HIGH POINT, N.C. - Stanley Furniture Company, Inc. (STLY) today reported sales and operating results for the fourth quarter and total year ending December 31, 2013.
Fourth quarter 2013 highlights:
• Net sales were $22.7 million compared to $23.4M in the fourth quarter of 2012.
• Gross margin declined to 6.3% of net sales compared to 9.3% in the fourth quarter of 2012.
• Selling, general and administrative expenses were $5.1 million (22.2% of net sales) compared to $4.6 million (19.6%) in the fourth quarter of 2012, excluding current period restructuring charges.
• Operating loss was $3.9 million compared to a loss of $2.4 million in fourth quarter of 2012.
• As of December 31, 2013, the companys financial position reflected $19.0 million in cash, restricted cash and short-term investments.
Total Year 2013 highlights:
• Net sales were $96.9 million compared to $98.6 million in 2012. Decline in sales was primarily due to lower unit volume for the Stanley Furniture product line, offset partially by higher average selling prices for that product line and higher sales and unit volume from the Young America product line.
• Gross margin declined to 10.1% of net sales compared to 12.4% in 2012, due to higher discounting and inflation on both sourced items and raw materials.
• Selling, general and administrative expenses were $19.2 million (19.8% of net sales) compared to $18.3 million (18.6% of net sales) in 2012, excluding current year restructuring charges. The higher costs were related to new showrooms and operating systems.
• Operating loss was $10.2 million compared to a loss of $6.1 million in 2012.
• Capital expenditures, leasehold improvements and investment in new operating systems totaled $5.1 million during 2013 compared to $6.6 million in 2012.
Overview
Retail activity in the last three months of the year proved to be weaker than anticipated. We believe this is primarily a result of overall industry conditions within the casegoods sector of the industry. Though our operational performance improved throughout the period, retail traffic slowed as the quarter progressed, shared Glenn Prillaman, President & Chief Executive Officer. However, we would have shown year-over-year sales growth in the quarter if not for a delay in shipping our newest major introduction in our Stanley product line, now being delivered to customers.
Balance Sheet
The company invested $5.1 million in the office and showroom consolidation, the implementation of its new operating systems and capital spending in the Robbinsville plant during 2013, with a majority of the spending occurring during the first half of the year. Working capital less cash on hand, restricted cash and short-term investments increased $2.6 million since December 31, 2012 to $37.1 million. The increase in working capital was driven by an increase in accounts receivable and a decrease in accounts payable, partially offset by a reduction in inventory. Cash, restricted cash and short-term investments at December 31, 2013 were $19.0 million.
Outlook
As we have said, the capital expenditures associated with restructuring the company and its brands to position them for growth are behind us, continued Prillaman. Our team has also overcome the operational challenges associated with the structural changes that negatively affected service to customers. As order rates begin to grow, we are positioned to generate sales results quicker than we have in recent years.
New product will also drive sales growth. Last year we focused much time and effort on the final hurdles of our companys transition. Consolidating corporate offices, constructing new showrooms and implementing modern operating systems did not allow our organization the bandwidth necessary to bring a normal amount of new introductions to market. This year we have an aggressive product introduction plan scheduled and remain focused on market share gains as we enable our customers to build on their confidence in our brands and our ability to execute. I expect the first half of this year to validate the hard work our team has put into positioning our company within our segment of the market and reward the loyalty many customers have shown us. Our shareholders, suppliers, customers and associates have waited patiently for our return to growth and profitability, and we look forward to progressing toward that end over the coming quarters, concluded Prillaman.
About the Company
Established in 1924, Stanley Furniture Company, Inc. is a leading designer and manufacturer of wood furniture targeted at the premium segment of the residential market. The company offers two major product lines. Its Stanley Furniture brand represents its fashion-oriented adult furniture and competes through an overseas sourcing model in the upscale market through superior finish, styling and piece assortment. Its Young America brand is positioned as the leader in the infant and youth segment and differentiates through a domestic manufacturing model catering to parent preferences such as child safety, color, choice and quick delivery of customized special orders. The companys common stock is traded on the NASDAQ stock market under the symbol STLY.
