-----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, SlGt0DTX1YwW2nxkobphm+TNX7c+sdYX9FhQnmqflAnKT73JRC1O/+EgZgq1gkJQ /NCsnfNAeMorJsYwz33GNg== 0000797465-97-000014.txt : 19971015 0000797465-97-000014.hdr.sgml : 19971015 ACCESSION NUMBER: 0000797465-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971014 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: SEC FILE NUMBER: 000-14938 FILM NUMBER: 97695163 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 September 28, 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 October 10, 1997. Class Number Common Stock, par value $.02 per share 3,845,944 Shares PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STANLEY FURNITURE COMPANY, INC. BALANCE SHEETS (In thousands, except share data) (Unaudited) September 28, December 31, 1997 1996 ASSETS Current assets: Cash........................................... $ 1,299 $ 8,126 Accounts receivable, less allowances of $1,928 and $1,945 respectively............... 30,308 23,096 Inventories: Finished goods............................... 23,879 20,953 Work-in-process.............................. 7,031 6,142 Raw materials................................ 14,958 13,144 45,868 40,239 Prepaid expenses and other current assets...... 995 486 Deferred income taxes.......................... 1,634 1,886 Total current assets....................... 80,104 73,833 Property, plant and equipment, at cost........... 81,837 80,737 Less accumulated depreciation.................. 31,578 28,024 50,259 52,713 Goodwill, less accumulated amortization of $2,940 and $2,688.............................. 10,500 10,752 Other assets..................................... 4,207 4,212 $145,070 $141,510 LIABILITIES Current liabilities: Current maturities of long-term debt........... $ 5,086 $ 725 Accounts payable............................... 16,315 14,630 Accrued salaries, wages and benefits........... 9,856 9,584 Other accrued expenses......................... 1,985 2,669 Total current liabilities.................... 33,242 27,608 Long-term debt, exclusive of current maturities.. 43,736 38,625 Deferred income taxes............................ 10,786 11,673 Other long-term liabilities...................... 1,987 1,987 Total liabilities.............................. 89,751 79,893 STOCKHOLDERS' EQUITY Common stock, $.02 par value, 10,000,000 shares authorized, 3,845,944 and 4,579,042 shares issued and outstanding......................... 76 91 Capital in excess of par value................... 47,696 62,442 Retained earnings (deficit)...................... 7,547 (916) Total stockholders' equity..................... 55,319 61,617 $145,070 $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 Nine Months Ended Ended September September September September 28, 1997 29, 1996 28, 1997 29, 1996 Net sales.......................... $54,270 $52,550 $153,370 $148,023 Cost of sales...................... 40,982 39,772 115,133 113,389 Gross profit................... 13,288 12,778 38,237 34,634 Selling, general and administrative expenses......................... 7,501 7,619 21,828 21,973 Operating income............... 5,787 5,159 16,409 12,661 Other expense, net................. 94 90 227 485 Interest expense................... 992 852 2,493 2,569 Income from continuing operations before income taxes............ 4,701 4,217 13,689 9,607 Income taxes....................... 1,766 1,602 5,227 3,706 Income from continuing operations 2,935 2,615 8,462 5,901 Gain from discontinued operations, net of taxes..................... 246 246 Net income......................... $ 2,935 $ 2,861 $ 8,462 $ 6,147 Primary earnings per share: Continuing operations............ $ .68 $ .53 $ 1.77 $ 1.22 Discontinued operations.......... .05 .05 Net income.................... $ .68 $ .58 $ 1.77 $ 1.27 Weighted average number of shares.. 4,315 4,954 4,794 4,848 Fully diluted earnings per share: Continuing operations............ $ .68 $ .52 $ 1.75 $ 1.17 Discontinued operations.......... .05 .05 Net income.................... $ .68 $ .57 $ 1.75 $ 1.22 Weighted average number of shares.. 4,315 5,051 4,839 5,052
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended September September 28, 1997 29, 1996 Cash flows from operating activities: Cash received from customers.................... $ 146,302 $141,887 Cash paid to suppliers and employees............ (137,431) (127,917) Interest paid................................... (2,880) (3,169) Income taxes paid, net.......................... (6,461) (3,409) Net cash (used) provided by operating activities.................................. (470) 7,392 Cash flows from investing activities: Capital expenditures............................ (1,369) (2,706) Purchase of other assets........................ (100) (181) Proceeds from sale of assets.................... 12 Net cash used by investing activities......... (1,469) (2,875) Cash flows from financing activities: Purchase and retirement of common stock......... (15,000) Proceeds from (repayment of) revolving credit facility, net.......................... 10,197 (914) Repayment of senior note........................ (725) (650) Proceeds from insurance policy loans............ 480 430 Proceeds from exercise of stock options......... 160 24 Net cash used by financing activities......... (4,888) (1,110) Net (decrease) increase in cash................. (6,827) 3,407 Cash at beginning of year....................... 8,126 298 Cash at end of quarter.......................... $ 1,299 $ 3,705 Supplemental cash flow information: Net income...................................... $ 8,462 $ 6,147 Adjustments to reconcile net income to net cash (used) provided by operating activities: Depreciation and amortization............... 4,070 3,865 Loss on sale of assets...................... 76 265 Other....................................... (246) Changes in assets and liabilities: Accounts receivable....................... (7,212) (5,441) Inventories............................... (5,629) 1,362 Prepaid expenses and other current assets. (873) (1,101) Accounts payable.......................... 1,685 539 Accrued salaries, wages and benefits...... 272 2,183 Other accrued expenses.................... (605) 41 Deferred income taxes..................... (635) 114 Other assets.............................. (81) (69) Other long-term liabilities............... (267) Net cash (used) provided by operating activities.................................... $ (470) $ 7,392
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) September 28, December 31, 1997 1996 Land and buildings............. $33,802 $33,694 Machinery and equipment........ 45,643 45,120 Office fixtures and equipment.. 1,825 1,794 Construction in progress....... 567 129 $81,837 $80,737 3. Long-Term Debt (Unaudited) September 28, December 31, 1997 1996 7.28% senior notes due March 15, 2004..................... $30,000 $30,000 7.57% senior note due June 30, 2005......................... 8,625 9,350 Revolving credit facility...... 10,197 Total 48,822 39,350 Less current maturities........ 5,086 725 $43,736 $38,625 STANLEY FURNITURE COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) (In thousands, except share and per share data) 4. Common Stock Repurchase 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. Assuming the shares were repurchased on January 2, 1997 and financed entirely by borrowings under the revolving credit facility at an assumed interest rate of 7.25%, the pro forma fully diluted earnings per share would have been $1.86, for the nine month period ended September 28, 1997. 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 Nine Months Ended September September September September 28, 1997 29, 1996 28, 1997 29, 1996 Basic earnings per share: Continuing operations... $.76 $.56 $1.94 $1.25 Discontinued operations. .05 .05 Net income............ $.76 $.61 $1.94 $1.30 Diluted earnings per share: Continuing operations... $.68 $.53 $1.77 $1.22 Discontinued operations. .05 .05 Net income............ $.68 $.58 $1.77 $1.27
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales increased $1.7 million, or 3.3%, for the three month period ended September 28, 1997 from the comparable 1996 period. For the nine month period, net sales increased $5.3 million, or 3.6%, from the comparable 1996 period. The increase was due primarily to higher average selling prices. Gross profit margin for the three and nine month periods of 1997 increased to 24.5% and 24.9%, respectively, from 24.3% and 23.4% for the comparable 1996 periods. Gross profit margin for the third quarter approximates the comparable prior year quarter. The higher gross profit margin for the nine month period of 1997 was due primarily to lower raw material costs as a percentage of net sales and improved operating efficiencies. However, gross profit margin declined from 25.2% for the first half of 1997 to 24.5% for the third quarter of 1997, due primarily to rising lumber cost, and management expects this trend to continue in the fourth quarter and into 1998. Selling, general and administrative expenses for the three and nine month periods of 1997 as a percentage of net sales decreased to 13.8% and 14.2%, respectively, from 14.5% and 14.8% for the comparable 1996 periods. These expenses were lower in the 1997 periods, due primarily to a higher provision for bad debts in the prior year periods. As a result of the above, operating income for the three and nine month periods of 1997 increased to $5.8 million, or 10.7% of net sales, and $16.4 million, or 10.7% of net sales, respectively, from $5.2 million, or 9.8% of net sales, and $12.7 million, or 8.6% of net sales, for the comparable 1996 periods. Interest expense for the 1997 three month period increased due to higher debt levels resulting from the Company's June 1997 repurchase of 750,000 shares of its common stock. For the 1997 nine month period, interest expense decreased due primarily to lower net borrowing levels. The Company's effective income tax rate was 38.2% and 38.6% for the nine month periods of 1997 and 1996, respectively. Financial Condition, Liquidity and Capital Resources At September 28, 1997, long-term debt including current maturities was $48.8 million. 