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This Company Is Selling Below Book Value

July 23, 2014 | About:
cody56

cody56

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1. Company

Stanley Furniture (STLY) is an American furniture manufacturing company headquartered in High Point, North Carolina. It went through a restructing and had a number of losses during the financial crisis. Which led the company to outsource all of its manufacturing overseas to achieve higher returns on invested capital. The company's stock is trading at its 52-week low and its market cap is the same as it was in 1997. Its stock price hasn't performed well since the financial crisis and has underperformed its peers and market as a whole.

Market Cap: $38 million

Enterprise Value: $26 million

Total Cash: 14.96

Total Debt: 0.0

Cash Per Share: $1.01

Book Value Per Share: $4.81

Price to Book: 0.80

Price to Sales: 0.43

Ticker: (STLY)

1.2 Company History

The company was started in 1924 by Thomas Bahnson Stanley who went own to become Governor of Virginia. In 2009, the company announced that its line of Young America would undergo a major overhaul. The company ceased all oversea production of Young America line and moved its production to the United States primarily North Carolina and Virginia. In 2010 the company that it was shutttering its Shanleytown manufacturing operation and converting it to warehouse and distribution center.

Board of Directors:

  • Glenn Prillaman - President and Chief Executive Officer. Has been a director since 2010 and his present term will end in 2016
  • Micah Goldstein - Has been a director since December 2011 and his present term will end in 2015. From 2006 to 2010 he was the CEO of Bri - Mar Manufacturing LLC.
  • Michael P. Haley - Has been a director since 2003 and Chairman since 2011. His present term will end in 2015. Has been a advisor to Fenway Partners LLC, a private equity firm since 2006. From 2007 to 2010 he was Executive Chairman of Coach America.
  • Scott Mcllhenny - Has been a director since 1997 and was a principal of Northstar Travel Media LLC. (Northstar). He was chief operating officer of the company from 2001 to 2005.
  • Paul Dascoli - Has been a director since 2010 and his term ends in 2016. He has served as Senior Vice President and Chief Financial Officer and Treasurer of Express Ince.

2. Management

Top Executive:

  • Glenn Prillaman - Director, President, and CEO
  • Micah Goldstein - Director, Chief Operating Officer, Chief Finanical Officer
  • Anita Winmer - Assistant Secretary,Vice President, and Corporate Controller

2.2 Executive Compensation

Key Executive Compensation

STLY

  Name/Title   2009 2010 2011 2012 2013
               
               
  Key Executive Compensation   553,775 1,077,344 1,219,416 1,314,206 597,020
               
  Salary   274,955 412,510 580,020 580,020 580,020
               
  Bonus   0 0 176,000 0 0
               
  Annual Other Income   0 0 0 0 0
               
  Restricted Stock Award   0 0 249,935 396,001 0
               
  Securities Options   272,100 589,834 213,461 323,611 0
               
  LTIP Payout   0 0 0 0 0
               
  Non-Equity Compensation   0 0 0 0 0
               
  Other Compensation   6,720 75,000 0 14,574 17,000
               
  Total   553,775 1,077,344 1,219,416 1,314,206 597,020
               
  R. Glenn Prillaman/President and Chief Executive Officer   553,775 641,192 663,670 799,200 328,504
               
  Salary   274,955 320,004 320,004 320,004 320,004
               
  Bonus   0 0 88,000 0 0
               
  Annual Other Income   0 0 0 0 0
               
  Restricted Stock Award   0 0 137,895 240,002 0
               
  Securities Options   272,100 321,188 117,771 231,694 0
               
  LTIP Payout   0 0 0 0 0
               
  Non-Equity Compensation   0 0 0 0 0
               
  Other Compensation   6,720 0 0 7,500 8,500
               
  Total   553,775 641,192 663,670 799,200 328,504
               
  Micah Goldstein/Chief Operating and Financial Officer and Secretary   - 436,152 555,746 515,006 268,516
               