| STANLEY FURNITURE COMPANY, INC. | ||||||||||||||||||||
| Consolidated Operating Results | ||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
| Net sales | $ | 22,744 | $ | 23,384 | $ | 96,944 | $ | 98,570 | ||||||||||||
| Cost of sales | 21,314 | 21,202 | 87,170 | 86,368 | ||||||||||||||||
| Gross profit | 1,430 | 2,182 | 9,774 | 12,202 | ||||||||||||||||
| Selling, general and administrative expenses | 5,290 | 4,582 | 19,966 | 18,281 | ||||||||||||||||
| Operating loss | (3,860 | ) | (2,400 | ) | (10,192 | ) | (6,079 | ) | ||||||||||||
| CDSOA expense (income), net | 65 | (39,349 | ) | |||||||||||||||||
| Other income, net | 16 | 15 | 67 | 79 | ||||||||||||||||
| Interest income | - | 31 | 60 | 82 | ||||||||||||||||
| Interest expense | 714 | 641 | 2,729 | 2,402 | ||||||||||||||||
| (Loss) income before income taxes | (4,558 | ) | (3,060 | ) | (12,794 | ) | 31,029 | |||||||||||||
| Income tax (benefit) expense | (14 | ) | (52 | ) | (157 | ) | 645 | |||||||||||||
| Net (loss) income | $ | (4,544 | ) | $ | (3,008 | ) | $ | (12,637 | ) | $ | 30,384 | |||||||||
| Diluted (loss) earnings per share | $ | (.32 | ) | $ | (.21 | ) | $ | (.89 | ) | $ | 2.10 | |||||||||
| Weighted average number of shares | 14,149 | 14,290 | 14,147 | 14,484 | ||||||||||||||||
| STANLEY FURNITURE COMPANY, INC. | ||||||||||||||||||||
| Supplemental Information | ||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Operating Results | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
| Reconciliation of gross profit as reported to gross profit adjusted: | ||||||||||||||||||||
| Gross profit as reported | $ | 1,430 | $ | 2,182 | $ | 9,774 | $ | 12,202 | ||||||||||||
| Less restructuring charge | 474 | |||||||||||||||||||
| Gross profit as adjusted | $ | 1,430 | $ | 2,182 | $ | 9,774 | $ | 12,676 | ||||||||||||
| Percentage of net sales: | ||||||||||||||||||||
| Gross profit % as reported | 6.3 | % | 9.3 | % | 10.1 | % | 12.4 | % | ||||||||||||
| Less restructuring charge | .5 | % | ||||||||||||||||||
| Gross profit % as adjusted | 6.3 | % | 9.3 | % | 10.1 | % | 12.9 | % | ||||||||||||
| Reconciliation of selling, general and administrative expenses (SG&A) as reported to SG&A expenses adjusted: | ||||||||||||||||||||
| SG&A expenses as reported | $ | 5,290 | $ | 4,582 | $ | 19,966 | $ | 18,281 | ||||||||||||
| Less restructuring charge | 238 | 770 | ||||||||||||||||||
| SG&A expenses as adjusted | $ | 5,052 | $ | 4,582 | $ | 19,196 | $ | 18,281 | ||||||||||||
| Percentage of net sales: | ||||||||||||||||||||
| SG&A expenses as reported | 23.3 | % | 19.6 | % | 20.6 | % | 18.6 | % | ||||||||||||
| Less restructuring charge | 1.1 | % | .8 | % | ||||||||||||||||
| SG&A expenses as adjusted | 22.2 | % | 19.6 | % | 19.8 | % | 18.6 | % | ||||||||||||
| Reconciliation of operating loss as reported to operating loss adjusted: | ||||||||||||||||||||
| Operating loss as reported | $ | (3,860 | ) | $ | (2,400 | ) | $ | (10,192 | ) | $ | (6,079 | ) | ||||||||
| Less restructuring charge | 238 | 770 | 474 | |||||||||||||||||
| Operating loss as adjusted | $ | (3,622 | ) | $ | (2,400 | ) | $ | (9,422 | ) | $ | (5,605 | ) | ||||||||
| Reconciliation of net (loss) income as reported to net loss adjusted: | ||||||||||||||||||||
| Net (loss) income as reported | $ | (4,544 | ) | $ | (3,008 | ) | $ | (12,637 | ) | $ | 30,384 | |||||||||
| Less income from CDSOA | 65 | (38,859 | ) | |||||||||||||||||
| Less restructuring charge | 238 | 770 | 474 | |||||||||||||||||
| Net loss as adjusted | $ | (4,306 | ) | $ | (2,943 | ) | $ | (11,867 | ) | $ | (8,001 | ) | ||||||||
| Reconciliation of diluted EPS as reported to diluted EPS adjusted: | ||||||||||||||||||||
| Diluted EPS as reported | $ | (.32 | ) | $ | (.21 | ) | $ | (.89 | ) | $ | 2.10 | |||||||||
