-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYejMQ7zlSNHRnKj2JE0IgczbVGWZs0WnhXlWmZ/cEhgQVnBr87b9yOa4ZqtcYWR qUTjaNqwlAY+uh2tLiWC2Q== 0000081112-99-000001.txt : 19990226 0000081112-99-000001.hdr.sgml : 19990226 ACCESSION NUMBER: 0000081112-99-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990124 FILED AS OF DATE: 19990225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PULASKI FURNITURE CORP CENTRAL INDEX KEY: 0000081112 STANDARD INDUSTRIAL CLASSIFICATION: WOOD HOUSEHOLD FURNITURE, (NO UPHOLSTERED) [2511] IRS NUMBER: 540594965 STATE OF INCORPORATION: VA FISCAL YEAR END: 1103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00314 FILM NUMBER: 99550255 BUSINESS ADDRESS: STREET 1: P O BOX 1371 STREET 2: ONE PULASKI SQ CITY: PULASKI STATE: VA ZIP: 24301 BUSINESS PHONE: 7039807330 MAIL ADDRESS: STREET 1: P O BOX 1371 STREET 2: 1 PULASKI SQUARE CITY: PULASKI STATE: VA ZIP: 24301 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------- FORM 10-Q --------- [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended January 24, 1999 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________ to ________________ COMMISSION FILE NUMBER 0-314 Pulaski Furniture Corporation (Exact name of registrant as specified in its charter) Virginia (State or other jurisdiction of incorporation) 54-0594965 (IRS employer identification number) P.O. Box 1371, Pulaski, Virginia (Address of principal executive offices) 24301 (Zip Code) 540-980-7330 (Registrant's telephone number) Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 2,894,597 shares of common stock outstanding as of February 25, 1999 Pulaski Furniture Corporation Index PART I: Financial Statements Consolidated Condensed Balance Sheets as of January 24, 1999 and November 1, 1998 . . . . . . . . . . . . . . 2 Consolidated Condensed Statements of Income Three 4-week periods ended January 24, 1999 and January 25, 1998 . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows Three 4-week periods ended January 24, 1999 and January 25, 1998 . . . . . . . . . . . . . . . . . . . . . . 4 Notes to Consolidated Condensed Financial Statements . . . . . . 5 Management's Discussion and Analysis of the Consolidated Condensed Statements of Income . . . . . . . . . . . 6 PART II: Other Information . . . . . . . . . . . . . . . . . . . . . 9 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 11 Pulaski Furniture Corporation Consolidated Condensed Balance Sheets (in thousands) January 24, November 1, 1999 1998 ASSETS ---------- ---------- Current assets: Cash and cash equivalents $ 182 $ 1,452 Accounts receivable, net 32,036 38,411 ---------- ---------- 32,218 39,863 Inventories: Raw materials 16,824 17,824 Work-in-process 8,329 8,253 Finished goods 30,496 29,024 ---------- ---------- 55,649 55,101 Less LIFO reserve (16,260) (16,111) ---------- ---------- 39,389 38,990 Prepaid expenses 462 803 Deferred income taxes 687 687 ---------- ---------- Total current assets 72,756 80,343 Property, plant and equipment, net 34,718 35,225 Cash surrender value of life insurance 2,053 2,049 Other 11 11 ---------- ---------- Total assets $ 109,538 $ 117,628 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses: Accounts payable $ 8,171 $ 7,685 Wages and commissions 1,012 3,948 Taxes withheld from employees 620 355 Other accrued liabilities 1,464 2,096 ---------- ---------- 11,267 14,084 Notes payable 6,000 12,000 Federal and state income taxes 663 754 Current portion of long-term debt 2,000 2,000 ---------- ---------- Total current liabilities 19,930 28,838 Long-term notes payable 23,330 23,765 Deferred income taxes 3,509 3,532 Deferred compensation 2,792 2,875 Shareholders' equity Common stock 6,964 6,328 Retained earnings 53,755 52,956 Unamortized restricted stock (742) (666) ---------- ---------- Total shareholders' equity 59,977 58,618 Total liabilities and shareholders' equity $ 109,538 $ 117,628 ========== ========== See accompanying notes to financial statements. Pulaski Furniture Corporation Consolidated Condensed Statements of Income (in thousands, except for per share data) Three 4-week periods ended Jan 24, Jan 25, Incr 1999 1998 (Decr) % --------- --------- -------- ---- Net sales $ 40,942 $ 36,310 $ 4,632 12.8 % Costs and expenses Cost of sales 32,997 29,215 3,782 12.9 Selling & administrative 5,690 5,092 598 11.7 ---------- ---------- -------- Total 38,687 34,307 4,380 12.8 ---------- ---------- -------- Operating income 2,255 2,003 252 12.6 Other income and expenses Interest expense 471 446 25 5.6 Interest income (14) (4) (10) (250.0) Miscellaneous income (198) 6 (204)(3400.0) ---------- ---------- -------- Total 259 448 (189) (42.2) Income before income taxes 1,996 1,555 441 28.4 Provision for taxes on income 705 555 150 27.0 ---------- ---------- -------- Net income $ 1,291 $ 1,000 $ 291 29.1 ========== ========== ======== Weighted average number of shares outstanding: Basic 2,880,409 2,815,724 Diluted 2,891,096 