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
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* |
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| Major Direct Holders (Forms 3 & 4) |
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| Top Institutional Holders |
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| Top Mutual Fund Holders |
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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 | |||||||||||||||||||||||||||||||||||||||||||||
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| Total Assets | 95.22 | 110.72 | 80.61 | 88.4 | |||||||||||||||||||||||||||||||||||||||||||||
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| Total Current Liabilities | 13.2 | 14.91 | 16.46 | 19.2 | |||||||||||||||||||||||||||||||||||||||||||||
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| Total Liabilities | 19.58 | 23.48 | 23.57 | 26.6 | |||||||||||||||||||||||||||||||||||||||||||||
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| Total Equity | 75.64 | 87.24 | 57.04 | 61.8 | |||||||||||||||||||||||||||||||||||||||||||||
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| 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 | |||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||
| Cash From Investing Activities | 9.88 | -31.62 | -4.41 | 4.85 | |||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||
| Cash From Financing Activities | 2.04 | 1.49 | 1.88 | -11.74 | |||||||||||||||||||||||||||||||||||||||||||||
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| 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.
