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 26, 1994 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.)
Route 57, Stanleytown, Virginia 24168
(Address of principal executive offices, Zip Code)
(703) 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 18, 1994.
Class Number
Common Stock, par value $.02 per share 4,725,880 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS
(In thousands except share data)
(Unaudited)
June 26, December 31,
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash................................. $ 399 $ 200
Accounts receivable, less allowances
of $1,300 and $827, respectively... 23,176 22,749
Inventories:
Finished goods...................... 24,527 17,398
Work-in-process..................... 5,534 6,076
Raw materials....................... 13,316 14,210
43,377 37,684
Prepaid expenses and other current
assets.............................. 560 554
Insurance claim receivable............ 1,966
Deferred income taxes................. 3,613 3,229
Net assets of discontinued operations 417 1,994
Total current assets.............. 71,542 68,376
Property, plant and equipment, at cost.. 62,406 60,211
Less accumulated depreciation......... 18,154 16,277
44,252 43,934
Excess of cost over fair value of net
assets acquired, less accumulated
amortization of $1,848 and $1,680,
respectively.......................... 11,592 11,760
Other assets........................... 1,274 789
$128,660 $124,859
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS (CONTINUED)
(In thousands except share data)
<TABLE>
(Unaudited)
June 26, December 31,
1994 1993
<S> <C> <C>
LIABILITIES
Current liabilities:
Current maturities of long-term
debt........................... $ 625
Accounts payable................. $ 14,587 15,411
Accrued salaries, wages and
benefits....................... 9,121 8,183
Other accrued expenses........... 3,876 3,324
Total current liabilities...... 27,584 27,543
Long-term debt, exclusive of
current maturities............... 34,802 32,022
Deferred income taxes.............. 11,622 12,828
Other long-term liabilities........ 6,797 5,262
Total liabilities................ 80,805 77,655
STOCKHOLDERS' EQUITY
Common stock, $.02 par value,
10,000,000 shares authorized,
4,725,880 and 4,720,768 shares
issued and outstanding,
respectively..................... 94 94
Capital in excess of par value..... 64,447 64,381
Adjustment for minimum pension
liability........................ (1,122) (1,122)
Deficit............................ (15,564) (16,149)
Total stockholders' equity....... 47,855 47,204
$128,660 $124,859
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
STANLEY FURNITURE COMPANY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
<TABLE>
Three Months Six Months
Ended Ended
June 26, June 27, June 26, June 27,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales.......................... $44,101 $40,855 $88,838 $76,491
Cost of sales:
From products sold............... 35,557 33,587 71,617 63,262
Business interruption insurance.. (1,583) (3,220)
35,557 32,004 71,617 60,042
Gross profit................... 8,544 8,851 17,221 16,449
Selling, general and administrative
expenses......................... 6,156 6,489 12,401 12,261
Operating income............... 2,388 2,362 4,820 4,188
Gain on insurance settlement....... (2,143) (2,379) (2,143)
Other expense, net................. 83 194 223 433
Interest expense................... 752 787 1,479 1,854
Income from continuing operations
before income taxes............ 1,553 3,524 5,497 4,044
Income tax provision............... 596 1,445 2,154 1,660
Income from continuing operations 957 2,079 3,343 2,384
Discontinued operations:
Loss on disposal of fabric div-
ision, including an additional
provision of $1,329 for oper-
ating losses during phaseout
period (less applicable income
tax benefit of $1,736)......... (2,758)
Net income......................... $ 957 $ 2,079 $ 585 $ 2,384
Earnings (loss) per common share:
Continuing operations............ $ .20 $ .70 $ .70 $ .80
Discontinued operations.......... (.58)
Net income.................... $ .20 $ .70 $ .12 $ .80
Weighted average number of shares.. 4,757 2,996 4,790 2,996
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
STANLEY FURNITURE COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
Six Months
Ended
June 26, June 27,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $88,136 $77,522
Cash paid to suppliers and employees.... (87,459) (82,357)
Interest paid........................... (931) (2,315)
Income taxes (paid) recovered, net...... (3,283) 33
Proceeds received on insurance coverage. 4,625 13,010
Operating activities of discontinued
operations............................ (829) (308)
Net cash provided by operating
activities.......................... 259 5,585
Cash flows from investing activities:
Capital expenditures.................... (2,229) (2,684)
Proceeds received on insurance coverage. 1,657
Purchase of other assets................ (390) (530)
Proceeds from sale of assets............ 338 443
Investing activities of discontinued
operations............................ (26)
Net cash used by investing activities. (2,281) (1,140)
Cash flows from financing activities:
Issuance of senior notes................ 30,000
Repayment of term note.................. (16,569) (1,241)
Repayment of revolving credit facility.. (11,276) (2,938)
Proceeds from issuance of stock options. 66
Net cash provided (used) by financing
activities.......................... 2,221 (4,179)
Net increase in cash.................... 199 266
Cash at beginning of year............... 200 649
Cash at end of quarter.................. $ 399 $ 915
</TABLE>
The accompanying notes are an integral part
of the financial statements.