| Less income from CDSOA | (2.68 | ) | ||||||||||||||||||
| Less restructuring charge | .02 | .05 | .03 | |||||||||||||||||
| Diluted EPS as adjusted | $ | (.30 | ) | $ | (.21 | ) | $ | (.84 | ) | $ | (.55 | ) | ||||||||
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 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) | ||||||||
| December 31, | December 31, | |||||||
| 2013 | 2012 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and equivalents | $ | 7,218 | $ | 10,930 | ||||
| Restricted cash | 1,737 | 1,737 | ||||||
| Short-term investments | 10,000 | 25,000 | ||||||
| Accounts receivable, net | 12,002 | 10,028 | ||||||
| Inventories | 33,666 | 35,060 | ||||||
| Prepaid expenses and other current assets | 3,964 | 3,438 | ||||||
| Deferred income taxes | 699 | 962 | ||||||
| Total current assets | 69,286 | 87,155 | ||||||
| Property, plant and equipment, net | 20,144 | 19,870 | ||||||
| Other assets | 5,794 | 3,691 | ||||||
| Total assets | $ | 95,224 | $ | 110,716 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
|
Accounts payable |
$ | 7,897 | $ | 8,667 | ||||
| Accrued expenses | 5,301 | 6,247 | ||||||
| Total current liabilities | 13,198 | 14,914 | ||||||
| Deferred income taxes | 699 | 962 | ||||||
| Other long-term liabilities | 5,686 | 7,601 | ||||||
| Stockholders' equity | 75,641 | 87,239 | ||||||
| Total liabilities and stockholders' equity | $ | 95,224 | $ | 110,716 | ||||
| STANLEY FURNITURE COMPANY, INC. | ||||||||||
| Consolidated Condensed Statements of Cash Flows | ||||||||||
| (in thousands) | ||||||||||
| Twelve Months Ended | ||||||||||
| December 31, | December 31, | |||||||||
| 2013 | 2012 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Cash received from customers | $ | 94,951 | $ | 99,064 | ||||||
| Cash paid to suppliers and employees | (108,028 | ) | (110,185 | ) | ||||||
| Cash from Continued Dumping and Subsidy Offset Act | 39,466 | |||||||||
| Interest paid, net | (2,516 | ) | (2,218 | ) | ||||||
| Income taxes paid, net | (42 | ) | (768 | ) | ||||||
| Net cash (used) provided by operating activities | (15,635 | ) | 25,359 | |||||||
| Cash flows from investing activities: | ||||||||||
| Increase in restricted cash | (150 | ) | ||||||||
| Sale (purchase) of short-term investments | 15,000 | (25,000 | ) | |||||||
| Capital expenditures | (2,700 | ) | (3,820 | ) | ||||||
| Purchase of other assets | (2,415 | ) | (2,730 | ) | ||||||
| Other, net | 81 | |||||||||
| Net cash provided (used) by investing activities | 9,885 | (31,619 | ) | |||||||
| Cash flows from financing activities: | ||||||||||
| Proceeds from insurance policy loans | 2,416 | 2,283 | ||||||||
| Purchase and retirement of common stock | (358 | ) | (661 | ) | ||||||
| Proceeds from exercise of stock options | 112 | |||||||||
| Capital lease payments | (132 | ) | (132 | ) | ||||||
| Net cash provided by financing activities | 2,038 | 1,490 | ||||||||
| Net increase in cash and equivalents | (3,712 | ) | (4,770 | ) | ||||||
| Cash and equivalents at beginning of period | 10,930 | 15,700 | ||||||||
| Cash and equivalents at end of period | $ | 7,218 | $ | 10,930 | ||||||
|
Reconciliation of net (loss) income to net cash (used) provided by operating activities: |
||||||||||
| Net (loss) income | $ | (12,637 | ) | $ | 30,384 | |||||
| Depreciation and amortization | 2,236 | 1,767 | ||||||||
| Stock-based compensation | 959 | 779 | ||||||||
| Changes in working capital | (4,567 | ) | (8,437 | ) | ||||||
| Other assets | 153 | 146 | ||||||||
| Other long-term liabilities | (1,783 | ) | 782 | |||||||
| Other | 4 | (62 | ) | |||||||
| Net cash (used) provided by operating activities | $ | (15,635 | ) | $ | 25,359 | |||||
Source: Stanley Furniture Company, Inc.
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