HG HOLDINGS, INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
Commission file number 0-14938
STANLEY FURNITURE COMPANY, INC.
(Exact name of Registrant as specified in its Charter)
| Delaware | 54-1272589 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1641 Fairystone Park Highway, Stanleytown, VA 24168
(Address of principal executive offices, Zip Code)
(Address of principal executive offices, Zip Code)
Registrant’s telephone number, including area code: (
276) 627-2010
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, par value $.02 per share | Nasdaq Stock Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act: Yes
o
No
þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act: Yes
o
No
þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes
þ
No
o
Indicate by check mark whether the Registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Date File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Section 232.504 of this chapter) during the preceding 12 months (or
for such shorter period that the Registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act,
(check one):
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act):
Yes
o
No
þ
Aggregate market value of the voting and non-voting common equity held by non-affiliates of the
Registrant based on the closing price on June 30, 2010: $40 million.
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of
January 29, 2011:
| Common Stock, par value $.02 per share | 14,344,679 | ||
| (Class of Common Stock) | Number of Shares | ||
Documents incorporated by reference: Portions of the Registrant’s Proxy Statement for our Annual
Meeting of Stockholders scheduled for April 27, 2011 are incorporated by reference into Part III.
TABLE OF CONTENTS
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| Exhibit 21 | ||||||||
| Exhibit 23 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
2
Table of Contents
Stanley Furniture Company, Inc.
| Item 1. |
Business
|
General
We are a leading designer, manufacturer and importer of residential wood furniture exclusively
targeted at the premium price range. We offer two major product lines diversifying us across all
major style and product categories within the premium price range. Our adult furniture product line
carries the Stanley Furniture brand and Young America is our infant and youth furniture brand. Our
product depth and extensive style selection makes us a complete wood furniture resource for
retailers in the premium price range. We have established a broad distribution network that
includes independent furniture stores, interior designers, smaller specialty retailers, regional
furniture chains, buying clubs and e-tailers. To support this network of customers and to cater to
the specific factors which drive consumer demand for our two branded product lines, we have
implemented two distinct operating strategies. A domestic manufacturing model supports Young
America, while an offshore sourcing model serves the demands of the Stanley Furniture customer.
Products and Styles
Our adult product line, Stanley Furniture, is marketed as luxury home furnishings with
selections including dining, bedroom, home office, home entertainment, and accent items. We
believe the end consumer for these products is typically a mature, affluent consumer with a larger
home. Our infant and youth product line is marketed as Young America with product characteristics
designed to provide children a safe, healthy indoor environment and offer parents the ability to
customize with color options and make an investment in furniture that grows with the child from
crib to college and beyond. The typical consumer purchasing Young America is between the ages of 25
and 40. However, grandparents are often involved in the purchase.
We believe that the diversity of our product lines enables us to anticipate and respond
quickly to changing consumer preferences and provides retailers a complete wood furniture resource
in the premium price range. We believe that our products represent good value and that the quality
and design of our furniture combined with our broad selection and dependable service differentiates
our products in the marketplace.
We provide products in a variety of woods and finishes. Our products are designed to appeal
to a broad range of consumer tastes in the premium segment and cover all major style categories
including traditional, continental, contemporary, transitional and cottage designs.
We continually design and develop new styles to replace those discontinued and, if desired, to
expand our product lines. Our product design process begins with marketing personnel identifying
customer preferences and marketplace trends and conceptualizing product ideas. A variety of
sketches are produced, usually by company designers, from which prototype furniture pieces are
built prior to full-scale production. We consult with our marketing and operations personnel,
independent sales representatives and selected customers throughout this process and introduce our
new product designs primarily at the fall and spring international furniture markets.
Distribution
We have developed a broad domestic and international customer base and sell our furniture
through independent sales representatives to independent furniture stores, interior designers,
smaller specialty retailers, regional furniture chains, buying clubs and e-tailers. We believe
this broad network reduces exposure to fluctuations in regional economic conditions and allows us
to capitalize on emerging channels of distribution. We offer tailored marketing programs to
address each channel of distribution.
The general marketing practice followed in the furniture industry is to exhibit products at
international and regional furniture markets. In the spring and fall of each year, a furniture
market is held in High Point, North Carolina, which is attended by the majority of our retail
customer base and is regarded by most of the industry as the most important international market.
We utilize showroom space at this market to introduce new products, increase retail placements of
existing products and test ideas for future products.
We sold product to approximately 2,600 customers during 2010, and approximately 10% of our
sales in 2010 were to international customers compared to 8% in 2009. No single customer accounted
for more than 10% of our sales in 2010. No material part of the business is dependent upon a
single customer, the loss of which
would have a material effect on our business. The loss of several major customers could have
a material impact on our business.
3
Table of Contents
Manufacturing and Offshore Sourcing
In 2010, we transformed our manufacturing and sourcing strategy for each of our product lines.
This transformation, we believe, better aligns the operations and associated cost structures with
the driving forces of demand for each line.
Young America
In 2010, we continued our efforts to position the Young America product line as the trusted
brand for child safety, broad selection (including color options), quick delivery, environmental
commitment, and quality to better differentiate our infant and youth products in the marketplace.
To support this initiative we began moving the production of those items previously purchased
offshore (primarily beds and cribs) to our domestic facilities in the fourth quarter of 2009. In
the last quarter of 2010, we completed the consolidation of all Young America manufacturing into
our Robbinsville, North Carolina facility.
Domestic manufacturing supports our product and distribution strategy allowing us to drive
continuous improvement in product safety, quality and customer service, while offering maximum
choice and customization with minimum inventory. Our domestic manufacturing strategy includes:
| • |
Smaller, more frequent and cost-effective production runs,
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| • |
Standardized engineering philosophy to improve quality and lower cost,
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| • |
Identification and elimination of manufacturing bottlenecks and waste,
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| • |
Use of cellular manufacturing in the production of components, and
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| • |
Improvement of our relationships with suppliers by establishing primary
suppliers.
|
In addition, a key element of our manufacturing practices is to involve all personnel, from
hourly associates to management, in the improvement of the manufacturing processes by encouraging
and responding to ideas to improve quality and to reduce manufacturing lead times.
Stanley Furniture
We ceased manufacturing at our Stanleytown, Virginia facility in December 2010 completing the
transformation of the Stanley Furniture product line to a completely sourced operations model.
We are subject to the usual risk inherent in importing products manufactured abroad,
including, but not limited to, supply disruptions and delays, currency exchange rate fluctuations,
economic and political developments and instability, as well as the laws, policies and actions of
foreign governments and the United States affecting trade, including tariffs.
Our Stanley Furniture product line is being imported from a minimal number of smaller,
specialized furniture manufacturers in Southeast Asia, primarily in Indonesia and Vietnam. A
sudden disruption in our supply chain from any of our strategic vendors could significantly
compromise our ability to fill customers orders. If a disruption were to occur, we believe we would
have sufficient inventory to meet demand for approximately three to four months. We believe that
we could source any impacted products from other strategic suppliers but could potentially
experience service gaps and short-term increases in cost.
We enter into standard purchase arrangements with certain overseas suppliers for finished
goods inventory to support our Stanley Furniture product line. The terms of these arrangements are
customary for our industry and do not contain any long-term purchase obligations. We generally
negotiate firm pricing with our foreign suppliers in U.S. Dollars for a term of one year. We accept
exposure to exchange rate movement after this period and do not use any derivative instruments to
manage currency risk. We generally expect to reflect any substantial price increases from these
suppliers in the price we charge for these goods.
Warehousing and Delivery
We warehouse Young America products in our manufacturing facility in North Carolina and lease
two warehouse facilities in Virginia to support the Stanley Furniture product line. We consider our
facilities to be generally modern, well equipped and well maintained.
4
Table of Contents
Production of our two product lines is scheduled based upon both actual and anticipated
orders. To support our service objectives, we plan to maintain a higher inventory of imported
products compared to those manufactured domestically. We ship the majority of Young America orders
within 30 days from receipt of order and the majority of Stanley Furniture product line orders
within 60 days from receipt of order. Therefore, the size of our backlog is not necessarily
indicative of our long-term operations. Our backlog of unshipped orders was $11.0 million at
December 31, 2010 and $15.6 million at December 31, 2009.
Raw Materials
The principal materials used in our domestic manufacturing include lumber, veneers, plywood,
particle board, hardware, glue, finishing materials, glass products, laminates, and metals. We use
two main species of lumber: poplar and maple. Domestic lumber availability and prices fluctuate
over time based primarily on supply and demand.
Our five largest raw material suppliers accounted for approximately 49% of our purchases in
2010. We believe we keep adequate inventory of lumber and other supplies to maintain production
levels. We believe that our sources of supply for these materials are adequate and that we are not
dependent on any one supplier.
Competition
The furniture industry is highly competitive and includes a large number of competitors, none
of which dominates the market. In addition, competition has significantly increased as the
industry’s worldwide manufacturing capacity remains highly underutilized due to a lack of demand
driven by the effects of the ongoing economic recession. Significant manufacturing capacity was
added during the housing boom our economy experienced pre-recession. This excess capacity has
created intense price competition as industry participants attempt to generate sales to better
utilize their manufacturing capacity. The vast majority of our competitors own manufacturing
facilities or source finished goods from suppliers in China, Vietnam, and Indonesia.
The markets in which we compete include a large number of relatively small manufacturers.
However, certain competitors have substantially greater sales volumes and financial resources
compared to us. Competitive factors in the premium price range include design, quality, service,
selection, price, and for our Young America product line, child safety. We believe the changes to
our operational strategy, long-standing customer relationships and customer responsiveness,
consistent support of high-quality and diverse product lines, and our mixture of youth and
experience in our management team are competitive advantages.
Associates
At December 31, 2010, we employed approximately 650 associates. We consider our relationship
with our associates to be good and none of our associates are represented by a labor union.
Trademarks
Our trade names represent many years of continued business, and we believe these names are
well recognized and associated with excellent quality and styling in the furniture industry. We
own a number of trademarks and design patents, none of which are considered to be material.
Governmental Regulations
We are subject to federal, state and local laws and regulations in the areas of safety, health
and environmental protection. Compliance with these laws and regulations has not in the past had
any material effect on our earnings, capital expenditures or competitive position. However, the
impact of such compliance in the future cannot be predicted. We believe that we are in material
compliance with applicable federal, state and local safety, health and environmental regulations.
5
Table of Contents
Forward-Looking Statements
Certain statements made in this report are not based on historical facts, but are
forward-looking statements. These statements can be identified by the use of forward-looking
terminology such as “believes,” “estimates,” “expects,” “may,” “will,” “should,” or “anticipates,”
or the negative thereof or other variations thereon or comparable terminology, or by discussions of
strategy. These statements reflect our reasonable judgment with respect to future events and are
subject to risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Such risks and uncertainties include our
success in profitably producing Young America products in our domestic manufacturing facility,
disruptions in offshore sourcing including those arising from supply or distribution disruptions or
those arising from changes in political, economic and social conditions, as well as laws and
regulations, in countries from which we source products, international trade policies of the United
States and countries from which we source products, our success in transitioning our adult product
line to offshore vendors, the inability to raise prices in response to inflation and increasing
costs, lower sales due to worsening of current economic conditions, the cyclical nature of the
furniture industry, failure to anticipate or respond to changes in consumer tastes and fashions in
a timely manner, business failures or loss of large customers, competition in the furniture
industry including competition from lower-cost foreign manufacturers, the inability to obtain
sufficient quantities of quality raw materials in a timely manner, environmental, health, and
safety compliance costs, and extended business interruption at our manufacturing facility. In
addition, we have made certain forward looking statements with respect to payments we expect to
receive under the Continued Dumping and Subsidy Offset Act, which are subject to the risks and
uncertainties described in our discussion of those payments that may cause the actual payments to
differ materially from those in the forward looking statements. Any forward-looking statement
speaks only as of the date of this filing, and we undertake no obligation to update or revise any
forward-looking statements, whether as a result of new developments or otherwise.
Available Information
Our principal Internet address is www.stanleyfurniture.com. We make available free of charge
on this web site our annual, quarterly and current reports, and amendments to those reports, as
soon as reasonably practicable after we electronically file such material with, or furnish it to,
the Securities and Exchange Commission.
In addition, you may request a copy of these filings (excluding exhibits) at no cost by
writing, telephoning, faxing or e-mailing us at the following address, telephone number, fax number
or e-mail address.
Stanley Furniture Company, Inc.
1641 Fairystone Park Highway
Stanleytown, Virginia 24168
Attention: Mr. Micah S. Goldstein
Telephone: 276-627-2565
Fax: 276-629-5114
Or e-mail your request to: Investor@Stanleyfurniture.com
1641 Fairystone Park Highway
Stanleytown, Virginia 24168
Attention: Mr. Micah S. Goldstein
Telephone: 276-627-2565
Fax: 276-629-5114
Or e-mail your request to: Investor@Stanleyfurniture.com
6
Table of Contents
| Item 1A. |
Risk Factors
|
Our results of operations and financial condition can be adversely affected by numerous risks.
