-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, b8ybs4/0rAQtVpRlqkCZF5FULdUxYMNTbyac5/SLnrgRzk+SpfUl2ovDO7fYbFVJ HbTQTwSBL5J/pUhGDZmuSw== 0000797465-94-000001.txt : 19940517 0000797465-94-000001.hdr.sgml : 19940517 ACCESSION NUMBER: 0000797465-94-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940327 FILED AS OF DATE: 19940506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANLEY FURNITURE CO INC/ CENTRAL INDEX KEY: 0000797465 STANDARD INDUSTRIAL CLASSIFICATION: 2510 IRS NUMBER: 541272589 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14938 FILM NUMBER: 94526450 BUSINESS ADDRESS: STREET 1: ROUTE 57 CITY: STANLEYTOWN STATE: VA ZIP: 24168 BUSINESS PHONE: 7036272000 MAIL ADDRESS: STREET 1: ROUTE 57 CITY: STANLEYTOWN STATE: VA ZIP: 24168 FORMER COMPANY: FORMER CONFORMED NAME: STANLEY INTERIORS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 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 27, 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 May 4, 1994. Class Number Common Stock, par value $.02 per share 4,725,880 Shares PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STANLEY FURNITURE COMPANY, INC. BALANCE SHEETS (In thousands except share data) (Unaudited) ASSETS March 27, December 31, 1994 1993 Current assets: Cash................................. $ 219 $ 200 Accounts receivable, less allowances of $1,135 and $827, respectively... 26,763 22,749 Inventories: Finished goods..................... 19,539 17,398 Work-in-process.................... 6,672 6,076 Raw materials...................... 13,631 14,210 39,842 37,684 Prepaid expenses and other current assets............................. 404 554 Insurance claim receivable........... 4,600 1,966 Deferred income taxes................ 3,040 3,229 Net assets of discontinued operations 591 1,994 Total current assets............ 75,459 68,376 Property, plant and equipment, at cost. 60,722 60,211 Less accumulated depreciation........ 17,160 16,277 43,562 43,934 Excess of cost over fair value of net assets acquired, less accumulated amortization of $1,764 and $1,680, respectively...................... 11,676 11,760 Other assets........................... 911 789 $131,608 $124,859
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. BALANCE SHEETS (CONTINUED) (In thousands except share data) (Unaudited) March 27, December 31, 1994 1993 LIABILITIES Current liabilities: Current maturities of long-term debt........................... $ 625 Accounts payable.................... $ 14,839 15,411 Accrued salaries, wages and benefits....................... 8,831 8,183 Other accrued expenses.............. 4,072 3,324 Total current liabilities...... 27,742 27,543 Long-term debt, exclusive of current maturities............... 38,683 32,022 Deferred income taxes................. 11,423 12,828 Other long-term liabilities........... 6,862 5,262 Total liabilities.............. 84,710 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............................... (16,521) (16,149) Total stockholders' equity....... 46,898 47,204 $131,608 $124,859
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. STATEMENTS OF OPERATIONS (Unaudited) (In thousands) Three Months Ended March 27, March 28, 1994 1993 Net sales........................ $44,737 $35,636 Cost of sales: From products sold............. 36,060 29,675 Business interruption insurance (1,637) 36,060 28,038 Gross profit................. 8,677 7,598 Selling, general and administrative expenses........ 6,245 5,772 Operating income............. 2,432 1,826 Gain on insurance settlement..... (2,379) Other expense, net............... 140 239 Interest expense................. 727 1,067 Income from continuing opera- tions before income taxes.. 3,944 520 Income tax provision............. 1,558 215 Income from continuing operations 2,386 305 Discontinued operations: Loss on disposal of fabric div- ision, including an addition- al provision of $1,329 for operating losses during phase- out period (less applicable income tax benefit of $1,736) (2,758) Net income (loss)................ $ (372) $ 305 Earnings (loss) per common share: Continuing operations.......... $ .49 $ .10 Discontinued operations........ (.57) Net income (loss)........... $ (.08) $ .10 Weighted average number of shares 4,823 2,996
The accompanying notes are an integral part of the financial statements. STANLEY FURNITURE COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended March 27, March 28, 1994 1993 Cash flows from operating activities: Cash received from customers........... $40,595 $38,352 Cash paid to suppliers and employees... (43,497) (37,690) Interest paid.......................... (539) (1,323) Income taxes paid, net................. (1,291) (7) Advances received on insurance coverage 25 7,296 Operating activities of discontinued operations........................... (599) (215) Net cash provided (used) by operating activities............ (5,306) 6,413 Cash flows from investing activities: Capital expenditures................... (573) (413) Purchase of other assets............... (198) (116) Proceeds from sale of assets........... 37 18 Investing activities of discontinued operations........................... (43) (9) Net cash used by investing activities (777) (520) Cash flows from financing activities: Issuance of senior notes............... 30,000 Repayment of term note................. (16,569) (539) Repayment of revolving credit facility. (7,395) (5,273) Proceeds from issuance of stock options 66 Net cash provided (used) by financing activities......................... 6,102 (5,812) Net increase in cash..................... 19 81 Cash at beginning of year................ 200 649 Cash at end of quarter................... $ 219 $ 730
