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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment #1
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended October 1, 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 October 18, 1995.
Class Number
Common Stock, par value $.02 per share 4,726,550 Shares
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
(Unaudited)
October 1, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash................................. $ 273 $ 301
Accounts receivable, less allowances
of $1,243 and $933, respectively... 25,261 23,760
Inventories:
Finished goods..................... 24,285 20,893
Work-in-process.................... 4,890 5,957
Raw materials...................... 12,508 13,055
41,683 39,905
Prepaid expenses and other current
assets............................. 749 1,446
Deferred income taxes................ 2,058 2,003
Total current assets............. 70,024 67,415
Property, plant and equipment, at cost. 77,309 64,827
Less accumulated depreciation........ 23,075 20,049
54,234 44,778
Excess of cost over fair value of net
assets acquired, less accumulated
amortization of $2,268 and $2,016,
respectively......................... 11,172 11,424
Other assets........................... 1,872 902
$137,302 $124,519
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS (CONTINUED)
(In thousands, except share data)
<TABLE>
(Unaudited)
October 1, December 31,
1995 1994
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable................. $ 11,463 $ 14,659
Accrued salaries, wages and
benefits....................... 8,577 7,119
Other accrued expenses........... 2,899 2,725
Current maturities of long-term
debt........................... 650
Total current liabilities...... 23,589 24,503
Long-term debt..................... 45,634 33,395
Deferred income taxes.............. 11,403 11,541
Other long-term liabilities........ 3,365 4,250
Total liabilities................ 83,991 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............................ (11,280) (13,791)
Total stockholders' equity....... 53,311 50,830
$137,302 $124,519
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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STANLEY FURNITURE COMPANY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
Three Months Nine Months
Ended Ended
October September October September
1, 1995 25, 1994 1, 1995 25, 1994
<S> <C> <C> <C> <C>
Net sales............ $44,706 $43,845 $127,858 $132,683
Cost of sales........ 35,611 34,980 101,612 106,597
Gross profit..... 9,095 8,865 26,246 26,086
Selling, general and ad-
ministrative expenses 6,347 6,521 19,402 18,922
Unusual items (136)
Operating income. 2,748 2,344 6,980 7,164
Gain on insurance
settlement....... (2,379)
Other expense, net... 109 206 306 429
Interest expense..... 1,028 741 2,622 2,220
Income from continuing
operations before income
taxes............ 1,611 1,397 4,052 6,894
Income tax provision. 613 534 1,541 2,688
Income from continuing
operations....... 998 863 2,511 4,206
Discontinued operations
including provisions for
operating losses of $1,721.. (2,758)
Net income........... $ 998 $ 863 $ 2,511 $ 1,448
Earnings (loss) per common share:
Continuing operations. $ .21 $ .18 $ .53 $ .89
Discontinued opera-
tions............ (.58)
Net income...... $ .21 $ .18 $ .53 $ .31
Weighted average number
of shares.......... 4,727 4,726 4,727 4,725
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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STANLEY FURNITURE COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
Nine Months
Ended
October September
1, 1995 25, 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $126,394 $129,956
Cash paid to suppliers and employees.... (122,447) (126,668)
Interest paid........................... (3,019) (2,335)
Income taxes paid, net.................. (932) (4,176)
Proceeds received on insurance coverage. 4,625
Operating activities of discontinued
operations............................ (868)
Net cash (used) provided by operating
activities.......................... (4) 534
Cash flows from investing activities:
Capital expenditures.................... (12,932) (3,614)
Purchase of other assets................ (399) (407)
Proceeds from sale of assets............ 25 441
Net cash used by investing activities. (13,306) (3,580)
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.................. 2,897 (10,764)
Proceeds from insurance policy loans.... 385 345
Proceeds from issuance of stock options. 66
Net cash provided by financing
activities.......................... 13,282 3,078
Net (decrease) increase in cash......... (28) 32
Cash at beginning of year............... 301 200
Cash at end of quarter.................. $ 273 $ 232
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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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)
October 1, December 31,
1995 1994
Land and buildings.............. $32,888 $17,853
Machinery and equipment......... 42,277 41,059
Leasehold improvements.......... 153 3,986
Furniture, fixtures and office
equipment..................... 1,349 1,289
Construction in progress........ 642 640
$77,309 $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 are being depreciated on a straight-line basis over
their remaining estimated useful life of 20-30 years.
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STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands)
3. Long-Term Debt
(Unaudited)
October 1, December 31,
1995 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...... 6,131 3,234
7% convertible subordinated
debentures due April 1, 2012. 153 161
Total 46,284 33,395
Less current maturities........ 650
$45,634 $33,395
Effective August 21, 1995, the Company's $25.0 million revolving
credit facility was amended (the Amended Facility). The maturity
date was extended to August, 1998. Borrowings under the Amended
Facility bear interest at prime (prime was 8.75% on October 1,
1995) or at the Company's option at a rate equal to the reserve
adjusted LIBOR rate plus 1.0% per annum rate. The Amended Facility
is not subject to a termination penalty.