You should carefully consider the risk factors detailed below in conjunction with the other
information contained in this document. Should any of these risks actually materialize, our
business, financial condition and future prospects could be negatively impacted.
Our strategy to transition Young America Products (infant and youth furniture) to our domestic
manufacturing facilities has, and will in the near term, increase operating expenses. If we are
not successful in the implementation of this strategy, we may continue to experience significant
disruptions to our operations that may result in a decline in revenues in addition to a continued
increase in operating expenses.
We believe our decision to bring all Young America production back to our domestic manufacturing
facility was necessary to regain control of the entire production process so that we can reposition
Young America as the trusted children’s furniture brand for safety, broad selection, quick delivery
and commitment to environmentally conscious production. This transition has increased operating
expenses due to the disruption caused by the transition of approximately one-third of our Young
America product line from offshore sourcing to our domestic manufacturing facility. We expect the
long-term benefit to be beneficial as we distinguish our Young America product line from the
competition in the marketplace. If we are unsuccessful in implementing this strategy, we may
continue to experience significant disruptions in our operations that may result in a decline in
revenues in addition to a continued increase in operating expenses.
As a result of our reliance on foreign sourcing
:
| • |
Our ability to service customers could be adversely affected and result in lower sales
and earnings.
|
|
Our supply of goods could be interrupted for a variety of reasons. A natural disaster or
other causes of physical damage to any one of our sourcing factories could interrupt
production for an extended period of time. Our sourcing partners may not
supply goods that meet our manufacturing, quality or safety specifications, in a timely
manner and at an acceptable price. We may reject goods that do not meet our
specifications, requiring us to find alternative sourcing arrangements at a higher cost,
or may force us to discontinue the product. Also, delivery of goods from our foreign
sourcing partners may be delayed for reasons not typically encountered with domestic
manufacturing or sourcing, such as shipment delays caused by customs or labor issues.
|
| • |
Changes in political, economic and social conditions, as well as laws and regulations,
in the countries from which we source products could adversely affect us.
|
|
Foreign sourcing is subject to political and social instability in countries where our
sourcing partners are located. This could make it more difficult for us to service our
customers. Also, significant fluctuations of foreign exchange rates against the value of
the U.S. dollar could increase costs and decrease earnings. In addition, an outbreak of
the avian flu or similar epidemic in Asia or elsewhere may lower our sales and earnings
by disrupting our supply chain in the countries impacted.
|
| • |
International trade policies of the United States and countries from which we source
products could adversely affect us
.
|
Imposition of trade sanctions relating to imports, taxes, import duties and other charges
on imports could increase our costs and decrease our earnings.
We may experience a decrease in revenues, as well as asset impairment or other charges, if our
strategy to transition Young America products to our domestic manufacturing is not successful.
If we do not achieve operating efficiencies sufficient to profitably manufacture our Young America
product line domestically, or if our marketing strategy for this product line is unsuccessful, we
would need to reposition our Young America product line, consider closing our Robbinsville facility
and transitioning manufacture of Young America products to other sources. In this event, we could
experience a decrease in revenues, as well as asset
impairment or other restructuring charges. In addition, if any of these actions are necessary,
they could affect our ability to meet product demand which may in turn negatively impact customer
relations and result in loss of market share.
7
Table of Contents
We may not be able to maintain or to raise prices in response to inflation and increasing costs.
Future market and competitive pressures may prohibit us from raising prices to offset increased
costs from our sourcing partners, raw material costs, freight costs and other inflationary items.
This could lower our earnings.
We may not be able to sustain sales, earnings and liquidity levels due to economic downturns.
The furniture industry historically has been cyclical in nature and has fluctuated with economic
cycles including the current economic recession. During economic downturns, the furniture industry
tends to experience longer periods of recession and greater declines than the general economy. We
believe that the industry is significantly influenced by economic conditions generally and
particularly by housing activity, consumer confidence, the level of personal discretionary
spending, demographics and credit availability. These factors not only affect the ultimate
consumer, but also impact furniture retailers, which are our primary customers. As a result, a
worsening of current conditions could further lower our sales and earnings and impact our
liquidity. In addition, the current economic recession may result in permanent changes in consumer
preferences and behavior which could result in a contraction of our market segment resulting in
lower sales and earnings levels for the long term which would also adversely impact our liquidity.
Failure to anticipate or respond to changes in consumer tastes and fashions in a timely manner
could result in a decrease in our sales and earnings
.
Residential furniture is a highly styled product and is subject to rapidly changing consumer trends
and tastes. If we are unable to predict or respond to changes in these trends and tastes in a
timely manner, we may lose sales and have to sell excess inventory at reduced prices. This could
lower our sales and earnings.
Business failures, or the loss, of large customers could result in a decrease in our future sales
and earnings.
Although we have no customers that individually represent 10% or more of our total annual sales,
the possibility of business failures, or the loss, of large customers could result in a decrease of
our future sales and earnings. Lost sales may be difficult to replace and any amounts owed to us
may become uncollectible.
We may not be able to sustain current sales and earnings due to the actions and strength of our
competitors.
The furniture industry is very competitive and fragmented. We compete with many domestic and
foreign manufacturers. Competition from foreign producers has increased dramatically in recent
years, with most residential wood furniture sold in the United States now coming from imports.
These foreign producers typically have lower selling prices due to their lower operating costs.
Some competitors have greater financial resources than we have and often offer extensively
advertised, well-recognized, branded products. As a result, we are continually subject to the risk
of losing market share, which may lower our sales and earnings.
We may not be able to obtain sufficient quantities of quality raw materials in a timely manner,
which could result in a decrease in our sales and earnings.
Because we are dependent on outside suppliers for all of our raw material needs, we must obtain
sufficient quantities of quality raw materials from our suppliers at acceptable prices and in a
timely manner. We have no long-term supply contracts with our key suppliers. Unfavorable
fluctuations in the price, quality and availability of these raw materials could negatively affect
our ability to meet demands of our customers and could result in a decrease in our sales and
earnings.
Future cost of compliance with environmental, safety and health regulations could reduce our
earnings.
We are subject to federal, state and local laws and regulations in the areas of safety, health and
environmental protection. The timing and ultimate magnitude of costs for compliance with
environmental, health and safety regulations are difficult to predict and could reduce our
earnings.
8
Table of Contents
Extended business interruption at our manufacturing facility could result in reduced sales.
Furniture manufacturing creates large amounts of highly flammable wood dust. Additionally, we
utilize other highly flammable materials such as varnishes and solvents in our manufacturing
processes and are therefore subject to the risk of losses arising from explosions and fires. Our
inability to fill customer orders during an extended business interruption could negatively impact
existing customer relationships resulting in the loss of market share.
| Item 1B. |
Unresolved Staff Comments
|
None.
| Item 2. |
Properties
|
Set forth below is certain information with respect to our principal properties. We believe
that all these properties are well maintained and in good condition. All of our production and
warehousing facilities are equipped with automatic sprinkler systems and modern fire protection
equipment, which we believe are adequate. All facilities set forth below are active and
operational. Production capacity and extent of utilization of our facilities are difficult to
quantify, and in 2010 we operated our facilities at levels significantly below their estimated
capacity.
| Approximate | Owned | |||||||||||
| Facility Size | or | |||||||||||
| Location | Primary Use | (Square Feet) | Leased | |||||||||
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Stanleytown, VA
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Warehouse and Corporate Headquarters | 950,000 | Leased | |||||||||
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Robbinsville, NC
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Manufacturing/Warehouse | 562,100 | Owned | |||||||||
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Martinsville, VA
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Warehouse | 300,000 | Leased | |||||||||
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High Point, NC
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Showroom | 51,000 | Leased | |||||||||
| Item 3. |
Legal Proceedings
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In the normal course of business, we are involved in claims and lawsuits none of which
currently, in our opinion, will have a material adverse affect on our consolidated financial
statements.
| Item 4. |
(Removed and Reserved)
|
9
Table of Contents
Executive Officers of the Registrant
Our executive officers and their ages as of February 5, 2011 are as follows:
| Name | Age | Position | ||||
|
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Glenn Prillaman
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39 | President and Chief Executive Officer | ||||
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||||||
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Micah S. Goldstein
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40 | Chief Operating and Financial Officer | ||||
Glenn Prillaman
has been President and Chief Executive Officer since February 2010. Mr.
Prillaman was President and Chief Operating Officer from August 2009 until February 2010. He was
our Executive Vice President — Marketing and Sales from September 2008 until August 2009. He held
the position of Senior Vice President — Marketing and Sales from September 2006 until September
2008 and was our Senior Vice President — Marketing/Sales — Young America
®
from August 2003 to
September 2006. Mr. Prillaman held various management positions in product development from June
1999 to August 2003. He is the son of Albert L. Prillaman, a director of the company.
Micah S. Goldstein
has been Chief Operating Officer since August 2010 and has also served as
Chief Financial Officer since December 2010. From January 2006 until August 2010, Mr. Goldstein
was President and Chief Executive Officer of Bri-Mar Manufacturing, LLC, a manufacturer of
hydraulic equipment trailers.
| Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Our common stock is quoted on the Nasdaq Stock Market (“Nasdaq”) under the symbol
STLY.
The
table below sets forth the high and low sales prices per share, for the periods indicated, as
reported by Nasdaq.
| 2010 | 2009 | |||||||||||||||||||||||
| Dividends | Dividends | |||||||||||||||||||||||
| High | Low | Paid | High | Low | Paid | |||||||||||||||||||
|
First Quarter
|
$ | 11.12 | $ | 7.50 | — | $ | 8.59 | $ | 6.50 | — | ||||||||||||||
|
Second Quarter
|
11.14 | 4.01 | — | 11.10 | 7.08 | — | ||||||||||||||||||
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Third Quarter
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4.29 | 3.35 | — | 13.48 | 9.69 | — | ||||||||||||||||||
|
Fourth Quarter
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4.00 | 2.98 | — | 11.01 | 7.13 | — | ||||||||||||||||||
As of January 20, 2011, we have approximately 2,300 beneficial stockholders. On January 28,
2009, our Board of Directors voted to suspend quarterly cash dividend payments. Our dividend
policy and the decision to suspend dividend payments is subject to review and revision by the Board
of Directors and any future payments will depend upon our financial condition, our capital
requirements and earnings, as well as other factors the Board of Directors may deem relevant.
10
Table of Contents
Performance Graph
The following graph compares cumulative total stockholder return for our company with a broad
performance indicator, the Nasdaq Market index (an industry index) and a Peer group index for the
period from December 31, 2005 to December 31, 2010.
| (1) |
The graph shows the cumulative total return on $100 invested at the market close on
December 31, 2005, the last trading day in 2005, in common stock or the specified index,
including reinvestments of dividends.
|
|
| (2) |
Nasdaq Market Index as prepared by Morningstar, Inc.
|
|
| (3) |
Peer group Index as prepared by Morningstar, Inc. consists of SIC Code 2511 Wood
Household Furniture Index and SIC Code 2512 Wood Household Furniture, Upholstered. At
January 18, 2011, Morningstar, Inc. reported that these two indexes consisted of Chromcraft
Revington, Inc., Ethan Allen Interiors, Inc., Flexsteel Industries, Inc., Furniture Brands
International, Inc., Hooker Furniture Corporation, Industrie Natuzzi, Keller Manufacturing
Company, Inc., Kimball International, Inc., Krause’s Furniture Inc., La-Z-Boy, Inc., Luxor
Industrial, Mobile Presence Technologies Inc., Rowe Companies, Sunstates Corporation, Virco
Manufacturing Corporation, and Stanley Furniture Company, Inc.
