Stanley Furniture Reports Second Quarter Results

Furniture World News Desk on 7/21/2014

Stanley Furniture Company, Inc.  reported sales and operating results for the second quarter of 2014.

Financial results for the second quarter include:

• Net sales were $24.0 million, essentially flat with prior year second quarter.
• Gross profit, excluding restructuring related charges, was 10.5% of net sales compared to 9.0% in the prior year second quarter.
• Selling, general and administrative expenses, excluding restructuring charges, were 19.0% of net sales, compared to 20.1% in the prior year second quarter.
• Operating loss, net of restructuring, was $2.1 million compared to a loss of $2.7 million in the prior year second quarter.
• As of June 28, 2014, the company had $13.1 million in cash and restricted cash.
• A $16.2 million restructuring charge, mostly non-cash, was taken during the quarter related to ceasing domestic production of the Young America product line.

Overview

Net sales for the company’s Stanley Furniture brand grew 10.9% over the prior year comparable quarter while total company sales were essentially flat. Total company sales growth was impacted by a 17.6% decline on the Young America product line as custom orders were not accepted after April 29, 2014. “We were pleased to see our Stanley brand grow nicely as shipments were buoyed from strong order growth in the previous quarter. We are successfully adjusting the size of the company’s overhead structure without sacrificing service to customers or momentum behind initiatives to grow the Stanley brand,” commented Glenn Prillaman, President and Chief Executive Officer.

Impact of Restructuring

Restructuring charges of $16 million, mostly non-cash, consisted of asset impairments , the write-down of inventories, severance and other termination costs. The company expects cash expenses of $300,000 to $500,000 during the third quarter consisting of mostly severance and other termination costs, as it finalizes efforts to close its domestic production facility and adjust its overhead structure.

Balance Sheet

Cash, restricted cash and short-term investments at quarter-end were $13.1 million, down from $16.7 million at March 30, 2014. Working capital, excluding cash, restricted cash and short-term investments, decreased to $31.9 million compared to $37.1 million at year end. The decrease was the result of ceasing production of the Young America product line and writing down inventories. The company still expects the closure of its Young America facility in Robbinsville, NC to be cash generative in total. “As we guided when we announced the closing of our Robbinsville plant in April, we expected to use cash initially in order to satisfy all open orders, including the large influx of orders we received when we announced ceasing domestic production,” said Prillaman. “The company maintains a healthy cash position and should generate cash in the coming quarter through the sale of assets associated with the Young America operation. Also, we should generate more cash than we use in ceasing domestic production, and we anticipate ending this year with more cash than we exited the last.”

Outlook

“Although it is difficult to predict sales, we maintain a strong pipeline of new product introductions for this year and next and continue to expect to exit this year with a business that is generating cash and operating profitably,” said Prillaman. “At present, our retailers are seeing a softening in consumer traffic, and we have noted a corresponding softness in orders that began in the latter part of the second quarter. Given our adjustments to our overhead structure, we expect selling, general and administrative costs to be approximately $3.5 million quarterly for the near term, excluding restructuring charges.”

The company enters the third quarter with a $2.3 million Young America backlog and approximately $3 million of unsold inventory. It expects to end domestic production and ship the current backlog in July and the remaining inventory throughout the balance of 2014. “As we collect Young America receivables and proceeds from the sale of related assets, our balance sheet will strengthen,” concluded Prillaman. “With the end of our domestic production effort, comes a clear path to profitability and improved results for the company. Our organization’s focus is on growth of the Stanley brand and helping our customers increase store traffic.”

Other Information

As part of the company’s restructuring efforts related to its ceasing domestic manufacturing efforts previously announced, the company also announced today that Micah S. Goldstein, its Chief Operating and Financial Officer, plans to resign in mid-August. Mr. Goldstein joined the company in August 2010. In addition to his responsibilities in finance, he presided primarily over the company’s manufacturing operations. “Micah has been an integral part of the team here at our company as we did everything we knew possible over the last several years to make our domestic manufacturing model successful. From now until his departure, Micah will focus mostly on maximizing value from the assets at our Robbinsville plant and assisting with several other financial matters,” commented Prillaman.

Anita Wimmer, the company’s current Vice President of Finance and an executive who has been promoted through the finance department throughout her career of twenty years, assumes the role of the company’s principal financial officer upon Mr. Goldstein’s departure. Mrs. Wimmer came to the company in 1993 after seven years in public accounting, beginning her career with Deloitte. She will assist Mr. Prillaman with investor relations among other financial and administrative support roles she already fulfills in the company. “I am confident in our go-forward strategy as a design, marketing and logistics company now operating an overseas sourcing operations model only. Our financial and operating model is simpler than it has been in the past. I am both pleased and proud to see several key managers, including Anita, ready and prepared to step into expanded roles as our company adjusts for its smaller size and profitable future,” stated Prillaman.

About Stanley Furniture: 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.