STANLEYTOWN, VA - Stanley Furniture Company, Inc. (Nasdaq-NGS:STLY) today reported sales and operating results for the first quarter of 2014.
“Our Stanley business is growing and profitable. We are successfully launching new products into the marketplace each quarter. The company remains debt-free with a healthy balance sheet”
Financial results for the first quarter of 2014:
• Net sales were $21.9 million, a 16% decrease compared to the first quarter of 2013.
• Gross profit, excluding restructuring related charges, was 9.1% of net sales compared to 13.0% in prior year comparable quarter.
• Selling, general and administrative expenses, excluding restructuring charges, were $4.8 million (22.1% of net sales) compared to $4.6 million (17.7% of net sales) in the prior year first quarter.
• Operating loss, net of restructuring, was $2.8 million compared to a loss of $1.2 million in the prior year first quarter.
• As of March 29, 2014, the company’s financial position reflected $16.7 million in cash, restricted cash and short-term investments.
“The decision we announced on April 1, 2014 to no longer pursue our long-term goals associated with the Young America brand was painful for both us and our customers, representatives and associates who have dedicated themselves to the brand over the past several years. We made great strides towards building a business model that would successfully compete in a quickly changing consumer marketplace but concluded we could not ultimately achieve profitability within an acceptable amount of time,” commented Glenn Prillaman, President and Chief Executive Officer.
The company’s Stanley brand continued to prove its potential with double digit order growth during the first quarter and a strong book of new orders. “Our Stanley business is growing and profitable. We are successfully launching new products into the marketplace each quarter. The company remains debt-free with a healthy balance sheet,” stated Prillaman.
Impact of Restructuring
Non-cash restructuring charges in the first quarter of 2014 related to the announcement on Young America totaled $1.2 million. These charges were approximately split between cost of goods sold and selling, general and administrative expenses and consisted of reevaluating inventories and accounts receivable values based on ceasing production of the Young America product line.
During the second quarter of this year the company expects further restructuring charges as it ceases production, communicates termination dates for affected associates and recognizes any further asset impairments. The company expects cash restructuring charges mostly consisting of severance and other termination costs to occur mostly in the third quarter and range from $500,000 to $900,000. The company also expects to receive additional proceeds from the sale of property, plant and equipment, which has a book value of approximately $18 million.
Balance Sheet
Cash, restricted cash and short-term investments at quarter-end were $16.7 million, down from $19.0 million at December 31, 2013. Working capital, excluding cash, restricted cash and short-term investments, remained relatively flat to year-end December 31, 2013 at $36.6 million. The company expects the closure of its Young America facility in Robbinsville, NC to be cash generative in total, although it expects to use cash initially to wind down production and service wholesale customers who were allowed to place orders through April 28. The amount of cash ultimately returned to the balance sheet will be dependent upon the sale of plant, property, equipment and intellectual property.
Outlook
“We are pleased with the double-digit order growth that our Stanley brand experienced in the first quarter even with the challenging retail environment. We expect further growth in the coming periods as new introductions gain traction. We will also benefit from the increased time, attention and resources focused on a single brand. Over time, we expect our gross margin to benchmark favorably with other companies’ casegoods, and we intend to maintain a lean overhead structure that is consistent with upper-end brands that support wholesale customers in their efforts to market to today’s consumer,” concluded Prillaman.
About the Company
Established in 1924, Stanley Furniture Company, Inc. is a leading design and marketing resource in the upscale segment of the wood residential market. Designs feature superior finish, styling and piece assortment supported by an overseas manufacturing model. The company distributes its Stanley Furniture brand through a network of carefully chosen retailers and interior designers worldwide. The company’s common stock is traded on the NASDAQ stock market under the symbol STLY.
All earnings per share amounts are shown on a diluted basis.
| STANLEY FURNITURE COMPANY, INC. | ||||||||
| Consolidated Operating Results | ||||||||
| (in thousands, except per share data) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 29, | March 30, | |||||||
| 2014 | 2013 | |||||||
| Net sales | $ | 21,891 | $ | 26,052 | ||||
| Cost of sales | 20,498 | 22,667 | ||||||
| Gross profit | 1,393 | 3,385 | ||||||
| Selling, general and administrative expenses | 5,418 | 4,857 | ||||||
| Operating loss | (4,025 | ) | (1,472 | ) | ||||
| Other income, net | 331 | 2 | ||||||
| Interest income | 6 | 21 | ||||||
| Interest expense | 732 | 652 | ||||||
| Loss before income taxes | (4,420 | ) | (2,101 | ) | ||||
| Income tax benefit | (10 | ) | (7 | ) | ||||