  Salary   - 92,506 260,016 260,016 260,016
               
  Bonus   - 0 88,000 0 0
               
  Annual Other Income   - 0 0 0 0
               
  Restricted Stock Award   - 0 112,040 155,999 0
               
  Securities Options   - 268,646 95,690 91,917 0
               
  LTIP Payout   - 0 0 0 0
               
  Non-Equity Compensation   - 0 0 0 0
               
  Other Compensation   - 75,000 0 7,074 8,500
               
  Total   - 436,152 555,746 515,006 268,516

2.3 Insider Ownership

Insider Holders*
Individual/Entity Most Recent Trans. Shares Owned as of Trans. Date
DASCOLI DOMINIC P
Director
Acquisition (Non Open Market)
Apr 17, 2014
24,290
Apr 17, 2014
GOLDSTEIN MICAH S.
Officer
Acquisition (Non Open Market)
Jan 15, 2014
153,456
Jan 15, 2014
HALEY MICHAEL P
Director
Acquisition (Non Open Market)
Apr 17, 2014
66,277
Apr 17, 2014
MCILHENNY T SCOTT JR
Director
Sale
May 7, 2014
36,803
May 7, 2014
PRILLAMAN R GLENN
Officer
Acquisition (Non Open Market)
Jan 15, 2014
440,704
Jan 15, 2014
Major Direct Holders (Forms 3 & 4)
Holder Shares Reported
PRILLAMAN R GLENN 440,704 Jan 15, 2014
GOLDSTEIN MICAH S. 153,456 Jan 15, 2014
HALEY MICHAEL P 66,277 Apr 17, 2014
MCILHENNY T SCOTT JR 36,803 May 7, 2014
DASCOLI DOMINIC P 24,290 Apr 17, 2014
Top Institutional Holders
Holder Shares % Out Value* Reported
FMR, LLC 1,241,200 8.34 3,400,888 Mar 31, 2014
Royce & Associates, LLC 1,105,703 7.43 3,029,626 Mar 31, 2014
Heartland Advisors Inc. 750,000 5.04 2,055,000 Mar 31, 2014
Heritage Wealth Advisors 658,180 4.42 1,803,413 Mar 31, 2014
Dimensional Fund Advisors LP 512,898 3.45 1,405,340 Mar 31, 2014
Vanguard Group, Inc. (The) 355,741 2.39 974,730 Mar 31, 2014
New York State Common Retirement Fund 326,355 2.19 894,212 Mar 31, 2014
Ariel Investments, LLC 2,863,046 19.23 7,844,746 Mar 31, 2014
BlackRock Institutional Trust Company, N.A. 267,496 1.80 732,939 Mar 31, 2014
Ancora Advisors, LLC 193,808 1.30 531,033 Mar 31, 2014
Top Mutual Fund Holders
Holder Shares % Out Value* Reported
Fidelity Low-Priced Stock Fund 1,289,638 8.66 4,900,624 Jan 31, 2014
Pennsylvania Mutual Fund Inc 962,235 6.46 2,636,523 Mar 31, 2014
Heartland Value Fund 750,000 5.04 2,055,000 Mar 31, 2014
Vanguard Total Stock Market Index Fund 227,672 1.53 623,821 Mar 31, 2014
Bridgeway Funds Inc-Ultra Small Company Market Fund 107,783 0.72 295,325 Mar 31, 2014
Third Avenue Value Fund, Inc. 94,758 0.64 281,431 Apr 30, 2014
Royce Micro Cap Trust 93,468 0.63 256,102 Mar 31, 2014
DFA U.S. Small Cap Value Series 93,359 0.63 277,276 Apr 30, 2014
Vanguard Extended Market Index Fund 76,192 0.51 208,766 Mar 31, 2014
DFA Tax Managed U.S. Targeted Value Port 57,224 0.38 169,955 Apr 30, 2014

3. Financial Summary

For fiscal year ending 2013, the company's revenues decreased 2% to $96.9 million. The company has a net loss of $12.6 million and income of $30.4 million. It revenues reflect that demand for the company's products and services have decreased.

For the three months ending in March 2014 the company revenues decreased 16% to $21 million and the net loss increased from $21 to $4.4 million. Revenues reflect a decrease in demand of the company products and services do to unfavable market conditions. The higher net loss reflects restructuring increase from $260k to $588k and interest expenses increase of 12% to $732k.

Profitability:

Gross Margins 10.08%
Return on Equity -16%
Return on Assets -13%
Total Equity to Total Assets 0.79%
Asset Turnover 1.02
Quick Ratio 2.68
Current Ratio 5.18