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 (Unaudited) March 27, December 31, 1994 1993 Land and buildings............. $17,300 $16,923 Machinery and equipment........ 38,491 37,552 Leasehold improvements......... 2,921 2,914 Furniture, fixtures and office equipment.................... 1,028 1,026 Construction in progress....... 982 1,796 $60,722 $60,211 3. Long-Term Debt (Unaudited) March 27, December 31, 1994 1993 7.28% senior notes due March 15, 2004..................... $30,000 Revolving credit facility...... 8,524 $15,919 Term note payable.............. 16,569 7% convertible subordinated debentures due April 1, 2012. 159 159 Total 38,683 32,647 Less current maturities........ 625 $38,683 $32,022 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. STANLEY FURNITURE COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (In thousands except share and per share data) 4. Discontinued Operations In April 1994, the Company announced the closing of its Norman's of Salisbury division ("Norman's"), scheduled for June 1994. As a result, the Company recorded a $2.8 million ($4.5 million pretax) additional loss provision in the first quarter. Steps taken by management designed to improve Norman's profitability had resulted in improved operating results in 1993. However, Norman's incurred a significant operating loss in the first quarter of 1994 from continued erosion of its market share. In early April 1994, after renewing contacts with several potential buyers, management concluded that Norman's could not be sold as an ongoing operation and decided to close the division. The loss provision primarily represents factory closing costs including the write down of related assets and estimated operating losses through closure, employee benefits and long-term lease commitments. The Company plans to utilize a portion of the Norman's facilities as a cut and sew operation in the production of the upholstery furniture products which are planned for introduction in the fall of 1994. Sales applicable to Norman's were $2.2 million and $3.0 million for the three months ended March 27, 1994 and March 28, 1993, respectively. The adjusted net realizable value of Norman's net assets of $591 is included in "Net assets of discontinued operations". 5. Insurance Claim Accounting The Company reached a final settlement with its insurance carrier in connection with the February 1993 fire at the Stanleytown facility. Consequently, the Company recorded a gain on insurance settlement of $2.4 million in the first quarter of 1994. In connection with the fire, the Company incurred costs of $30.5 million and has received advances from insurance coverage of $25.9 million through the first quarter of 1994. The insurance claim receivable of $4.6 million recorded at March 27, 1994 was collected in April 1994. 6. Common Stock and Stock Options During the three month period ended March 27, 1994, stock options for 5,112 shares of common stock were exercised at prices ranging from $8.50 to $12.86 per share. 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 (loss) to net cash provided (used) by operating activities for the three months ended (in thousands): March 27, March 28, 1994 1993 Net income.......................... $ (372) $ 305 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization.... 1,070 1,059 Loss (gain) on sale of assets.... 65 (10) Loss on disposal of fabric divi- sion........................... 2,758 Change in assets and liabilities: Accounts receivable............ (4,014) 2,803 Inventories.................... (2,158) 560 Income taxes recoverable....... 23 Prepaid expenses and other current assets, net.......... 150 428 Operating assets of dis- continued operations......... (599) (215) Accounts payable............... (761) 314 Accrued salaries, wages and benefits..................... 370 196 Other accrued expenses......... 1,021 607 Advances received from insurance, net of estimated claim........................ (2,571) 746 Accrued restructuring costs.... (108) Deferred income taxes.......... (260) (72) Other assets..................... 59 49 Other long-term liabilities...... (64) (272) Net cash provided (used) by operating activities............. $(5,306) $6,413 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales increased $9.1 million or 25.6% for the three month period ended March 27, 1994 from the comparable 1993 period due principally to higher unit volume and higher average selling prices. Lower unit volume in the 1993 period was due principally to the disruption in production caused by the February 1993 fire at the Stanleytown facility. Gross profit margin decreased to 19.4% in the 1994 period from 21.3% in the comparable 1993 period. The higher gross profit percentage in the 1993 period was due principally to the recognition of $1.6 million of business interruption insurance without the related sales revenue. Selling, general and administrative expenses increased 8.2% to $6.2 million in the 1994 period from $5.8 million in the 1993 period. Increases were due principally to higher selling expenses resulting from higher sales in the 1994 period. Selling, general and administrative expenses as a percentage of net sales decreased to 14.0% from 16.2% in the 1993 period principally as a result of higher net sales. As a result of the above, first quarter 1994 operating income increased to $2.4 million from $1.8 million in the comparable 1993 period, an increase of 33.2%. Operating income as a percentage of net sales increased to 5.4% in the 1994 period from 5.1% in the comparable 1993 period. Interest expense in the 1994 period decreased $340,000 from the 1993 period due principally to lower debt levels resulting from the July 1993 public offering. The Company's effective income tax rate decreased to 39.5% for the three month period ended March 27, 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 recorded for 1993. 