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Stanley Furniture Co. (STLY): Significant Interim Events

January 20, 2011 | About:
While many investors comb through a company’s 10-k’s and 10-q’s in their analyses, often there have been events have have occurred since the most recently filed statements that have a material effect on the company.

Consider the case of Stanley Furniture Co. (STLY), a designer and manufacturer of residential wood furniture, with a diversified customer base, and until very recently, appeared to be trading at a discount to its NCAV. The company’s most recently filed financial statements occurred in early November. An investor focusing solely on the company’s financial statements as reported would have missed a highly significant event that occurred subsequent to the filing of the last 10-Q.

In December, STLY completed a rights offering, which allows current shareholders the opportunity to purchase more shares in proportion to their current ownership, effectively giving them the opportunity to maintain their proportionate interest in the company (an action favoured by famed investor Sardar Biglari). The rights offering resulted in 4million more shares being issued, raising $12 million cash, which, along with cash raised from the sale of some machinery, went to paying down $15 million worth of debt that came due (it had been classified as a CL for the following calculations).

Before (As Reported) After Rights Offering
Current Assets 76,247,000 78,300,000 (est.)
Total Liabilities 44,905,000 29,905,000
NCAV 31,342,000 48,395,000
Shares Outstanding 10,344,679 14,344,679
NCAV/Share $3.03 $3.37
D/E 0.25 0.00
Current Ratio 2.24 4.1
As we can see, a different more positive picture of the company emerges when the analyst considers events that have occurred subsequent to the date of the financial statements being filed.

About the author:

Frank Voisin
Frank is an entrepreneur who owned four restaurants by the time he was twenty. He sold his businesses and returned to school, completing a concurrent Law / MBA degree. At the same time, he successfully completed all three levels of the CFA exams. He now invests full time with a focus on value investing. Frank Voisin writes about value investing topics at http://www.frankvoisin.com.

Visit Frank Voisin's Website


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