High Point, NC - Stanley Furniture Company, Inc. (Nasdaq-NGS:STLY) today reported sales and operating results for the third quarter of 2014.
Third Quarter Highlights:
· First quarter of reporting results from operating only its Stanley brand following earlier announcement to discontinue Young America product line
· Final quarter of corporate overhead costs required to support two brands
· Third consecutive quarter of sequentially improved operating results from continuing operations
· Stanley brand experiences highest third quarter order volume in four years
· Ended quarter with approximately $20 million in cash after generating approximately $7.5 million from discontinued operations
· Production of Young America product line ceased with substantially all assets sold or under contract
The company reported its third consecutive quarter of sequentially improved results from operating only its Stanley brand and, for the first time, reported results from its continuing operations after announcing in early April the discontinuance of its nursery and youth brand, Young America. In addition, this was the final quarter in which corporate costs associated with operating both brands impacted results from continuing operations, as the company exited the quarter with adjustments for lost revenues in place.
Order declines in the previous quarter, driven at least partially by retail disruptions associated with the company’s announcement to discontinue its Young America brand, contributed to a net sales decline of 5.0% from the prior year third quarter. Year-to-date net sales were essentially flat compared to the prior year nine months. Operating loss for the third quarter was $378,000, compared to $665,000 (net of restructuring charges), $1.1 million and $1.5 million (net of restructuring charges) in the sequential three quarters, respectively, showing steady and expected sequential improvement as previously guided.
“After sequential improvements in expense structure, adjustments of inventories to market value and successful management of our effort to discontinue roughly 40% of our company’s revenues in a customer-friendly manner, we expect to operate a cash positive business and exit the year profitably,” stated Glenn Prillaman, President and Chief Executive Officer. “Order rates continue to be negatively affected by the lingering effects of retail disruption caused by discontinuing operations of our Young America brand. However, well-styled product that is valued in the marketplace supported by the quality and service customers in our industry have trusted Stanley with for years sustains our company’s opportunities for growth.”
While traditionally a weaker period for orders, the Stanley brand experienced its highest third quarter order volume in four years. “The strength of our Stanley brand and its position in the marketplace combined with the cohesive efforts of our management team, sales force and loyal customers have contributed to our company completing its operational transition,” commented Prillaman. “We are pleased to see progress in our business with the sequential improvement in operating results and the highest third quarter order volume for our Stanley brand since 2010.”
Production of Young America product line is complete with substantially all assets sold or under contract. Loss from discontinued operations for the third quarter was $1.1 million and consisted mostly of asset impairment charges, costs of finalizing operations and severance and other termination costs. The company expects minimal additional charges in the fourth quarter. Overall cash generated from discontinued operations during the third quarter was $7.5 million and consisted of proceeds from sale of assets and collections of receivables, net of payments for accounts payable and severance and other termination cost. The estimated cash remaining to collect on sale of assets and customer receivables, net of liabilities and ongoing expenses is expected to be $3.5 million with a majority realized in the fourth quarter.
Cash, restricted cash and short-term investments at quarter-end were $19.8 million, up from $13.1 million at June 28, 2014. Working capital, excluding cash and restricted cash, short-term investments and discontinued operations, increased to $25.5 million compared to $23.3 million at year end. The increase was largely the result of lower accounts payable for finished goods inventory. “Stanley maintains a healthy cash position, and we expect to generate additional cash in the coming quarter depending upon the timing of inventories related to plans for an early launch of our fall market introductions,” said Prillaman.
“The demand for upscale wood residential furniture in the industry’s traditional channels of distribution remains relatively weak. The need for strong brands who market effectively and partner with retailers to attract and retain today’s consumer is greater than ever,” said Prillaman. “As an increasing number of the more efficient, entrepreneurial-minded wholesale customers in the marketplace regain confidence in our company and shop our product offerings, we expect slow but steady growth driving operating profits and generating cash.”
About the Company
Established in 1924, Stanley Furniture Company, Inc. is a leading design, marketing and logistics 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.
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