<PAGE>
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 July 2, 1995 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)
(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 August 1, 1995.
Class Number
Common Stock, par value $.02 per share 4,726,550 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS
(In thousands, except share data)
July 2,
1995 December 31,
(Unaudited) 1994
<S> <C> <C>
ASSETS
Current assets:
Cash................................. $ 223 $ 301
Accounts receivable, less allowances
of $1,106 and $933, respectively... 19,943 23,760
Inventories:
Finished goods..................... 29,187 20,893
Work-in-process.................... 5,221 5,957
Raw materials...................... 13,519 13,055
47,927 39,905
Prepaid expenses and other current
assets............................. 1,065 1,446
Deferred income taxes................ 2,058 2,003
Total current assets............. 71,216 67,415
Property, plant and equipment, at cost. 76,868 64,827
Less accumulated depreciation........ 21,922 20,049
54,946 44,778
Excess of cost over fair value of net
assets acquired, less accumulated
amortization of $2,184 and $2,016,
respectively......................... 11,256 11,424
Other assets........................... 1,236 902
$138,654 $124,519
</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>
July 2,
1995 December 31,
(Unaudited) 1994
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable................. $ 12,409 $ 14,659
Accrued salaries, wages and
benefits....................... 7,385 7,119
Other accrued expenses........... 2,998 2,725
Current maturities of long-term
debt........................... 650
Total current liabilities...... 23,442 24,503
Long-term debt..................... 48,062 33,395
Deferred income taxes.............. 11,403 11,541
Other long-term liabilities........ 3,434 4,250
Total liabilities................ 86,341 73,689
STOCKHOLDERS' EQUITY
Common stock, $.02 par value,
10,000,000 shares authorized,
4,726,550 shares issued and
outstanding...................... 94 94
Capital in excess of par value..... 64,497 64,527
Deficit............................ (12,278) (13,791)
Total stockholders' equity....... 52,313 50,830
$138,654 $124,519
</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
July 2, June 26, July 2, June 26,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales.......................... $38,163 $44,101 $83,152 $88,838
Cost of sales...................... 30,113 35,557 66,001 71,617
Gross profit................... 8,050 8,544 17,151 17,221
Selling, general and administrative
expenses......................... 6,152 6,156 13,055 12,401
Unusual items (136) (136)
Operating income............... 2,034 2,388 4,232 4,820
Gain on insurance settlement....... (2,379)
Other expense, net................. 66 83 197 223
Interest expense................... 829 752 1,594 1,479
Income from continuing operations
before income taxes............ 1,139 1,553 2,441 5,497
Income tax provision............... 420 596 928 2,154
Income from continuing operations 719 957 1,513 3,343
Discontinued operations including
provisions for operating losses
of $1,721........................ (2,758)
Net income......................... $ 719 $ 957 $ 1,513 $ 585
Earnings (loss) per common share:
Continuing operations............ $ .15 $ .20 $ .32 $ .70
Discontinued operations.......... (.58)
Net income.................... $ .15 $ .20 $ .32 $ .12
Weighted average number of shares.. 4,727 4,726 4,727 4,724
</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
July 2, June 26,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $87,052 $88,136
Cash paid to suppliers and employees.... (87,866) (87,459)
Interest paid........................... (1,719) (931)
Income taxes paid, net.................. (591) (3,283)
Proceeds received on insurance coverage. 4,625
Operating activities of discontinued
operations............................ (829)
Net cash provided (used) by operating
activities.......................... (3,124) 259
Cash flows from investing activities:
Capital expenditures.................... (12,550) (2,229)
Purchase of other assets................ (139) (390)
Proceeds from sale of assets............ 25 37
Investing activities of discontinued
operations............................ 301
Net cash used by investing activities. (12,664) (2,281)
Cash flows from financing activities:
Issuance of senior notes................ 10,000 30,000
Repayment of term note.................. (16,569)
Proceeds from (repayment of) revolving
credit facility, net.................. 5,325 (11,276)
Proceeds from insurance policy loans.... 385
Proceeds from issuance of stock options. 66
Net cash provided by financing
activities.......................... 15,710 2,221
Net increase (decrease) in cash......... (78) 199
Cash at beginning of year............... 301 200
Cash at end of quarter.................. $ 223 $ 399
</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
July 2,
1995 December 31,
(Unaudited) 1994
Land and buildings.............. $32,267 $17,853
Machinery and equipment......... 41,960 41,059
Leasehold improvements.......... 153 3,986
Furniture, fixtures and office
equipment..................... 1,266 1,289
Construction in progress........ 1,222 640
$76,868 $64,827
On June 30, 1995, the Company purchased the manufacturing
facilities at its Stanleytown, VA and West End, NC locations, which
it previously leased. The total purchase price was $10.5 million
for both plants. As a result of the purchase, the Company also
reclassified the related leasehold improvements with a net book
value of $3.3 million to land and building. The purchase will
result in lower annual rental expense of $1.1 million through
October 1999, the remaining term of the lease. The buildings and
improvements will be depreciated on a straight-line basis over
their remaining estimated useful life of 20-30 years.