2,824,204 Earnings per share: Basic $0.45 $0.36 Diluted $0.45 $0.35 Cash dividends per share: $0.17 $0.17 See accompanying notes to financial statements. Pulaski Furniture Corporation Consolidated Statements of Cash Flows Three 4-week periods ended January 24, January 25, 1999 1998 ------------ ------------ OPERATING ACTIVITIES Net income $ 1,291,326 $ 1,000,107 Adjustments to reconcile net income to net cash provided by operating activities: Provision for depreciation/amortization 1,101,201 1,152,624 Provision for deferred income taxes (22,500) (22,500) Provision for deferred compensation (82,864) (52,582) Changes in operating assets and liabilities: Decrease in trade receivables 6,375,613 11,760,138 Increase (decrease) in inventories (399,681) 2,008,859 Decrease in prepaid expenses 340,861 412,946 Decrease in recoverable income taxes 0 1,473,577 Decrease in accounts payable and accrued expenses (2,816,193) (2,937,763) Increase (decrease) in federal and state income taxes payable (91,487) 102,361 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 5,696,276 14,897,767 INVESTING ACTIVITIES Purchase of property, plant and equipment (669,820) (520,020) Increase in cash surrender value (3,470) 0 ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (673,290) (520,020) FINANCING ACTIVITIES Proceeds from issuance of common stock 635,701 514,930 Repurchase of common stock 0 (96,250) Payment of dividends (492,081) (477,925) Decrease in notes payable (6,000,000) (10,000,000) Payments on long-term debt (436,204) (435,979) ------------ ------------ NET CASH USED IN FINANCING ACTIVITIES (6,292,584) (10,495,224) ------------ ------------ Increase (decrease) in cash and cash equivalents (1,269,598) 3,882,523 Cash and cash equivalents at beginning of period 1,452,166 2,702,339 ------------ ------------ Cash and cash equivalents at end of period $ 182,568 $ 6,584,862 ============ ============ See accompanying notes to financial statements. Pulaski Furniture Corporation Notes to Consolidated Condensed Financial Statements See notes to financial statements included in the Corporation's 10-K for the year ended November 1, 1998, for information concerning accounting policies, long-term debt, stock options and other financial matters. There have been no material changes in financial matters since November 1, 1998. The Corporation has signed a Letter of Intent to purchase Dawson Heritage Furniture Co., Inc., located in Southwest Missouri. The Corporation intends to borrow approximately $17,000,000 in the next fiscal quarter to finance the cost of the acquisition and the Corporation expects to service the new debt with the earnings from operations of the acquired facility. No other borrowings are contemplated by the Corporation at this time. The Corporation has entered into a short-term agreement with Dawson Heritage Furniture Company, Inc. which compensates the Corporation for marketing related services. Accordingly, for the quarter ended January 24, 1999, the Corporation has recognized miscellaneous other income in the amount of $242,000 under the terms of this agreement. In the opinion of the Corporation, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the financial position as of January 24, 1999 and November 1, 1998, and the results of operations and cash flows for the three 4-week periods ended January 24, 1999 and January 25, 1998. The results of operations for the three and nine 4-week periods ended January 24, 1999 and January 25, 1998 are not necessarily indicative of the results to be expected for the full year. See Management's Discussion and Analysis for a discussion on the cyclical nature of the Corporation's operating results. The following table sets forth the computation of earnings per share: Three 4-week periods ended January 24, January 25, 1999 1998 ------------ ------------ Numerator: Net income $ 1,291,326 $ 1,000,107 Denominator: Denominator for basic earnings per share - weighted average shares 2,880,409 2,815,724 Effect of dilutive securities: Stock options 7,183 4,800 Stock purchase plan 3,504 3,680 Denominator for diluted earnings per share - adjusted weighted average shares 2,891,096 2,824,204 Basic earnings per share $0.45 $0.36 Diluted earnings per share $0.45 $0.35 Pulaski Furniture Corporation Management's Discussion and Analysis of the Consolidated Condensed Statements of Income Comparison of First Quarter 1999 to First Quarter 1998 (See page 3 for dollar and percent changes.) - ----------------------------------------------------------------------------- A robust retail environment in the first quarter of 1999 resulted in an increase in orders throughout the period and was the primary reason for the sales increase compared with the 1998 quarter. The increase in net income was due primarily to the sales increase. As discussed in Notes to the financial statements, the Corporation recognized miscellaneous other income in the first quarter of 1999 for marketing