|
Equity Compensation Plan Information
The following table summarizes our equity compensation plans as of December 31, 2010:
| Number of shares | Weighted-average | Number of shares | ||||||||||
| to be issued upon | exercise price | remaining available | ||||||||||
| exercise of | of outstanding | for future issuance | ||||||||||
| outstanding options, | options, warrants | under equity | ||||||||||
| warrants and rights | and rights | compensation plans | ||||||||||
|
Equity compensation plans
approved by stockholders
|
2,093,654 | $ | 8.91 | 374,334 | ||||||||
|
|
||||||||||||
11
Table of Contents
| Item 6. |
Selected Financial Data
|
| Years Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 (3) | 2008 (3) | 2007 (3) | 2006 (3) | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
|
Income Statement Data:
|
||||||||||||||||||||
|
Net sales
|
$ | 137,012 | $ | 160,451 | $ | 226,522 | $ | 282,847 | $ | 307,547 | ||||||||||
|
Cost of sales (1)
|
153,115 | 158,695 | 197,995 | 240,932 | 248,703 | |||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit (loss)
|
(16,103 | ) | 1,756 | 28,527 | 41,915 | 58,844 | ||||||||||||||
|
Selling, general and administrative
expenses (2)
|
20,625 | 26,666 | 32,375 | 34,578 | 36,115 | |||||||||||||||
|
Goodwill impairment charge
|
9,072 | |||||||||||||||||||
|
Pension plan termination charge
|
6,605 | |||||||||||||||||||
|
|
||||||||||||||||||||
|
Operating income (loss)
|
(45,800 | ) | (24,910 | ) | (3,848 | ) | 732 | 22,729 | ||||||||||||
|
Income from Continued Dumping and Subsidy
Offset Act, net
|
1,556 | 9,340 | 11,485 | 10,429 | 4,419 | |||||||||||||||
|
Other income, net
|
25 | 160 | 308 | 265 | 297 | |||||||||||||||
|
Interest expense, net
|
3,534 | 3,703 | 3,211 | 2,679 | 1,710 | |||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) before income taxes
|
(47,753 | ) | (19,113 | ) | 4,734 | 8,747 | 25,735 | |||||||||||||
|
Income taxes (benefit)
|
(3,963 | ) | (7,362 | ) | 998 | 2,845 | 8,954 | |||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | (43,790 | ) | $ | (11,751 | ) | $ | 3,736 | $ | 5,902 | $ | 16,781 | ||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Basic Earnings (loss) Per Share:
|
||||||||||||||||||||
|
Net income (loss)
|
$ | (4.11 | ) | $ | (1.14 | ) | $ | .36 | $ | .56 | $ | 1.44 | ||||||||
|
|
||||||||||||||||||||
|
Weighted average shares
|
10,650 | 10,332 | 10,332 | 10,478 | 11,649 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Diluted Earnings (loss) Per Share:
|
||||||||||||||||||||
|
Net income (loss)
|
$ | (4.11 | ) | $ | (1.14 | ) | $ | .36 | $ | .55 | $ | 1.41 | ||||||||
|
|
||||||||||||||||||||
|
Weighted average shares
|
10,650 | 10,332 | 10,332 | 10,677 | 11,924 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Cash dividends paid per share
|
$ | $ | $ | .40 | $ | .40 | $ | .32 | ||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Balance Sheet and Other Data:
|
||||||||||||||||||||
|
Cash
|
$ | 25,532 | $ | 41,827 | $ | 44,013 | $ | 31,648 | $ | 6,269 | ||||||||||
|
Inventories
|
25,695 | 37,225 | 47,344 | 58,086 | 59,364 | |||||||||||||||
|
Working capital
|
52,769 | 87,277 | 97,059 | 91,852 | 72,036 | |||||||||||||||
|
Total assets
|
88,396 | 150,462 | 165,871 | 173,731 | 162,678 | |||||||||||||||
|
Long-term debt including
current maturities
|
27,857 | 29,286 | 30,714 | 8,571 | ||||||||||||||||
|
Stockholders’ equity
|
61,795 | 92,847 | 103,108 | 102,851 | 109,647 | |||||||||||||||
|
Capital expenditures
|
$ | 857 | $ | 2,621 | $ | 2,261 | $ | 3,951 | $ | 4,196 | ||||||||||
|
Stock repurchases:
|
||||||||||||||||||||
|
Shares
|
639 | 1,423 | ||||||||||||||||||
|
Total cost
|
$ | 13,557 | $ | 33,576 | ||||||||||||||||
| (1) |
Included in cost of sales in 2010 is $10.4 million for accelerated depreciation and
restructuring and related charges for the conversion of our Stanleytown manufacturing
facility to a warehouse and distribution center. Included in cost of sales in 2009 is $5.2
million for restructuring and related charges for a warehouse consolidation, elimination of
certain positions, and a write-down of inventories. Included in cost of sales in 2008 is
$5.9 million for the consolidation of two manufacturing facilities into one. Included in
cost of sales in 2007 is $3.6 million for the conversion of a manufacturing facility to a
warehouse operation.
|
|
| (2) |
Included in selling, general and administrative expenses in 2009 is $876 thousand and in
2008 is $1.4 million of restructuring charges.
|
|
| (3) |
Amounts reflect the reclassification of costs to warehouse and prepare goods for shipping
to customers from selling, general and administrative expenses to cost of sales to conform
to the 2010 presentation. These expenses amounted to $3.7 million in 2009, $4.1 million in
2008, $5.0 million in 2007 and $6.0 million in 2006. These reclassifications had no
affect on our reported net income or loss.
|
12
Table of Contents
| Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of
Operation
|
The following discussion should be read in conjunction with the Selected Financial Data and
the Consolidated Financial Statements and Notes.
Overview
Significant declines in housing activity, consumer confidence and disposable income have led
to depressed consumer demand for residential furniture. This slowdown began in late 2005 for the
residential furniture industry and intensified in recent years as weakness spread to the broader
U.S. economy and beyond. As a result, our revenues fell from $333.6 million in 2005 to $137.0
million in 2010 and we recorded significant losses in 2009 and 2010.
In response to these deteriorating industry conditions, we took several significant steps to
lower our cost structure from 2007 through 2009 as follows:
| • |
In late 2007, we consolidated production from our Martinsville, Virginia facility
into our Stanleytown, Virginia facility. In 2008, we converted the Martinsville
facility into a warehouse. This improved our asset utilization and production
efficiencies at the Stanleytown facility and lowered our costs by eliminating leased
warehouse space. The related pre-tax restructuring cost was $3.8 million ($3.6 million
in 2007 and $249,000 in 2008).
|
| • |
In 2008, we consolidated two manufacturing facilities into one, eliminated certain
positions and offered a voluntary early retirement incentive. We incurred pre-tax
restructuring charges of $7.3 million ($7.1 million in 2008 and $216,000 in 2009)
related to these actions.
|
| • |
In 2009, pre-tax restructuring charges of $6.1 million were incurred for three major
items. A warehouse consolidation represented about $2 million pre-tax. We ceased
operations at our former Lexington, North Carolina warehouse facility and this real
estate was sold in early 2010. We eliminated approximately 25% of our salaried
positions through a combination of early-retirement incentives and layoffs resulting in
about $2 million of pre-tax charges. The remainder of about $2 million pre-tax
restructuring expense was due to a write-down of inventories as a result of reducing
the number of items offered in our adult product line by discontinuing certain slow
moving items.
|
| • |
In the second half of 2009, we began implementing a strategy to differentiate our
Young America product line that led us to move the production of those items we
purchased offshore to our domestic facilities. These items were primarily youth beds
and cribs. This transition began in late 2009 and our Young America nursery and youth
product line is now exclusively manufactured in our Robbinsville, North Carolina
facility, except for certain component SKU’s of nominal value.
|
| • |
We suspended cash dividend payments in 2009, providing annual cash savings of
approximately $4 million.
|
We continued to evaluate our manufacturing capacity needs considering offshore sourcing
opportunities, current and anticipated demand for our products, overall market conditions, the
overhead expenses associated with the Stanleytown manufacturing operation, and other factors we
considered relevant in early 2010. We concluded that current demand in our price segment results
in a unit volume below that necessary to profitably operate a facility the size of our Stanleytown,
Virginia facility. Accordingly, in May 2010 we announced a major restructuring plan that we believe
will eventually return our company to profitability. This plan included the following major
components:
| • |
From May through December 2010, we transitioned the majority of the manufacturing of
the Stanley Furniture product line from our Stanleytown, Virginia facility to several
strategic offshore vendors with whom we already had established working relationships.
We ceased manufacturing operations at the Stanleytown facility in December 2010. A
portion of this facility is now being used as a warehousing and distribution center for
the Stanley Furniture product line, and our corporate office.
|
| • |
We have retained a domestic assembly and finish process at our Martinsville,
Virginia location to continue offering multiple finish options on certain items in the
Stanley Furniture product line. The Martinsville facility is also used for warehousing
and distribution.
|
| • |
Youth bed and crib production along with certain machinery and equipment was moved
from our Stanleytown, Virginia facility to our Robbinsville, North Carolina facility in
the fourth quarter of 2010. In addition, to support this move and improve production
flow and efficiency we invested in some new equipment and relocated certain machinery
and equipment within our Robbinsville facility.
|
13
Table of Contents
In 2010, we incurred expenses of $10.4 million from accelerated depreciation and restructuring
and related charges, and expect less than $1.0 million of residual expense in 2011 from the
restructuring plan.
Our transition away from overseas sources for our Young America product line continues to
challenge us. We believe we have dedicated the appropriate resources to improve efficiencies in
our Robbinsville, North Carolina facility, and we implemented a price increase for our Young
America products in June 2010.
During the first quarter of 2010, we performed a goodwill impairment evaluation as a result of
our first quarter operating loss and restructuring actions announced in May 2010 and recorded a
goodwill impairment charge of $9.1 million representing the entire amount of goodwill associated
with the business. In 2010, we recorded a non-cash charge to our valuation allowance of $11.4
million against our December 31, 2010 net deferred tax assets. We intend to maintain a valuation
allowance until sufficient positive evidence exists to support its reversal.
Several special items in 2010 that impacted our liquidity and financial condition are as
follows:
| • |
We received net proceeds of $1.0 million from the sale of our former Lexington,
North Carolina warehouse facility.
|
| • |
We raised $12.0 million of gross proceeds from a successful rights offering and
issued 4 million new shares of common stock, in December 2010.
|
| • |
We received $2.2 million of funds under the Continued Dumping and Subsidy Offset Act
of 2000 (CDSOA) in connection with the case involving wooden bedroom furniture imported
from China.
|
| • |
We used $27.9 million to repay in full all outstanding debt under our note agreement
with Prudential Insurance Company of America and other lenders. We made a scheduled
principal payment of $1.4 million in May 2010; and no penalty pre-payments of $11.5
million and $15.0 million in May 2010 and December 2010, respectively.
|
| • |
We received tax refunds of $8.4 million due to the carry back of operating losses to
prior years.
|
| • |
We received $2.4 million of gross proceeds in December 2010 from the sale of the
Stanleytown, Virginia property and leased back a substantial portion of the facility
for a five year term with monthly rental payments of $40,000 starting January 1, 2011.
|
| • |
We received $2.4 million of gross proceeds in December 2010 from the sale of the
Martinsville, Virginia property and leased back the facility on a rent free basis for
an initial one-year term, with a renewal option to rent for a second year. The
transaction has been accounted for as a financing arrangement.
|
| • |
We received $2.3 million in December 2010 from the sale of certain machinery and
equipment resulting from the decision to cease manufacturing at our Stanleytown,
Virginia facility. We subsequently received an additional $1.4 million in January 2011
from the sale of this machinery and equipment and expect approximately $100,000 in
February 2011.
|
We will continue to focus on effective balance sheet management and cost control in 2011.
14
Table of Contents
Results of Operations
2010 Compared to 2009
Net sales decreased $23.4 million, or 14.6%, in 2010 compared to 2009. The decrease was due
primarily to lower unit volume, resulting from continued weakness in demand for our price segment
of residential wood furniture, which we believe is consistent with current economic and industry
trends. We also believe some loss of market share resulting from the transition caused by the
major restructuring of our business contributed to the decline. Partially offsetting the unit
decline was higher average selling prices for our Young America products.
Gross profit in 2010 decreased to a loss of $16.1 million from a profit of $1.8 million in
2009. Included in gross profit in 2010 and 2009 is $10.4 million and $5.2 million, respectively,
in restructuring and related charges. See Note 10 of the Notes to the Consolidated Financial
Statements for further details on restructuring and related charges. The remaining decline in
gross profit for 2010 compared to 2009, resulted primarily from lower sales and production levels,
manufacturing inefficiencies and increased cost of transitioning approximately one-third of our
Young America product line revenues from overseas vendors into our Robbinsville, North Carolina
production facility, and inefficiencies associated with ceasing manufacturing at our Stanleytown,
Virginia facility. Partially offsetting these factors were lower expenses resulting from previous
restructuring efforts, on-going cost reductions, and increased selling prices in the second half of
2010 on our Young America product line.
Selling, general and administrative expenses for 2010 decreased $6.0 million compared to 2009,
due primarily to lower selling expenses resulting from lower sales and cost reduction initiatives.
Restructuring and related expenses of $876,000 are included in 2009.
During the first quarter of 2010, we determined that goodwill impairment indicators existed
based on our first quarter operating loss and restructuring plans. Upon completing our impairment
analysis, a goodwill impairment charge of $9.1 million, the entire amount of goodwill associated
with the business, was recognized.
As a result of the above, operating loss was $45.8 million in 2010 compared to an operating
loss of $24.9 million in 2009.
We recorded income of $1.6 million in 2010 from the receipt of funds under the Continued
Dumping and Subsidy Offset Act of 2000 (CDSOA) involving wooden bedroom furniture imported from
China and other related payments, net of legal expenses, compared to $9.3 million in 2009.