<PAGE>
STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share and per share data)
3. Long-Term Debt
July 2,
1995 December 31,
(Unaudited) 1994
7.28% senior notes due March
15, 2004..................... $30,000 $30,000
7.57% senior note due June
30, 2005..................... 10,000
Revolving credit facility...... 8,559 3,234
7% convertible subordinated
debentures due April 1, 2012. 153 161
Total 48,712 33,395
Less current maturities........ 650
$48,062 $33,395
In June 1995, the Company completed the issuance of $10.0 million
7.57% senior note due 2005 in a private placement of debt. The
proceeds from the senior note was used to purchase real estate at
two plant facilities, as discussed in Note 2.
4. Unusual Items
During the second quarter, the Company was released from a
lease obligation at its previously closed Waynesboro, Virginia
manufacturing facility. Accordingly, the Company has recognized a
pretax credit of $1.1 million related to the reversal of an accrual
set up in 1991 for the closing of the facility. Unusual items for
the second quarter of 1995 also include a pretax charge for
severance resulting from the resignation of the Company's Chief
Operating Officer.
<PAGE>
STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data)
5. Supplemental Cash Flow Information
Following is a reconciliation of net income to net cash provided by
operating activities for the six months ended:
<TABLE>
July 2, June 26,
1995 1994
<S> <C> <C>
Net income.......................... $ 1,513 $ 585
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization... 2,365 2,168
Loss on sale of assets.......... 44 65
Loss on disposal of fabric divi-
sion.......................... 2,758
Other........................... (30)
Changes in assets and liabili-
ties:
Accounts receivable........... 3,817 (427)
Inventories................... (8,022) (5,693)
Income taxes recoverable...... 530 (44)
Prepaid expenses and other
current assets, net......... (628) 38
Insurance claim receivable.... 2,029
Operating assets of discon-
tinued operations........... (829)
Accounts payable.............. (2,250) (994)
Accrued salaries, wages and
benefits.................... 266 660
Other accrued expenses........ 417 825
Deferred income taxes......... (193) (634)
Other assets.................... (137) (119)
Other long-term liabilities..... (816) (129)
Net cash provided (used) by
operating activities............. $(3,124) $ 259
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales decreased $5.9 million or 13.5% for the three month
period ended July 2, 1995 from the comparable 1994 period. For the
six month period, net sales decreased $5.7 million or 6.4% from the
comparable 1994 period. The decreases for these periods were due
principally to lower unit volume, partially offset by the
additional volume from upholstered products.
Gross profit margin for the three month period of 1995 increased to
21.1% and 20.6% for the six month period from 19.4% for the
comparable 1994 periods. The higher gross profit margin was due
principally to increased prices, a moderation in lumber cost
increases and a more favorable product mix.
Selling, general and administrative expenses as a percentage of net
sales increased to 16.1% for the three month period and 15.7% for
the six month period from 14.0% in both the 1994 comparable
periods. The increase for the 1995 three month period was due
principally to lower net sales. For the six month period of 1995,
these expenses increased 5.3% as a result of increased selling
costs associated with "The Saturday Evening Post/Norman Rockwell
Home Furnishings Collection" and increased expenses associated with
the new upholstered furniture products including the expansion of
the High Point, North Carolina showroom.
During the second quarter, the Company was released from a lease
obligation at its previously closed Waynesboro, Virginia
manufacturing facility. Accordingly, the Company has recognized a
pretax credit of $1.1 million related to the reversal of an accrual
set up in 1991 for the closing of the facility. Unusual items for
the second quarter of 1995 also include a pretax charge of $936,000
for severance resulting from the resignation of the Company's Chief
Operating Officer.
As a result of the above, operating income as a percentage of net
sales decreased to 5.3% in the 1995 three month period from 5.4% in
the comparable 1994 period. For the six month period of 1995,
operating income as a percentage of net sales decreased to 5.1%
from 5.4% in the comparable 1994 period. Upholstery operations
reduced operating income by approximately $236,000 and $445,000
during the three and six month period of 1995, respectively.