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 notes and a portion of the revolving credit facility. Long- term debt at March 27, 1994 was $38.7 millon. The Company has no debt service requirements for the remainder of 1994 or in 1995. Debt service requirements will be $8.5 million in 1996, $159,000 in 1997 and $4.3 million in each of 1998 through 2004. As of March 27, 1994, approximately $9.6 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. During the three month period ended March 27, 1994, the Company used cash of $5.3 million in operations funded by net borrowings from the revolving credit facility. Cash generated from operations in the comparable 1993 period of $6.4 million was used to fund capital expenditures and reduce borrowings under the Company's senior credit facility by $5.8 million. Cash was required in the 1994 period to support higher accounts receivable and inventory levels as well as higher payments to suppliers, employees, and for income taxes. These higher payments were partially offset by lower interest payments. The Company generated cash from operations in the 1993 period principally due to lower payments to suppliers and employees resulting from the decreased production levels caused by the February 1993 Stanleytown fire and the resulting lower accounts receivable and inventory levels. Net cash flow used by investing activities was $777,000 in the 1994 period compared to $520,000 in the comparable 1993 period. 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 $6.1 million in the 1994 period compared to net cash used by financing activities of $5.8 million in the 1993 period. 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. Cash provided by financing activities in the 1994 period was used to fund operations and capital expenditures. In the 1993 period, cash provided by operations enabled the Company to reduce borrowings under its senior credit facility by $5.8 million. Discontinued Operations In April 1994, the Company announced the closing of its Norman's of Salisbury division ("Norman's"), scheduled for June 1994. As a result, the Company recorded a $2.8 million ($4.5 million pretax) additional loss provision in the first quarter. Steps taken by management designed to improve Norman's profitability had resulted in improved operating results in 1993. However, Norman's incurred a significant operating loss in the first quarter of 1994 from continued erosion of its market share. In early April 1994, after renewing contacts with several potential buyers, management concluded that Norman's could not be sold as an ongoing operation and decided to close the division. The loss provision primarily represents factory closing costs including the write down of related assets and estimated operating losses through closure, employee benefits and long-term lease commitments. The Company plans to utilize a portion of the Norman's facilities as a cut and sew operation in the production of the upholstery furniture products which are planned for introduction in the fall of 1994. Sales applicable to Norman's were $2.2 million and $3.0 million for the three months ended March 27, 1994 and March 28, 1993, respectively. The adjusted net realizable value of Norman's net assets of $591,000 is included in "Net assets of discontinued operations". PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11. Schedule of Computation of Earnings Per Share.* (b) Reports on Form 8-K None. * Filed herewith. 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: May 6, 1994 By: /s/ Douglas I. Payne Douglas I. Payne Vice President of Finance, Secretary and Treasurer (Principal Financial and Accounting Officer) EX-11 2 EXHIBIT 11 - COMPUTATION OF EARNINGS EXHIBIT 11 STANLEY FURNITURE COMPANY, INC. SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE FOR THE THREE MONTHS ENDED (In thousands, except per share data) March 27, March 28, 1994 1993 Earnings used in calculating primary and fully diluted earnings (loss) per common share: Income from continuing operations...... $2,386 $ 305 Loss on disposal of discontinued operations........................... (2,758) Net income (loss) used in calcu- lating primary and fully diluted earnings (loss) per common share. $ (372) $ 305 Primary earnings (loss) per common share: Weighted average shares outstanding.... 4,723 2,996 Add shares issuable assuming excercise of stock options..................... 100 Weighted average number of shares used in calculating primary earnings (loss) per common share. 4,823 2,996 Income from continuing operations...... $ .49 $ .10 Loss on disposal of discontinued operations........................... (.57) Net income (loss)...................... $ (.08) $ .10 Fully diluted earnings (loss) per common share: Weighted average shares outstanding.... 4,723 2,996 Add shares issuable assuming excer- cise of stock options................ 122 Weighted average number of shares used in calculating fully diluted earnings (loss) per common share. 4,845 2,996 Income from continuing operations...... $ .49 $ .10 Loss on disposal of discontinued operations........................... (.57) Net income (loss)...................... $ (.08) $ .10 -----END PRIVACY-ENHANCED MESSAGE-----