Interest expense for 2010 declined from 2009 due to lower average debt levels, partially
offset by higher interest rates on outstanding debt.
Our effective tax rate benefit for 2010 was 8.3% which differs from the U.S. federal statutory
tax rate of 35% due primarily to the establishment of a deferred tax valuation allowance and to a
lesser extent the goodwill impairment charge.
2009 Compared to 2008
Net sales decreased $66.1 million, or 29.2%, in 2009 compared to 2008. The decrease was due
primarily to lower unit volume, resulting from continued weakness in demand, which we believe is
due primarily to the current economic recession and is consistent with industry trends. Partially
offsetting this lower unit volume was an increase in average selling prices of less than 1%.
Gross profit in 2009 decreased to $1.8 million from $28.5 million in 2008. Included in gross
profit in 2009 and 2008 is $5.2 million and $5.9 million, respectively, in restructuring and
related charges. See Note 10 of the Notes to the Consolidated Financial Statements for further
details on restructuring and related charges. The lower gross profit and margins in 2009 are
primarily due to the significant decline in sales and production levels. Sales declined at a
faster rate in 2009 than we were able to adjust our cost structure. The much lower production
levels led to significant unfavorable factory overhead variances and plant inefficiencies. Costs
associated with the transition of certain Young America products (primarily cribs and youth beds)
from offshore sourcing to our domestic manufacturing facilities and higher selling discounts also
contributed to lower gross profit in 2009. These factors were partially offset by cost savings
from restructuring steps taken in 2008 which resulted in an estimated $4 to $5 million in savings
during 2009.
15
Table of Contents
Selling, general and administrative expenses for 2009 decreased $5.7 million compared to 2008,
due primarily to lower selling expenses resulting from decreased sales and cost reduction
initiatives. Restructuring and related expenses of $876,000 and $1.4 million are included in 2009
and 2008, respectively.
As a result of the above, operating loss was $24.9 million in 2009 compared to an operating
loss of $3.8 million in 2008.
We recorded income of $9.3 million in 2009 from the receipt of funds under the CDSOA
involving wooden bedroom furniture imported from China and other related payments, net of legal
expenses, compared to $11.5 million in 2008.
Interest income for 2009 decreased from 2008 due primarily to lower earnings on cash primarily
invested in a money market fund containing only short duration U.S. Treasury securities backed by
the full faith and credit of the U.S. Government.
The effective tax rate for 2009 was 38.5% compared to 21.1% for 2008. The higher effective
tax rate was due to the impact of permanent differences on the loss before income taxes. The
primary permanent difference was the increase in cash surrender value of life insurance policies,
which are used to fund our deferred compensation plan. We expect this relationship to continue,
but the percentage impact on the effective rate will depend on the level of future losses or
earnings.
Financial Condition, Liquidity and Capital Resources
Sources of liquidity include cash on hand and cash generated from operations. We expect these
sources of liquidity to be adequate for ongoing expenditures and capital expenditures for the
foreseeable future. We believe that cash on hand will be adequate during 2011 in the event we do
not generate cash from operations. At December 31, 2010 cash on hand was $25.5 million.
Working capital, excluding cash and current maturities of long-term debt, decreased $19.7
million during 2010 to $27.2 million from $46.9 million in 2009. The decrease was primarily due to
lower accounts receivable and inventories, reflecting lower sales and production levels.
Cash used by operations was $9.4 million in 2010 compared to cash used of $1.2 million in 2009
and cash generated of $18.3 million in 2008. The increase in cash used by operations in 2010 was
primarily due to lower receipts from customers due to lower sales and higher cash paid to suppliers
and employees due to manufacturing inefficiencies, the incremental cost of transitioning
approximately one-third of our Young America product line revenues from overseas into domestic
facilities, and inefficiencies associated with ceasing production at our Stanleytown facility.
Partially offsetting this increase was the receipt of tax refunds and increased prices on our Young
America product line. The change in 2009 was primarily due to lower cash received from customers
due to lower sales, partially offset by lower cash paid to suppliers and employees due to lower
production and lower tax payments due to an operating loss in 2009.
Net cash provided by investing activities was $4.8 million in 2010 compared to cash used of
$1.3 million in 2009 and $1.9 million in 2008. Sale of assets provided cash of $5.7 million and
$1.3 million in 2010 and 2009, respectively. We invested $857,000, $2.6 million, and $2.3 million
for normal capital expenditures in 2010, 2009, and 2008, respectively. Capital expenditures in
2011 are anticipated to be in the range of $1.5 million to $2.0 million.
Net cash used by financing activities was $11.7 million in 2010, compared to cash provided of
$318,000 in 2009 and cash used of $4.0 million in 2008. In 2010, cash of $27.9 million was used to
retire our outstanding debt. Cash proceeds of $11.8 million (net of expenses) were received from
the issuance of 4 million shares of our common stock. Proceeds of $2.4 million were received from
the sale of our Martinsville, Virginia facility which was accounted for as a financing obligation.
The change from 2008 to 2009 was due primarily to the suspension of quarterly cash dividend
payments in 2009.
16
Table of Contents
The following table sets forth our contractual cash obligations and other commercial
commitments at December 31, 2010 (in thousands):
| Payment due or commitment expiration | ||||||||||||||||||||
| Less Than | Over | |||||||||||||||||||
| Total | 1 year | 2-3 years | 4-5 years | 5 years | ||||||||||||||||
|
Contractual cash obligations:
|
||||||||||||||||||||
|
Postretirement benefits other than pensions(1)
|
$ | 3,614 | $ | 394 | $ | 705 | $ | 612 | $ | 1,903 | ||||||||||
|
Operating leases
|
4,507 | 1,058 | 1,888 | 1,561 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Total contractual cash obligations
|
$ | 8,121 | $ | 1,452 | $ | 2,593 | $ | 2,173 | $ | 1,903 | ||||||||||
|
|
||||||||||||||||||||
|
Other commercial commitments:
|
||||||||||||||||||||
|
Letters of credit
|
$ | 1,552 | $ | 1,552 | ||||||||||||||||
|
|
||||||||||||||||||||
| (1) |
The RP-2000 Mortality tables were used in estimating future benefit payments, and the
health care cost trend rate for determining payments is 9.5% for 2010 and gradually
declines to 5.5% in 2018 where it is assumed to remain constant for the remaining years.
|
Not included in the above table is unrecognized tax benefits of $722,000, due to the
uncertainty of the date of occurrence.
Continued Dumping and Subsidy Offset Act (CDSOA)
We recorded income of $1.6 million, $9.3 million, and $11.5 million in 2010, 2009, and 2008,
respectively, from CDSOA payments and other related payments, net of legal expenses. These payments
came from the case involving Wooden Bedroom Furniture imported from China. The CDSOA provides for
distribution of monies collected by U.S. Customs and Border Protection (CBP) for imports covered by
antidumping duty orders entering the United States through September 30, 2007 to qualified affected
domestic producers. Antidumping duties for merchandise entering the U.S. after September 30, 2007
remain with the U.S. Treasury.
Approximately $152 million of CDSOA funds that otherwise would have been available for
distribution to qualifying affected domestic producers of wooden bedroom furniture were set aside
by the government over the past five years as a result of holdings in two court cases involving
challenges to the CDSOA on constitutional grounds. In 2009, the U.S. Court of Appeals for the
Federal Circuit determined in one of those cases that the CDSOA does not violate the Constitution’s
free speech and equal protection guarantees. In May 2010, the U.S. Supreme Court denied a
petition for certiorari that sought review of the Federal Circuit’s decision. In 2010, the Federal
Circuit also summarily dismissed the constitutional claims in the second of the two court cases.
Eighteen other CDSOA-related cases before the U.S. Court of International Trade have been stayed in
light of this litigation. The U.S. Court of International Trade has issued orders for the
plaintiffs to show cause why these cases should not be dismissed. The resolution of these cases
will have a significant impact on the amount of CDSOA funds that may be distributed to qualifying
affected domestic producers of wooden bedroom furniture. Based on our allocation of the CDSOA
funds distributed in each of the past five years, however, we could receive approximately $41
million of the funds set aside by the government, although the extent to which such distributions
ultimately may be received is uncertain.
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 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 million to $4 million in CDSOA funds in
addition to the funds held back and set aside pending the final resolution of the court cases
discussed above.
Due to the uncertainty of the various legal and administrative processes, we cannot provide
assurances as to the amount of additional CDSOA funds that ultimately will be received, if any, and
we cannot predict when we may receive any additional CDSOA funds.
17
Table of Contents
Critical Accounting Policies
We have chosen accounting policies that are necessary to accurately and fairly report our
operational and financial position. Below are the critical accounting policies that involve the
most significant judgments and estimates used in the preparation of our consolidated financial
statements.
Allowance for doubtful accounts
— We maintain an allowance for doubtful accounts for
estimated losses resulting from the failure of our customers to make required payments. We perform
ongoing credit evaluations of our customers and monitor their payment patterns. Should the
financial condition of our customers deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required which would reduce our earnings.
Inventory valuation
— Inventory is valued at the lower of cost or market. Cost for all
inventories is determined using the first-in, first-out (FIFO) method. We evaluate our inventory
to determine excess or slow moving items based on current order activity and projections of future
demand. For those items identified, we estimate our market value based on current trends. Those
items having a market value less than cost are written down to their market value. If we fail to
forecast demand accurately, we could be required to write off additional non-saleable inventory,
which would also reduce our earnings.
Deferred Taxes
— We recognize deferred tax assets and liabilities based on the estimated
future tax effects of differences between the financial statements and the tax basis of assets and
liabilities given the enacted tax laws. We evaluate the need for a deferred tax asset valuation
allowance by assessing whether it is more likely than not that the company will realize its
deferred tax assets in the future. The assessment of whether or not a valuation allowance is
required often requires significant judgment, including the forecast of future taxable income.
Adjustments to the deferred tax valuation allowance are made to earnings in the period when such
assessment is made.
In preparation of the company’s financial statements, management exercises judgments in
estimating the potential exposure to unresolved tax matters and applies a more likely than not
criteria approach for recording tax benefits related to uncertain tax positions. While actual
results could vary, in management’s judgment, the company has adequate tax accruals with respect to
the ultimate outcome of such unresolved tax matters.
Long-lived assets
— Property, plant and equipment is reviewed for possible impairment when
events indicate that the carrying amount of an asset may not be recoverable. Assumptions and
estimates used in the evaluation of impairment may affect the carrying value of long-lived assets,
which could result in impairment charges in future periods that would lower our earnings.
Depreciation policy reflects judgments on the estimated useful lives of assets. If the estimated
remaining useful lives of our assets decrease, we would be required to depreciate our assets more
quickly, which would also lower our earnings.
Off-Balance Sheet Arrangements
We do not have transactions or relationships with “special purpose” entities, and we do not
have any off-balance sheet financing other than normal operating leases primarily for warehousing,
showroom and office space, and certain technology equipment.
| Item 7A. |
Quantitative and Qualitative Disclosures about Market Risk
|
None of our foreign sales or purchases are denominated in foreign currency and we do
not have any foreign currency hedging transactions. While our foreign purchases are denominated in
U.S. dollars, a relative decline in the value of the U.S. dollar could result in an increase in the
cost of products obtained from offshore sourcing and reduce our earnings, unless we are able to
increase our prices for these items to reflect any such increased cost.
| Item 8. |
Financial Statements and Supplementary Data
|
The consolidated financial statements and schedule listed in items 15(a) (1) and (a)
(2) hereof are incorporated herein by reference and are filed as part of this report.
| Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
None.
18
Table of Contents
| Item 9A. |
Controls and Procedures
|
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our
principal executive officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in
Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in
Internal Control — Integrated Framework
, our management
concluded that our internal control over financial reporting was effective as of December 31, 2010.
The effectiveness of our internal control over financial reporting as of December 31, 2010 has
been audited by PricewaterhouseCoopers LLP, our independent public accounting firm, as stated in
their report, which is included on page F-2 of this Annual Report on Form 10-K.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during
the fourth quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
| Item 9B. |
Other Information
|
None.
| Item 10. |
Directors, Executive Officers and Corporate Governance
|
Information related to our directors is set forth under the caption “Election of Directors” of
our proxy statement (the “2011 Proxy Statement”) for our annual meeting of shareholders scheduled
for April 27, 2011. Such information is incorporated herein by reference.
Information relating to compliance with section 16(a) of the Exchange Act is set forth under
the caption “Section 16(a) Beneficial Ownership Reporting Compliance” of our 2011 Proxy Statement
and is incorporated herein by reference.
Information relating to the Audit Committee and Board of Directors’ determinations concerning
whether a member of the Audit Committee of the Board is a “financial expert” as that term is
defined under Item 407(d) (5) of Regulation S-K is set forth under the caption “Board and Board
Committee Information” of our 2011 Proxy Statement and is incorporated herein by reference.
