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 25, 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 October 17, 1994.
Class Number
Common Stock, par value $.02 per share 4,725,880 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS
(In thousands except share data)
<TABLE>
September
25, 1994 December
(Unaudited) 31, 1993
<S> <C> <C>
ASSETS
Current assets:
Cash................................. $ 232 $ 200
Accounts receivable, less allowances
of $1,305 and $827, respectively... 25,249 22,749
Inventories:
Finished goods...................... 23,153 17,398
Work-in-process..................... 4,955 6,076
Raw materials....................... 12,495 14,210
40,603 37,684
Prepaid expenses and other current
assets.............................. 1,047 554
Insurance claim receivable............ 1,966
Deferred income taxes................. 2,705 3,229
Net assets of discontinued operations 1,994
Total current assets.............. 69,836 68,376
Property, plant and equipment, at cost.. 63,525 60,211
Less accumulated depreciation......... 19,030 16,277
44,495 43,934
Excess of cost over fair value of net
assets acquired, less accumulated
amortization of $1,932 and $1,680,
respectively.......................... 11,508 11,760
Other assets........................... 850 789
$126,689 $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>
September
25, 1994 December
(Unaudited) 31, 1993
<S> <C> <C>
LIABILITIES
Current liabilities:
Current maturities of long-term
debt........................... $ 625
Accounts payable................. $ 13,784 15,411
Accrued salaries, wages and
benefits....................... 8,656 8,183
Other accrued expenses........... 2,616 3,324
Total current liabilities...... 25,056 27,543
Long-term debt, exclusive of
current maturities............... 35,314 32,022
Deferred income taxes.............. 10,870 12,828
Other long-term liabilities........ 6,731 5,262
Total liabilities................ 77,971 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............................ (14,701) (16,149)
Total stockholders' equity....... 48,718 47,204
$126,689 $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 Nine Months
Ended Ended
September September September September
25, 1994 26, 1993 25, 1994 26, 1993
<S> <C> <C> <C> <C>
Net sales.......................... $43,845 $42,666 $132,683 $119,157
Cost of sales:
From products sold............... 34,980 34,417 106,597 97,679
Business interruption insurance.. (952) (4,172)
34,980 33,465 106,597 93,507
Gross profit................... 8,865 9,201 26,086 25,650
Selling, general and administrative
expenses......................... 6,521 6,474 18,922 18,735
Operating income............... 2,344 2,727 7,164 6,915
Gain on insurance settlement....... (2,379) (2,143)
Other expense, net................. 206 81 429 514
Interest expense................... 741 570 2,220 2,424
Income from continuing operations
before income taxes............ 1,397 2,076 6,894 6,120
Income tax provision............... 534 850 2,688 2,510
Income from continuing operations 863 1,226 4,206 3,610
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......................... $ 863 $ 1,226 $ 1,448 $ 3,610
Earnings (loss) per common share:
Continuing operations............ $ .18 $ .26 $ .89 $ 1.03
Discontinued operations.......... (.58)
Net income.................... $ .18 $ .26 $ .31 $ 1.03
Weighted average number of shares.. 4,739 4,724 4,745 3,514
</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>
Nine Months
Ended
September September
25, 1994 26, 1993
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $129,956 $116,453
Cash paid to suppliers and employees.... (126,668) (129,994)
Interest paid........................... (2,335) (2,989)
Income taxes paid, net.................. (4,176) (48)
Advances received on insurance coverage. 4,625 21,518
Operating activities of discontinued
operations............................ (868) (407)
Net cash provided by operating
activities.......................... 534 4,533
Cash flows from investing activities:
Capital expenditures.................... (3,614) (3,501)
Proceeds received on insurance coverage. 1,657
Purchase of other assets................ (407) (433)
Proceeds from sale of assets............ 441 459
Investing activities of discontinued
operations............................ (18)
Net cash used by investing activities. (3,580) (1,836)
Cash flows from financing activities:
Proceeds from issuance of common stock.. 13,186
Issuance of senior notes................ 30,000
Redemption of senior subordinated
debentures............................ (3,093)
Repayment of term note.................. (16,569) (2,158)
Repayment of revolving credit facility.. (10,764) (11,179)
Proceeds from insurance policy loans.... 345 292
Other................................... 66 (179)
Net cash provided (used) by financing
activities.......................... 3,078 (3,131)
Net increase (decrease) in cash......... 32 (434)
Cash at beginning of year............... 200 649
Cash at end of quarter.................. $ 232 $ 215
</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
September
25, 1994 December
(Unaudited) 31, 1993
Land and buildings............. $17,555 $16,923
Machinery and equipment........ 39,056 37,552
Leasehold improvements......... 3,313 2,914
Furniture, fixtures and office
equipment.................... 1,563 1,026
Construction in progress....... 2,038 1,796
$63,525 $60,211
3. Long-Term Debt
September
25, 1994 December
(Unaudited) 31, 1993
7.28% senior notes due March
15, 2004..................... $30,000
Revolving credit facility...... 5,155 $15,919
Term note payable.............. 16,569
7% convertible subordinated
debentures due April 1, 2012. 159 159
Total 35,314 32,647
Less current maturities........ 625
$35,314 $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.