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 were 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 also
include a pretax charge for severance resulting from the
resignation of the Company's Chief Operating Officer.
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STANLEY FURNITURE COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands)
<TABLE>
5. Supplemental Cash Flow Information
Following is a reconciliation of net income to net cash provided by
operating activities for the nine months ended:
October September
1, 1995 25, 1994
<S> <C> <C>
Net income.......................... $ 2,511 $ 1,448
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization... 3,529 3,296
Loss on sale of assets.......... 44 141
Loss on disposal of fabric divi-
sion.......................... 2,758
Other........................... (30)
Changes in assets and liabili-
ties:
Accounts receivable........... (1,501) (2,500)
Inventories................... (1,778) (2,919)
Prepaid expenses and other
current assets, net......... (265) (493)
Insurance claim receivable.... 2,029
Operating assets of discon-
tinued operations........... (868)
Accounts payable.............. (3,196) (1,797)
Accrued salaries, wages and
benefits.................... 1,458 195
Other accrued expenses........ 356 (36)
Deferred income taxes......... (193) (478)
Other assets.................... (54) (48)
Other long-term liabilities..... (885) (194)
Net cash provided (used) by
operating activities............. $ (4) $ 534
</TABLE>
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ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales increased $861,000 or 2.0% for the three month period
ended October 1, 1995 from the comparable 1994 period, due
principally to higher average selling prices and the additional
volume from the new upholstered product line. For the nine month
period, net sales decreased $4.8 million or 3.6% from the
comparable 1994 period, due principally to lower unit volume,
partially offset by higher average selling prices and the
additional volume from the new upholstered product line.
Gross profit margin for the three and nine month period of 1995
increased to 20.3% and 20.5%, respectively from 20.2% and 19.7% in
each of the comparable 1994 periods. The higher gross profit
margin was due principally to increased prices, a moderation in
lumber cost increases, a more favorable product mix and the
favorable impact from the purchase of the previously leased
manufacturing facilities discussed in Note 2 of the Notes to
Financial Statements. The increase in gross profit margin was
partially offset by an increased overhead absorption rate resulting
from lower output levels during the 1995 third quarter.
Selling, general and administrative expenses as a percentage of net
sales for the three month period decreased to 14.2% from 14.9% for
the comparable 1994 period principally due to lower merchandising
expense. Selling, general and administrative expenses as a
percentage of net sales for the nine month period of 1995 increased
to 15.2% from 14.3% in the comparable 1994 periods due to lower net
sales and increased selling cost associated with new products.
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 as
an unusual item 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 1995 also included 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 for the three month period increased to 6.1% from 5.3% in the
comparable three month period of 1994. Operating income as a
percentage of net sales for the nine month period approximated the
1994 period. The Company estimates that upholstery operations
reduced operating income by approximately $289,000 and $734,000
during the three and nine month period of 1995, respectively.
Interest expense for both the 1995 three month and nine month
periods increased principally due to higher debt levels, resulting
from the purchase of two previously leased manufacturing facilities
on June 30, 1995.
Financial Condition, Liquidity and Capital Resources
In June 1995, the Company issued a $10.0 million 7.57% senior note
due 2005 in a private placement of debt. The proceeds from the
senior note were used to purchase two previously leased
manufacturing facilities. Long-term debt at October 1, 1995 was
$45.6 million. Aggregate maturities of long-term debt for the next
five years are as follows: 1996-$650,000; 1997-$878,000; 1998-
$11.2 million; 1999-$5.1 million; 2000-$5.2 million. As of October
1, 1995 approximately $17.8 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.
Cash provided from the Company's operations during the 1995 nine
month period virtually funded operating activities. Cash was
required for higher interest payments offset by lower tax payments
and less cash paid to suppliers and employees due to reduced
inventory levels. During the 1994 nine month period, 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. 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 at the
Stanleytown manufacturing facility. 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 used by investing activities was $13.3 million in the 1995
period compared to $3.6 million in the 1994 period. As noted
above, proceeds of $10.0 million from the senior note and
additional borrowings from the revolving credit facility were used
to purchase $10.5 million of previously leased manufacturing
facilities. The remaining expenditures were primarily for plant
and equipment and other assets in the normal course of business,
funded by borrowings from the revolving credit facility.
Net cash provided by financing activities was $13.3 million in the
1995 period compared to $3.1 million in the comparable 1994 period.
The 1994 borrowings of $3.1 million 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 a term note and
a portion of the revolving credit facility.
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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 24, 1995 By: /s/ Douglas I. Payne
Douglas I. Payne
Vice President of Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
