-----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, C4eh/A6cmBfxcvlO9g09iHaf91WSVMra7NkgOJG7QeWtEwes6SKU2pc55sNF5xmh 11KbOdFVEG7o9eC5VQrZ7g== 0000797465-97-000011.txt : 19970715 0000797465-97-000011.hdr.sgml : 19970715 ACCESSION NUMBER: 0000797465-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970714 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANLEY FURNITURE CO INC/ CENTRAL INDEX KEY: 0000797465 STANDARD INDUSTRIAL CLASSIFICATION: WOOD HOUSEHOLD FURNITURE, (NO UPHOLSTERED) [2511] IRS NUMBER: 541272589 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14938 FILM NUMBER: 97640234 BUSINESS ADDRESS: STREET 1: ROUTE 57 CITY: STANLEYTOWN STATE: VA ZIP: 24168 BUSINESS PHONE: 7036272000 MAIL ADDRESS: STREET 1: ROUTE 57 CITY: STANLEYTOWN STATE: VA ZIP: 24168 FORMER COMPANY: FORMER CONFORMED NAME: STANLEY INTERIORS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 29, 1997 or 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 0-14938. STANLEY FURNITURE COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 54-1272589 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1641 Fairystone Park Highway, Stanleytown, Virginia 24168 (Address of principal executive offices, Zip Code) (540) 627-2000 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark 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 July 11, 1997. Class Number Common Stock, par value $.02 per share 3,837,444 Shares PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STANLEY FURNITURE COMPANY, INC. BALANCE SHEETS (In thousands, except share data) (Unaudited) June 29, December 31, 1997 1996 ASSETS Current assets: Cash............................................. $ 8,330 $ 8,126 Accounts receivable, less allowances of $2,131 and $1,945 respectively.............. 23,727 23,096 Inventories: Finished goods................................. 26,012 20,953 Work-in-process................................ 6,487 6,142 Raw materials.................................. 15,465 13,144 47,964 40,239 Prepaid expenses and other current assets........ 824 486 Deferred income taxes............................ 1,718 1,886 Total current assets......................... 82,563 73,833 Property, plant and equipment, at cost............. 81,176 80,737 Less accumulated depreciation.................... 30,337 28,024 50,839 52,713 Goodwill, less accumulated amortization of $2,856 and $2,688....................................... 10,584 10,752 Other assets....................................... 3,815 4,212 $147,801 $141,510 LIABILITIES Current liabilities: Current maturities of long-term debt............. $ 5,811 $ 725 Accounts payable................................. 16,150 14,630 Accrued salaries, wages and benefits............. 9,447 9,584 Other accrued expenses........................... 2,493 2,669 Total current liabilities...................... 33,901 27,608 Long-term debt, exclusive of current maturities.... 33,539 38,625 Deferred income taxes.............................. 11,116 11,673 Other long-term liabilities........................ 1,987 1,987 Total liabilities................................ 80,543 79,893 STOCKHOLDERS' EQUITY Common stock, $.02 par value, 10,000,000 shares authorized, 4,587,444 and 4,579,042 shares issued and outstanding........................... 91 91 Capital in excess of par value..................... 62,555 62,442 Retained earnings (deficit)........................ 4,612 (916) Total stockholders' equity....................... 67,258 61,617 $147,801 $141,510
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) Three Months Six Months Ended Ended June 29, June 30, June 29, June 30, 1997 1996 1997 1996 Net sales.......................... $49,469 $47,282 $99,100 $95,472 Cost of sales...................... 36,981 36,195 74,150 73,617 Gross profit................... 12,488 11,087 24,950 21,855 Selling, general and administrative expenses......................... 7,199 7,308 14,327 14,354 Operating income............... 5,289 3,779 10,623 7,501 Other expense, net................. 65 145 134 393 Interest expense................... 744 838 1,500 1,717 Income before income taxes....... 4,480 2,796 8,989 5,391 Income taxes....................... 1,724 1,092 3,461 2,104 Net income......................... $ 2,756 $ 1,704 $ 5,528 $ 3,287 Net income per share: Primary.......................... $ .55 $ .35 $ 1.11 $ .69 Fully Diluted.................... $ .55 $ .35 $ 1.10 $ .68 Weighted average number of shares: Primary.......................... 4,971 4,842 4,993 4,775 Fully Diluted.................... 5,021 4,842 5,019 4,801