related services. Seasonality - ----------- Historically, the quarterly results of the Corporation have reflected a cyc- lical pattern, as indicated below: QTR 1 QTR 2 QTR 3 QTR 4 4-year average of net sales volume 22.30% 22.88% 18.37% 36.46% This pattern reveals that the Corporation's first quarter, ending in January, has accounted for approximately 22% of net sales volume. The second quarter, ending in April, is roughly equivalent in sales volume to the first quarter, while the third quarter, ending in July, shows a drop in volume to 18%. The remainder, or 36% of sales volume, is recorded in the fourth quarter, which comprises four 4-week reporting periods and which also includes the strongest selling season for certain product lines. However, due to a number of risks and uncertainties beyond the Corporation's control, including economic condi- tions and consumer confidence, historical trends should not be viewed as an accurate predictor of future results. The Corporation believes the results of the third quarter ended January 24, 1999, are reasonable in relation to the historical pattern, considering the retail environment for household furniture. Year 2000 - --------- The Corporation realizes that the year 2000 presents many challenges for information systems and the overall exchange of business related information. To address this event, management has embarked on a strategic plan to ensure that the needs of the Year 2000 are met and that the costs are understood. Based on the assessments made pursuant to the strategic plan, the Corporation determined that it would be required to modify or replace significant portions of its software so that its computer systems would properly reflect dates beyond December 31, 1999. The Corporation realizes that if such modifications were not made, or in the event they are not completed in a timely manner, the Year 2000 issue could have a material impact on the operations of the Corp- oration. The Corporation's Year 2000 remediation efforts progressed through the selection phase into the testing phase in the beginning of the fourth fiscal quarter of 1998, where both internal and external resources were employed to modify and test new enterprise software. These efforts culminated in the recent installation, as of the 1998 fiscal year end, of the necessary equipment and software to assure that the computer systems are Year 2000 compliant. Additionally, the Corporation has undertaken to identify critical areas outside of the information systems were the Year 2000 issue could have an adverse impact on the Corporation. Pulaski Furniture Corporation Management's Discussion and Analysis of the Consolidated Condensed Statements of Income (cont.) Year 2000 (continued) - --------------------- The principal cost associated with the Year 2000 issue has been the purchase of compliant enterprise software and the requisite hardware over which it operates. Additional support applications have been purchased or developed in-house as needed, and the total software costs to date have not exceeded, nor are expected to exceed, $700,000. Compliant hardware was put into service over the past three years in conjunction with the Corporation's migration to a client-server network, which was a planned upgrade unrelated to the Year 2000 issue. Additional hardware has been purchased in 1998 relating specif- ically to the Year 2000 enterprise software at a cost not exceeding $100,000. No further hardware requirements have been identified with the Year 2000 issue. User education and training costs to date have amounted to less than $100,000 and are not expected to exceed that amount in total. At the present time, the Corporation believes there are no other material costs which relate to the Year 2000 issue. Funding for the Year 2000 project has been provided by cash generated from operations. The project expenditures are being cap- italized or expensed as appropriate, and are not expected to have a material effect on the results of operations. The Corporation cannot fully assess the risks of the Year 2000 problem due to numerous uncertainties surrounding the issue. Management believes that the primary risks are external to the Corporation and relate solely to the Year 2000 readiness of the Corporation's business partners. Formal communications with all significant suppliers, customers and financial service organizations of the Corporation is currently underway to determine the extent to which the Corporation might be made vulnerable by those third parties' failure to remediate their own Year 2000 issue. The Corporation has determined that it has no exposure to contingencies related to the Year 2000 issue for products already sold. The failure to correct a material Year 2000 problem could result in an inter- ruption, or failure of certain normal business activities or operations, which could materially and adversely affect the