Information concerning our executive officers is included in Part I of this report under the
caption “Executive Officers of the Registrant.”
We have adopted a code of ethics that applies to our associates, including the principal
executive officer, principal financial officer, principal accounting officer or controller, or
person performing similar functions. Our code of ethics is posted on our website at
www.stanleyfurniture.com. Amendments to and waivers from our code of ethics will be posted to our
website when permitted by applicable SEC and NASDAQ rules and regulations.
19
Table of Contents
| Item 11. |
Executive Compensation
|
Information relating to our executive compensation is set forth under the captions
“Compensation of Executive Officers,” “Compensation Committee Interlocks and Insider Participation”
and “Compensation Committee Report” of our 2011 Proxy Statement. Such information is incorporated
herein by reference.
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
|
Our information relating to this item is set forth under the caption “Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters” of our 2011 Proxy
Statement. Such information is incorporated herein by reference.
Information concerning our equity compensation plan is included in Part II of this report
under the caption “Equity Compensation Plan Information.”
| Item 13. |
Certain Relationships and Related Transactions, and Director Independence
|
Our information relating to this item is set forth under the caption “Compensation of
Executive Officers — Employment Agreements and Related Transactions” and “Board and Board
Committee Information” of our 2011 Proxy Statement. Such information is incorporated herein by
reference.
| Item 14. |
Principal Accounting Fees and Services
|
Our information relating to this item is set forth under the caption “Independent Registered
Public Accountants” of our 2011 Proxy Statement. Such information is incorporated herein by
reference.
| Item 15. |
Exhibits, Financial Statement Schedules
|
| (a) |
Documents filed as a part of this Report:
|
| (1) |
The following consolidated financial statements are included in this report on Form 10-K
:
|
||
|
Report of Independent Registered Public Accounting Firm
|
|||
|
Consolidated Balance Sheets as of December 31, 2010 and 2009
|
|||
|
Consolidated Statements of Income for each of the three years in the period ended December 31, 2010
|
|||
|
Consolidated Statements of Changes in Stockholders’ Equity for each of the three years in the period
ended December 31, 2010.
|
|||
|
Consolidated Statements of Cash Flow for each of the three years in the period ended December 31, 2010
|
|||
|
Notes to Consolidated Financial Statements
|
|||
| (2) |
Financial Statement Schedule
:
|
||
|
Schedule II — Valuation and Qualifying Accounts for each of the three years in the period ended
December 31, 2010.
|
| (b) |
Exhibits:
|
| 3.1 |
The Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1
to the Registrant’s Form 10-Q (Commission File No. 0-14938) for the quarter ended July 2, 2005).
|
|||
|
|
||||
| 3.2 |
By-laws of the Registrant as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s
Form 8-K (Commission File No. 0-14938) filed February 3, 2010).
|
|||
|
|
||||
| 4.1 |
The Certificate of Incorporation and By-laws of the Registrant as currently in effect (incorporated
by reference to Exhibits 3.1 and 3.2 hereto).
|
20
Table of Contents
| 10.1 |
Supplemental Retirement Plan of Stanley
Furniture Company, Inc., as restated effective
January 1, 1993 (incorporated by reference to
Exhibit 10.8 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 1993).(1)
|
|||
|
|
||||
| 10.2 |
First Amendment to Supplemental Retirement Plan
of Stanley Furniture Company, Inc., effective
December 31, 1995, adopted December 15, 1995
(incorporated by reference to Exhibit 10.7 to
the Registrant’s Form 10-K (Commission File No.
0-14938) for the year ended December 31,
1995).(1)
|
|||
|
|
||||
| 10.3 |
Stanley Interiors Corporation Deferred
Compensation Capital Enhancement Plan, effective
January 1, 1986, as amended and restated
effective August 1, 1987 (incorporated by
reference to Exhibit 10.12 to the Registrant’s
Registration Statement on Form S-1 (Commission
File No. 0-14938), No. 33-7300).(1)
|
|||
|
|
||||
| 10.4 |
Employment Agreement dated as of December 31,
2008, between Douglas I. Payne and the
Registrant (incorporated by reference to Exhibit
10.1 to the Registrant’s Form 8-K (Commission
File No. 0-14938) filed on December 10,
2008).(1)
|
|||
|
|
||||
| 10.5 |
2000 Incentive Compensation Plan (incorporated
by reference to Exhibit A to the Registrant’s
Proxy Statement (Commission File No. 0-14938)
for the special meeting of stockholders held on
August 24, 2000).(1)
|
|||
|
|
||||
| 10.6 |
Second Amendment to Supplemental Retirement Plan
of Stanley Furniture Company, Inc. effective
January 1, 2002 (incorporated by reference to
Exhibit 10.33 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 2002).(1)
|
|||
|
|
||||
| 10.7 |
2005 Incentive Compensation Award, dated as of
December 15, 2004, from the Registrant to
Douglas I. Payne (incorporated by reference to
Exhibit 10.22 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 2004).(1)
|
|||
|
|
||||
| 10.8 |
Form of Stock Option Award under 2000 Incentive
Plan (ISO) (incorporated by reference to Exhibit
10.23 to the Registrant’s Form 10-K (Commission
File No. 0-14938) for the year ended December
31, 2004).(1)
|
|||
|
|
||||
| 10.9 |
Form of Stock Option Award under 2000 Incentive
Plan (ISO/NSO) (incorporated by reference to
Exhibit 10.24 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 2004).(1)
|
|||
|
|
||||
| 10.10 |
Form of Stock Option Award under 2000 Incentive
Plan (Directors) (incorporated by reference to
Exhibit 10.25 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 2004).(1)
|
|||
|
|
||||
| 10.11 |
Form of Indemnification Agreement between the
Registrant and each of its Directors
(incorporated by reference to Exhibit 10.1 to
the Registrant’s Form 8-K (Commission File No.
0-14938) filed on September 25, 2008).
|
|||
|
|
||||
| 10.12 |
Change in Control Protection Agreement, dated
December 11, 2009, by and between Stanley
Furniture Company, Inc. and Glenn Prillaman
(incorporated by reference to Exhibit 10.1 to
the Registrant’s Form 8-K (commission File No.
0-14938) filed on December 14, 2009).(1)
|
|||
|
|
||||
| 10.13 |
2008 Incentive Compensation Plan (incorporated
by reference to Exhibit A to the Registrant’s
Proxy Statement (Commission File No. 0-14938)
for the annual meeting of stockholders held on
April 15, 2008).(1)
|
|||
|
|
||||
| 10.14 |
Form of Stock Option Award under 2008 Incentive
Plan (Officers) (incorporated by reference to
Exhibit 10.21 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 2008).(1)
|
| (1) |
Management contract or compensatory plan
|
21
Table of Contents
| 10.15 |
Form of Stock Option Award under 2008 Incentive
Plan (Directors) (incorporated by reference to
Exhibit 10.22 to the Registrant’s Form 10-K
(Commission File No. 0-14938) for the year ended
December 31, 2008).(1)
|
|||
|
|
||||
| 10.16 |
Form of Separation Agreement and General Release
between Stephen A. Bullock and the Registrant
(incorporated by reference to the Registrant’s
Form 8-K (Commission File No. 0-14938) filed on
December 14, 2009).(1)
|
|||
|
|
||||
| 10.17 |
Change in Control Protection Agreement, dated
August 11, 2010, by and between the Registrant
and Micah Goldstein (incorporated by reference
to Exhibit 10.1 to the Registrant’s Form 8-K
(Commission File No. 0-14938) filed August 16,
2010).(1)
|
|||
|
|
||||
| 10.18 |
Amendment to the Change in Control Protection
Agreement dated September 10, 2010, by and
between the Registrant and Glenn Prillaman
(incorporated by reference to Exhibit 10.1 to
Registrant’s Form 8-K (Commission File No.
0-14938) filed September 16, 2010).(1)
|
|||
|
|
||||
| 10.19 |
Amendment to Employment Agreement dated
September 10, 2010, by and between the
Registrant and Douglas I. Payne (incorporated by
reference to Exhibit 10.2 to Registrant’s Form
8-K (Commission File No. 0-14938) filed
September 16, 2010).(1)
|
|||
|
|
||||
| 21 |
List of Subsidiaries. (2)
|
|||
|
|
||||
| 23 |
Consent of PricewaterhouseCoopers LLP. (2)
|
|||
|
|
||||
| 31.1 |
Certification by Glenn Prillaman, our Chief
Executive Officer, pursuant to Rule
13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended. (2)
|
|||
|
|
||||
| 31.2 |
Certification by Micah S. Goldstein, our
Chief Financial Officer, pursuant to Rule
13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended. (2)
|
|||
|
|
||||
| 32.1 |
Certification by Glenn Prillaman, our Chief
Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.(2)
|
|||
|
|
||||
| 32.2 |
Certification by Micah S. Goldstein, our
Chief Financial Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.(2)
|
| (1) |
Management contract or compensatory plan
|
|
| (2) |
Filed Herewith
|
22
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on our behalf by the undersigned, thereunto
duly authorized.
|
STANLEY FURNITURE COMPANY, INC.
|
||||
| February 3, 2011 | By: | /s/ Glenn Prillaman | ||
| Glenn Prillaman | ||||
| President and Chief Executive Officer | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
| Signature | Title | Date | ||
|
|
||||
|
/s/ Michael P. Haley
|
Chairman and Director | February 3, 2011 | ||
|
|
||||
|
/s/ Glenn Prillaman
|
President and Chief Executive Officer (Principal Executive Officer) and Director | February 3, 2011 | ||
|
|
||||
|
/s/ Micah S. Goldstein
|
Chief Operating and Financial Officer and Secretary (Principal Financial and Accounting Officer) | February 3, 2011 | ||
|
|
||||
|
/s/ Robert G. Culp, III
|
Director | February 3, 2011 | ||
|
|
||||
|
/s/ Dominic P. Dascoli
|
Director | February 3, 2011 | ||
|
|
||||
|
/s/ Thomas L. Millner
|
Director | February 3, 2011 | ||
|
|
||||
|
/s/ T. Scott McIlhenny, Jr.
|
Director | February 3, 2011 | ||
|
|
||||
|
/s/ Albert L. Prillaman
|
Director | February 3, 2011 |
23
Table of Contents
STANLEY FURNITURE COMPANY, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2010
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2010
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||||
|
|
||||
|
Consolidated Financial Statements
|
||||
|
|
||||
| F-2 | ||||
|
|
||||
| F-3 | ||||
|
|
||||
| F-4 | ||||
|
|
||||
| F-5 | ||||
|
|
||||
| F-6 | ||||
|
|
||||
| F-7 | ||||
|
|
||||
|
Financial Statement Schedule
|
||||
|
|
||||
| S-1 | ||||
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of the Directors and Stockholders of Stanley Furniture Company, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Stanley Furniture Company, Inc.
and its subsidiaries at December 31, 2010 and December 31, 2009, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2010
in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in conjunction with
the related consolidated financial statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2010,
based on criteria established in
Internal Control — Integrated Framework
issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in Management’s Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Richmond, Virginia
February 2, 2011
Richmond, Virginia
February 2, 2011
F-2
Table of Contents
STANLEY FURNITURE COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| December 31, | ||||||||
| 2010 | 2009 | |||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash
|
$ | 25,532 | $ | 41,827 | ||||
|
Accounts receivable, less allowances of $1,240 and $1,747
|
9,888 | 15,297 | ||||||
|
Inventories:
|
||||||||
|
Finished goods
|
20,855 | 22,376 | ||||||
|
Work-in-process
|
1,709 | 8,184 | ||||||
|
Raw materials
|
3,131 | 6,665 | ||||||
|
|
||||||||
|
Total inventories
|
25,695 | 37,225 | ||||||
|
|
||||||||
|
Prepaid expenses and other current assets
|
5,883 | 4,898 | ||||||
|
Income tax receivable
|
3,952 | 6,882 | ||||||
|
Deferred income taxes
|
1,021 | 3,433 | ||||||
|
|
||||||||
|
Total current assets
|
71,971 | 109,562 | ||||||
|
|
||||||||
|
Property, plant and equipment, net
|
15,980 | 31,375 | ||||||
|
Goodwill
|
9,072 | |||||||
|
Other assets
|
445 | 453 | ||||||
|
|
||||||||
|
Total assets
|
$ | 88,396 | $ | 150,462 | ||||
|
|
||||||||
|
|
||||||||
|
LIABILITIES
|
||||||||
|
Current liabilities:
|
||||||||
|
Current maturities of long-term debt
|
$ | 1,429 | ||||||
|
Accounts payable
|
$ | 9,116 | 11,633 | |||||
|
Accrued salaries, wages and benefits
|
4,805 | 6,597 | ||||||
|
Other accrued expenses
|
2,921 | 2,626 | ||||||
|
Lease related obligation
|
2,360 | |||||||
|
|
||||||||
|
Total current liabilities
|
19,202 | 22,285 | ||||||
|
|
||||||||
|
Long-term debt, exclusive of current maturities
|
26,428 | |||||||
|
Deferred income taxes
|
1,021 | 2,128 | ||||||
|
Other long-term liabilities
|
6,378 | 6,774 | ||||||
|
|
||||||||
|
Total liabilities
|
26,601 | 57,615 | ||||||
|
|
||||||||
|
|
||||||||
|
Commitments and Contingencies
|
||||||||
|
|
||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||
|
Common stock, $0.02 par value, 25,000,000 shares authorized,
14,344,679 and 10,332,179 shares issued and outstanding,
respectively
|
287 | 207 | ||||||
|
Capital in excess of par value
|
14,433 | 1,897 | ||||||
|
Retained earnings
|
47,062 | 90,852 | ||||||
|
Accumulated other comprehensive loss
|
13 | (109 | ) | |||||
|
|
||||||||
|
Total stockholders’ equity
|
61,795 | 92,847 | ||||||
|
|
||||||||
|
Total liabilities and stockholders’ equity
|
$ | 88,396 | $ | 150,462 | ||||
|
|
||||||||
The accompanying notes are an integral part
of the consolidated financial statements.
of the consolidated financial statements.