| Net loss | $ | (4,410 | ) | $ | (2,094 | ) | ||
| Diluted loss per share | $ | (.31 | ) | $ | (.15 | ) | ||
| Weighted average number of shares | 14,163 | 14,162 | ||||||
|
STANLEY FURNITURE COMPANY, INC. |
||||||||
| Supplemental Information | ||||||||
| Reconciliation of GAAP to Non-GAAP Operating Results | ||||||||
| Three Months Ended | ||||||||
|
March 29, |
March 30, | |||||||
| 2014 | 2013 | |||||||
| Reconciliation of gross profit as reported to gross profit adjusted: | ||||||||
| Gross profit as reported | $ | 1,393 | $ | 3,385 | ||||
| Restructuring charge | 590 |
- |
||||||
| Gross profit expenses as adjusted | $ | 1,983 | $ | 3,385 | ||||
| Percentage of net sales: | ||||||||
| Gross Profit as reported | 6.4 | % | 13.0 | % | ||||
| Restructuring charge | 2.7 | % |
- |
|||||
| Gross profit as adjusted | 9.1 | % | 13.0 | % | ||||
| Reconciliation of selling, general and administrative expenses (SG&A) as reported to SG&A expenses adjusted: | ||||||||
| SG&A expenses as reported | $ | 5,418 | $ | 4,857 | ||||
| Restructuring charge | 588 | 260 | ||||||
| SG&A expenses as adjusted | $ | 4,830 | $ | 4,597 | ||||
| Percentage of net sales: | ||||||||
| SG&A expenses as reported | 24.8 | % | 18.6 | % | ||||
| Restructuring charge | 2.7 | % | 1.0 | % | ||||
| SG&A expenses as adjusted | 22.1 | % | 17.6 | % | ||||
| Reconciliation of operating loss as reported to operating loss adjusted: | ||||||||
| Operating loss as reported | $ | (4,025 | ) | $ | (1,472 | ) | ||
| Restructuring charge | 1,178 | 260 | ||||||
| Operating loss as adjusted | $ | (2,847 | ) | $ | (1,212 | ) | ||
| Reconciliation of net loss as reported to net loss adjusted: | ||||||||
| Net loss as reported | $ | (4,410 | ) | $ | (2,094 | ) | ||
| Restructuring charge | 1,178 | 260 | ||||||
| Net loss as adjusted | $ | (3,232 | ) | $ | (1,834 | ) | ||
| Reconciliation of diluted EPS as reported to diluted EPS adjusted: | ||||||||
| Diluted EPS as reported | $ | (.31 | ) | $ | (.15 | ) | ||
| Restructuring charge | .08 | .02 | ||||||
| Diluted EPS as adjusted | $ | (.23 | ) | $ | (.13 | ) | ||
Note:
We have included the above reconciliation of reported financial measures according to GAAP to non-GAAP financial measures because we believe that this reconciliation provides useful information that allows investors to compare operating results to those of other periods by excluding restructuring related charges. These measures should be considered in addition to results prepared in accordance with GAAP and should not be considered a substitute for or superior to GAAP results.
| STANLEY FURNITURE COMPANY, INC. | ||||||
| Consolidated Condensed Balance Sheets | ||||||
| (in thousands) | ||||||
| March 29, | December 31, | |||||
| 2014 | 2013 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and equivalents | $ | 9,964 | $ | 7,218 | ||
| Restricted cash | 1,737 | 1,737 | ||||
| Short-term investments | 5,000 | 10,000 | ||||
| Accounts receivable, net | 12,758 | 12,002 | ||||
| Inventories | 32,442 | 33,666 | ||||
| Prepaid expenses and other current assets | 3,576 | 3,964 | ||||
| Deferred income taxes | 572 | 699 | ||||
| Total current assets | 66,049 | 69,286 | ||||
| Property, plant and equipment, net | 19,681 | 20,144 | ||||
| Other assets | 4,722 | 5,794 | ||||
| Total assets | $ | 90,452 | $ | 95,224 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 7,647 | $ | 7,897 | ||
| Accrued expenses | 5,115 | 5,301 | ||||
| Total current liabilities | 12,762 | 13,198 | ||||
| Deferred income taxes | 572 | 699 | ||||
| Other long-term liabilities | 5,699 | 5,686 | ||||
| Stockholders' equity | 71,419 | 75,641 | ||||
| Total liabilities and stockholders' equity | $ | 90,452 | $ | 95,224 | ||
| STANLEY FURNITURE COMPANY, INC. | ||||||||
| Consolidated Condensed Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| Three Months Ended | ||||||||
| March 29, | March 30, | |||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Cash received from customers | $ | 20,724 | $ | 23,960 | ||||
| Cash paid to suppliers and employees | (22,853 | ) | (30,909 | ) | ||||
| Interest received | 3 | 18 | ||||||
| Income taxes paid, net |
- |
(96 | ) | |||||
| Net cash used by operating activities | (2,126 | ) | (7,027 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Sale of short-term investments | 5,000 | 5,000 | ||||||
| Capital expenditures | (51 | ) | (1,151 | ) | ||||
| Purchase of other assets | (44 | ) | (761 | ) | ||||
| Net cash provided by investing activities | 4,905 | 3,088 | ||||||
| Cash flows from financing activities: | ||||||||
| Purchase and retirement of common stock |
- |
(353 | ) | |||||
| Capital lease payments |
(33 |
) | (33 | ) | ||||
| Net cash used by financing activities | (33 | ) | (386 | ) | ||||
| Net increase (decrease) in cash and equivalents | 2,746 | (4,325 | ) | |||||
| Cash and equivalents at beginning of period | 7,218 | 10,930 | ||||||
| Cash and equivalents at end of period | $ | 9,964 | $ | 6,605 | ||||
|
Reconciliation of net loss to net cash used by operating activities: |
||||||||
| Net loss | $ | (4,410 | ) | $ | (2,094 | ) | ||
| Depreciation and amortization | 601 | 448 | ||||||
| Stock-based compensation | 223 | 247 | ||||||
| Other, net | 233 |
- |
||||||
| Changes in working capital | 452 | (6,180 | ) | |||||
| Other assets | 729 | 649 | ||||||
| Other long-term liabilities | 46 | (97 | ) | |||||
| Net cash used by operating activities | $ | (2,126 | ) | $ | (7,027 | ) | ||
Source: Stanley Furniture
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