<PAGE>
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 26, December 31,
1994 1993
Land and buildings............. $17,384 $16,923
Machinery and equipment........ 39,131 37,552
Leasehold improvements......... 3,097 2,914
Furniture, fixtures and office
equipment.................... 1,032 1,026
Construction in progress....... 1,762 1,796
$62,406 $60,211
3. Long-Term Debt
(Unaudited)
June 26, December 31,
1994 1993
7.28% senior notes due March
15, 2004..................... $30,000
Revolving credit facility...... 4,643 $15,919
Term note payable.............. 16,569
7% convertible subordinated
debentures due April 1, 2012. 159 159
Total 34,802 32,647
Less current maturities........ 625
$34,802 $32,022
<PAGE>
STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands except share and per share data)
3. Long-Term Debt (continued)
In February 1994, the Company completed the private placement of
$30.0 million of 7.28% senior notes due 2004 and the refinancing of
its revolving credit facility. The proceeds from the senior notes
were used to repay the existing term note and a portion of the
revolving credit facility.
4. Discontinued Operations
In June 1994, the Company ceased operations at its Norman's of
Salisbury division ("Norman's"). In the first quarter of 1994, the
Company recorded a $2.8 million ($4.5 million pretax) additional
loss provision representing costs associated with the closing and
liquidation of the operation. Currently, a portion of the Norman's
facilities is being subleased on a short term basis and a portion
is being utilized in the production of upholstery furniture
products which are scheduled for introduction in the fall of 1994.
Sales applicable to Norman's were $1.9 million and $3.1 million for
the three months ended June 26, 1994 and June 27, 1993,
respectively; and $4.1 million and $6.0 million for the six month
periods ended June 26, 1994 and June 27, 1993, respectively.
5. Insurance Claim Accounting
In the first quarter of 1994, the Company reached a final
settlement with its insurance carrier in connection with the
February 1993 fire at the Stanleytown facility and recorded a gain
on insurance settlement of $2.4 million.
6. Common Stock and Stock Options
During the six month period ended June 26, 1994, stock options for
5,112 shares of common stock were exercised at prices ranging from
$8.50 to $12.86 per share.
<PAGE>
STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands except share and per share data)
7. Supplemental Cash Flow Information
Following is a reconciliation of net income to net cash provided by
operating activities for the six months ended:
<TABLE>
June 26, June 27,
1994 1993
<S> <C> <C>
Net income.......................... $ 585 $2,384
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization... 2,168 2,101
Loss (gain) on sale of assets... 65 (5)
Loss on disposal of fabric divi-
sion.......................... 2,758
Changes in assets and liabili-
ties:
Accounts receivable........... (427) 1,185
Inventories................... (5,693) (1,117)
Income taxes recoverable...... (44) 93
Prepaid expenses and other
current assets, net......... 38 784
Insurance claim receivable.... 2,029 (3,855)
Operating assets of discon-
tinued operations........... (829) (308)
Accounts payable.............. (994) 2,215
Accrued salaries, wages and
benefits.................... 660 683
Other accrued expenses........ 825 511
Accrued restructuring costs... (198)
Deferred income taxes......... (634) 1,600
Other assets.................... (119) (64)
Other long-term liabilities..... (129) (424)
Net cash provided by operating
activities....................... $ 259 $5,585
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales increased $3.2 million or 7.9% for the three month period
ended June 26, 1994 from the comparable 1993 period due principally
to higher average selling prices. For the six month period, net
sales increased $12.3 million or 16.1% from the comparable 1993
period due principally to higher unit volume and higher average
selling prices. Lower unit volume in the 1993 period was due
principally to the disruption in production caused by the 1993 fire
at the Stanleytown facility (the "Fire").
