'We will continue to improve our operating results' – HKFI President
Hancock Fabrics, Inc. filed its 2008 Form 10-K and reported sales and earnings for the fiscal year ended January 31, 2009 (fiscal 2008).
Financial highlights for the year include:
- Net sales for fiscal 2008 were $276.4 million compared with $276.3 million in fiscal 2007, and comparable sales increased 2.1% compared with a 0.5% increase in the previous year.
- Operating income increased to $3.1 million, an increase of $7.1 million from fiscal 2007.
- Net loss narrowed to $12.4 million, or $0.65 per share, in 2008 from $33.3 million, or $1.76 per share in 2007. The $12.4 million loss for the year included $8.2 million of reorganization expenses and $2.2 million of interest expense related to bankruptcy claims.
- EBITDA for the year was $9.7 million, a $6.6 million increase over the 2007 result of $3.1 million.
- Inventories reduced by over $10.1 million, the majority of this reduction occurring in continuing stores.
- Cash totaling $24.4 million was generated from operations before reorganization activities including an $8.1 million federal tax refund from previous operating losses.
- Since emergence from bankruptcy through fiscal year end, the Company has reduced gross debt including bankruptcy liabilities by approximately $25.8 million.
- At fiscal year end, the Company had outstanding borrowings under its Revolver of $32.6 million and outstanding letters of credit of $6.5 million. The Note balance was $20.9 million and the warrant discount on the Notes was $10.5 million. Additional amounts available to borrow at that time were $35.0 million and this borrowing capacity has been maintained into fiscal 2009.
Jane Aggers, President and Chief Executive Officer, noted, "We have made significant progress during 2008 in our effort to position Hancock for the future. The results of these efforts are demonstrated by our positive sales growth, significant increase in EBITDA, and considerable reduction in borrowings since we emerged - all of which have continued in 2009. We are optimistic that we can continue to improve our operating results, despite the challenging economic environment."
Gross margin for fiscal 2008 of 43.3% was a 70 basis point improvement over the 42.6% of the prior year. This increase reflects a 160 basis point reduction in merchandise cost offset by reduced supply chain leverage as store count and inventory levels have diminished from prior years.
Selling, general and administrative expenses for the year decreased to $112.1 million (40.6% of sales) from $117.8 million (42.6% of sales) in the prior year. This reduction in expense was driven primarily by a $6.2 million curtailment gain provided by the changes made to our retirement programs in 2008.
In fiscal 2008, net cash inflows provided by operating activities before reorganization activities decreased by $27.6 million compared to fiscal 2007. This decrease was mainly the result of the significant inventory liquidations in 2007. Excluding the impact of inventory reductions, net cash provided by operating activities before reorganization activities increased by $16.8 million principally due to a reduced net loss, increased vendor payable support and a significant income tax refund.