Hooker Furniture Reports Higher Sales and Net Income for Second Quarter, First Half
Net sales increased approximately 8%, or
For the fiscal 2019 first half, consolidated net sales were
“We’re pleased to report a solid quarter, with both increased sales and net income, despite a challenging retail furniture environment during the period,” said
During the second quarter, consolidated gross profit increased 7.6%, or
For the fiscal 2019 first half, consolidated gross profit increased 10.4% or
Consolidated operating income stayed flat at
For the fiscal 2019 first half, Hooker Branded segment operating income benefited from proceeds received from company-owned life insurance of approximately
The Company also benefited from lower effective tax rates in the quarter and year-to-date periods due to the recently enacted Tax Cut and Jobs Act of 2017. Effective tax rates for the quarter and year-to-date periods were 24.9% and 23.0%, respectively, compared to 35.2% and 34.4%, respectively, for the comparable prior year periods.
Segment Reporting: Hooker Branded
Sales in the Hooker Branded segment were essentially flat compared to the same quarter a year ago. The leveling in sales followed two consecutive quarters of sales growth. After a sluggish July for incoming orders, “We are encouraged by a double-digit uptick of orders in August. Orders are up 17% for
Toms said, “The Company has previewed several new collections slated for the upcoming October market to over 80 retailers this summer on the road and at a recent design meeting. Both of our major new collections have been very well received, so we have pre-ordered each to increase speed to market. We expect a positive impact as we begin shipping these collections to our largest retailers in direct containers by the end of the calendar year, and shipping from our warehouse to other retailers by the end of the fiscal year 2019 and into Q1 of next year.”
Toms attributed the flat sales at
Segment Reporting: Home Meridian
During the quarter, “Home Meridian resolved the disruptions with our Asian suppliers that negatively impacted shipments last quarter, and grew net sales 4.8% over the prior year,” said
During the quarter, operating income was up 6.9% compared to a year ago. “While margins remained above prior year levels, increased spending overall, including in new and emerging businesses, constrained operating income growth,” he said.
Boone characterized orders in the second quarter as soft. “Orders were down 14.7%, while backlog was also down 4% during the period. However, some of this is attributed to the timing of large orders, since backlog is up 15% over the prior year, four weeks into Q3.”
Year-to-date, sales in the eCommerce Division are up nearly 30%, sales at Samuel Lawrence Hospitality (SLH) are up 30%, while sales to traditional channels are down 3%. Demand is up at SLH and Prime Resources (PRI), with SLH’s orders up 74% and PRI’s orders up 49% year-to-date, due to an upswing in the Hospitality and Warehouse Club Businesses.
These increases, he said, “are mitigated by a slowdown in orders from traditional retail customers, making Home Meridian’s overall year-to-date incoming orders flat as of quarter-end.”
Segment Reporting: All Other
The sales increase in All Other, which includes Bradington-Young (“B-Y”),
“While Bradington-Young’s sales were up only slightly, incoming orders increased 6.6% year-over-year during the quarter, and backlog is up over 35%. In addition, B-Y has broken ground on a factory expansion that will increase capacity by about 50%,” said
All upholstery units experienced a negative impact on margins from price increases in materials and components such as foam, plywood and steel, “and we experienced a lag between those cost increases and our own price increases to customers,” Delgatti said. “However, we expect to catch up during the third quarter.” Additionally,
At Shenandoah, “Order rates and sales are steadily improving, and we are in a good position with major retail customers who have expanded their assortments, as we head toward the fall selling season,” Delgatti said.
“At H Contract, we are planning several new product launches in the next few months, and plan to dramatically pick up the pace of product introductions over the next year,” Delgatti said. “This should help to continue growing H Contract sales in both the short and long term.”
Cash, Debt and Inventory
The Company finished the fiscal first half with
Outlook
"Given improving conditions at retail, recent incoming order trends and increased backlogs at six of ten divisions, we are encouraged about our position going into the fall season," Toms said. "We do have some concern about the prospects of tariffs being imposed on finished goods and component parts imported from
“A generally positive macro environment is driven by recent GDP growth of 4.1%, a stock market pushing all-time highs, strong employment and consumer confidence at record levels. Our expectation for the fall selling season and the balance of the year is guardedly optimistic."
