Hooker Furniture Reports Double-Digit Sales, Income Gains for Fiscal Year, Fourth Quarter
“Hooker Furniture performed extremely well during the year, growing sales and improving profitability in all segments, and increasing sales in 9 of our 11 business units and profits in 7 of them,” said
Toms added, “We believe our solid performance validates our strategy to diversify our corporate portfolio around winning products, price points and distribution channels, while keeping a strong presence in traditional channels.”
The fiscal 2019 sales increase was driven by organic growth, as well as the addition of a full year of sales from
“The 41% net income improvement for the year was favorably impacted by the Tax Cuts and Jobs Act of 2017, but we also are pleased to report a 15.9% improvement in operating income for the year, with significant increases in both the Hooker Branded segment and All Other, which includes our domestically-produced upholstery divisions and H Contract furnishings for senior living facilities,” Toms said.
The 2019 fiscal year ended on an upsurge in sales in the fourth quarter. For the fiscal 2019 fourth quarter, which began
“Home Meridian led the way in our strong fourth quarter shipments, and the additional shipping week contributed about 7% of the higher year-over-year sales for the quarter,” said Toms, adding that the 72% net income improvement was driven by higher incremental sales and lower income tax rates.
Segment Reporting: Hooker Branded
Net sales for the Hooker Branded segment increased approximately
Segment Reporting: Home Meridian
The Home Meridian segment finished fiscal 2019 with a
“While we are pleased with our revenue increases, fiscal 2019 profitability was below expectation as a result of quality costs incurred,” Boone continued. “Additionally, because most of Home Meridian’s sales are shipped from our Asian manufacturing partners directly to our retailers via container, rather than stocked in our US warehouses, Home Meridian was not able to build inventory levels before the 10% tariff on Chinese finished furniture and component parts became effective. Increased product costs resulting from the tariff, and an unfavorable customer mix negatively impacted the Home Meridian segment’s gross margin. We have implemented counter-measures to address the quality issues and we are optimistic about better results going forward.”
For the fourth quarter, Home Meridian sales were up over 17%, and operating income was up over 22% over the comparable period in the prior year and it finished fiscal 2019 with orders up 9% and backlog up 3% over the previous year.
Segment Reporting: All Other
All Other increased net sales
Cash, Debt and Inventory
“As the parts of our business serviced by finished goods inventory have grown, our inventories have grown accordingly to ensure we are in-stock on bestsellers and in position to deliver in a timely manner to our customers,” Toms said. “In the Hooker Casegoods and Upholstery divisions, we intentionally increased inventories ahead of the 10% Chinese tariffs going into effect, and in anticipation of possible higher tariffs this year, which thankfully have not occurred.”
The Company finished fiscal 2019 with
Outlook
“Many long-term macro-economic indicators are positive,” Toms said. “Especially encouraging are developments in the housing market, including more affordable mortgage rates, a near-record level of home remodeling activity, and the highest rate of homeownership in five years. However, we have seen a softening of demand and retail activity in the first two months of fiscal 2020,” Toms added. “For the fiscal 2019 fourth quarter, incoming orders were essentially flat, but in February and March, incoming orders were down 13.6% on a consolidated basis, with backlogs down 16.1% similarly deflated versus the same period in the prior year. Based on industry dynamics and the macro-economic outlook for the year, we expect these are short-term headwinds and remain confident in our business model and strategies and our strategic execution. We believe our diversified business model allows us to perform well through economic fluctuations, and we are making the investments needed in products, programs, systems and people to continue to perform at a high level.”
