After market close yesterday, Motley Fool Hidden Gems selection Hooker Furniture (NASDAQ:HOFT) quietly slipped out yet another disappointing earnings release. The company hadn't announced when to expect it, and Hooker itself seemed a bit embarrassed. Read through the release, and it will take you a good three paragraphs to reach the point where, with palpable reluctance, Hooker admitted that it has again (1) missed earnings estimates and (2) suffered a year-over-year quarterly earnings decline.

In Q3 2004, Hooker recorded $0.27 per share in net profits. In Q3 2005, a major restructuring charge, necessitated by the company's closing of yet another factory, dragged Hooker's earnings down to just $0.06 per diluted share. Worse, from Wall Street's point of view, the company committed the unpardonable sin of missing earnings. Back out the restructuring charge, and Hooker would still have earned only $0.31 per diluted share, a penny short of analysts' predictions. All of this news has this Hooker shareholder wondering: Will this ignominy ever end? When will I be able to admit to my friends and loved ones that I invested my hard-earned capital in Hooker?

Soon, I hope. And here's why I have hope. For all the hemming and hawing that Hooker's investor-relations department put into admitting its earnings numbers, the press release was not entirely devoid of good news. For one thing, the company made more sales than Wall Street analysts had expected. Not a lot more, but with little else to cling to, the fact that Hooker sold $82.4 million worth of goods compared with the $80 million that Wall Street had predicted will have to serve as a straw for the grasping.

What's more, those $82.4 million in sales represented just a 2.3% decline year over year, a tenfold improvement over what we saw two months ago. Perhaps, just perhaps, this is the beginning of the end of Hooker's sales decline. In the parlance of the chartists, Q3 may have been Hooker's "inflection point."

Finally, and most importantly, the company finally appears to have its supply chain under control. Inventories increased 4% (another tenfold improvement over last quarter) and accounts receivable 3%. Mind you, when sales fall, no increase in either of these areas is desirable. But we take good news where we find it. And these two facts went a long way toward creating the most important result: Hooker is generating cash again. The first nine months of 2004 saw Hooker experience net free cash outflows of $1.6 million. So far this year, the company has generated a tidy $5 million in free cash flow. It's not a lot, but at least it's positive.

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Fool contributor Rich Smith owns shares of Hooker Furniture. The Motley Fool has a disclosure policy.