Charges lead to $18.4M loss for Hooker
By Furniture Today Staff -- Furniture Today, March 26, 2007
Martinsville, Va. — One-time charges for ending an employee stock ownership plan and for restructuring left Hooker Furniture with an $18.4 million loss in its two-month transition period from Dec. 1 to Jan. 28, the company reported.
The maker and importer of case goods and upholstery is switching to a new fiscal year, beginning Jan. 29 and ending Feb. 3, 2008, from its previous Nov. 30 year, making the transition period necessary.
Net sales for the period came to $49.1 million. As it had forecast, Hooker reported a net loss for the two months.
The loss of $18.4 million or $1.52 per share was due to two special charges:
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An $18.4 million non-cash, non-tax deductible charge related to the termination of the ESOP effective Jan. 26. Hooker also wrote off a related deferred tax asset in the amount of $855,000.
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Restructuring charges of $3 million, mainly for severance and benefits related to Hooker's previously announced decision to close its last domestic wood furniture manufacturing plant by the end of this month.
The charges were partially offset by an improvement in gross profit margin to 27.8% of net sales for the 2007 two-month transition period, compared with 26.9% of net sales for the 2006 first quarter. The company also reported a decline in selling and administrative expenses as a percentage of net sales to 19.3% in the 2007 transition period, from 19.9% during the 2006 first quarter.
Gross profit margin improved primarily as a result of an increased proportion of sales of higher-margin imported wood and upholstered furniture. The reduction in selling and administrative costs as a percentage of net sales was primarily the result of lower port storage and temporary warehousing costs for imported wood furniture purchases.
"The net loss in our two-month transition period, resulting from a combined $21.4 million in restructuring and ESOP termination charges, should be viewed as an anomaly," said Paul Toms Jr., Hooker chairman, CEO and president. "In fact, the termination of the ESOP and closing of the Martinsville facility, combined with declining warehousing and distribution costs, should position us for improved profitability in our 2008 fiscal year that began Jan. 29, 2007."
Toms added, "A clearer indicator of our outlook for bottom-line performance can be seen in our gross profit margin improvement and the decline in selling and administrative expenses as a percentage of net sales during the period."
Excluding the effect of the ESOP termination and restructuring and asset impairment charges, operating profitability as a percentage of net sales during the transition period improved when compared with the three-month first quarter of fiscal 2006, to 8.6% from 7%, the company said.
"Our business outlook has not changed, and we still expect retail conditions to remain challenging at least through the first half of 2007," Toms said. "Under current business conditions, we still expect improved financial performance because of the cost-cutting measures we have implemented and the continued progress in our supply chain management and warehousing and distribution operations."
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