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended June 29, June 30, 1997 1996 Cash flows from operating activities: Cash received from customers......................... $ 98,443 $94,276 Cash paid to suppliers and employees................. (92,047) (86,331) Interest paid........................................ (968) (1,662) Income taxes paid, net............................... (4,520) (2,343) Net cash provided by operating activities.......... 908 3,940 Cash flows from investing activities: Capital expenditures................................. (696) (2,305) Purchase of other assets............................. (88) (25) Proceeds from sale of assets......................... - 9 Net cash used by investing activities.............. (784) (2,321) Cash flows from financing activities: Repayment of revolving credit facility............... (914) Proceeds from insurance policy loans................. 430 Proceeds from exercised stock options................ 80 Net cash provided (used) by financing activities... 80 (484) Net increase in cash................................. 204 1,135 Cash at beginning of year............................ 8,126 298 Cash at end of quarter............................... $ 8,330 $ 1,433 Reconciliation of net income to net cash provided (used) by operating activities: Net income........................................ $ 5,528 $ 3,287 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................. 2,704 2,559 Loss on sale of assets........................ 75 268 Changes in assets and liabilities: Accounts receivable......................... (631) (977) Inventories................................. (7,725) (2,469) Prepaid expenses and other current assets... (88) (648) Accounts payable............................ 1,520 85 Accrued salaries, wages and benefits........ (137) 1,499 Other accrued expenses...................... (143) 405 Deferred income taxes....................... (389) 275 Other assets.................................. 194 (166) Other long-term liabilities................... (178) Net cash provided by operating activities......... $ 908 $ 3,940
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (In thousands, except share and per share data) 1. Preparation of Interim Financial Statements The financial statements of Stanley Furniture Company, Inc. (referred to as "Stanley" or the "Company") have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with generally accepted accounting principles have been either condensed or omitted pursuant to SEC rules and regulations. However, management believes that the disclosures made are adequate for a fair presentation of results of operations and financial position. It is suggested that these financial statements be read in conjunction with the financial statements and accompanying notes included in Stanley's latest annual report on Form 10-K. 2. Property, Plant and Equipment (Unaudited) June 29, December 31, 1997 1996 Land and buildings............. $33,802 $33,694 Machinery and equipment........ 45,135 45,120 Office fixtures and equipment.. 1,817 1,794 Construction in progress....... 422 129 $81,176 $80,737 3. Long-Term Debt (Unaudited) June 29, December 31, 1997 1996 7.28% senior notes due March 15, 2004..................... $30,000 $30,000 7.57% senior note due June 30, 2005......................... 9,350 9,350 Total 39,350 39,350 Less current maturities........ 5,811 725 $33,539 $38,625
4. Subsequent Event On June 30, 1997, the Company purchased 750,000 shares of its Common Stock for an aggregate purchase price of $15 million which was funded from available cash and borrowings under its revolving credit facility. The shares were purchased from the ML-Lee Acquisition Fund, L.P. and its affiliates. The following pro forma information assumes the repurchase of Common Stock is financed entirely by borrowings under the revolving credit facility at an assumed interest rate of 7.25%. The pro forma effects on the Company's financial position assuming the shares were repurchased on June 29, 1997, is as follows: Long-term debt including current maturities..... $54,350 Stockholders' equity............................ $52,258 Assuming the shares were repurchased on January 2, 1997, the pro forma fully diluted earnings per share would have been $0.61 and $1.22, for the three and six month periods ended June 29, 1997, respectively. 5. New Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share" effective for financial statements issued for periods ending after December 15, 1997. The new standard specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock. Since early adoption of the standard is prohibited, the following pro forma earnings per share amounts computed using the new standard are presented below: Three Months Ended Six Months Ended June 29, June 30, June 29, June 30, 1997 1996 1997 1996 Basic earnings per share.............. $.60 $.36 $1.21 $.70 Diluted earnings per share.............. $.55 $.35 $1.11 $.69