Balance Sheet

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Total Current Assets 69.29 87.16 62.52 71.97
Cash and Short Term Investments 17.22 35.93 15.7 25.53
Cash 7.22 10.93 15.7 25.53
Cash & Equivalents - - - -
Short Term Investments 10 25 - -
Total Receivables, Net 12 10.03 10.25 13.84
Accounts Receivables - Trade, Net 12 10.03 10.25 9.89
Total Inventory 33.67 35.06 31.08 25.7
Prepaid Expenses 3.96 3.44 3.38 5.88
Other Current Assets, Total 2.44 2.7 2.11 1.02
Total Assets 95.22 110.72 80.61 88.4
Property/Plant/Equipment, Total - Net 20.14 19.87 17.59 15.98
Property/Plant/Equipment, Total - Gross 43.36 43.98 44.46 46.18
Accumulated Depreciation, Total -23.22 -24.11 -26.87 -30.2
Goodwill, Net - - - -
Intangibles, Net 4.9 - - -
Long Term Investments - - - -
Note Receivable - Long Term - - - -
Other Long Term Assets, Total 0.89 3.69 0.5 0.45
Other Assets, Total - - - -
Total Current Liabilities 13.2 14.91 16.46 19.2
Accounts Payable 7.9 8.67 9.96 9.12
Payable/Accrued - - - -
Accrued Expenses 5.3 6.25 6.49 7.73
Notes Payable/Short Term Debt - - - -
Current Port. of LT Debt/Capital Leases - - - 2.36
Other Current liabilities, Total - - - -
Total Liabilities 19.58 23.48 23.57 26.6
Total Long Term Debt - - - -
Long Term Debt - - - -
Capital Lease Obligations - - - -
Total Debt - - - 2.36
Deferred Income Tax 0.7 0.96 0.52 1.02
Minority Interest - - - -
Other Liabilities, Total 5.69 7.6 6.59 6.38
Total Equity 75.64 87.24 57.04 61.8
Redeemable Preferred Stock, Total - - - -
Preferred Stock - Non Redeemable, Net - - - -
Common Stock, Total 0.28 0.28 0.29 0.29
Additional Paid-In Capital 15.73 15.02 14.9 14.43
Retained Earnings (Accumulated Deficit) 59.78 72.42 42.04 47.06
Treasury Stock - Common - - - -
ESOP Debt Guarantee - - - -
Unrealized Gain (Loss) - - - -
Other Equity, Total -0.16 -0.48 -0.18 0.01
Total Liabilities & Shareholders' Equity 95.22 110.72 80.61 88.4
Total Common Shares Outstanding 14.52 14.57 14.52 14.34
Total Preferred Shares Outstanding - - - -

Cash Flow Statements

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Period Length: 12 Months 12 Months 12 Months 12 Months
Net Income/Starting Line -12.64 30.38 -5.03 -43.79
Cash From Operating Activities -15.63 25.36 -7.31 -9.4
Depreciation/Depletion 1.89 1.75 1.61 9.36
Amortization 0.35 0.01 0.03 0.05
Deferred Taxes - - - 1.3
Non-Cash Items 0.96 0.72 0.97 10.43
Cash Receipts - - - -
Cash Payments - - - -
Cash Taxes Paid 0.04 0.77 -3.64 -8.2
Cash Interest Paid 2.52 2.22 2.09 3.75
Changes in Working Capital -6.2 -7.51 -4.9 13.25
Cash From Investing Activities 9.88 -31.62 -4.41 4.85
Capital Expenditures -5.12 -6.55 -4.39 -0.89
Other Investing Cash Flow Items, Total 15 -25.07 -0.02 5.73
Cash From Financing Activities 2.04 1.49 1.88 -11.74
Financing Cash Flow Items - - - -
Total Cash Dividends Paid - - - -
Issuance (Retirement) of Stock, Net -0.25 -0.66 - 11.91
Issuance (Retirement) of Debt, Net 2.28 2.15 1.88 -23.65
Foreign Exchange Effects - - - -
Net Change in Cash -3.71 -4.77 -9.83 -16.3

4. Valuation

Stanley is undervalued selling below its book value of $4.81 and has about $17 million dollars in cash on the balance sheet. The company reported -0.89 cent per shares for earnings and -1.30 per share in free cash flow. As the company lowers its costs to make goods by manufacturing products overseas. This will allow the the company to make more money off of its goods. It has massively underperformed its peers and should trade up to book value. It has a current ratio of 5.25 that shows the company is over capitalized and needs to return cash, sell assets, or do a stock buyback to close the gap between the current stock price and book value.

5 Risk

The risk is that the company can't return to profitablity and the stock price will stall or fall. The company is in a business that hasn't done well since the Financial Crisis. The risk for permanent loss of capital is there but the margin of safety of over 20% will protect potential investors capital. The company could be what value investor call, the "value trap" that based on the numbers its undervalued but it never realizes that value.


Rating: 3.3/5 (3 votes)

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