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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996 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 April 15, 1996.
Class Number
Common Stock, par value $.02 per share 4,726,578 Shares
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STANLEY FURNITURE COMPANY, INC.
BALANCE SHEETS
(In thousands, except share data)
ASSETS (Unaudited)
March 31, December 31,
1996 1995
Current assets:
Cash.................................... $ 1,298 $ 298
Accounts receivable, less allowances
of $1,206 and $1,157.................. 26,366 22,732
Inventories:
Finished goods........................ 21,791 22,391
Work-in-process....................... 5,712 5,368
Raw materials......................... 12,602 12,408
40,105 40,167
Prepaid expenses and other current assets 507 435
Deferred income taxes.................... 2,420 2,420
Total current assets................... 70,696 66,052
Property, plant and equipment, at cost..... 78,719 78,399
Less accumulated depreciation............ 25,118 24,168
53,601 54,231
Goodwill, less accumulated amortization of
$2,436 and $2,352........................ 11,004 11,088
Other assets............................... 3,138 3,180
$138,439 $134,551
LIABILITIES
Current liabilities:
Current maturities of long-term debt.... $ 650 $ 650
Accounts payable........................ 14,619 13,637
Accrued salaries, wages and benefits.... 7,897 6,619
Other accrued expenses.................. 3,816 2,724
Total current liabilities............. 26,982 23,630
Long-term debt, exclusive of current
maturities.............................. 39,503 40,417
Deferred income taxes..................... 12,180 12,180
Other long-term liabilities............... 3,452 3,585
Total liabilities....................... 82,117 79,812
STOCKHOLDERS' EQUITY
Common stock, $.02 par value, 10,000,000 shares
authorized, 4,726,578 shares
issued and outstanding.................. 94 94
Capital in excess of par value............ 64,547 64,547
Deficit................................... (8,319) (9,902)
Total stockholders' equity.............. 56,322 54,739
$138,439 $134,551
The accompanying notes are an integral part
of the financial statements.
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STANLEY FURNITURE COMPANY, INC.
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months
Ended
March 31, April 2,
1996 1995
Net sales............................ $ 48,190 $ 44,989
Cost of sales........................ 37,421 35,888
Gross profit..................... 10,769 9,101
Selling, general and administrative
expenses........................... 7,046 6,903
Operating income................. 3,723 2,198
Other expense, net................... 249 131
Interest expense..................... 879 765
Income before income tax
provision...................... 2,595 1,302
Income tax provision................. 1,012 508
Net income........................ $ 1,583 $ 794
Net income per common share.......... $ .33 $ .17
Weighted average number of shares.... 4,727 4,727
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)
Three Months
Ended
March 31, April 2,
1996 1995
Cash flows from operating activities:
Cash received from customers....................... $ 44,497 $ 43,810
Cash paid to suppliers and employees............... (40,844) (45,148)
Interest paid...................................... (1,305) (1,238)
Income taxes recovered, net........................ 286 618
Net cash provided (used) by operating activities. 2,634 (1,958)
Cash flows from investing activities:
Capital expenditures............................... (701) (756)
Purchase of other assets........................... (19) (36)
Proceeds from sale of assets....................... 25
Net cash used by investing activities............ (720) (767)
Cash flows from financing activities:
Proceeds from (repayment of) revolving credit
facility, net.................................... (914) 2,647
Net increase (decrease) in cash.................... 1,000 (78)
Cash at beginning of year.......................... 298 301
Cash at end of quarter............................. $ 1,298 $ 223
Reconciliation of net income to net cash provided
(used) by operating activities:
Net income......................................... $ 1,583 $ 794
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization.................. 1,282 1,182
Loss on sale of assets......................... 150 45
Changes in assets and liabilities:
Accounts receivable.......................... (3,634) (1,030)
Inventories.................................. 62 (3,513)
Income taxes recoverable..................... 945
Prepaid expenses and other current
assets, net................................ (185) (309)
Accounts payable............................. 982 (304)
Accrued salaries, wages and benefits......... 1,278 863
Other accrued expenses....................... 1,092 (623)
Other assets................................... 83 70
Other long-term liabilities.................... (59) (78)
Net cash provided (used) by operating activities... $ 2,634 $ (1,958)
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)
March 31, December 31,
1996 1995
Land and buildings.............. $33,594 $33,594
Machinery and equipment......... 42,768 43,127
Leasehold improvements.......... 153 153
Furniture, fixtures and office
equipment..................... 1,388 1,387
Construction in progress........ 816 138
$78,719 $78,399
3. Long-Term Debt
(Unaudited)
March 31, December 31,
1996 1995
7.28% senior notes due March
15, 2004..................... $30,000 $30,000
7.57% senior note due June
30, 2005..................... 10,000 10,000
Revolving credit facility...... 914
7% convertible subordinated
debentures due April 1, 2012. 153 153
Total 40,153 41,067
Less current maturities........ 650 650
$39,503 $40,417
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ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales increased $3.2 million, or 7.1%, for the three month
period ended March 31, 1996, from the comparable 1995 period. The
increase was due principally to higher unit volume and higher
average selling prices.
