Gross margin increased to $3.8 million (14.7% of net sales) in the third quarter from $3.4 million (12.3% of net sales) in the second quarter excluding restructuring credit. “We made significant progress on our path to become a profitable and efficient domestic manufacturer during the quarter,” said Micah Goldstein, chief operating and financial officer. “The gross margin improvement in the third quarter came primarily from improvements related to the modernization efforts underway in our factory in Robbinsville, NC.”
Cash at quarter-end was $19.5 million including restricted cash. Working capital, excluding cash and restricted cash, increased to $24.3 million from $22.6 million at the end of the second quarter, mostly driven by a $2.8 million increase in finished goods inventory. Capital expenditures during the third quarter were $1.7 million as we began to invest in our Robbinsville manufacturing facility. “We believe the consistent narrowing of our operating losses along with the short investment payback on the projects we are undertaking protects our balance sheet as we strategically invest in our business.” Goldstein commented.
“The overseas sourcing efforts associated with our Stanley brand are paying dividends, and now we accelerate our investments in the domestic operations which support our Young America brand’s differentiation in the marketplace. This will take time, but we will emerge a stronger company with improved product offerings addressing changing distribution channels,” Prillaman concluded.
All earnings per share amounts are on a diluted basis.
Established in 1924, Stanley Furniture Co., Inc. is a leading designer and manufacturer of wood furniture targeted at the premium price range of the residential market. Its common stock is traded on the NASDAQ stock market under the symbol STLY.
Conference Call Details
The Company will host a conference call Thursday morning, Oct. 20, 2011 at 9:00 a.m. Eastern Time. The dial-in-number is (877) 407-8029. The call will also be web cast and archived on the Company’s web site at StanleyFurniture.com. The dial-in-number for the replay (available through October 28, 2011) is (877) 660-6853, the account reference number is 275 and the conference number is 379411.
Forward-Looking Statements
Certain statements made in this news release are not based on historical facts, but are forward-looking statements. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “may,” “will,” “should,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These statements reflect our reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include our success in profitably producing Young America products in our domestic manufacturing facility, disruptions in offshore sourcing including those arising from supply or distribution disruptions or those arising from changes in political, economic and social conditions, as well as laws and regulations, in countries from which we source products, international trade policies of the United States and countries from which we source products, lower sales due to worsening of current economic conditions, the inability to raise prices in response to inflation and increasing costs, the cyclical nature of the furniture industry, failure to anticipate or respond to changes in consumer tastes and fashions in a timely manner, business failures or loss of large customers, competition in the furniture industry including competition from lower-cost foreign manufacturers, our success in transitioning our adult product line to offshore vendors, the inability to obtain sufficient quantities of quality raw materials in a timely manner, environmental, health, and safety compliance costs, and extended business interruption at our manufacturing facility. Any forward-looking statement speaks only as of the date of this news release and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.