F-3
Table of Contents
STANLEY FURNITURE COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
| For the Years Ended | ||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Net sales
|
$ | 137,012 | $ | 160,451 | $ | 226,522 | ||||||
|
|
||||||||||||
|
Cost of sales
|
153,115 | 158,695 | 197,995 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Gross profit (loss)
|
(16,103 | ) | 1,756 | 28,527 | ||||||||
|
|
||||||||||||
|
Selling, general and administrative expenses
|
20,625 | 26,666 | 32,375 | |||||||||
|
|
||||||||||||
|
Goodwill impairment charge
|
9,072 | |||||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Operating income (loss)
|
(45,800 | ) | (24,910 | ) | (3,848 | ) | ||||||
|
|
||||||||||||
|
Income from Continued Dumping and Subsidy
Offset Act, net
|
1,556 | 9,340 | 11,485 | |||||||||
|
Other income, net
|
25 | 160 | 308 | |||||||||
|
Interest income
|
3 | 45 | 591 | |||||||||
|
Interest expense
|
3,537 | 3,748 | 3,802 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Income (loss) before income taxes
|
(47,753 | ) | (19,113 | ) | 4,734 | |||||||
|
|
||||||||||||
|
Income tax (benefit) expense
|
(3,963 | ) | (7,362 | ) | 998 | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | (43,790 | ) | $ | (11,751 | ) | $ | 3,736 | ||||
|
|
||||||||||||
|
|
||||||||||||
|
Earnings (loss) per share:
|
||||||||||||
|
|
||||||||||||
|
Basic
|
$ | (4.11 | ) | $ | (1.14 | ) | $ | .36 | ||||
|
|
||||||||||||
|
Diluted
|
$ | (4.11 | ) | $ | (1.14 | ) | $ | .36 | ||||
|
|
||||||||||||
|
|
||||||||||||
|
Weighted average shares outstanding:
|
||||||||||||
|
|
||||||||||||
|
Basic
|
10,650 | 10,332 | 10,332 | |||||||||
|
|
||||||||||||
|
Diluted
|
10,650 | 10,332 | 10,332 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash dividends declared and paid
per common share
|
$ | $ | $ | .40 | ||||||||
|
|
||||||||||||
The accompanying notes are an integral part
of the consolidated financial statements.
of the consolidated financial statements.
F-4
Table of Contents
STANLEY FURNITURE COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For each of the three years in the period ended December 31, 2010
(in thousands, except per share data)
| Accumulated | ||||||||||||||||||||||||
| Capital in | Other | |||||||||||||||||||||||
| Common Stock | Excess of | Retained | Comprehensive | |||||||||||||||||||||
| Shares | Amount | Par Value | Earnings | Loss | Total | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance at December 31, 2007
|
10,332 | 207 | 591 | 102,999 | (946 | ) | 102,851 | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income
|
3,736 | 3,736 | ||||||||||||||||||||||
|
Prior service cost, net of deferred income
tax benefit of $3
|
(5 | ) | (5 | ) | ||||||||||||||||||||
|
Actuarial gain, net of deferred income tax
expense of $118
|
191 | 191 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Comprehensive Income
|
3,922 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Stock-based compensation
|
467 | 467 | ||||||||||||||||||||||
|
Dividends paid, $0.40 per share
|
(4,132 | ) | (4,132 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance at December 31, 2008
|
10,332 | 207 | 1,058 | 102,603 | (760 | ) | 103,108 | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net loss
|
(11,751 | ) | (11,751 | ) | ||||||||||||||||||||
|
Negative plan amendment, net of deferred
income tax benefit of $130
|
209 | 209 | ||||||||||||||||||||||
|
Prior service cost, net of deferred income
tax benefit of $326
|
526 | 526 | ||||||||||||||||||||||
|
Actuarial loss, net of deferred income tax
expense of $138
|
(84 | ) | (84 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Comprehensive loss
|
(11,100 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Stock-based compensation
|
839 | 839 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance at December 31, 2009
|
10,332 | $ | 207 | $ | 1,897 | $ | 90,852 | $ | (109 | ) | $ | 92,847 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Net loss
|
(43,790 | ) | (43,790 | ) | ||||||||||||||||||||
|
Prior service cost
|
(57 | ) | (57 | ) | ||||||||||||||||||||
|
Actuarial gain
|
179 | 179 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Comprehensive loss
|
(43,668 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Exercise of stock options
|
13 | 116 | 116 | |||||||||||||||||||||
|
Issuance of common stock
|
4,000 | 80 | 11,717 | 11,797 | ||||||||||||||||||||
|
Stock-based compensation
|
703 | 703 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance at December 31, 2010
|
14,345 | $ | 287 | $ | 14,433 | $ | 47,062 | $ | 13 | $ | 61,795 | |||||||||||||
|
|
||||||||||||||||||||||||
The accompanying notes are an integral part
of the consolidated financial statements.
of the consolidated financial statements.
F-5
Table of Contents
STANLEY FURNITURE COMPANY, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| For the Years Ended | ||||||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Cash received from customers
|
$ | 142,481 | $ | 168,504 | $ | 230,255 | ||||||
|
Cash paid to suppliers and employees
|
(158,560 | ) | (171,349 | ) | (215,527 | ) | ||||||
|
Cash from Continued Dumping and Subsidy
Offset Act, net
|
2,232 | 7,443 | 10,828 | |||||||||
|
Interest paid
|
(3,750 | ) | (3,664 | ) | (3,111 | ) | ||||||
|
Income tax refunds (payments)
|
8,195 | (2,120 | ) | (4,168 | ) | |||||||
|
|
||||||||||||
|
Net cash (used) provided by operating activities
|
(9,402 | ) | (1,186 | ) | 18,277 | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Capital expenditures
|
(857 | ) | (2,621 | ) | (2,261 | ) | ||||||
|
Proceeds from sale of assets
|
5,731 | 1,303 | ||||||||||
|
Other, net
|
(28 | ) | 360 | |||||||||
|
|
||||||||||||
|
Net cash provided (used) by investing activities
|
4,846 | (1,318 | ) | (1,901 | ) | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Repayment of senior notes
|
(27,857 | ) | (1,429 | ) | (1,429 | ) | ||||||
|
Dividends paid
|
(4,132 | ) | ||||||||||
|
Proceeds from lease related obligation
|
2,360 | |||||||||||
|
Proceeds from exercise of stock options
|
116 | |||||||||||
|
Proceeds from issuance of common stock
|
11,797 | |||||||||||
|
Proceeds from insurance policy loans
|
1,845 | 1,747 | 1,550 | |||||||||
|
|
||||||||||||
|
Net cash (used) provided by financing activities
|
(11,739 | ) | 318 | (4,011 | ) | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net (decrease) increase in cash
|
(16,295 | ) | (2,186 | ) | 12,365 | |||||||
|
Cash at beginning of year
|
41,827 | 44,013 | 31,648 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash at end of year
|
$ | 25,532 | $ | 41,827 | $ | 44,013 | ||||||
|
|
||||||||||||
|
|
||||||||||||
| Reconciliation of net (loss) income to net cash (used) provided by operating activities: | ||||||||||||
|
|
||||||||||||
|
Net (loss) income
|
$ | (43,790 | ) | $ | (11,751 | ) | $ | 3,736 | ||||
|
Adjustments to reconcile net (loss) income to net cash
(used) provided by operating activities:
|
||||||||||||
|
Goodwill impairment charge
|
9,072 | |||||||||||
|
Depreciation
|
9,357 | 5,908 | 8,805 | |||||||||
|
Amortization
|
48 | 86 | 48 | |||||||||
|
Inventory write-down
|
2,077 | |||||||||||
|
Deferred income taxes
|
1,305 | (177 | ) | (2,571 | ) | |||||||
|
Stock-based compensation
|
703 | 839 | 467 | |||||||||
|
Other, net
|
657 | |||||||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
Accounts receivable
|
5,409 | 6,576 | 3,520 | |||||||||
|
Inventories
|
11,530 | 8,042 | 10,742 | |||||||||
|
Prepaid expenses and other current assets
|
508 | (10,435 | ) | (2,041 | ) | |||||||
|
Accounts payable
|
(2,517 | ) | 397 | (4,870 | ) | |||||||
|
Accrued salaries, wages and benefits
|
(1,667 | ) | 1,580 | (525 | ) | |||||||
|
Other accrued expenses
|
292 | (2,875 | ) | 904 | ||||||||
|
Other assets
|
87 | 66 | 103 | |||||||||
|
Other long-term liabilities
|
(396 | ) | (1,519 | ) | (41 | ) | ||||||
|
|
||||||||||||
|
Net cash (used) provided by operating activities
|
$ | (9,402 | ) | $ | (1,186 | ) | $ | 18,277 | ||||
|
|
||||||||||||
The accompanying notes are an integral part
of the consolidated financial statements.
of the consolidated financial statements.
F-6
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
Organization and Basis of Presentation
The consolidated financial statements include Stanley Furniture Company, Inc. and our wholly
owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.
We are a leading designer, manufacturer and importer of wood furniture exclusively targeted at the
premium price range of the residential market.
We operate in one business segment. Substantially all revenues result from the sale of
residential furniture products in the United States. Substantially all trade accounts receivable
are due from retailers in this market, which consists of a large number of entities with a broad
geographical dispersion.
Subsequent events were evaluated through the date these financial statements were issued.
Cash Equivalents
Cash and short-term, highly-liquid investments with original maturities of three
months or less are considered cash and cash equivalents.
Revenue Recognition
Sales are recognized when products are shipped to customers. Revenue includes
amounts billed to customers for shipping.
Inventories
Inventories are valued at the lower of cost or market. Cost for all inventories is determined
using the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed using the straight-line method based
upon the estimated useful lives. Gains and losses related to dispositions and retirements are
included in income. Maintenance and repairs are charged to income as incurred; renewals and
betterments are capitalized. Assets are reviewed for possible impairment when events indicate that
the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the
evaluation of impairment may affect the carrying value of property, plant and equipment, which
could result in impairment charges in future periods. Depreciation policy reflects judgments on
the estimated useful lives of assets.
Income Taxes
Deferred income taxes are determined based on the difference between the consolidated
financial statement and income tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Deferred tax expense
represents the change in the deferred tax asset/liability balance. Income tax credits are reported
as a reduction of income tax expense in the year in which the credits are generated. A valuation
allowance is recorded when it is more likely than not that a deferred tax asset will not be
realized. Interest and penalties on uncertain tax positions are recorded as income tax expense.
Fair Value of Financial Instruments
Accounting for fair value measurements requires disclosure of the level within the fair value
hierarchy in which fair value measurements in their entirety fall, segregating fair value
measurements using quoted prices in active markets for identical assets or liabilities (Level 1),
significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). The
fair value of trade receivables, trade payables and letters of credit approximate the carrying
amount because of the short maturity of these instruments.
F-7
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1.
Summary of Significant Accounting Policies (continued)
Earnings per Common Share
Basic earnings per share is computed based on the average number of common shares outstanding.
Diluted earnings per share reflects the increase in average common shares outstanding that would
result from the assumed exercise of outstanding stock options, calculated using the treasury stock
method.
Stock-Based Compensation
Accounting for share-based payment requires compensation costs related to share-based payment
transactions to be recognized in the financial statements. We adopted the related standard using
the modified prospective application transition method. Under this method, compensation cost
includes options prior to but not vested as of December 31, 2005 and all options granted since the
adoption of this standard.
Goodwill
We test goodwill for impairment annually on December 31, or whenever events occur or
circumstances change that would more likely than not reduce the fair value of a reporting unit
below its carrying amount. If the fair value of the reporting unit is less than its carrying
value, we perform an additional step to determine the implied fair value of goodwill associated
with that reporting unit.