Gross profit margin for the three month period of 1996 increased to
22.3 % from 20.2% for the comparable 1995 period. The higher gross
profit margin was due primarily to stablizing raw material costs,
improved operating efficiencies and the favorable impact from the
June 1995 purchase of the previously leased manufacturing
facilities. Gross profit margin improved despite the loss of
several production days due to severe winter weather.
Selling, general and administrative expenses increased $143,000, or
2.1%, over the prior year quarter. However, these expenses as a
percentage of net sales decreased to 14.6 % for the 1996 period
from 15.3% in the comparable 1995 period. The lower percentage was
due to higher net sales and lower selling cost associated with new
products, as compared to the 1995 period.
As a result of the above, operating income increased to $3.7
million, or 7.7 % of net sales, from 2.2 million, or 4.9% in the
comparable 1995 period.
Interest expense for the three month period ended March 31, 1996,
increased due to higher average debt levels resulting from the June
1995 purchase of two previously leased manufacturing facilities.
The Company's effective income tax rate was 39.0% for the three
month period in 1996 and 1995.
Financial Condition, Liquidity and Capital Resources
Long-term debt at March 31, 1996, was $39.5 million. Debt service
requirements for the next five years are $650,000 in 1996, $878,000
in 1997, $5.1 million in 1998 and 1999, and $5.2 million in 2000.
As of March 31, 1996, approximately $23.9 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 generated cash from operations of $2.6 million in the
1996 three month period compared to cash used in operations of $2.0
million during the 1995 period. The cash generated in 1996 was
used to fund capital expenditures and reduce borrowings under the
revolving credit facility. Cash was required in the 1995 period to
support higher accounts receivable and inventory levels as well as
higher payments to suppliers and employees. In the 1995 period
cash was also required for higher interest payments, partially
offset by income taxes recovered.
Net cash used by investing activities was $720,000 in the 1996
period compared to $767,000 in the 1995 period. Expenditures in
each year were primarily for plant and equipment and other assets
in the normal course of business.
Net cash used by financing activities was $914,000 in the 1996
period compared to cash provided of $2.6 million in the comparable
1995 period. Cash generated from operations in the 1996 period,
reduced borrowings under the revolving credit facility. In 1995,
borrowings from the revolving credit facility provided cash for
operations and capital expenditures.
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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.
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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: April 17, 1996 By: /s/ Douglas I. Payne
Douglas I. Payne
Vice President of Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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Exhibit 11
STANLEY FURNITURE COMPANY, INC.
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
(In thousands, except per share data)
March 31, April 2,
1996 1995
Net income used in calculating primary
and fully diluted earnings per
common share......................... $1,583 $ 794
Primary earnings per common share:
Weighted average shares outstanding.... 4,727 4,727
Add shares issuable assuming exercise
of stock options..................... 76
Weighted average number of shares
used in calculating primary
earnings per common share........ 4,803 4,727
Primary earnings per common share.... $ .33 $ .17
Fully diluted earnings per common share:
Weighted average shares outstanding.... 4,727 4,727
Add shares issuable assuming excer-
cise of stock options................ 76
Weighted average number of shares
used in calculating fully diluted
earnings per common share........ 4,803 4,727
Fully diluted earnings per common
share............................. $ .33 $ .17