Interest expense for both the 1995 three month and six month
periods increased principally due to higher debt levels.
Financial Condition, Liquidity and Capital Resources
In June 1995, the Company completed the issuance of a $10.0 million
7.57% senior note due 2005 in a private placement of debt. The
proceeds from the senior note was used to purchase two plant
facilities which were previously being leased. Long-term debt at
July 2, 1995 was $48.1 million. Aggregate maturities of long-term
debt for the next five years are as follows: 1996-$650,000; 1997-
$9.4 million; 1998-$5.1 million; 1999-$5.1 million; 2000-$5.2
million. As of July 2, 1995 approximately $13.6 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 in operations of $3.1 million in the 1995 six
month period, funded by net borrowings from the revolving credit
facility. The decrease in cash provided by operations was a result
of lower sales volume and increased inventory levels. Cash was
also required for higher interest payments offset by lower tax
payments. During the 1994 six month period, cash of $259,000 was
provided from operations. Operating cash flows in 1994 included
proceeds of $4.6 million from insurance and $2.7 million of cash
paid to suppliers both related to the 1993 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.
Net cash flow used by investing activities was $12.7 million in the
1995 period compared to $2.3 million in the 1994 period. As noted
above, proceeds of $10.0 from the senior note and additional
borrowings from the revolving credit facility were used to purchase
$10.5 million of real estate. The remaining expenditures were
primarily for plant and equipment and other assets in the normal
course of business.
Net cash provided by financing activities was $15.7 million in the
1995 period compared to $2.2 million in the comparable 1994 period.
Excluding the real estate transaction, the remaining 1995
borrowings and the 1994 borrowings provided cash for operations and
other capital expenditures. In the 1994 period, the Company
completed the private placement of $30.0 million of 7.28% senior
notes 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.
<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 20, 1995.
(b) The shareholders of the Company elected one director for a
three-year term expiring at the Annual Meeting of Shareholders
to be held in 1998. The election was approved by the
following vote:
For Withheld
Edward J. Mack 4,498,911 104,875
(c)(i) 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 4,596,308
AGAINST 2,363
ABSTAIN 5,115
(c)(ii) The shareholders approved the 1994 Stock Option Plan by
the following vote:
FOR 4,098,793
AGAINST 331,854
ABSTAIN 168,104
BROKERS NONVOTE 5,035
(c)(iii) The shareholders approved the Stanley Furniture Company,
Inc. Executive Loan Plan by the following vote:
FOR 4,095,132
AGAINST 335,216
ABSTAIN 168,104
BROKERS NONVOTE 5,334
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10. The long term debt as shown on the balance sheet of
the Company at June 26, 1994 includes a $10 million
7.57% Senior Note due 2005. The documents
evidencing this obligation are omitted pursuant to
Regulation S-K, Item 601(b)(4)(iii) and will be
furnished to the Securities and Exchange Commission
upon request.
Exhibit 11. Schedule of Computation of Earnings Per Share.*
Exhibit 27. Financial Data Schedule.*
(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: August 1, 1995 By: /s/ Douglas I. Payne
Douglas I. Payne
Vice President of Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
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 July 2, 1995 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)
(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 August 1, 1995.
Class Number
Common Stock, par value $.02 per share 4,726,550 Shares
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS
(In thousands, except share data)
ASSETS July 2,
1995 December 31,
(Unaudited) 1994
Current assets:
Cash................................. $ 223 $ 301
Accounts receivable, less allowances
of $1,106 and $933, respectively... 19,943 23,760
Inventories:
Finished goods..................... 29,187 20,893 Work-
in-process.................... 5,221 5,957 Raw
materials...................... 13,519 13,055
47,927 39,905
Prepaid expenses and other current
assets............................. 1,065 1,446
Deferred income taxes................ 2,058 2,003
Total current assets............. 71,216 67,415
Property, plant and equipment, at cost. 76,868 64,827
Less accumulated depreciation........ 21,922 20,049
54,946 44,778
Excess of cost over fair value of net
assets acquired, less accumulated
amortization of $2,184 and $2,016,
respectively......................... 11,256 11,424
Other assets........................... 1,236 902
$138,654 $124,519
The accompanying notes are an integral part
of the financial statements.