In assessing potential impairment of goodwill, we have determined that we have two reporting
units based on our reporting structure. Determining the fair value of our reporting units involves
the use of significant estimates and assumptions. The estimate of fair value of our reporting units
is based on our projection of revenues, gross margin, operating costs and cash flows considering
historical and estimated future results, general economic and market conditions as well as the
impact of planned business and operational strategies.
Tariffs imposed on wooden bedroom furniture imported from China
Tariff expense is based on the most current rates published by the U.S. Department of
Commerce. These rates are potentially subject to an administrative review process starting
approximately one year after the publication date. The final amounts paid will depend on whether
administrative reviews are performed and the outcome of those reviews, if any, on the vendors we
purchase from.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and accompanying notes. Changes in
such estimates may affect amounts reported in future periods.
Significant Risks and Uncertainties
We periodically enter into restructuring activities to reduce costs and improve the results of our business (see Note 10). In addition, we recorded a goodwill impairment charge of $9.1 million (see Note
3) during 2010 as a result of first quarter 2010 losses and these restructuring activities. While
we believe that our restructuring and business optimization efforts will be successful, we cannot
predict with certainty the ultimate impact on our revenues, operating costs and cash flows from
operations. Our current sources of liquidity include cash on hand and cash generated from
operations. We expect these sources of liquidity to be adequate for ongoing expenditures and
capital expenditures for the foreseeable future. We believe that cash on hand will be adequate
during 2011 in the event we do not generate cash from operations.
Reclassification
Certain prior period amounts have been reclassified to conform with current period
presentation. The costs to warehouse and prepare goods for shipping to customers have been
reclassified from selling, general and administrative expenses to cost of sales. These
reclassifications had no affect on our reported net income or loss.
F-8
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2.
Property, Plant and Equipment
| Depreciable | ||||||||||
| lives | (in thousands) | |||||||||
| (in years) | 2010 | 2009 | ||||||||
|
Land and buildings
|
20 to 50 | $ | 19,096 | $ | 33,900 | |||||
|
Machinery and equipment
|
5 to 12 | 24,780 | 63,403 | |||||||
|
Office furniture and equipment
|
3 to 10 | 1,168 | 1,284 | |||||||
|
Construction in progress
|
1,139 | 670 | ||||||||
|
|
||||||||||
|
Property, plant and equipment, at cost
|
46,183 | 99,257 | ||||||||
|
Less accumulated depreciation
|
30,203 | 67,882 | ||||||||
|
|
||||||||||
|
Property, plant and equipment, net
|
$ | 15,980 | $ | 31,375 | ||||||
|
|
||||||||||
In early 2010, we sold our Lexington, North Carolina warehouse facility, which was closed in
2009. In December 2010 we sold our Stanleytown, Virginia facility. We leased back a substantial
portion of the Stanleytown facility for a five year term with monthly rental payments of $40,000
starting January 2011, which will be accounted for as an operating lease.
3.
Goodwill
As of January 1, 2008, our goodwill resulting from prior acquisitions was $9.1 million. All
goodwill is associated with the Stanley Furniture reporting unit. We performed an annual
impairment test at December 31, 2008 and 2009 and determined that no impairment of the goodwill was
required.
During the first quarter of 2010, we determined that indicators existed based on our first
quarter loss and restructuring plans. Upon completing an impairment analysis as of April 3, 2010,
taking into account the restructuring, an impairment charge of $9.1 million, the entire amount of
goodwill attributable to the Stanley Furniture reporting unit, was recognized. At December 31,
2010, there is no goodwill in our consolidated financial statements.
4.
Debt
| (in thousands) | ||||||||
| 2010 | 2009 | |||||||
|
6.73% Senior notes due through May 3, 2017
|
$ | 25,000 | ||||||
|
6.94% Senior notes due through May 3, 2011
|
2,857 | |||||||
|
|
||||||||
|
Total
|
27,857 | |||||||
|
Less current maturities
|
1,429 | |||||||
|
|
||||||||
|
Long-term debt, exclusive of current maturities
|
$ | 26,428 | ||||||
|
|
||||||||
During 2010, we repaid in full all outstanding debt under our senior note agreements. We made
a scheduled principal payment of $1.4 million in May 2010; and no penalty pre-payments of $11.5
million and $15.0 million in May 2010 and December 2010, respectively.
We utilize letters of credit to collateralize certain insurance policies and inventory
purchases. Outstanding letters of credit at December 31, 2010 were $1.6 million.
F-9
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5.
Lease-Related Obligation
During December 2010 we sold and leased back our Martinsville facility for one year starting
in January 2011. Because we are leasing the building, but not required to pay rent, the building
remained on the books at cost, and a lease-related obligation was recorded equal to the proceeds
received. During the rent free period no depreciation will be recognized and we will record
interest expense on the obligation at our incremental borrowing rate (4.5% at December 31, 2010)
and increase the lease-related obligation by the same amount. At the end of the rent free period
we will recognize the sale of the property and any income (loss) that results from removing the
asset and the obligation from our books.
6.
Income Taxes
The provision for income tax expense (benefit) consists of (in thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | (5,605 | ) | $ | (6,398 | ) | $ | 3,163 | ||||
|
State
|
27 | (329 | ) | 633 | ||||||||
|
|
||||||||||||
|
Total current
|
(5,578 | ) | (6,727 | ) | 3,796 | |||||||
|
|
||||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
1,476 | (569 | ) | (2,432 | ) | |||||||
|
State
|
139 | (66 | ) | (366 | ) | |||||||
|
|
||||||||||||
|
Total deferred
|
1,615 | (635 | ) | (2,798 | ) | |||||||
|
|
||||||||||||
|
Income tax expense (benefit)
|
$ | (3,963 | ) | $ | (7,362 | ) | $ | 998 | ||||
|
|
||||||||||||
A reconciliation of the difference between the federal statutory income tax rate and the
effective income tax rate follows:
| 2010 | 2009 | 2008 | ||||||||||
|
Federal statutory rate
|
(35.0 | )% | (35.0 | )% | 34.0 | % | ||||||
|
State tax, net of federal benefit
|
(1.4 | ) | (1.6 | ) | 3.6 | |||||||
|
State tax credits and adjustments
|
(.7 | ) | (.8 | ) | (2.8 | ) | ||||||
|
Increase in cash surrender value
of life insurance policies
|
(1.2 | ) | (2.8 | ) | (9.6 | ) | ||||||
|
Deduction for qualified domestic
production activities
|
(1.2 | ) | ||||||||||
|
Tax-exempt interest income
|
(.1 | ) | (3.7 | ) | ||||||||
|
Increase to valuation allowance
|
23.3 | 1.5 | ||||||||||
|
Goodwill impairment
|
6.7 | |||||||||||
|
Other, net
|
.3 | .8 | ||||||||||
|
|
||||||||||||
|
Effective income tax rate
|
(8.3 | )% | (38.5 | )% | 21.1 | % | ||||||
|
|
||||||||||||
F-10
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6.
Income Taxes (continued)
The income tax effects of temporary differences that comprise deferred tax assets and
liabilities at December 31 follow (in thousands):
| 2010 | 2009 | |||||||
|
Current deferred tax assets:
|
||||||||
|
Accounts receivable
|
$ | 474 | $ | 668 | ||||
|
Employee benefits
|
1,248 | 2,247 | ||||||
|
Other accrued expenses
|
791 | 541 | ||||||
|
Financing obligation
|
903 | |||||||
|
Net operating loss carry forward
|
165 | |||||||
|
|
||||||||
|
Gross current deferred tax asset
|
3,416 | 3,621 | ||||||
|
Less valuation allowance
|
(2,395 | ) | (188 | ) | ||||
|
|
||||||||
|
Net current deferred tax asset
|
$ | 1,021 | $ | 3,433 | ||||
|
|
||||||||
|
|
||||||||
|
Noncurrent deferred tax assets (liabilities)
|
||||||||
|
Property, plant and equipment
|
$ | (4,944 | ) | $ | (4,851 | ) | ||
|
Employee benefits
|
3,004 | 2,288 | ||||||
|
Other noncurrent assets
|
245 | 435 | ||||||
|
Net Operating Loss
|
9,877 | |||||||
|
|
||||||||
|
Gross non-current deferred tax assets (liabilities)
|
8,182 | (2,128 | ) | |||||
|
Less valuation allowance
|
(9,203 | ) | ||||||
|
|
||||||||
|
Net noncurrent deferred tax assets (liabilities)
|
$ | (1,021 | ) | $ | (2,128 | ) | ||
|
|
||||||||
We have U.S. federal and state net operating loss carry-forwards of approximately $26.4
million which are available to reduce future taxable income. The federal net operating loss will
begin expiring in 2030 and the state net operating losses will expire at various times beginning in
2025.
During 2010, we recorded a non-cash charge to our valuation allowance of $11.4 million against
our December 31, 2010 deferred tax assets. The primary assets which are covered by this valuation
allowance are the 2010 losses in excess of the amounts which can be carried back to prior periods.
The valuation allowance was calculated in accordance with the provisions of ASC 740, Income Taxes,
which requires an assessment of both positive and negative evidence when measuring the need for a
valuation allowance. Our results over the most recent three-year period were heavily affected by
our business restructuring activities. Our cumulative loss in the most recent three-year period, in
our view, represented sufficient negative evidence to require a valuation allowance under the
provisions of ASC 740, Income Taxes. We intend to maintain a valuation allowance until sufficient
positive evidence exists to support its reversal. Although realization is not assured, we have
concluded that the remaining net deferred tax asset in the amount of $1.0 million will be realized
based on the reversal of existing deferred tax liabilities. The amount of the deferred tax assets
actually realized, however, could vary if there are differences in the timing or amount of future
reversals of existing deferred tax liabilities. Should we determine that we will not be able to
realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax
asset will be charged to income in the period such determination is made.
The unrecognized tax benefits activity for the year ending December 31 follow (in thousands):
| 2010 | 2009 | |||||||
|
Unrecognized tax benefits balance at January 1
|
$ | 808 | $ | 940 | ||||
|
Gross increases for tax positions of prior years
|
300 | |||||||
|
Gross decreases for tax positions of prior years
|
(386 | ) | (79 | ) | ||||
|
Lapse of statute of limitations
|
(53 | ) | ||||||
|
|
||||||||
|
Unrecognized tax benefits balance at December 31
|
$ | 722 | $ | 808 | ||||
|
|
||||||||
F-11
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6.
Income Taxes (continued)
As of December 31, 2010 and 2009, we had approximately $392,000 and $442,000 of accrued
interest related to uncertain tax positions, respectively.
Total amount of unrecognized tax benefits that would affect our effective tax rate if
recognized is $528,000 at December 31, 2010 and $783,000 at December 31, 2009. The 2008 tax year
remains open to examination by major taxing jurisdictions. Our 2009 tax year is currently under
examination by the Internal Revenue Service.
7.
Stockholders’ Equity
In December 2010, we issued 4,000,000 shares of common stock at $3.00 per share in a rights offering.
In addition to common stock, authorized capital includes 1,000,000 shares of “blank check”
preferred stock. None was outstanding during the three years ended December 31, 2010. The Board
of Directors is authorized to issue such stock in series and to fix the designation, powers,
preferences, rights, limitations and restrictions with respect to any series of such shares. Such
“blank check” preferred stock may rank prior to common stock as to dividend rights, liquidation
preferences or both, may have full or limited voting rights and may be convertible into shares of
common stock.
Basic and diluted earnings per share are calculated using the following share data (in
thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Weighted average shares outstanding
for basic calculation
|
10,650 | 10,332 | 10,332 | |||||||||
|
Dilutive effect of stock options
|
||||||||||||
|
|
||||||||||||
|
Weighted average shares outstanding
for diluted calculation
|
10,650 | 10,332 | 10,332 | |||||||||
|
|
||||||||||||
In 2010 and 2009, the dilutive effect of stock options was not recognized since we had a net
loss. In 2008, the calculation of dilutive shares was not impacted by outstanding stock options as
all options had exercise prices greater than the average market price during 2008. Approximately
2.1 million shares in 2010 and 1.6 million shares in 2009 were issuable upon the exercise of stock
options, which were not included in the diluted per share calculation because they were
anti-dilutive.
8.
Stock Based Compensation
As of December 31, 2010, there was approximately $1.8 million of unrecognized compensation
cost related to unvested share-based compensation awards granted. That cost is expected to be
recognized over the next four years.
Our stock option plans provide for the granting of stock options and stock awards up to an
aggregate of 2,000,000 shares of common stock to employees and directors at prices equal to the
market value of the stock on the dates the options were granted. The options granted have a term
of 10 years from the grant date and granted options for employees vest ratably over a four to five
year period. The fair value of each option is amortized into compensation expense on a
straight-line basis between the grant date for the option and each vesting date. We have estimated
the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes
pricing valuation model.