Conference Call Details
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) 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, such as the current U.S. administration imposing a 10% tariff on certain goods imported into
For more information, contact:
Chairman and Chief Executive Officer
Phone: (276) 632-2133, or
Phone: (276) 666-3949
Table I | |||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
(In thousands, except per share data) | |||||||||||
Fourteen Weeks Ended |
Thirteen Weeks Ended |
Fifty-Three Weeks Ended |
Fifty-Two Weeks Ended |
||||||||
February 3, | January 28, | February 3, | January 28, | ||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Net sales | $ | 200,475 | $ | 175,519 | $ | 683,501 | $ | 620,632 | |||
Cost of sales | 156,935 | 136,240 | 536,014 | 485,815 | |||||||
Casualty loss | - | - | 500 | - | |||||||
Gross profit | 43,540 | 39,279 | 146,987 | 134,817 | |||||||
Selling and administrative expenses | 23,777 | 23,533 | 91,928 | 87,279 | |||||||
Intangible asset amortization | 596 | 793 | 2,384 | 2,084 | |||||||
Operating income | 19,167 | 14,953 | 52,675 | 45,454 | |||||||
Other income, net | 91 | 907 | 369 | 1,566 | |||||||
Interest expense, net | 354 | 388 | 1,454 | 1,248 | |||||||
Income before income taxes | 18,904 | 15,472 | 51,590 | 45,772 | |||||||
Income tax expense | 4,213 | 6,948 | 11,717 | 17,522 | |||||||
Net income | $ | 14,691 | $ | 8,524 | $ | 39,873 | $ | 28,250 | |||
Earnings per share | |||||||||||
Basic | $ | 1.25 | $ | 0.72 | $ | 3.38 | $ | 2.42 | |||
Diluted | $ | 1.24 | $ | 0.72 | $ | 3.38 | $ | 2.42 | |||
Weighted average shares outstanding: | |||||||||||
Basic | 11,763 | 11,747 | 11,759 | 11,633 | |||||||
Diluted | 11,784 | 11,771 | 11,783 | 11,663 | |||||||
Cash dividends declared per share | $ | 0.15 | $ | 0.14 | $ | 0.57 | $ | 0.50 | |||
Table II | ||||||||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES |
||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||
(In thousands) | ||||||||||||||||
Fourteen Weeks Ended |
Thirteen Weeks Ended |
Fifty-Three Weeks Ended |
Fifty-Two Weeks Ended |
|||||||||||||
February 3, | January 28, | February 3, | January 28, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net Income | $ | 14,691 | $ | 8,524 | $ | 39,873 | $ | 28,250 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Amortization of actuarial (loss) gain | (434 | ) | (190 | ) | (305 | ) | (144 | ) | ||||||||
Income tax effect on amortization | 104 | 43 | 73 | 26 | ||||||||||||
Adjustments to net periodic benefit cost | (330 | ) | (147 | ) | (232 | ) | (118 | ) | ||||||||
Reclassification of tax effects due to the adoption of | ||||||||||||||||
ASU 2018-02 | - | - | 111 | - | ||||||||||||
Total Comprehensive Income | $ | 14,361 | $ | 8,377 | $ | 39,752 | $ | 28,132 | ||||||||
Table III | |||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
As of | February 3, | January 28, | |||||
2019 | 2018 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 11,435 | $ | 30,915 | |||
Trade accounts receivable, net | 112,557 | 92,803 | |||||
Inventories | 105,204 | 84,459 | |||||
Prepaid expenses and other current assets | 5,735 | 5,314 | |||||
Total current assets | 234,931 | 213,491 | |||||
Property, plant and equipment, net | 29,482 | 29,249 | |||||
Cash surrender value of life insurance policies | 23,816 | 23,622 | |||||
Deferred taxes | 4,522 | 3,264 | |||||
Intangible assets, net | 35,755 | 38,139 | |||||
Goodwill | 40,058 | 40,058 | |||||
Other assets | 1,152 | 2,235 | |||||
Total non-current assets | 134,785 | 136,567 | |||||
Total assets | $ | 369,716 | $ | 350,058 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities | |||||||
Current portion of term loans | $ | 5,829 | $ | 7,528 | |||
Trade accounts payable | 40,838 | 32,685 | |||||
Accrued salaries, wages and benefits | 8,002 | 9,218 | |||||
Income tax accrual | 3,159 | 3,711 | |||||
Customer deposits | 3,023 | 4,293 | |||||
Other accrued expenses | 3,564 | 2,894 | |||||
Total current liabilities | 64,415 | 60,329 | |||||
Long term debt | 29,628 | 45,778 | |||||
Deferred compensation | 11,513 | 11,164 | |||||
Pension plan | - | 2,441 | |||||
Other long-term liabilities | 984 | 886 | |||||
Total long-term liabilities | 42,125 | 60,269 | |||||
Total liabilities | 106,540 | 120,598 | |||||
Shareholders’ equity | |||||||
Common stock, no par value, 20,000 shares authorized, | |||||||
11,785 and 11,762 shares issued and outstanding on each date | 49,549 | 48,970 | |||||