Dividends
On
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) 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; (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) | |||||||||||
For the | |||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||
July 29, | July 30, | July 29, | July 30, | ||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Net sales | $ | 168,661 | $ | 156,308 | $ | 311,553 | $ | 287,180 | |||
Cost of sales | 132,516 | 123,191 | 243,442 | 225,920 | |||||||
Casualty loss | 500 | - | 500 | - | |||||||
Gross profit | 35,645 | 33,117 | 67,611 | 61,260 | |||||||
Selling and administrative expenses | 23,184 | 20,858 | 45,171 | 41,428 | |||||||
Intangible asset amortization | 596 | 333 | 1,192 | 667 | |||||||
Operating income | 11,865 | 11,926 | 21,248 | 19,165 | |||||||
Other income, net | 73 | 368 | 77 | 460 | |||||||
Interest expense, net | 364 | 282 | 745 | 533 | |||||||
Income before income taxes | 11,574 | 12,012 | 20,580 | 19,092 | |||||||
Income tax expense | 2,881 | 4,234 | 4,730 | 6,568 | |||||||
Net income | $ | 8,693 | $ | 7,778 | $ | 15,850 | $ | 12,524 | |||
Earnings per share: | |||||||||||
Basic | $ | 0.74 | 0.67 | 1.35 | 1.08 | ||||||
Diluted | $ | 0.74 | 0.67 | 1.34 | 1.08 | ||||||
Weighted average shares outstanding: | |||||||||||
Basic | 11,760 | 11,565 | 11,755 | 11,554 | |||||||
Diluted | 11,784 | 11,593 | 11,775 | 11,587 | |||||||
Cash dividends declared per share | $ | 0.14 | $ | 0.12 | $ | 0.28 | $ | 0.24 | |||
Table II | ||||||||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||||
(In thousands) | ||||||||||||||||
For the | ||||||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
July 29, | July 30, | July 29, | July 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net Income | $ | 8,693 | $ | 7,778 | $ | 15,850 | $ | 12,524 | ||||||||
Other comprehensive income: | ||||||||||||||||
Amortization of actuarial loss | 43 | 15 | 86 | 31 | ||||||||||||
Income tax effect on amortization | (10 | ) | (6 | ) | (21 | ) | (11 | ) | ||||||||
Adjustments to net periodic benefit cost | 33 | 9 | 65 | 20 | ||||||||||||
Reclassification of tax effect due to the adoption of ASU 2018-02 | - | - | 111 | - | ||||||||||||
Total comprehensive Income | $ | 8,726 | $ | 7,787 | $ | 16,026 | $ | 12,544 | ||||||||
Table III | |||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
As of | July 29, | January 28, | |||||
2018 | 2018 | ||||||
Assets | (Unaudited) | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 29,231 | $ | 30,915 | |||
Trade accounts receivable, net | 83,584 | 92,461 | |||||
Inventories | 98,465 | 84,459 | |||||
Prepaid expenses and other current assets | 6,137 | 5,314 | |||||
Total current assets | 217,417 | 213,149 | |||||
Property, plant and equipment, net | 27,647 | 29,249 | |||||
Cash surrender value of life insurance policies | 23,229 | 23,622 | |||||
Deferred taxes | 2,494 | 3,264 | |||||
Intangible assets, net | 36,947 | 38,139 | |||||
Goodwill | 40,058 | 40,058 | |||||
Other assets | 2,258 | 2,235 | |||||
Total non-current assets | 132,633 | 136,567 | |||||
Total assets | $ | 350,050 | $ | 349,716 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities | |||||||
Current portion of term loans | $ | 6,532 | $ | 7,528 | |||
Trade accounts payable | 36,987 | 32,685 | |||||
Accrued salaries, wages and benefits | 7,557 | 9,218 | |||||
Income tax accrual | 112 | 3,711 | |||||
Customer deposits | 4,957 | 3,951 | |||||
Other accrued expenses | 3,659 | 2,894 | |||||
Total current liabilities | 59,804 | 59,987 | |||||
Long term debt | 33,031 | 45,778 | |||||
Deferred compensation | 11,343 | 11,164 | |||||
Pension plan | 2,366 | 2,441 | |||||
Other long-term liabilities | 963 | 886 | |||||
Total long-term liabilities | 47,703 | 60,269 | |||||
Total liabilities | 107,507 | 120,256 | |||||
Shareholders’ equity | |||||||
Common stock, no par value, 20,000 shares authorized, 11,785 and 11,762 shares issued and outstanding on each date | 49,223 | 48,970 | |||||
Retained earnings | 192,775 | 180,122 | |||||