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS (CONTINUED)
(In thousands, except share data)
LIABILITIES July 2,
1995 December 31,
(Unaudited) 1994
Current liabilities:
Accounts payable................. $ 12,409 $ 14,659
Accrued salaries, wages and
benefits....................... 7,385 7,119 Other
accrued expenses........... 2,998 2,725
Current maturities of long-term
debt........................... 650
Total current liabilities...... 23,442 24,503
Long-term debt..................... 48,062 33,395 Deferred
income taxes.............. 11,403 11,541 Other long-term
liabilities........ 3,434 4,250
Total liabilities................ 86,341 73,689
STOCKHOLDERS' EQUITY
Common stock, $.02 par value,
10,000,000 shares authorized,
4,726,550 shares issued and
outstanding...................... 94 94
Capital in excess of par value..... 64,497 64,527
Deficit............................ (12,278) (13,791)
Total stockholders' equity....... 52,313 50,830
$138,654 $124,519
The accompanying notes are an integral part
of the financial statements.
STANLEY FURNITURE COMPANY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended Ended
July 2, June 26, July 2, June 26,
1995 1994 1995 1994
Net sales.......................... $38,163 $44,101 $83,152 $88,838
Cost of sales...................... 30,113 35,557 66,001 71,617
Gross profit................... 8,050 8,544 17,151 17,221
Selling, general and administrative
expenses......................... 6,152 6,156 13,055 12,401
Unusual items (136) (136)
Operating income............... 2,034 2,388 4,232 4,820
Gain on insurance settlement....... (2,379)
Other expense, net................. 66 83 197 223
Interest expense................... 829 752 1,594 1,479
Income from continuing operations
before income taxes............ 1,139 1,553 2,441 5,497
Income tax provision............... 420 596 928 2,154
Income from continuing operations 719 957 1,513 3,343
Discontinued operations including
provisions for operating losses
of $1,721........................ (2,758)
Net income......................... $ 719 $ 957 $ 1,513 $ 585
Earnings (loss) per common share:
Continuing operations............ $ .15 $ .20 $ .32 $ .70
Discontinued operations.......... (.58)
Net income.................... $ .15 $ .20 $ .32 $ .12
Weighted average number of shares.. 4,727 4,726 4,727 4,724
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
July 2, June 26,
1995 1994
Cash flows from operating activities:
Cash received from customers............ $87,052 $88,136
Cash paid to suppliers and employees.... (87,866) (87,459)
Interest paid........................... (1,719) (931)
Income taxes paid, net.................. (591) (3,283)
Proceeds received on insurance coverage. 4,625
Operating activities of discontinued
operations............................ (829)
Net cash provided (used) by operating
activities.......................... (3,124) 259
Cash flows from investing activities:
Capital expenditures.................... (12,550) (2,229)
Purchase of other assets................ (139) (390)
Proceeds from sale of assets............ 25 37
Investing activities of discontinued
operations............................ 301
Net cash used by investing activities. (12,664) (2,281)
Cash flows from financing activities:
Issuance of senior notes................ 10,000 30,000
Repayment of term note.................. (16,569)
Proceeds from (repayment of) revolving
credit facility, net.................. 5,325 (11,276)
Proceeds from insurance policy loans.... 385
Proceeds from issuance of stock options. 66
Net cash provided by financing
activities.......................... 15,710 2,221
Net increase (decrease) in cash......... (78) 199
Cash at beginning of year............... 301 200
Cash at end of quarter.................. $ 223 $ 399
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
July 2,
1995 December 31,
(Unaudited) 1994
Land and buildings.............. $32,267 $17,853
Machinery and equipment......... 41,960 41,059
Leasehold improvements.......... 153 3,986
Furniture, fixtures and office
equipment..................... 1,266 1,289
Construction in progress........ 1,222 640
$76,868 $64,827
On June 30, 1995, the Company purchased the manufacturing
facilities at its Stanleytown, VA and West End, NC locations, which
it previously leased. The total purchase price was $10.5 million
for both plants. As a result of the purchase, the Company also
reclassified the related leasehold improvements with a net book
value of $3.3 million to land and building. The purchase will
result in lower annual rental expense of $1.1 million through
October 1999, the remaining term of the lease. The buildings and
improvements will be depreciated on a straight-line basis over
their remaining estimated useful life of 20-30 years.
STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share and per share data)
3. Long-Term Debt
July 2,
1995 December 31,
(Unaudited) 1994
7.28% senior notes due March
15, 2004..................... $30,000 $30,000
7.57% senior note due June
30, 2005..................... 10,000
Revolving credit facility...... 8,559 3,234
7% convertible subordinated
debentures due April 1, 2012. 153 161
Total 48,712 33,395
Less current maturities........ 650
$48,062 $33,395
In June 1995, the Company completed the issuance of $10.0 million
7.57% senior note due 2005 in a private placement of debt. The
proceeds from the senior note was used to purchase real estate at
two plant facilities, as discussed in Note 2.
4. Unusual Items
During the second quarter, the Company was released from a
lease obligation at its previously closed Waynesboro, Virginia
manufacturing facility. Accordingly, the Company has recognized a
pretax credit of $1.1 million related to the reversal of an accrual
set up in 1991 for the closing of the facility. Unusual items for
the second quarter of 1995 also include a pretax charge for
severance resulting from the resignation of the Company's Chief
Operating Officer.
STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data)
5. Supplemental Cash Flow Information
Following is a reconciliation of net income to net cash provided by
operating activities for the six months ended:
July 2, June 26,
1995 1994
Net income.......................... $ 1,513 $ 585
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization... 2,365 2,168
Loss on sale of assets.......... 44 65
Loss on disposal of fabric divi-
sion.......................... 2,758
Other........................... (30)
Changes in assets and liabili-
ties:
Accounts receivable........... 3,817 (427)
Inventories................... (8,022) (5,693)
Income taxes recoverable...... 530 (44)
Prepaid expenses and other
current assets, net......... (628) 38
Insurance claim receivable.... 2,029
Operating assets of discon-
tinued operations........... (829)
Accounts payable.............. (2,250) (994)
Accrued salaries, wages and
benefits.................... 266 660
Other accrued expenses........ 417 825
Deferred income taxes......... (193) (634)
Other assets.................... (137) (119)
Other long-term liabilities..... (816) (129)
Net cash provided (used) by
operating activities............. $(3,124) $ 259
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales decreased $5.9 million or 13.5% for the three month
period ended July 2, 1995 from the comparable 1994 period. For the
six month period, net sales decreased $5.7 million or 6.4% from the
comparable 1994 period. The decreases for these periods were due
principally to lower unit volume, partially offset by the
additional volume from upholstered products.
Gross profit margin for the three month period of 1995 increased to
21.1% and 20.6% for the six month period from 19.4% for the
comparable 1994 periods. The higher gross profit margin was due
principally to increased prices, a moderation in lumber cost
increases and a more favorable product mix.
Selling, general and administrative expenses as a percentage of net
sales increased to 16.1% for the three month period and 15.7% for
the six month period from 14.0% in both the 1994 comparable
periods. The increase for the 1995 three month period was due
principally to lower net sales. For the six month period of 1995,
these expenses increased 5.3% as a result of increased selling
costs associated with "The Saturday Evening Post/Norman Rockwell
Home Furnishings Collection" and increased expenses associated with
the new upholstered furniture products including the expansion of
the High Point, North Carolina showroom.
During the second quarter, the Company was released from a lease
obligation at its previously closed Waynesboro, Virginia
manufacturing facility. Accordingly, the Company has recognized a
pretax credit of $1.1 million related to the reversal of an accrual
set up in 1991 for the closing of the facility. Unusual items for
the second quarter of 1995 also include a pretax charge of $936,000
for severance resulting from the resignation of the Company's Chief
Operating Officer.
As a result of the above, operating income as a percentage of net
sales decreased to 5.3% in the 1995 three month period from 5.4% in
the comparable 1994 period. For the six month period of 1995,
operating income as a percentage of net sales decreased to 5.1%
from 5.4% in the comparable 1994 period. Upholstery operations
reduced operating income by approximately $236,000 and $445,000
during the three and six month period of 1995, respectively.
Interest expense for both the 1995 three month and six month
periods increased principally due to higher debt levels.
Financial Condition, Liquidity and Capital Resources
In June 1995, the Company completed the issuance of a $10.0 million
7.57% senior note due 2005 in a private placement of debt. The
proceeds from the senior note was used to purchase two plant
facilities which were previously being leased. Long-term debt at
July 2, 1995 was $48.1 million. Aggregate maturities of long-term
debt for the next five years are as follows: 1996-$650,000; 1997-
$9.4 million; 1998-$5.1 million; 1999-$5.1 million; 2000-$5.2
million. As of July 2, 1995 approximately $13.6 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 in operations of $3.1 million in the 1995 six
month period, funded by net borrowings from the revolving credit
facility. The decrease in cash provided by operations was a result
of lower sales volume and increased inventory levels. Cash was
also required for higher interest payments offset by lower tax
payments. During the 1994 six month period, cash of $259,000 was
provided from operations. Operating cash flows in 1994 included
proceeds of $4.6 million from insurance and $2.7 million of cash
paid to suppliers both related to the 1993 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.