STANLEY FURNITURE CO., INC. | ||||||||||||||||||||
Consolidated Operating Results | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Oct. 1, | Jul. 2, | Apr. 2, | Dec. 31, | |||||||||||||||||
2011 | 2011 | 2011 | 2010 | |||||||||||||||||
Net sales | $ | 26,051 | $ | 27,393 | $ | 26,571 | $ | 27,689 | ||||||||||||
Cost of sales | 22,227 | 23,760 | 24,886 | 33,711 | ||||||||||||||||
Gross profit (loss) | 3,824 | 3,633 | 1,685 | (6,022 | ) | |||||||||||||||
Selling, general and administrative expenses | 4,952 | 4,748 | 5,121 | 4,363 | ||||||||||||||||
Operating loss | (1,128 | ) | (1,115 | ) | (3,436 | ) | (10,385 | ) | ||||||||||||
Income from Continued Dumping and Subsidy Offset Act |
1,117 |
|
1,556 |
|||||||||||||||||
Other income, net | 25 | 21 | 29 | 6 | ||||||||||||||||
Interest income | 9 | 3 | ||||||||||||||||||
Interest expense | 623 | 586 | 538 | 707 | ||||||||||||||||
Loss before income taxes | (1,717 | ) | (560 | ) | (3,945 | ) | (9,530 | ) | ||||||||||||
Income tax (benefit) expense | (26 | ) | 35 | (16 | ) | (1,206 | ) | |||||||||||||
Net loss | $ | (1,691 | ) | $ | (595 | ) | $ | (3,929 | ) | $ | (8,324 | ) | ||||||||
Diluted loss per share | $ | (.12 | ) | $ | (.04 | ) | $ | (.27 | ) | $ | (.73 | ) | ||||||||
Weighted average number of shares | 14,345 | 14,345 | 14,345 | 11,345 | ||||||||||||||||
STANLEY FURNITURE COMPANY, INC. |
||||||||||||||||
Supplemental Information | ||||||||||||||||
Reconciliation of GAAP to Non-GAAP Operating Results | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Oct. 1, | Jul. 2, | Apr. 2, | Dec. 31, | |||||||||||||
2011 | 2011 | 2011 | 2010 | |||||||||||||
Reconciliation of gross margin as reported to gross margin adjusted: |
||||||||||||||||
Gross margin as reported | $ | 3,824 | $ | 3,633 | $ | 1,685 | $ | (6,022) | ||||||||
Plus accelerated depreciation | 2,403 | |||||||||||||||
Plus restructuring charge (credit) | (277) | 768 | 2,511 | |||||||||||||
Gross margin as adjusted | $ | 3,824 | $ | 3,356 | $ | 2,453 | $ | (1,108) | ||||||||
Reconciliation of gross margin as a percent of sales as reported to gross margin as a percent of sales adjusted: |
||||||||||||||||
Gross margin percentage as reported | 14.7% | 13.3% | 6.3% | (21.8%) | ||||||||||||
Plus accelerated depreciation | 8.7% | |||||||||||||||
Plus restructuring charge (credit) | (1.0%) | 2.9% | 9.1% | |||||||||||||
Gross margin percentage as adjusted | 14.7% | 12.3% | 9.2% | (4.0%) | ||||||||||||
Reconciliation of operating loss as reported to operating loss adjusted: |
||||||||||||||||
Operating loss as reported | $ | (1,128) | $ | (1,115) | $ | (3,436) | $ | (10,385) | ||||||||
Plus accelerated depreciation | 2,403 | |||||||||||||||
Plus restructuring charge (credit) | (277) | 768 | 2,511 | |||||||||||||
Operating loss as adjusted | $ | (1,128) | $ | (1,392) | $ | (2,668) | $ | (5,471) | ||||||||
Reconciliation of net loss as reported to net loss adjusted: |
||||||||||||||||
Net loss as reported | $ | (1,691) | $ | (595) | $ | (3,929) | $ | (8,324) | ||||||||
Less income from CDSOA | (1,117) | (1,427) | ||||||||||||||
Plus accelerated depreciation | 2,099 | |||||||||||||||
Plus restructuring charge (credit) | (277) | 768 | 2,193 | |||||||||||||
Net loss as adjusted | $ | (1,691) | $ | (1,989) | $ | (3,161) | $ | (5,459) | ||||||||
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 income from CDSOA proceeds, accelerated depreciation and 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) | |||||||||||||||
Oct. 1, | Jul. 2, | Dec. 31, | |||||||||||||