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales increased $2.2 million, or 4.6%, for the three month period ended June 29, 1997 from the comparable 1996 period. For the six month period, net sales increased $3.6 million, or 3.8%, from the comparable 1996 period. The increase was due primarily to higher average selling prices and to a lesser extent higher unit volume. Gross profit margin for the three and six month periods of 1997 increased to 25.2%, from 23.4% and 22.9% for the comparable 1996 periods, respectively. The higher gross profit margin was due primarily to lower raw material costs as a percentage of sales and improved operating efficiencies. However, in the second quarter of 1997 the Company experienced rising lumber costs which were offset by lower sales discounts and improved operating efficiencies as compared to the first quarter of 1997. Selling, general and administrative expenses for the three and six month periods of 1997 as a percentage of net sales decreased to 14.6% and 14.5%, respectively, from 15.5% and 15.0% for the comparable 1996 periods. The lower percentages in 1997 were due principally to higher net sales and reduced selling expenses. As a result of the above, operating income for the three and six month periods of 1997 increased to $5.3 million, or 10.7% of net sales, and $10.6 million, or 10.7% of net sales, respectively, from $3.8 million, or 8.0% of net sales, and $7.5 million, or 7.9% of net sales, for the comparable 1996 periods. Interest expense for the 1997 three and six month periods decreased due primarily to lower average debt levels. The Company's effective income tax rate was 38.5% for both the 1997 and 1996 periods. Financial Condition, Liquidity and Capital Resources At June 29, 1997, long-term debt including current maturities was $39.4 million. Debt service requirements for the next five years are $725,000 in 1997, $5.1 million in both 1998 and 1999, $5.2 million in 2000, and $5.3 million in 2001. As of June 29, 1997, approximately $23.8 million of additional borrowings were available under the revolving credit facility. The Company believes that its financial resources are adequate to support its capital needs and debt service requirements. The Company generated cash from operations of $908,000 in the 1997 period compared to cash generated from operations of $3.9 million during the 1996 period. The cash generated in 1997 was used to fund capital expenditures. The cash generated in 1996 was used to fund capital expenditures and reduce borrowings under the revolving credit facility. Net cash used by investing activities was $784,000 in the 1997 period compared to $2.3 million in the 1996 period. Expenditures in each year were primarily for plant and equipment and other assets in the normal course of business. Net cash generated by financing activities was $80,000 in the 1997 period compared to net cash used by financing activities of $484,000 in the 1996 period. In the 1996 period, cash generated from operations reduced borrowings under the revolving credit facility. Subsequent Event On June 30, 1997, the Company purchased 750,000 shares of its Common Stock for an aggregate purchase price of $15 million which was funded from available cash and borrowings under its revolving credit facility. The shares were purchased from the ML-Lee Acquisition Fund, L.P. and its affiliates. The following pro forma information assumes the repurchase of Common Stock is financed entirely by borrowings under the revolving credit facility at an assumed interest rate of 7.25%. The pro forma effects on the Company's financial position assuming the shares were repurchased on June 29, 1997, is as follows: Long-term debt including current maturities..... $54,350 Stockholders' equity............................ $52,258 Assuming the shares were repurchased on January 2, 1997, the pro forma fully diluted earnings per share would have been $0.61 and $1.22, for the three and six month periods ended June 29, 1997, respectively. New Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share" effective for financial statements issued for periods ending after December 15, 1997. The new standard specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock. Since early adoption of the standard is prohibited, the following pro forma earnings per share amounts computed using the new standard are presented below: Three Months Ended Six Months Ended June 29, June 30, June 29, June 30, 1997 1996 1997 1996 Basic earnings per share.............. $.60 $.36 $1.21 $.70 Diluted earnings per share.............. $.55 $.35 $1.11 $.69
PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of the Company's shareholders was held April 24, 1997. (c)(i) The shareholders of the Company elected three directors for staggered terms expiring at the Annual Meeting of Shareholders to be held in 1999 and 2000. The elections were approved by the following vote: Elected for Three-Year Terms Ending 2000 For Withheld David V. Harkins 3,971,596 3,260 Albert L. Prillaman 3,971,500 3,356 Elected for Two-Year Term Ending 1999 For Withheld T. Scott McIlhenny, Jr. 3,971,508 3,348 (ii) The shareholders approved the ratification of the selection of Coopers & Lybrand L.L.P. as the independent public accountants for the Company for the current fiscal year. The ratification was approved by the following vote: FOR 3,971,096 AGAINST 657 ABSTAIN 3,103 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 4.1 Letter Amendment, dated June 16, 1997, to Note Agreements, dated February 15, 1994 and June 29, 1995, between the Registrant and The Prudential Insurance Company of America (incorporated by reference to Exhibit 4.1 to the Registrant's Statement on Form 8-K filed July 9, 1997). Exhibit 10.1 Stock Purchase Agreement, dated as of June 27, 1997 among the Registrant and the Selling Stock- holders named therein (incorporated by reference to Exhibit 99.1 to the Registrant's Statement on Form 8-K filed July 9, 1997). Exhibit 10.2 Amendment No. 1, dated as of June 27, 1997, to Registration Rights Agreement, dated as of November 9, 1992, by and among the Registrant, ML-Lee Acquisition Fund, L.P., ML-Lee Acquisition Fund II, L.P., ML-Lee Acquisition Fund (Retirement Accounts) II, L.P., Lee Stockholders and Management Stockholders (incorporated by reference to Exhibit 99.2 to the Registrant's Statement on Form 8-K filed July 9, 1997). Exhibit 10.3 Amendment No. 3, dated as of June 27, 1997, between the Company and the Thomas H. Lee Company to the Management Agreement, dated September 29, 1988, among the Company's pre- decessors and the Thomas H. Lee Company (incorporated by reference to Exhibit 99.3 to the Registrant's Statement on Form 8-K filed July 9, 1997). Exhibit 10.4 Third Amendment, dated as of June 24, 1997, to the Second Amended and Restated Revolving Credit Facility and Term Loan Agreement dated February 15, 1994 between the Registrant, National Canada Finance Corp., and the National Bank of Canada (incorporated by reference to Exhibit 99.4 to the Registrant's Statement on Form 8-K filed July 9, 1997). Exhibit 11. Schedule of Computation of Earnings Per Share.* Exhibit 27. Financial Data Schedule.* (b) Reports on Form 8-K None. * Filed herewith. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STANLEY FURNITURE COMPANY, INC. Date: July 14, 1997 By: /s/ Douglas I. Payne Douglas I. Payne Sr. V.P. - Finance and Administration, Secretary and Treasurer (Principal Financial and Accounting Officer) EX-11 2 Exhibit 11 STANLEY FURNITURE COMPANY, INC. SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE (Unaudited) (In thousands, except per share data) Three Months Ended Six Months Ended June 29, June 30, June 29, June 30, 1997 1996 1997 1996 Net income used in calcula- ting primary and fully diluted earnings per common share............. $2,756 $1,704 $5,528 $3,287 Primary earnings per common share: Weighted average shares outstanding.............. 4,587 4,727 4,586 4,727 Add shares issuable assuming exercise of stock options............ 384 115 407 48 Weighted average number of shares used in calculating primary earnings per common share................ 4,971 4,842 4,993 4,775 Primary earnings per common share........... $ .55 $ .35 $ 1.11 $ .69 Fully diluted earnings per common share: Weighted average shares outstanding.............. 4,587 4,727 4,585 4,727 Add shares issuable assuming excercise of stock options........... 434 115 434 74 Weighted average number of shares used in calculating fully diluted earnings per common share......... 5,021 4,842 5,019 4,801 Fully diluted earnings per common share....... $ .55 $ .35 $ 1.10 $ .68
EX-27 3
5 STANLEY FURNITURE COMPANY, INC. ARTICLE 5 FINANCIAL DATA SCHEDULE FOR PERIOD ENDING JUNE 29, 1997 6-MOS DEC-31-1997 JUN-29-1997 8,330 0 23,727 2,131 47,964 82,563 81,176 30,337 147,801 33,901 0 0 0 91 67,167 147,801 99,100 99,100 74,150 88,477 134 180 1,500 8,989 3,461 5,528 0 0 0 5,528 1.11 1.10
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