-----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, FUV5TxdKq5pINEvwuOXPPLkDMVmdp8+b6Cov4YTkDu2jPHkTVyycFY1Mm2e3wtof vRBoYPf7cK0ny9ZjwKq54g== 0000797465-98-000005.txt : 19980415 0000797465-98-000005.hdr.sgml : 19980415 ACCESSION NUMBER: 0000797465-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980414 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: 98592670 BUSINESS ADDRESS: STREET 1: 1641 FAIRYSTONE PK HWY 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 FIRST QUARTER REPORT 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 March 28, 1998 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 April 10, 1998. Class Number ----- ------ Common Stock, par value $.02 per share 3,440,757 Shares PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STANLEY FURNITURE COMPANY, INC. BALANCE SHEETS (In thousands, except share data)
(Unaudited) March 28, December 31, ASSETS 1998 1997 ----------- ------------- Current assets: Cash........................................... $ 1,717 $ 756 Accounts receivable, less allowances of $1,943 and $1,895......................... 31,295 27,427 Inventories: Finished goods............................... 21,984 21,220 Work-in-process.............................. 7,124 6,997 Raw materials................................ 19,334 17,513 -------- -------- 48,442 45,730 Prepaid expenses and other current assets...... 653 1,571 Deferred income taxes.......................... 770 770 -------- -------- Total current assets......................... 82,877 76,254 -------- -------- Property, plant and equipment, at cost........... 85,557 84,545 Less accumulated depreciation.................. 34,138 32,831 -------- -------- 51,419 51,714 Goodwill, less accumulated amortization of $3,108 and $3,024..................................... 10,332 10,416 Other assets..................................... 4,729 4,841 -------- -------- $149,357 $143,225 ======== ======== LIABILITIES Current liabilities: Current maturities of long-term debt........... $ 5,086 $ 5,086 Accounts payable............................... 19,040 18,164 Accrued salaries, wages and benefits........... 9,673 9,687 Other accrued expenses......................... 2,955 1,877 -------- -------- Total current liabilities.................... 36,754 34,814 Long-term debt, exclusive of current maturities.. 48,303 47,491 Deferred income taxes............................ 10,448 10,448 Other long-term liabilities...................... 2,225 2,225 -------- -------- Total liabilities.............................. 97,730 94,978 -------- -------- STOCKHOLDERS' EQUITY Common stock, $.02 par value, 10,000,000 shares authorized, 3,440,757 and 3,432,759 shares issued and outstanding......................... 68 68 Capital in excess of par value................... 37,618 37,508 Retained earnings................................ 13,941 10,671 -------- -------- Total stockholders' equity..................... 51,627 48,247 -------- -------- $149,357 $143,225 ======== ========
The accompanying notes are an integral part of the financial statements. 2 STANLEY FURNITURE COMPANY, INC. STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
Three Months Ended --------------------- March 28, March 30, 1998 1997 -------- --------- Net sales............................ $ 57,691 $ 49,631 Cost of sales........................ 43,546 37,170 -------- -------- Gross profit..................... 14,145 12,461 Selling, general and administrative expenses........................... 7,752 7,127 -------- -------- Operating income................... 6,393 5,334 Other expense, net................... 34 69 Interest expense..................... 1,084 756 -------- ------- Income before income taxes....... 5,275 4,509 Income taxes......................... 2,005 1,737 -------- ------- Net income........................ $ 3,270 $ 2,772 ======== ======= Earnings per share: Basic............................. .95 .60 Diluted........................... .83 .55 Weighted average shares outstanding: Basic............................. 3,437 4,584 Diluted........................... 3,949 5,011
The accompanying notes are an integral part of the financial statements. 3 STANLEY FURNITURE COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended ---------------------- March 28, March 30, 1998 1997 --------- --------- Cash flows from operating activities: Cash received from customers....................... $53,836 $ 46,323 Cash paid to suppliers and employees............... (51,503) (45,667) Interest paid...................................... (1,183) (1,038) Income taxes paid, net............................. (37) (736) ------- -------- Net cash provided (used) by operating activities..................................... 1,113 (1,118) ------- -------- Cash flows from investing activities: Capital expenditures............................... (1,012) (270) Purchase of other assets........................... (24) (65) ------- -------- Net cash used by investing activities............ (1,036) (335) ------- -------- Cash flows from financing activities: Proceeds from revolving credit facility, net....... 5,098 Repayment of Senior Notes.......................... (4,286) Proceeds from exercised stock options.............. 72 75 ------- -------- Net cash provided by financing activities........ 