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Stanley Furniture Company Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 20, 2011 10:00PM
Stanley Furniture Company Inc. (STLY) filed Quarterly Report for the period ended 2011-07-02. Stanley Furniture Company Inc. has a market cap of $58.2 million; its shares were traded at around $4.06 with and P/S ratio of 0.4.
Highlight of Business Operations:
Net sales for the sequential three quarters have been relatively stable. On essentially flat sales, gross profit on a sequential basis has improved to $3.6 million for the current quarter compared with gross profit of $1.7 million in the first quarter of 2011 and a loss of $6.0 million in the fourth quarter of 2010. Included in gross profit for the current quarter is a benefit of $277,000 reversing previously accrued charges and for each sequential quarter restructuring charges were $768,000 and $4.9 million, respectively. The improved margin trend resulted from completing the transition of our Stanley Furniture product line to a fully offshore sourced model, eliminating the majority of our fixed costs at a previously owned domestic facility. Also contributing to the favorable trends is improved operating efficiencies in the domestic manufacturing of our Young America product line.
Gross profit for the current period of $3.6 million, or 13.3% of net sales, improved $9.4 million from the comparable three month period of 2010. Gross profit for the first half of 2011 increased to $5.3 million, or 9.9% of net sales, from a gross loss of $8.8 million, or -11.8% of net sales, for the comparable six months of 2010. Gross profit for the current quarter of 2011 includes a reversal of restructuring charges of $277,000, resulting in net restructuring charges of $491,000 in the first six months of 2011. Included in the three and six month periods of 2010 is $3.3 million in restructuring and related charges. The remaining margin improvement for the three and six months comparisons resulted primarily from the transition of our Stanley Furniture product line to a fully offshore sourced model. Improved operating efficiencies in the manufacturing of our Young America products along with increased average selling prices effective June 2010 on our Young America product also contributed to the improved margins in comparison to the prior year three and six months of 2010.
Selling, general and administrative expenses decreased to $4.7 million, or 17.3% of net sales, for the three months ended July 2, 2011, from $5.6 million, or 14.9% of net sales, for the comparable three months of 2010. For the first half of 2011, selling, general and administrative expense decreased to $9.9 million, or 18.3% of net sales, from $11.1 million, or 14.9% of net sales, for the comparable first half of 2010. This decline in expenses is primarily due to lower selling expenses resulting from decreased sales. Partially offsetting these lower costs were higher marketing and advertising expenses, which are expected to continue. The increase in the percentage to net sales is a result of the lower sales volumes in the current periods compared to prior year.
Net cash provided by investing activities was $600,000 in the 2011 period compared to $567,000 in 2010. Sale of assets provided $1.5 million in the first half of 2011, and we invested $834,000 in normal capital expenditures. We have increased our projected capital expenditures for 2011 to an anticipated range of $3.5 to $4.0 million as we begin a strategic investment program in our operations to improve our ability to service our customers and lower cost.
According to CBP, as of October 1, 2010, approximately $13 million in duties had been secured by cash deposits and bonds on unliquidated entries of wooden bedroom furniture that are subject to the CDSOA, and this amount is potentially available for distribution under the CDSOA to eligible domestic manufacturers in connection with the case involving wooden bedroom furniture imported from China. The amount ultimately distributed will be impacted by the annual administrative review process, which can retroactively increase or decrease the actual duties owed on entries secured by cash deposits and bonds, and by appeals concerning the results of the annual administrative reviews. Assuming that such funds are distributed and that our percentage allocation in future years is the same as it was for the 2010 distribution (approximately 30% of the funds distributed) and the $13 million collected by the government as of October 1, 2010 does not change as a result of the annual administrative review process or otherwise, we could receive approximately $1 to $4 million in CDSOA funds in addition to the funds held back and withheld pending the final resolution of the court cases discussed above.
Recently, CBP disclosed that as of April 30, 2011, $9.4 million in collected duties was potentially available for disbursement in 2011 to eligible domestic manufacturers of wooden bedroom furniture. CBP noted that the final amounts available for distribution in 2011 may be higher or lower than the preliminary amounts due to liquidations, reliquidations, protests, or other events affecting entries. Presumably, this amount, at least in part, came from the security held by CBP as of October 1, 2010, but CBP has not updated the amount of duties that remain secured by cash deposits and bonds on unliquidated entries of wooden bedroom furniture. CBP also has not announced what percentage of 2011 distributions might be set aside by the government as a result of litigation concerning the CDSOA. Assuming our percentage allocation in 2011 is the same as it was for the 2010 distribution and the 2011 preliminary CDSOA amount does not change and is actually distributed, we expect to receive approximately $1 million in the fourth quarter of 2011. To the extent these funds come from the security held by CBP as of October 1, 2010, the $1 to $4 million in CDSOA funds discussed in the preceding paragraph would be reduced.
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