Gross profit margin for the three and six month periods of 1994
decreased to 19.4% from 21.7% and 21.5% in the comparable 1993
periods, respectively. The higher gross profit percentage for the
three and six month periods of 1993 was due principally to the
recognition of $1.6 million and $3.2 million, respectively, of
business interruption insurance without the related sales revenue.
Selling, general and administrative expenses for the three month
period ended June 26, 1994 decreased 5.1% to $6.2 million from $6.5
million in the comparable 1993 period due principally to lower
selling costs incurred in the 1994 period. For the six month
period of 1994, selling, general and administrative expenses
increased 1.1% to $12.4 million from $12.3 million in the 1993
period due principally to higher selling expenses resulting from
higher sales in the 1994 period. As a percentage of net sales,
these expenses decreased to 14.0% for both the three and six month
periods of 1994 from 15.9% and 16.0%, respectively, in the
comparable 1993 periods, principally as a result of higher net
sales.
The Company incurred $116,000 and $208,000 in startup expenses
during the three and six month periods of 1994, respectively
related to its introduction of upholstery products planned for the
upcoming fall. It is expected that the startup of the upholstery
product line will adversely affect pretax earnings by approximately
$1 million in the second half of 1994, as upholstery products are
not expected to generate much additional revenue until 1995.
As a result of the above, operating income of $2.4 million for the
three month period of 1994 approximated the comparable 1993 period.
Operating income as a percentage of net sales decreased to 5.4% in
the 1994 period from 5.8% in the comparable 1993 period. For the
six month period of 1994, operating income increased to $4.8
million from $4.2 million in the comparable 1993 period, an
increase of 15.1%. Operating income as a percentage of net sales
decreased to 5.4% in the 1994 period from 5.5% in the comparable
1993 period.
Interest expense for the three month period of 1994 approximated
the 1993 period and for the six month period ended June 26, 1994
decreased $375,000 from the comparable 1993 period due principally
to lower debt levels resulting from the July 1993 public offering.
The Company's effective income tax rate decreased to 39.2% for the
six month period ended June 26, 1994 from 41.0% for total year
1993. The effective tax rate was higher in 1993 due principally to
the effect of the 1% federal statutory rate increase on the prior
years' deferred tax balances.
Financial Condition, Liquidity and Capital Resources
In February 1994, the Company completed the private placement of
$30.0 million of 7.28% senior notes due 2004 and the refinancing of
its revolving credit facility. The proceeds from the senior notes
were used to repay the existing term note and a portion of the
revolving credit facility. Long-term debt at June 26, 1994 was
$34.8 millon. The Company has no debt service requirements for the
remainder of 1994 or in 1995. Debt service requirements will be
$4.6 million in 1996, $159,000 in 1997 and $4.3 million in each of
1998 through 2004. As of June 26, 1994, approximately $13.1
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.
During the six month period ended June 26, 1994, cash provided by
operations of $259,000 and net borrowings from the revolving credit
facility of $2.2 million were used to fund capital expenditures of
$2.3 million. In the 1993 period cash generated from operations of
$5.6 million was used to fund capital expenditures of $1.1 million
and to reduce net borrowings under the revolving credit facility by
$4.2 million.
Operating cash flows in both the 1994 and 1993 periods include
proceeds of $4.6 million and $13.0 million, respectively, received
from insurance in connection with the Fire. Cash paid to suppliers
in both the 1994 and 1993 periods includes costs of $2.7 million
and $14.8 million, respectively incurred in connection with the
Fire. Excluding the effect of the Fire, cash was required in the
1994 period to support higher accounts receivable requirements
reflecting higher sales levels, higher payments to suppliers and
employees as a result of higher production levels and higher tax
payments. These higher payments in the 1994 period were partially
offset by lower interest payments due principally to lower debt
levels resulting from the 1993 public offering. The Company
generated cash from operations in the 1993 period due principally
to lower payments to suppliers and employees, resulting from the
decreased production levels caused by the Fire and the resulting
lower accounts receivable and inventory levels.