Corporation's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-party suppliers and customers, the Corporation is unable at this time whether the consequences of the Year 2000 problems will have a material impact on the Corporation's results of operations, liquidity or financial condition. This discussion of the Corporation's readiness for the Year 2000, including statements regarding anticipated completion dates for various phases of the Corporation's Year 2000 strategic plan, estimated costs for the Year 2000 readiness, the determination of likely worst case scenarios, actions to be taken in the event of such worst case scenarios and the impact on the Corporation of any delays or problems in the implementation of Year 2000 initiatives by the Corporation and/or any suppliers, service providers, and customers involve forward looking information which is subject to known and unknown risks, uncertainties, and contingencies which could cause actual results, performance or achievements to differ materially from those which are anticipated. Such risks, uncertainties and contingencies, many of which are beyond the control of the Corporation, include but are not limited to, government regulations and/or legislative initiative, variation in costs or expenses relating to the implementation of the Year 2000 initiatives, changes Pulaski Furniture Corporation Management's Discussion and Analysis of the Consolidated Condensed Statements of Income (cont.) in the scope of improvements to Year 2000 initiatives and delays or problems in the implementation of Year 2000 initiatives by the Corporation and/or any public or private sector suppliers and service providers and customers. Capital Resources and Liquidity - -------------------------------- Working capital provided by operations was $2,287,000 for the quarter ended January 24, 1999 compared to $2,100,000 for the quarter ended January 25, 1998. Net working capital increased by $1,321,000 during the first quarter of 1999 compared with an increase of $1,063,000 in the first quarter of 1998. During the first quarter of 1999, the Corporation's average amount of outstanding indebtedness for borrowed money was $35,751,093. The weighted average rate of interest on such indebtedness was approximately 5.71% per annum. Cautionary Factors - ------------------ Some of the information presented in this report, constitutes forward looking comments within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Corporation believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors which could cause actual results to differ from expectations include, without limitation, the timing of orders received from customers, the gain or loss of significant customers, comp- etition from other manufacturers, changes in the demand for the Corporation's products, increases in the cost of the product, changes in the market in general, fluctuations in currencies, and possible problems incurred in the Year 2000 strategic plan. Pulaski Furniture Corporation Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders On February 12, 1999, the Corporation held its annual meeting of share- holders, at which the following business was transacted: Bernard C. Wampler, Harry J.G. van Beek, and Harry H. Warner were elected to serve as Class III directors of the Corporation, each for a term of three years. The votes for the election of the directors were as follows: FOR AGAINST ABSTAIN ---------- ---------- ---------- Mr. Wampler 2,735,197 0 11,546 Mr. Van Beek 2,735,197 0 11,546 Mr. Warner 2,735,197 0 11,546 The terms of the following directors continued beyond the 1999 annual meeting: Hugh V. White, Jr., O. Kenton McCartney, III, Robert C. Greening, Jr., and John G. Wampler. Item 5. Other Information All other information called for by other items of Part II of the Form 10-Q is either inapplicable or the response to the items would be negative. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule* (b) Reports on Form 8-K A Form 8-K, dated November 4, 1998 and filed with the Securities and Exchange Commission on November 6, 1998, containing in Item 5 thereof the announcement of a signed letter of intent to purchase substantially all of the assets of Dawson Heritage Furniture Company, Inc. * Filed herewith. Pulaski Furniture Corporation Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PULASKI FURNITURE CORPORATION Date: February 25, 1999 /s/ John G. Wampler --------------------------------------- John G. Wampler President and Chief Executive Officer (Principal Accounting Officer) /s/ Carl W. Hoffman --------------------------------------- Carl W. Hoffman Treasurer Pulaski Furniture Corporation Exhibit Index Exhibit Number Description 27 Financial Data Schedule EX-27 2
5 1000 3-MOS OCT-31-1999 JAN-24-1999 182 0 32,036 0 39,389 72,756 95418 60700 109538 19930 23330 0 0 6964 53013 109538 40942 40942 32997 38687 0 105 471 1996 705 1291 0 0 0 1291 0.45 0.45
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