Sales applicable to Norman's were $2.8 million for the three months
September 26, 1993, and $4.1 million and $8.8 million for the nine
month periods ended September 25, 1994 and September 26, 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 nine month period ended September 25, 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 nine months ended:
<TABLE>
September September
25, 1994 26, 1993
<S> <C> <C>
Net income.......................... $1,448 $3,610
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization... 3,296 3,213
Loss (gain) on sale of assets... 141 (12)
Loss on disposal of fabric divi-
sion.......................... 2,758
Changes in assets and liabili-
ties:
Accounts receivable........... (2,500) (2,555)
Inventories................... (2,919) (4,192)
Income taxes recoverable...... (559) 101
Prepaid expenses and other
current assets, net......... 66 708
Insurance claim receivable.... 2,029 (1,919)
Operating assets of discon-
tinued operations........... (868) (407)
Accounts payable.............. (1,797) 3,309
Accrued salaries, wages and
benefits.................... 195 537
Other accrued expenses........ (36) 647
Accrued restructuring costs... (364)
Deferred income taxes......... (478) 2,361
Other assets.................... (48) (4)
Other long-term liabilities..... (194) (500)
Net cash provided by operating
activities....................... $ 534 $4,533
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales increased $1.2 million or 2.8% for the three month period
ended September 25, 1994 from the comparable 1993 period due
principally to higher average selling prices. For the nine month
period, net sales increased $13.5 million or 11.4% from the
comparable 1993 period due principally to higher average selling
prices and, to a lesser extent, higher unit volume. 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 nine month period of 1994
decreased to 20.2% and 19.7%, respectively from 21.6% and 21.5% in
each of the comparable 1993 periods. The higher gross profit
percentage for the three and nine month periods of 1993 was due
principally to the recognition of $1.0 million and $4.2 million,
respectively, of business interruption insurance without the
related sales revenue. Operating the Company's factories at lower
output levels to control inventories is expected to result in a
slightly reduced fourth quarter gross profit margin as a percent of
sales.
Selling, general and administrative expenses as a percentage of net
sales for the three and nine month periods of 1994 decreased to
14.9% and 14.3%, respectively, from 15.2% and 15.7% in each of the
comparable 1993 periods. These decreases occurred principally due
to higher net sales.
The Company incurred $290,000 and $498,000 in startup expenses
during the three and nine month periods of 1994, respectively
related to its introduction of upholstery products planned for the
upcoming quarter. It is expected that the startup of the
upholstery product line will adversely affect pretax earnings by
approximately $700,000 in the fourth quarter of 1994, as upholstery
products are not expected to generate significant revenue until
1995.
As a result of the above, operating income decreased to $2.3
million from $2.7 million for the three month periods of 1994 and
1993, respectively. For the nine month period of 1994, operating
income increased to $7.2 million from $6.9 million in the
comparable 1993 period. Operating income as a percentage of net
sales for the three and nine month periods of 1994 decreased to
5.3% and 5.4%, respectively, from 6.4% and 5.8% in each of the
comparable 1993 periods.
Interest expense for the three month period ended September 25,
1994 increased $171,000, due principally to higher interest rates.