884 75 ------- -------- Net increase (decrease) in cash.................... 961 (1,378) Cash at beginning of year.......................... 756 8,126 ------- -------- Cash at end of quarter............................. $ 1,717 $ 6,748 ======= ======== Reconciliation of net income to net cash provided (used) by operating activities: Net income......................................... $ 3,270 $ 2,772 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization.................. 1,416 1,350 Changes in assets and liabilities: Accounts receivable.......................... (3,868) (3,268) Inventories.................................. (2,712) (3,300) Prepaid expenses and other current assets, net................................ 914 8 Accounts payable............................. 876 984 Accrued salaries, wages and benefits......... (14) (477) Other accrued expenses....................... 1,116 859 Other assets................................. 115 97 Other long-term liabilities.................. (143) ------- -------- Net cash provided (used) by operating activities... $ 1,113 $ (1,118) ======= ========
The accompanying notes are an integral part of the financial statements. 4 STANLEY FURNITURE COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (In thousands) 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) March 28, December 31, 1998 1997 ---------- ------------ Land and buildings.............. $34,150 $33,941 Machinery and equipment......... 49,057 48,180 Office fixtures and equipment... 1,836 1,836 Construction in progress........ 514 588 ------- ------- $85,557 $84,545 ======= ======= 3. Long-Term Debt (Unaudited) March 28, December 31, 1998 1997 --------- ------------ 7.28% senior notes due March 15, 2004...................... $25,714 $30,000 7.57% senior note due June 30, 2005...................... 8,625 8,625 7.43% senior notes due November 18, 2007...................... 10,000 10,000 Revolving credit facility....... 9,050 3,952 ------- ------- Total 53,389 52,577 Less current maturities......... 5,086 5,086 ------- ------- $48,303 $47,491 ======= ======= 5 4. Earnings Per Common Share and Stock Split Basic earnings per common share are based upon the weighted average shares outstanding. Outstanding stock options are treated as common stock equivalents for purposes of computing diluted earnings per share and represent the difference between basic and diluted weighted average shares outstanding. In April 1998, the Board of Directors approved a two-for-one stock split, to be effected in the form of a stock dividend, payable to stockholders of record on May 1, 1998. In connection with the stock dividend, approximately $69,000 will be transferred to common stock from capital in excess of par value in the second quarter of 1998. The unaudited pro forma earnings per share, giving retroactive effect to the stock split were as follows: Three Months Ended -------------------------- March 28, March 30, 1998 1997 ----------- --------- Earnings per share: Basic.................... $ .48 $ .30 Diluted.................. $ .41 $ .28 Weighted average shares outstanding: Basic.................... 6,874 9,168 Diluted.................. 7,898 10,022 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales increased $8.1 million, or 16.2%, for the three month period ended March 28, 1998, from the comparable 1997 period. The increase was due to higher unit volume. Gross profit margin for the three month period of 1998 decreased to 24.5% from 25.1% for the comparable 1997 period. The decrease resulted from higher raw material (primarily lumber) costs, partially offset by improved operating efficiencies. Selling, general and administrative expenses as a percentage of net sales decreased to 13.4% for the 1998 period from 14.4% in the comparable 1997 period. The lower percentage was due principally to higher net sales in the 1998 period. The majority of the $625,000 increase in 1998 was selling expenses directly attributable to the sales increase. 6 As a result of the above, operating income increased to $6.4 million, or 11.1% of net sales, from $5.3 million, or 10.7% in the comparable 1997 period. Interest expense for the three month period ended March 28, 1998, increased due to higher average debt levels resulting from the Company's June and November 1997 repurchases of its common stock. The Company's effective income tax rate was 38.0% for the 1998 three month period and total year 1997. Financial Condition, Liquidity and Capital Resources At March 28, 1998, long-term debt including current maturities was $53.4 million. Debt service requirements are $800,000 in 1998, $14.2 million in 1999, $5.2 million in 2000, $6.7 million in 2001, and $6.8 million in 2002. As of March 28, 1998, approximately $9.7 million of additional borrowings were available under the Company's 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 $1.1 million in the 1998 first quarter compared to cash used from operations of $1.1 million in the 1997 period. Cash in the 1998 period was used to fund capital expenditures. Cash was required in the 1997 period to fund higher payments to suppliers and employees due to increased production levels and higher tax payments. Net cash used by investing activities was $1.0 million in the 1998 period compared to $335,000 in the 1997 period. Expenditures in each year were primarily for plant and equipment and other assets in the normal course of business. Net cash provided by financing activities was $884,000 in the 1998 period compared to $75,000 in the 1997 period. In the 1998 period, borrowings under the revolving credit facility provided cash for senior debt payments. 