 | ) | (5 | ) | ||||
Adjustments to net periodic benefit cost | 32 | 10 | ||||||
Reclassification of tax effect due to the adoption of ASU 2018-02 | 111 | - | ||||||
Total comprehensive Income | $ | 7,297 | $ | 4,756 | ||||
Table III | ||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(In thousands) | ||||||
As of | April 29, | January 28, | ||||
2018 | 2018 | |||||
Assets | (Unaudited) | |||||
Current assets | ||||||
Cash and cash equivalents | $ | 46,558 | $ | 30,915 | ||
Trade accounts receivable, net | 74,813 | 92,461 | ||||
Inventories | 84,203 | 84,459 | ||||
Prepaid expenses and other current assets | 5,565 | 5,314 | ||||
Total current assets | 211,139 | 213,149 | ||||
Property, plant and equipment, net | 28,572 | 29,249 | ||||
Cash surrender value of life insurance policies | 23,074 | 23,622 | ||||
Deferred taxes | 1,617 | 3,264 | ||||
Intangible assets | 37,543 | 38,139 | ||||
Goodwill | 40,058 | 40,058 | ||||
Other assets | 2,271 | 2,235 | ||||
Total non-current assets | 133,135 | 136,567 | ||||
Total assets | $ | 344,274 | $ | 349,716 | ||
Liabilities and Shareholders’ Equity | ||||||
Current liabilities | ||||||
Current portion of term loan | $ | 6,942 | $ | 7,528 | ||
Trade accounts payable | 34,894 | 32,685 | ||||
Accrued salaries, wages and benefits | 6,357 | 9,218 | ||||
Income tax accrual | 4,019 | 3,711 | ||||
Customer deposits | 4,338 | 3,951 | ||||
Other accrued expenses | 3,385 | 2,894 | ||||
Total current liabilities | 59,935 | 59,987 | ||||
Long term debt | 34,488 | 45,778 | ||||
Deferred compensation | 11,257 | 11,164 | ||||
Pension plan | 2,348 | 2,441 | ||||
Other long-term liabilities | 924 | 886 | ||||
Total long-term liabilities | 49,017 | 60,269 | ||||
Total liabilities | 108,952 | 120,256 | ||||
Shareholders’ equity | ||||||
Common stock, no par value, 20,000 shares authorized, | ||||||
11,768 and 11,762 shares issued and outstanding on each date | 49,082 | 48,970 | ||||
Retained earnings | 185,728 | 180,122 | ||||
Accumulated other comprehensive income | 512 | 368 | ||||
Total shareholders’ equity | 235,322 | 229,460 | ||||
Total liabilities and shareholders’ equity | $ | 344,274 | $ | 349,716 | ||
Table IV | |||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) | |||||||
Unaudited | |||||||
Thirteen Weeks Ended | |||||||
April 29, 2018 | April 30, 2017 | ||||||
Operating Activities: | |||||||
Net income | $ | 7,154 | $ | 4,746 | |||
Adjustments to reconcile net income to net cash | |||||||
provided by operating activities: | |||||||
Depreciation and amortization | 1,828 | 1,359 | |||||
Gain on disposal of assets | (19 | ) | (20 | ) | |||
Deferred income tax expense | 1,638 | 2,288 | |||||
Non-cash restricted stock and performance awards | 343 | 646 | |||||
Provision for doubtful accounts | (1,990 | ) | 13 | ||||
Gain on life insurance policies | (508 | ) | (150 | ) | |||
Changes in assets and liabilities | |||||||
Trade accounts receivable | 20,611 | 23,110 | |||||
Inventories | (321 | ) | (4,141 | ) | |||
Prepaid expenses and other current assets | (190 | ) | 696 | ||||
Trade accounts payable | 2,042 | (6,897 | ) | ||||
Accrued salaries, wages and benefits | (3,005 | ) | (4,138 | ) | |||
Accrued income taxes | 189 | 23 | |||||
Customer deposits | 387 | 520 | |||||
Other accrued (income) expenses | 424 | (418 | ) | ||||
Deferred compensation | (43 | ) | (18 | ) | |||
Other long-term liabilities | 39 | 223 | |||||
Net cash provided by operating activities | 28,579 | 17,842 | |||||
Investing Activities: | |||||||
Purchases of property, plant and equipment | (370 | ) | (867 | ) | |||
Proceeds received on notes receivable | 30 | 30 | |||||
Proceeds of life insurance policies | 1,099 | - | |||||
Premiums paid on life insurance policies | (155 | ) | (163 | ) | |||
Net cash provided by/(used in) investing activities | 604 | (1,000 | ) | ||||
Financing Activities: | |||||||
Payments for long-term debt | (11,893 | ) | (1,464 | ) | |||
Cash dividends paid | (1,647 | ) | (1,388 | ) | |||
Net cash used in financing activities | (13,540 | ) | (2,852 | ) | |||
Net increase in cash and cash equivalents | 15,643 | 13,990 | |||||
Cash and cash equivalents at the beginning of year | 30,915 | 39,792 | |||||
Cash and cash equivalents at the end of quarter | $ | 46,558 | $ | 53,782 | |||
Supplemental schedule of cash flow information: | |||||||
Income taxes paid, net | $ | 23 | $ | 23 | |||
Interest paid | 324 | 243 | |||||
Supplemental schedule of noncash investing activities: | |||||||
Increase in property and equipment through accrued purchases | $ | 166 | $ | 49 | |||
Table V | |||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||||
NET SALES AND OPERATING INCOME BY SEGMENT | |||||||||
(In thousands) | |||||||||
Unaudited | |||||||||
Net Sales | |||||||||
Thirteen Weeks Ended | |||||||||
April 29, 2018 | April 30, 2017 | ||||||||
% Net Sales |
% Net Sales |
||||||||
Hooker Branded | $ | 42,772 | 29.9 | % | $ | 37,473 | 28.6 | % | |
Home Meridian | 70,596 | 49.4 | % | 73,702 | 56.3 | % | |||
All Other | 29,524 | 20.7 | % | 19,697 | 15.1 | % | |||
Consolidated | $ | 142,892 | 100 | % | $ | 130,872 | 100 | % | |
Operating Profit and Margin | |||||||||
Thirteen Weeks Ended | |||||||||
April 29, 2018 | April 30, 2017 | ||||||||
% Net Sales |
% Net Sales |
||||||||
Hooker Branded | $ | 6,726 | 15.7 | % | $ | 4,950 | 13.2 | % | |
Home Meridian | (288 | ) | -0.4 | % | 846 | 1.1 | % | ||
All Other | 2,942 | 10.0 | % | 1,443 | 7.3 | % | |||
Consolidated | $ | 9,380 | 6.6 | % | $ | 7,239 | 5.5 | % | |
For more information, contact:
Chairman and Chief Executive Officer
Phone: (276) 632-2133, or
Phone: (276) 666-3949
Source: Hooker Furniture Corporation