For the nine month period of 1994, interest expense decreased
$204,000 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 39.0% for the
nine month period ended September 25, 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 September 25, 1994
was $35.3 millon. The Company has no debt service requirements for
the remainder of 1994 or in 1995. Debt service requirements will
be $5.1 million in 1996, $159,000 in 1997 and $4.3 million in each
of 1998 through 2004. As of September 25, 1994, approximately
$13.4 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 nine month period ended September 25, 1994, cash
provided by operations of $534,000 and net borrowings from the
revolving credit facility of $3.1 million were used to fund capital
expenditures of $3.6 million. In the 1993 period cash generated
from operations of $4.5 million was used to fund capital
expenditures and to reduce net borrowings under the revolving
credit facility.
Operating cash flows in both the 1994 and 1993 periods include
proceeds of $4.6 million and $21.5 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 $21.8 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 $3.6 million in the
1994 period compared to $1.8 million in the comparable 1993 period.
Expenditures in the 1994 period include the purchase of equipment
and other capital expenditures for the new upholstery operation of
approximately $622,000. 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 $3.1 million in the
1994 period compared to net cash used by financing activities of
$3.1 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 the
public offering ($13.2 million) and from operations enabled the
Company to redeem $3.1 million of outstanding senior subordinated
debentures and to reduce borrowings under the Company's senior
credit facility by $13.3 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.
Sales applicable to Norman's were $2.8 million for the three months
ended September 26, 1993, and $4.1 million and $8.8 million for the
nine month periods ended September 25, 1994 and September 26, 1993,
respectively.
<PAGE>
<PAGE>
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
None.
* Filed herewith.
<PAGE>
<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: October 20, 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 Nine Months Ended
September September September September
25, 1994 26, 1993 25, 1994 26, 1993
<S> <C> <C> <C> <C>
Earnings used in calculating pri-
mary and fully diluted earnings
(loss) per common share:
Income from continuing operations.. $ 863 $1,226 $4,206 $3,610
Loss on disposal of discontinued
division........................ (2,758)
Net income (loss) as reported...... $ 863 $1,226 $1,448 $3,610
Primary earnings (loss) per common
share:
Weighted average shares outstanding
during the period................ 4,726 4,721 4,725 3,513
Add shares issuable assuming excer-
cise of stock options............ 13 3 20 1
Weighted average number of shares
used in calculating primary
earnings per common share........ 4,739 4,724 4,745 3,514
Income from continuing operations.. $ .18 $ .26 $ .89 $ 1.03
Loss on disposal of discontinued
division......................... (.58)
Net income......................... $ .18 $ .26 $ .31 $ 1.03
Fully diluted earnings (loss) per
common share:
Weighted average shares outstanding
during the period................ 4,726 4,721 4,725 3,513
Add shares issuable assuming excer-
cise of stock options............ 6 3 5 1
Weighted average number of shares
used in calculating fully diluted
earnings per common share........ 4,732 4,724 4,730 3,514
Income from continuing operations.. $ .18 $ .26 $ .89 $ 1.03
Loss on disposal of discontinued
division......................... (.58)
Net income......................... $ .18 $ .26 $ .31 $ 1.03
</TABLE>
WP51\EXHIBIT.11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
STANLEY FURNITURE COMPANY, INC.
ARTICLE 5
FINANCIAL DATA SCHEDULE
FOR PERIOD ENDING SEPTEMBER 25, 1994
</LEGEND>
<CIK> 0000797465
<NAME> STANLEY FURNITURE COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JUN-27-1994
<PERIOD-END> SEP-25-1994
<CASH> 232
<SECURITIES> 0
<RECEIVABLES> 25,249
<ALLOWANCES> 1,305
<INVENTORY> 40,603
<CURRENT-ASSETS> 69,836
<PP&E> 63,525
<DEPRECIATION> 19,030
<TOTAL-ASSETS> 126,689
<CURRENT-LIABILITIES> 25,056
<BONDS> 0
<COMMON> 94
0
0
<OTHER-SE> 48,624
<TOTAL-LIABILITY-AND-EQUITY> 126,689
<SALES> 132,683
<TOTAL-REVENUES> 132,683
<CGS> 106,597
<TOTAL-COSTS> 106,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 240
<INTEREST-EXPENSE> 2,220
<INCOME-PRETAX> 6,894
<INCOME-TAX> 2,688
<INCOME-CONTINUING> 4,206
<DISCONTINUED> 2,758
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,448
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
