Hooker Furniture Reports Improved 3rd Quarter Operating Results

Furniture World News

Hooker Furniture reported net sales of $83.0 million for its third quarter ended August 31, 2006, a 0.7% increase from net sales of $82.4 million in the same quarter a year ago. Third quarter net income of $1.2 million, or $0.10 per share, increased 82.2% from $664,000, or $0.06 per share, in the prior year period. “We’re pleased to have achieved a modest sales increase given the challenging business environment in our industry, as well as improved net income despite some larger than typical selling and administrative expenses incurred during the quarter,” said Paul B. Toms Jr., chairman and chief executive officer. The Company’s gross profit margin increased to 28.3% of net sales in the 2006 third quarter compared to 25.8% in the 2005 third quarter, principally due to the shipment of a greater proportion of higher margin imported wood, metal and upholstered products. Third quarter 2006 operating income improved 70.1% to $2.0 million from $1.2 million in the prior year period. As a percentage of net sales, operating income increased to 2.5% in the current quarter, compared to 1.5% for the 2005 third quarter principally as a result of higher gross profit margins and lower restructuring charges, partially offset by higher selling and administrative expenses. Restructuring charges, which represented 3.4% of net sales in the 2006 third quarter and 5.7% of net sales in the same 2005 period, reduced operating income margin in both quarters. Selling and administrative expenses increased by 21.0%, or $3.2 million, to $18.6 million, compared to $15.4 million in the 2005 third quarter. The year-over-year increase in selling and administrative expenses is principally attributed to: •Higher warehousing and distribution costs to support increased imported furniture demand and supply chain initiatives; •Compensation expense of $1.4 million, or 1.7% of third quarter 2006 net sales, related to the previously announced early retirement of Doug Williams, president and chief operating officer; •Higher bad debt expense of $480,000, or 0.6% of third quarter 2006 net sales, related to a potential default by a customer. The Company recorded restructuring and asset impairment charges of $2.8 million ($1.8 million after tax, or $0.15 per share) during the 2006 third quarter principally related to the August 2006 closing of the Roanoke, Va. plant. In the same 2005 three-month period, the Company recorded aggregate restructuring and asset impairment charges of $4.7 million ($2.9 million after tax, or $0.25 per share) principally related to the October 2005 closing of the Pleasant Garden, N.C. facility. Announcements: On July 26, 2006, the Company entered into a definitive agreement for the sale of the Roanoke property and plant and substantially all of the facility’s machinery and equipment for an aggregate purchase price of $2.2 million, net of selling costs. The sale of the facility is expected to close by the end of the 2006 fourth quarter, subject to customary closing conditions, including satisfactory completion of the buyer’s due diligence. In a separate announcement, the Company’s Board of Directors today elected Chairman and CEO Paul B. Toms Jr. to the additional post of President effective on November 1, 2006, following Mr. Williams’ retirement. Also, the Board of Directors approved a quarterly cash dividend of $0.08 per share. The dividend will be payable on November 30, 2006, to shareholders of record on November 15, 2006. Business Outlook “While business has improved marginally since August, we are up against a strong fourth quarter last year,” Toms said. “Several factors, including a slowdown in housing and economic activity, continue to cause consumers to be cautious. On the positive side, energy prices are down, interest rates are stable, consumer confidence is improving and the stock market is performing well. During the near term, we are in a strong inventory position to capitalize immediately on any upturn. For the longer term, we would expect business to improve as we move into fall and winter.” Conference Call Details Hooker Furniture will present its third quarter 2006 earnings via teleconference and live internet web cast on Thursday morning October 5, 2006, at 9:00 AM Eastern Standard Time. The dial in number for domestic callers is (800) 479-1628 and (719) 457-2729 for international callers. The call will also be simultaneously web cast and archived for replay after the call on the Company’s web site at www.hookerfurniture.com in the Investors Information section. The call will be available for replay until February 7, 2007. Ranked as the nation's sixth largest publicly traded furniture producer based on 2005 shipments to U.S. retailers, Hooker Furniture is an 82-year old importer and manufacturer of residential wood, metal and upholstered furniture. The Company's principal customers are retailers of residential home furnishings who are broadly dispersed throughout North America. Major furniture categories include home entertainment and wall units, home office, casual and formal dining, bedroom, bath furnishings, accent, occasional, game table and motion and stationary leather and fabric upholstered furniture. With over 1,000 employees, the Company operates three manufacturing plants, two supply plants, six distribution centers and warehouses, four showrooms and a corporate office in Virginia and North Carolina. The Company also utilizes a distribution center and two warehouses in China. The Company's stock is listed on the NASDAQ Capital Market under the symbol HOFT, and closed at $14.33 per share on October 4, 2006. Please visit our websites at www.hookerfurniture.com and www.bradington-young.com.