Net cash flow used by investing activities was $12.7 million in the
1995 period compared to $2.3 million in the 1994 period. As noted
above, proceeds of $10.0 from the senior note and additional
borrowings from the revolving credit facility were used to purchase
$10.5 million of real estate. The remaining expenditures were
primarily for plant and equipment and other assets in the normal
course of business.
Net cash provided by financing activities was $15.7 million in the
1995 period compared to $2.2 million in the comparable 1994 period.
Excluding the real estate transaction, the remaining 1995
borrowings and the 1994 borrowings provided cash for operations and
other capital expenditures. In the 1994 period, the Company
completed the private placement of $30.0 million of 7.28% senior
notes 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.
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 20, 1995.
(b) The shareholders of the Company elected one director for a
three-year term expiring at the Annual Meeting of Shareholders
to be held in 1998. The election was approved by the
following vote:
For Withheld
Edward J. Mack 4,498,911 104,875
(c)(i) 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 4,596,308
AGAINST 2,363
ABSTAIN 5,115
(c)(ii) The shareholders approved the 1994 Stock Option Plan by
the following vote:
FOR 4,098,793
AGAINST 331,854
ABSTAIN 168,104
BROKERS NONVOTE 5,035
(c)(iii) The shareholders approved the Stanley Furniture Company,
Inc. Executive Loan Plan by the following vote:
FOR 4,095,132
AGAINST 335,216
ABSTAIN 168,104
BROKERS NONVOTE 5,334
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10. The long term debt as shown on the balance sheet of
the Company at June 26, 1994 includes a $10 million
7.57% Senior Note due 2005. The documents
evidencing this obligation are omitted pursuant to
Regulation S-K, Item 601(b)(4)(iii) and will be
furnished to the Securities and Exchange Commission
upon request.
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: August 1, 1995 By: /s/ Douglas I. Payne
Douglas I. Payne
Vice President of Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
STANLEY FURNITURE COMPANY, INC.
ARTICLE 5
FINANCIAL DATA SCHEDULE
FOR PERIOD ENDING JULY 2, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-2-1995
<CASH> 223
<SECURITIES> 0
<RECEIVABLES> 19943
<ALLOWANCES> 1106
<INVENTORY> 47927
<CURRENT-ASSETS> 71216
<PP&E> 54946
<DEPRECIATION> 2171
<TOTAL-ASSETS> 138654
<CURRENT-LIABILITIES> 23442
<BONDS> 0
<COMMON> 94
0
0
<OTHER-SE> 52,219
<TOTAL-LIABILITY-AND-EQUITY> 138654
<SALES> 83152
<TOTAL-REVENUES> 83152
<CGS> 66001
<TOTAL-COSTS> 66001
<OTHER-EXPENSES> 197
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 1594
<INCOME-PRETAX> 2441
<INCOME-TAX> 928
<INCOME-CONTINUING> 1513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1513
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
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
July 2, June 26, July 2, June 26,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Earnings used in calculating
primary and fully diluted earnings
(loss) per common share:
Income from continuing operations... $ 719 $ 957 $1,513 $3,343
Loss on disposal of discontinued
division.......................... (2,758)
Net income used in calculating pri-
mary and fully diluted earnings
per common share.................. $ 719 $ 957 $1,513 $ 585
Primary earnings (loss) per common
share:
Weighted average shares outstanding
during the period................. 4,727 4,726 4,727 4,724
Add shares issuable assuming excer-
cise of stock options............. 31 66
Weighted average number of shares
used in calculating primary
earnings per common share......... 4,727 4,757 4,727 4,790
Income from continuing operations... $ .15 $ .20 $ .32 $ .70
Loss on disposal of discontinued
division.......................... (.58)
Net income.......................... $ .15 $ .20 $ .32 $ .12
Fully diluted earnings (loss) per
common share:
Weighted average shares outstanding
during the period................. 4,727 4,726 4,727 4,724
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......... 4,727 4,740 4,727 4,738
Income from continuing operations... $ .15 $ .20 $ .32 $ .70
Loss on disposal of discontinued
division.......................... (.58)
Net income.......................... $ .15 $ .20 $ .32 $ .12
</TABLE>
