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| CFI > SEC Filings for CFI > Form 10-Q on 7-Dec-2012 | All Recent SEC Filings |
7-Dec-2012
Quarterly Report
Results of Operations
The following analysis of financial condition and results of operations should be read in conjunction with the Financial Statements and Notes and other exhibits included elsewhere in this report.
Overview
Our fiscal year is the 52 or 53 week period ending on the Sunday closest to April 30. The six months ended October 28, 2012, and October 30, 2011, represent 26 week periods, respectively. Our operations are classified into two business segments: mattress fabrics and upholstery fabrics. The mattress fabrics segment manufactures, sources and sells fabrics to bedding manufacturers. The upholstery fabrics segment sources, manufactures and sells fabrics primarily to residential and commercial (contract) furniture manufacturers.
We evaluate the operating performance of our segments based upon income (loss) from operations before certain unallocated corporate expenses and other non-recurring items. Cost of sales in both segments include costs to manufacture or source our products, including costs such as raw material and finished goods purchases, direct and indirect labor, overhead and incoming freight charges. Unallocated corporate expenses represent primarily compensation and benefits for certain executive officers and all costs related to being a public company.
We reported net sales of $65.6 million for the second quarter of fiscal 2013, an increase of 13% compared with $58.0 million for the second quarter of fiscal 2012. Net sales were $134.7 million for the first six months of fiscal 2013, an increase of 14% compared with $118.3 million for the first six months of fiscal 2012. The higher sales primarily reflect improved demand and favorable customer response to our innovative designs and our diverse product line. Our global manufacturing platform has enhanced our ability to develop new products and meet the changing style demands of our customers.
We reported income before income taxes of $4.5 million in the second quarter of fiscal 2013, an increase of 58%, compared with $2.9 million for the second quarter of fiscal 2012. We reported income before income taxes of $9.9 million for the first six months of fiscal 2013, an increase of 70% compared with $5.8 million for the first six months of fiscal 2012. These results primarily reflect the increase in net sales noted above and lower raw material costs in both of our business segments as compared to prior periods. The effects of these factors were partially offset by higher selling, general, and administrative expenses (SG&A). SG&A primarily increased due to the higher incentive compensation accruals reflecting stronger financial results in relation to pre-established performance targets.
We reported net income of $8.3 million, or $0.67 per diluted share, in the second quarter of fiscal 2013, compared with net income of $6.3 million, or $0.49 per diluted share, in the second quarter of fiscal 2012. Net income for the second quarter of fiscal 2013 included an income tax benefit of $3.7 million, compared with an income tax benefit of $3.4 million, for the second quarter of fiscal 2012. We reported net income of $11.8 million, or $0.94 per diluted share, for the first six months of fiscal 2013, compared with net income of $8.1 million, or $0.62 per diluted share, for the first six months of fiscal 2012. Net income for the first six months of fiscal 2013 included an income tax benefit of $1.9 million, and net income for the first six months of fiscal 2012 included an income tax benefit of $2.2 million. The income tax benefits of $3.7 million and $1.9 million for the second quarter and the first six months of fiscal 2013 include a $12.2 million income tax benefit during the second quarter to reverse primarily all of the valuation allowance against our U.S. net deferred tax assets, offset by an income tax charge of $6.6 million during the second quarter to record the U.S. income tax effects of the undistributed earnings from our foreign subsidiaries located in Canada and China.
At October 28, 2012, our cash and cash equivalents and short-term investments totaled $28.7 million and exceeded our total debt (current maturities of long-term debt, long-term debt, and line of credit) of $7.7 million. Our cash and cash equivalents and short-term investments increased $1.6 million from the first quarter of fiscal 2013, after spending $4.6 million for common stock repurchases, a $2.6 million principal and interest payment on our unsecured term notes, and a $366,000 dividend payment.
On June 13, 2012, we announced that our board of directors approved authorization for us to acquire up to $5.0 million of our common stock. This action replaced prior authorizations to acquire up to $7.0 million of our common stock in fiscal 2012, of which $5.4 million had been used during fiscal 2012. During the six months ended October 28, 2012, we purchased 502,595 shares of our common stock at a cost of $5.0 million and, as a result, we reached the authorized amount of $5.0 million. Since our common stock repurchase program was implemented in fiscal 2012, we have repurchased 1.1 million shares of common stock at a cost of $10.4 million.
On August 29, 2012, we announced that our board of directors approved a new authorization for us to acquire up to $2.0 million of our common stock. Under the common stock repurchase program, shares may be purchased from time to time in open market transactions, block trades, through plans established under the Securities Exchange Act Rule 10b5-1, or otherwise. The amount of shares purchased and the timing of such purchases will be based on working capital requirements, market and general business conditions, and other factors including alternative investment opportunities.
On June 13, 2012 we announced that our board of directors approved the payment of a cash dividend of $0.03 per share in the first quarter of fiscal 2013. In addition, we paid a cash dividend of $0.03 per share in the second quarter of fiscal 2013. These cash dividend payments in the first and second quarters of fiscal 2013 totaled $747,000.
On November 27, 2012, we announced that our board of directors approved the payment of a special cash dividend of $0.50 per share prior to the end of calendar 2012. In addition, the board approved the acceleration of payment of our scheduled January 2013 quarterly cash dividend of $0.03 per share. Both of these payments will be made on December 28, 2012, to shareholders of record as of December 19, 2012.
Future dividend payments are subject to board approval and may be adjusted at the board's discretion as business needs or market conditions change.
Segment Analysis
The following tables set forth the company's statement of operations by segment for the three and six months ended October 28, 2012, and October 30, 2011.
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