Accumulated other comprehensive income | 545 | 368 | |||||
Total shareholders’ equity | 242,543 | 229,460 | |||||
Total liabilities and shareholders’ equity | $ | 350,050 | $ | 349,716 | |||
Table IV | |||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) | |||||||
Unaudited | |||||||
Twenty-Six Weeks Ended | |||||||
July 29, 2018 | July 30, 2017 | ||||||
Operating Activities: | |||||||
Net income | $ | 15,850 | $ | 12,524 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 3,689 | 2,697 | |||||
Gain on disposal of assets | (48 | ) | (43 | ) | |||
Deferred income tax expense | 748 | 1,234 | |||||
Non-cash restricted stock and performance awards | 548 | 951 | |||||
(Benefit from) / provision for doubtful accounts and sales allowances | (785 | ) | 173 | ||||
Gain on life insurance policies | (504 | ) | (478 | ) | |||
Changes in assets and liabilities | |||||||
Trade accounts receivable | 10,633 | 17,034 | |||||
Inventories | (14,584 | ) | (6,732 | ) | |||
Prepaid expenses and other current assets | (672 | ) | 185 | ||||
Trade accounts payable | 4,281 | (9,283 | ) | ||||
Accrued salaries, wages and benefits | (1,804 | ) | (1,559 | ) | |||
Accrued income taxes | (3,719 | ) | (3,371 | ) | |||
Customer deposits | 1,007 | 388 | |||||
Other accrued expenses | 702 | 313 | |||||
Deferred compensation | 42 | (355 | ) | ||||
Other long-term liabilities | 81 | 207 | |||||
Net cash provided by operating activities | 15,465 | 13,885 | |||||
Investing Activities: | |||||||
Purchases of property, plant and equipment | (833 | ) | (1,665 | ) | |||
Proceeds received on notes receivable | 70 | 63 | |||||
Proceeds of life insurance policies | 1,225 | - | |||||
Premiums paid on life insurance policies | (529 | ) | (550 | ) | |||
Net cash used in investing activities | (67 | ) | (2,152 | ) | |||
Financing Activities: | |||||||
Payments for long-term debt | (13,786 | ) | (2,929 | ) | |||
Cash dividends paid | (3,296 | ) | (2,778 | ) | |||
Net cash used in financing activities | (17,082 | ) | (5,707 | ) | |||
Net (decrease)/increase in cash and cash equivalents | (1,684 | ) | 6,026 | ||||
Cash and cash equivalents at the beginning of year | 30,915 | 39,792 | |||||
Cash and cash equivalents at the end of quarter | $ | 29,231 | $ | 45,818 | |||
Supplemental schedule of cash flow information: | |||||||
Income taxes paid, net | $ | 7,699 | $ | 8,705 | |||
Interest paid | 632 | 489 | |||||
Supplemental schedule of noncash investing activities: | |||||||
Increase in property and equipment through accrued purchases | $ | 20 | $ | 50 | |||
Table V | ||||||||||||||||||||
HOOKER FURNITURE CORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
NET SALES AND OPERATING INCOME BY SEGMENT | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Unaudited | ||||||||||||||||||||
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||
July 29, | July 30 | July 29, | July 30 | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
% Net | % Net | % Net | % Net | |||||||||||||||||
Net Sales | Sales | Sales | Sales | Sales | ||||||||||||||||
Hooker Branded | $ | 40,551 | 24.0% | $ | 40,889 | 26.2% | $ | 83,322 | 26.7% | $ | 78,361 | 27.3% | ||||||||
Home Meridian | 101,022 | 59.9% | 96,403 | 61.7% | 171,618 | 55.1% | 170,105 | 59.2% | ||||||||||||
All other | 27,088 | 16.1% | 19,016 | 12.2% | 56,613 | 18.2% | 38,714 | 13.5% | ||||||||||||
Consolidated | $ | 168,661 | 100% | $ | 156,308 | 100% | $ | 311,553 | 100% | $ | 287,180 | 100% | ||||||||
Operating Income | ||||||||||||||||||||
Hooker Branded | $ | 4,943 | 12.2% | $ | 5,133 | 12.6% | $ | 11,669 | 14.0% | $ | 10,083 | 12.9% | ||||||||
Home Meridian | 5,628 | 5.6% | 5,265 | 5.5% | 5,339 | 3.1% | 6,111 | 3.6% | ||||||||||||
All other | 1,294 | 4.8% | 1,528 | 8.0% | 4,240 | 7.5% | 2,971 | 7.7% | ||||||||||||
Consolidated | $ | 11,865 | 7.0% | $ | 11,926 | 7.6% | $ | 21,248 | 6.8% | $ | 19,165 | 6.7% | ||||||||
For more information, contact:
Chairman and Chief Executive Officer
Phone: (276) 632-2133, or
Phone: (276) 666-3949
Source: Hooker Furniture Corporation