Net cash flow used by investing activities was $2.3 million in the
1994 period compared to $1.1 million in the comparable 1993 period.
Expenditures in the 1994 period include the purchase of equipment
and renovations for the new upholstery operation of approximately
$500,000. 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 $2.2 million in the
1994 period compared to net cash used by financing activities of
$4.2 million in the 1993 period. Cash provided by financing
activities in the 1994 period was used to fund operations and
capital expenditures. In the 1993 period, cash provided by
operations enabled the Company to reduce borrowings under its
senior credit facility by $4.2 million.
Discontinued Operations
In June 1994, the Company ceased operations at its Norman's of
Salisbury division ("Norman's"). In the first quarter of 1994, the
Company had recorded a $2.8 million ($4.5 million pretax)
additional loss provision representing costs associated with the
closing and liquidation of the operation. Currently, a portion of
the Norman's facilities is being subleased on a short term basis
and a portion is being utilized in the production of upholstery
furniture products which are scheduled for introduction in the fall
of 1994.
Sales applicable to Norman's were $1.9 million and $3.1 million for
the three months ended June 26, 1994 and June 27, 1993,
respectively; and $4.1 million and $6.0 million for the six month
periods ended June 26, 1994 and June 27, 1993, respectively.
<PAGE>
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 26, 1994.
(c)(i) The shareholders approved the ratification of the
selection of Coopers & Lybrand as the independent public
accountants for the Company for the current fiscal
year. The ratification was approved by the following
vote:
FOR: - 4,411,624
AGAINST: - 84
ABSTAIN: - 3,485
(c)(ii) The shareholders of the Company also elected a board of
five directors for staggered terms expiring at the Annual
Meeting of Shareholders to be held in 1995, 1996, and
1997. The elections were approved by the following vote:
Elected for Three-Year Terms
Ending 1997
For Withheld
David V. Harkins 4,395,431 19,762
Albert L. Prillaman 4,395,018 20,175
Elected for Two-Year Terms
Ending 1996
For Withheld
C. Hunter Boll 4,395,431 19,762
Lawrence E. Webb, Jr. 4,395,434 19,759
Elected for One-Year Term
Ending 1996
For Withheld
Edward J. Mack 4,395,424 19,769
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11. Schedule of Computation of Earnings Per Share.*
(b) Reports on Form 8-K
None.
* Filed herewith.
<PAGE>
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 22, 1994 By: /s/ Douglas I. Payne
Douglas I. Payne
Vice President of Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT 11
STANLEY FURNITURE COMPANY, INC.
SCHEDULE OF COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
(In thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 26, June 27, June 26, June 27,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Earnings used in calculating pri-
mary and fully diluted earnings
(loss) per common share:
Income from continuing operations.. $ 957 $2,079 $3,343 $2,384
Loss on disposal of discontinued
division........................ (2,758)
Net income used in calculating pri-
mary and fully diluted earnings
per common share................. $ 957 $2,079 $ 585 $2,384
Primary earnings (loss) per common
share:
Weighted average shares outstanding
during the period................ 4,726 2,996 4,724 2,996
Add shares issuable assuming excer-
cise of stock options............ 31 66
Weighted average number of shares
used in calculating primary
earnings per common share........ 4,757 2,996 4,790 2,996
Income from continuing operations.. $ .20 $ .70 $ .70 $ .80
Loss on disposal of discontinued
division......................... (.58)
Net income......................... $ .20 $ .70 $ .12 $ .80
Fully diluted earnings (loss) per
common share:
Weighted average shares outstanding
during the period................ 4,726 2,996 4,724 2,996
Add shares issuable assuming excer-
cise of stock options............ 14 14
Weighted average number of shares
used in calculating fully diluted
earnings per common share........ 4,740 2,996 4,738 2,996
Income from continuing operations.. $ .20 $ .70 $ .70 $ .80
Loss on disposal of discontinued
division......................... (.58)
Net income......................... $ .20 $ .70 $ .12 $ .80
</TABLE>