2011 | 2011 | 2010 | |||||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash | $ | 17,933 | $ | 23,999 | $ | 25,532 | |||||||||
Restricted cash | 1,587 | ||||||||||||||
Accounts receivable, net | 11,951 | 12,529 | 9,888 | ||||||||||||
Inventories | 26,354 | 23,927 | 25,695 | ||||||||||||
Prepaid expenses and other current assets | 3,737 | 4,027 | 5,883 | ||||||||||||
Income tax receivable | 525 | 916 | 3,952 | ||||||||||||
Deferred income taxes | 845 | 789 | 1,021 | ||||||||||||
Total current assets | 62,932 | 66,187 | 71,971 | ||||||||||||
Property, plant and equipment, net | 18,303 | 16,976 | 15,980 | ||||||||||||
Other assets | 1,085 | 1,689 | 445 | ||||||||||||
Total assets | $ | 82,320 | $ | 84,852 | $ | 88,396 | |||||||||
Liabilities and Stockholders' Equity | |||||||||||||||
Current liabilities: | |||||||||||||||
Accounts payable | $ | 7,476 | $ | 7,606 | $ | 9,116 | |||||||||
Accrued expenses | 11,597 | 12,028 | 10,086 | ||||||||||||
Total current liabilities | 19,073 | 19,634 | 19,202 | ||||||||||||
Deferred income taxes | 845 | 789 | 1,021 | ||||||||||||
Other long-term liabilities | 6,638 | 7,073 | 6,378 | ||||||||||||
Stockholders' equity | 55,764 | 57,356 | 61,795 | ||||||||||||
Total liabilities and stockholders' equity | $ | 82,320 | $ | 84,852 | $ | 88,396 | |||||||||
STANLEY FURNITURE COMPANY, INC. | ||||||||||||
Consolidated Condensed Statements of Cash Flows | ||||||||||||
(in thousands) | ||||||||||||
Nine Months Ended | ||||||||||||
Oct. 1, | Oct. 2, | |||||||||||
2011 | 2010 | |||||||||||
Cash flows from operating activities: | ||||||||||||
Cash received from customers | $ |
77,805 |
$ | 108,151 | ||||||||
Cash paid to suppliers and employees | (86,695 | ) | (125,495 | ) | ||||||||
Cash from Continued Dumping and Subsidy Offset Act |
1,117 | |||||||||||
Interest paid | (2,103 | ) | (3,046 | ) | ||||||||
Income taxes received, net | 3,077 | 6,429 | ||||||||||
Net cash used by operating activities | (6,799 | ) | (13,961 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||
Restricted cash increase | (1,587 | ) | ||||||||||
Capital expenditures | (2,562 | ) | (1,203 | ) | ||||||||
Purchase of other assets | (38 | ) | (28 | ) | ||||||||
Proceeds from sale of assets | 1,472 | 1,147 | ||||||||||
Net cash provided by investing activities | (2,715 | ) | (84 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Repayment of senior notes | (12,857 | ) | ||||||||||
Proceeds from exercise of stock options | 119 | |||||||||||
Proceeds from insurance policy loans | 2,003 | 1,845 | ||||||||||
Capital lease payments | (88 | ) | ||||||||||
Net cash provided (used) by financing activities | 1,915 | (10,893 | ) | |||||||||
Net decrease in cash | (7,599 | ) | (24,938 | ) | ||||||||
Cash at beginning of period | 25,532 | 41,827 | ||||||||||
Cash at end of period | $ | 17,933 | $ | 16,889 | ||||||||
Reconciliation of net loss to net cash used by operating activities: |
||||||||||||
Net loss | $ | (6,215 | ) | $ | (35,466 | ) | ||||||
Goodwill impairment | 9,072 | |||||||||||
Depreciation and amortization | 1,233 | 6,815 | ||||||||||
Deferred income taxes | 1,410 | |||||||||||
Stock-based compensation | 342 | 549 | ||||||||||
Other | 30 | |||||||||||
Changes in working capital | (1,219 | ) | 3,885 | |||||||||
Other assets | (448 | ) | (424 | ) | ||||||||
Other long-term liabilities | (492 | ) | 168 | |||||||||
Net cash used by operating activities | $ | (6,799 | ) | $ | (13,961 | ) | ||||||
Source: Stanley Furniture Co., Inc.
Have something to say? Share your thoughts with us in the comments below.