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, or by discussions of strategy. These statements reflect the Company's reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause 7 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. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10.1 Fourth Amendment, dated February 24, 1998, 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.* Exhibit 11. Schedule of Computation of Earnings Per Share.* Exhibit 27. Financial Data Schedule.* (b) Reports on Form 8-K None. * Filed herewith. 8 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: April 14, 1998 By: /s/ Douglas I. Payne ------------------------- Douglas I. Payne Sr. V.P. - Finance and Administration, Secretary and Treasurer (Principal Financial and Accounting Officer) 9 EX-10.1 2 FOURTH AMENDMENT LOAN AGREEMENT FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT This FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT FACILITY dated as of February 24, 1998 (the "Fourth Amendment") is by and between STANLEY FURNITURE COMPANY, INC., a Delaware corporation (the "Borrower"); and NATIONAL BANK OF CANADA, a Canadian chartered bank (the "Lender" or "NBC"). RECITALS - -------- A. National Canada Finance Corp., a Delaware corporation ("NCFC"), and the Lender made a certain credit facility available to the Borrower pursuant to the terms and conditions contained in that certain Second Amended and Restated Revolving Credit Agreement dated as of February 15, 1994 among the Borrower, NCFC and the Lender, as amended by a First Amendment to Second Amended and Restated Credit Agreement dated as of August 21, 1995, a Second Amendment to Second Amended and Restated Credit Agreement dated as of October 14, 1996 and a Third Amendment to Second Amended and Restated Revolving Credit Facility dated as of June 24, 1997 (as amended, the "Loan Agreement"). B. The Lender has been assigned the rights of NCFC under the Loan Agreement and the documents related thereto pursuant to the terms of an Agreement and Transfer Agreement. C. The Borrower has requested that the Lender make certain changes to the Loan Agreement. D. The Lender has agreed to make these changes to the Loan Agreement as set forth herein. NOW, THEREFORE, the Borrower and the Lender hereby agree as follows: A. The Loan Agreement is amended as follows: 1. A definition for "Funded Indebtedness" is added to Section 1.01 in correct alphabetical order to read as follows: "Funded Indebtedness" means Indebtedness excluding the maximum amount of all letters of credit issued or acceptance facilities established for the account of any Person and, without duplication, all drafts drawn thereunder." 2. Section 8.01(h) is amended to read as follows: "(h) Leverage Ratio. The Borrower will not at any time have a ratio of (i) Funded Indebtedness to (ii) Total Capitalization in excess of .55 to 1.0;". B. The Borrower represents and warrants that, as of the date hereof, it is not in default of the terms of the Loan Agreement, as amended hereby, or any of the other documents executed between the Borrower and the Lender in connection therewith. C. This Fourth Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original. D. This Fourth Amendment and the Loan Agreement, as amended hereby, shall be deemed to be contracts made under, and for all purposes shall be construed in accordance with the laws of the State of North Carolina. IN WITNESS WHEREOF, the parties hereto have executed or caused this instrument to be executed under seal as of the day and year first above written. STANLEY FURNITURE COMPANY, INC. ATTEST By/s/R. Gary Armbrister By/s/Douglas I. Payne Title Asst. Sec & Treas Title Senior VP - Finance & Adm (Corporate Seal) NATIONAL BANK OF CANADA By/s/Charles Collie Title VP & Manager By/s/Alex Councial Title Vice President EX-11 3 EPS Exhibit 11 STANLEY FURNITURE COMPANY, INC. SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except per share data) March 28, March 30, 1998 1997 --------- --------- Net income used in calculating basic and diluted earnings per common share.. $3,270 $2,772 ====== ====== Basic earnings per common share: Weighted average shares outstanding...... 3,437 4,584 ====== ====== Basic earnings per common share.......... $ .95 $ .60 ====== ====== Diluted earnings per common share: Weighted average shares outstanding.... 3,437 4,584 Add shares issuable assuming excer- cise of stock options................ 512 427 ------ ------ Weighted average number of shares used in calculating diluted earnings per common share........ 3,949 5,011 ====== ====== Diluted earnings per common share............................. $ .83 $ .55 ====== ====== EX-27.1 4 FDS
5 1000 3-mos dec-31-1998 mar-28-1998 1717 0 31295 1943 48442 82877 85557 34138 149357 36754 0 0 0 68 51559 149357 57691 57691 43546 51298 34 75 1084 5275 2005 3270 0 0 0 3270 .95 .83
EX-27 5 FDS
5 1000 3-mos Dec-31-1997 Mar-30-1997 6748 0 26364 2059 43539 78891 81007 29270 145496 33230 0 0 0 91 64403 145496 49631 49631 37170 44297 69 90 756 4509 1737 2772 0 0 0 2772 .60 .55
-----END PRIVACY-ENHANCED MESSAGE-----