Retained earnings | 213,380 | 180,122 | |||||
Accumulated other comprehensive income | 247 | 368 | |||||
Total shareholders’ equity | 263,176 | 229,460 | |||||
Total liabilities and shareholders’ equity | $ | 369,716 | $ | 350,058 | |||
Table IV | ||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(In thousands) | ||||||||
Fifty-Three Weeks Ended |
Fifty-Two Weeks Ended |
|||||||
February 3, | January 28, | |||||||
2019 | 2018 | |||||||
Operating Activities: | ||||||||
Net income | $ | 39,873 | $ | 28,250 | ||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization | 7,442 | 6,647 | ||||||
(Gain)/Loss on disposal of assets | (73 | ) | 571 | |||||
Proceeds from Casualty Loss | 409 | - | ||||||
Deferred income tax expense (benefit) | (1,221 | ) | 4,110 | |||||
Non-cash restricted stock and performance awards | 1,284 | 1,175 | ||||||
Provision for doubtful accounts and sales allowances | (799 | ) | (531 | ) | ||||
Gain on life insurance policies | (748 | ) | (582 | ) | ||||
Changes in assets and liabilities | ||||||||
Trade accounts receivable | (17,982 | ) | 2,908 | |||||
Inventories | (21,323 | ) | (6,776 | ) | ||||
Prepaid expenses and other current assets | 267 | (1,067 | ) | |||||
Trade accounts payable | 8,130 | (4,623 | ) | |||||
Accrued salaries, wages and benefits | (1,643 | ) | 129 | |||||
Accrued income taxes | (672 | ) | (612 | ) | ||||
Customer deposits | (1,270 | ) | (339 | ) | ||||
Other accrued expenses | 604 | (696 | ) | |||||
Deferred compensation | (2,757 | ) | (1,151 | ) | ||||
Other long-term liabilities | 141 | 333 | ||||||
Net cash provided by operating activities | 9,662 | 27,746 | ||||||
Investing Activities: | ||||||||
Acquisitions | - | (32,773 | ) | |||||
Purchases of property, plant and equipment | (5,214 | ) | (3,166 | ) | ||||
Proceeds received on notes receivable | 119 | 120 | ||||||
Proceeds from sale of property and equipment | 11 | 9 | ||||||
Premiums paid on life insurance policies | (652 | ) | (673 | ) | ||||
Proceeds received on life insurance policies | 1,225 | - | ||||||
Net cash used in investing activities | (4,511 | ) | (36,483 | ) | ||||
Financing Activities: | ||||||||
Proceeds from long-term debt | - | 12,000 | ||||||
Payments for long-term debt | (17,917 | ) | (6,286 | ) | ||||
Debt issuance cost | - | (39 | ) | |||||
Cash dividends paid | (6,714 | ) | (5,815 | ) | ||||
Net cash used in financing activities | (24,631 | ) | (140 | ) | ||||
Net decrease in cash and cash equivalents | (19,480 | ) | (8,877 | ) | ||||
Cash and cash equivalents at the beginning of year | 30,915 | 39,792 | ||||||
Cash and cash equivalents at the end of year | $ | 11,435 | $ | 30,915 | ||||
Supplemental schedule of cash flow information: | ||||||||
Interest paid, net | $ | 1,338 | $ | 1,135 | ||||
Income taxes paid, net | 13,613 | 14,122 | ||||||
Supplemental schedule of noncash investing activities: | ||||||||
Acquisition cost paid in common stock | $ | - | $ | 8,396 | ||||
Increase in property and equipment through accrued purchases | 23 | 58 | ||||||
Table V |
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HOOKER FURNITURE CORPORATION AND SUBSIDIARIES |
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NET SALES AND OPERATING INCOME BY SEGMENT | |||||||||||||||||
(In thousands) | |||||||||||||||||
Unaudited | |||||||||||||||||
14 Weeks Ended | 13 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||||||||
February 3, | January 28, | February 3, | January 28, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
% Net | % Net | % Net | % Net | ||||||||||||||
Net Sales | Sales | Sales | Sales | Sales | |||||||||||||
Hooker Branded | $ | 48,909 | 24.4% | $ | 45,821 | 26.1% | $ | 178,710 | 26.2% | $ | 166,754 | 26.9% | |||||
Home Meridian | 121,194 | 60.5% | 103,299 | 58.9% | 387,825 | 56.7% | 365,472 | 58.9% | |||||||||
All Other | 30,372 | 15.2% | 26,399 | 15.0% | 116,966 | 17.1% | 88,406 | 14.2% | |||||||||
Consolidated | $ | 200,475 | 100.0% | $ | 175,519 | 100% | $ | 683,501 | 100.0% | $ | 620,632 | 100% | |||||
Operating Income | |||||||||||||||||
Hooker Branded | $ | 7,889 | 16.1% | $ | 7,093 | 15.5% | $ | 25,269 | 14.1% | $ | 22,139 | 13.3% | |||||
Home Meridian | 8,660 | 7.1% | 7,080 | 6.9% | 18,828 | 4.9% | 17,828 | 4.9% | |||||||||
All Other | 2,618 | 8.6% | 780 | 3.0% | 8,578 | 7.3% | 5,487 | 6.2% | |||||||||
Consolidated | $ | 19,167 | 9.6% | $ | 14,953 | 8.5% | $ | 52,675 | 7.7% | $ | 45,454 | 7.3% | |||||
Source: Hooker Furniture Corporation