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. Debt service requirements for the next five years are $5.1 million in 1998, $15.3 million in 1999, $5.2 million in 2000, $5.3 million in 2001, and $5.4 million in 2002. As of September 28, 1997, approximately $13.0 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 used cash from operations of $482,000 in the 1997 period compared to cash generated from operations of $7.4 million during the 1996 period. Cash was required in the 1997 period to fund higher payments to suppliers and employees due to increased production. Cash was also required for higher tax payments resulting from higher taxable income in 1997. The cash generated by operations in 1996 was used to fund capital expenditures and reduce borrowings. Net cash used by investing activities was $1.5 million in the 1997 period compared to $2.9 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 used by financing activities was $4.9 million and $1.1 million in the 1997 and 1996 period, respectively. In the 1997 period cash and borrowings under the revolving credit facility were used to finance the stock repurchase discussed above. Discontinued Operations In 1996, the Company was released from a lease obligation at its former Norman's of Salisbury division. Accordingly, in the third quarter of 1996, the Company recorded an after tax gain of $246,000, or $.05 per share, related to the partial reversal of a 1994 accrual. Forward-Looking Statements Certain statements made in this report are not based on historical facts, but are forward-looking statements. These statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology. These statements reflect the Company's reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include the cyclical nature of the furniture industry, fluctuations in the price for lumber which is the most significant raw material used by the Company, competition in the furniture industry, capital costs and general economic conditions. 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 Nine Months Ended September September September September 28, 1997 29, 1996 28, 1997 29, 1996 Basic earnings per share: Continuing operations... $.76 $.56 $1.94 $1.25 Discontinued operations. .05 .05 Net income............ $.76 $.61 $1.94 $1.30 Diluted earnings per share: Continuing operations... $.68 $.53 $1.77 $1.22 Discontinued operations. .05 .05 Net income............ $.68 $.58 $1.77 $1.27
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11. Schedule of Computation of Earnings Per Share.* Exhibit 27. Financial Data Schedule.* (b) Reports on Form 8-K A report on Form 8-K was filed on July 9, 1997, to disclose the repurchase of 750,000 shares of the Company's common stock from the ML-Lee Acquisition Fund, L.P. and its affiliates. * 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: October 14, 1997 By: /s/ Douglas I. Payne Douglas I. Payne Sr. Vice President - Finance & 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 Nine Months Ended September September September September 28, 1997 29, 1996 28, 1997 29, 1996 Earnings used in calculating primary and fully diluted earnings per common share: Income from continuing operations... $2,935 $2,615 $8,462 $5,901 Gain from discontinued operations... 246 246 Net income used in calculating primary and fully diluted earnings per common share......... $2,935 $2,861 $8,462 $6,147 Primary earnings per common share: Weighted average shares outstanding. 3,846 4,728 4,364 4,727 Add shares issuable assuming exercise of stock options......... 469 226 430 121 Weighted average number of shares used in calculating primary earnings per common share......... 4,315 4,954 4,794 4,848 Income from continuing operations... $ .68 $ .53 $ 1.77 $ 1.22 Gain from discontinued operations... .05 .05 Net income.......................... $ .68 $ .58 $ 1.77 $ 1.27 Fully diluted earnings per common share: Weighted average shares outstanding. 3,846 4,728 4,364 4,727 Add shares issuable assuming excercise of stock options........ 469 323 475 325 Weighted average number of shares used in calculating fully diluted earnings per common share......... 4,315 5,051 4,839 5,052 Income from continuing operations... $ .68 $ .52 $ 1.75 $ 1.17 Gain from discontinued operations... .05 .05 Net income.......................... $ .68 $ .57 $ 1.75 $ 1.22
EX-27 3
5 STANLEY FURNITURE COMPANY, INC. ARTICLE 5 FINANCIAL DATA SCHEDULE FOR PERIOD ENDING SEPTEMBER 28, 1997 9-MOS DEC-31-1997 SEP-28-1997 1,299 0 30,308 1,928 45,868 80,104 81,837 31,578 145,070 33,242 0 76 0 0 55,243 145,070 153,370 153,370 115,133 136,961 227 270 2,493 13,689 5,227 8,462 0 0 0 8,462 1.77 1.75
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