F-12
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8.
Stock Based Compensation (continued)
The application of this valuation model involves assumptions that are judgmental and sensitive in
the determination of compensation expense. The weighted average for key assumptions used in
determining the fair value of options granted follows:
| 2010 | 2009 | 2008 | ||||||||||
|
Expected price volatility
|
53.21 | % | 42.97 | % | 36.12 | % | ||||||
|
Risk-free interest rate
|
2.30 | % | 2.29 | % | 3.07 | % | ||||||
|
Weighted average expected life in years
|
5.6 | 5.7 | 5.6 | |||||||||
|
Dividend yield
|
3.0 | % | 4.28 | % | ||||||||
|
Forfeiture rate
|
14.27 | % | 15.21 | % | 12.01 | % | ||||||
Historical information was the primary basis for the selection of the expected volatility,
expected dividend yield, forfeiture rate and the expected lives of the options. The risk-free
interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the
expected life of the option being valued.
Stock option activity for the three years ended December 31, 2010, follows:
| Weighted- | ||||||||||||||||
| Average | ||||||||||||||||
| Remaining | Aggregate | |||||||||||||||
| Weighted- | Contractual | Intrinsic | ||||||||||||||
| Number | Average | Term | Value | |||||||||||||
| of shares | Exercise Price | (in years) | (in thousands) | |||||||||||||
|
Outstanding at December 31, 2007
|
1,040,488 | $ | 15.73 | 4.4 | ||||||||||||
|
Lapsed
|
(374,500 | ) | 15.77 | |||||||||||||
|
Granted
|
535,808 | 9.70 | ||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Outstanding at December 31, 2008
|
1,201,796 | $ | 13.02 | 8.9 | ||||||||||||
|
Lapsed
|
(243,000 | ) | 9.61 | |||||||||||||
|
Granted
|
681,828 | 8.64 | ||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Outstanding at December 31, 2009
|
1,640,624 | $ | 11.71 | 6.8 | ||||||||||||
|
Exercised
|
(12,500 | ) | 9.22 | |||||||||||||
|
Lapsed
|
(70,000 | ) | 9.43 | |||||||||||||
|
Expired
|
(175,000 | ) | 12.47 | |||||||||||||
|
Granted
|
710,530 | 3.40 | ||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Outstanding at December 31, 2010
|
2,093,654 | $ | 8.91 | 7.6 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Exercisable at December 31, 2010
|
900,779 | $ | 13.31 | 5.6 | ||||||||||||
|
|
||||||||||||||||
At December 31, 2010, 374,334 shares were available for future grants and awards.
F-13
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8.
Stock Based Compensation (continued)
The average fair market value of options granted in 2010, 2009 and 2008, and cash proceeds,
tax benefits and intrinsic value related to total stock options exercised during 2010 are as
follows (in thousands, except per share data):
| 2010 | 2009 | 2008 | ||||||||||
|
Average fair market value of options granted
(per share)
|
$ | 1.72 | $ | 2.74 | $ | 2.32 | ||||||
|
Proceeds from stock options exercised
|
$ | 116 | ||||||||||
|
Intrinsic value of stock options exercised
|
$ | 126 | ||||||||||
9.
Employee Benefits Plans
Defined Contribution Plan
We maintain a defined contribution plan covering substantially all of our employees
and make discretionary matching and profit sharing contributions. During the fourth quarter of
2009, we suspended employer contributions to the plan. The total plan cost, including employer
contributions, was $89,000 in 2010, $753,000 in 2009, and $940,000 in 2008.
Supplemental Retirement Plan
The financial status of our Supplemental Retirement Plan at December 31 follows (in
thousands):
| 2010 | 2009 | |||||||
| Supplemental | Supplemental | |||||||
| Plan | Plan | |||||||
|
Change in benefit obligation:
|
||||||||
|
Beginning benefit obligation
|
$ | 1,925 | $ | 1,879 | ||||
|
Interest cost
|
101 | 110 | ||||||
|
Actuarial gain
|
94 | 113 | ||||||
|
Benefits paid
|
(164 | ) | (177 | ) | ||||
|
|
||||||||
|
Ending benefit obligation
|
1,956 | 1,925 | ||||||
|
|
||||||||
|
Change in plan assets:
|
||||||||
|
Beginning fair value of plan assets
|
||||||||
|
Employer contributions
|
164 | 177 | ||||||
|
Benefits paid
|
(164 | ) | (177 | ) | ||||
|
|
||||||||
|
Ending fair value of plan assets
|
||||||||
|
|
||||||||
|
Funded status
|
$ | (1,956 | ) | $ | (1,925 | ) | ||
|
|
||||||||
|
|
||||||||
|
Amount recognized in
the consolidated balance sheet:
|
||||||||
|
|
||||||||
|
Current liabilities
|
$ | (162 | ) | $ | (154 | ) | ||
|
Non current liabilities
|
(1,794 | ) | (1,771 | ) | ||||
|
|
||||||||
|
Total
|
$ | (1,956 | ) | $ | (1,925 | ) | ||
|
|
||||||||
F-14
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9.
Employee Benefits Plans (continued)
Components of pension cost follow (in thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Interest cost
|
$ | 101 | $ | 110 | $ | 116 | ||||||
|
Net amortization and deferral
|
94 | 113 | 3 | |||||||||
|
|
||||||||||||
|
Total expense
|
$ | 195 | $ | 223 | $ | 119 | ||||||
|
|
||||||||||||
The assumptions used to determine the plans’ financial status and pension cost were:
| 2010 | 2009 | 2008 | ||||||||||
|
Discount rate for funded status
|
4.90 | % | 5.50 | % | 6.25 | % | ||||||
|
Discount rate for pension cost
|
5.50 | % | 6.25 | % | 6.20 | % | ||||||
Estimated future benefit payments for the supplemental retirement plan are $162,000 in 2011,
$160,000 in 2012, $158,000 in 2013, $156,000 in 2014, $154,000 in 2015 and a total of $725,000 from
2016 through 2020.
Postretirement Benefits Other Than Pensions
We provided health care benefits to eligible retired employees between the ages of
55 and 65 and provide life insurance benefits to eligible retired employees from age 55 until
death. During the fourth quarter of 2009, we announced the termination of our postretirement
health care benefits for current employees effective January 1, 2010. In accordance with
Employers’ Accounting for Postretirement Benefits Other Than Pensions, we accounted for this
discontinuation as a negative plan amendment and as a result reduced the accumulated benefit
obligation by $1.3 million which will be amortized into net benefit cost over the participants
average remaining service period. The plan’s financial status at December 31, the measurement
date, follows (in thousands):
| 2010 | 2009 | |||||||
|
Change in benefit obligation:
|
||||||||
|
Beginning benefit obligation
|
$ | 1,964 | $ | 2,908 | ||||
|
Service cost
|
61 | |||||||
|
Interest cost
|
82 | 177 | ||||||
|
Actuarial loss (gain)
|
(324 | ) | 179 | |||||
|
Negative plan amendment
|
(61 | ) | (1,254 | ) | ||||
|
Plan participants’ contributions
|
239 | 232 | ||||||
|
Benefits paid
|
(242 | ) | (339 | ) | ||||
|
|
||||||||
|
Ending benefit obligation
|
1,658 | 1,964 | ||||||
|
|
||||||||
|
Change in plan assets:
|
||||||||
|
Beginning fair value of plan assets
|
||||||||
|
Employer contributions
|
4 | 107 | ||||||
|
Plan participants’ contributions
|
239 | 232 | ||||||
|
Benefits paid
|
(243 | ) | (339 | ) | ||||
|
|
||||||||
|
Ending fair value of plan assets
|
||||||||
|
|
||||||||
|
Funded status
|
$ | (1,658 | ) | $ | (1,964 | ) | ||
|
|
||||||||
F-15
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9.
Employee Benefits Plans (continued)
Amount recognized in the consolidated balance sheet (in thousands):
|
Current liabilities
|
$ | 232 | $ | 324 | ||||
|
Non current liabilities
|
1,425 | 1,640 | ||||||
|
|
||||||||
|
Total
|
$ | 1,657 | $ | 1,964 | ||||
|
|
||||||||
Components of net periodic postretirement benefit cost were (in thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Service cost
|
$ | 61 | $ | 73 | ||||||||
|
Interest cost
|
$ | 82 | 177 | 172 | ||||||||
|
Amortization of transition obligation
|
(153 | ) | 122 | 122 | ||||||||
|
Amortization of net actuarial loss
|
47 | 23 | 33 | |||||||||
|
Curtailment gain
|
(55 | ) | ||||||||||
|
|
||||||||||||
|
Net periodic postretirement benefit cost
|
$ | (24 | ) | $ | 328 | $ | 400 | |||||
|
|
||||||||||||
The assumptions used to determine the plan’s financial status and postretirement benefit cost:
| 2010 | 2009 | 2008 | ||||||||||
|
Discount rate for funded status
|
4.35 | % | 4.75 | % | 6.25 | % | ||||||
|
Discount rate for postretirement benefit cost
|
4.75 | % | 6.25 | % | 6.05 | % | ||||||
|
Health care cost assumed trend rate for next year
|
9.00 | % | 9.50 | % | 6.00 | % | ||||||
|
Rate that the cost trend rate gradually declines to
|
5.50 | % | 5.50 | % | 5.50 | % | ||||||
|
Year that the rate reaches the rate it is assumed to
remain at
|
2018 | 2018 | 2010 | |||||||||
An increase or decrease in the assumed health care cost trend rate of one percentage point in
each future year would affect the accumulated postretirement benefit obligation at December 31,
2010 by approximately $24,000 and the annual postretirement benefit cost by approximately $1,000.
Estimated future benefit payments are $232,000 in 2011, $204,000 in 2012, $183,000 in 2013,
$162,000 in 2014, $141,000 in 2015 and a total of $567,000 from 2016 through 2020.
The amounts in accumulated other comprehensive income that have not yet been recognized as
components of net periodic benefit cost at December 31, 2010, are as follows (in thousands):
| Other | ||||||||
| Supplemental | Postretirement | |||||||
| Plan | Benefits | |||||||
|
Net loss
|
$ | 403 | $ | 347 | ||||
|
Prior service credit
|
(768 | ) | ||||||
|
|
||||||||
|
Total
|
$ | 403 | $ | (421 | ) | |||
|
|
||||||||
F-16
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9.
Employee Benefits Plans (continued)
The amounts in accumulated other comprehensive incomes that are expected to be recognized as
components of net periodic benefit cost during 2011 are as follows (in thousands):
| Other | ||||||||
| Supplemental | Postretirement | |||||||
| Plan | Benefits | |||||||
|
Net loss
|
$ | 12 | $ | 21 | ||||
|
Prior service credit
|
(170 | ) | ||||||
|
|
||||||||
|
Total
|
$ | 12 | $ | (149 | ) | |||
|
|
||||||||
Deferred Compensation
We have a deferred compensation plan, funded with life insurance policies, which permitted
certain management employees to defer portions of their compensation and earn a fixed rate of
return. No deferrals have been made since 1991. The accrued liabilities relating to this plan of
$1.4 million at December 31, 2010 and $1.5 million at December 31, 2009 are included in accrued
salaries, wages and benefits and other long-term liabilities. The cash surrender value, net of
policy loans ($17.2 million and $15.3 million at December 31, 2010 and 2009, respectively), is
included in other assets. Policy loan interest of $2.0 million, $1.8 million, and $1.7 million was
charged to interest expense in 2010, 2009 and 2008, respectively.
10.
Restructuring and Related Charges
We periodically enter into restructuring activities to reduce costs and improve the results of
our business. In 2010, we completed a major restructuring plan that consisted of the conversion of
a portion of our Stanleytown manufacturing facility to a warehousing and distribution center and
ceasing all production at this facility.
In 2009, we consolidated certain warehousing operations and ceased operating a free standing
warehouse facility, eliminated certain positions through early retirement incentives and layoffs,
and discontinued a significant number of slow moving items in our adult product line that led to a
write-down of inventories. In 2008, we consolidated certain manufacturing operations, eliminated
certain positions and offered a voluntary early retirement incentive.
The following table summarizes restructuring and related expenses for the years ended December
31, 2010, 2009 and 2008 (in thousands):
| 2010 | 2009 | 2008 | ||||||||||
|
Accelerated depreciation and equipment relocation
|
$ | 7,160 | $ | 1,613 | $ | 4,319 | ||||||
|
Severance and other termination cost
|
1,370 | 1,889 | 1,929 | |||||||||
|
Inventory write-down
|
682 | 2,077 | ||||||||||
|
Other cost
|
1,237 | 528 | 1,051 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total restructuring and related charges
|
$ | 10,449 | $ | 6,107 | $ | 7,299 | ||||||
|
|
||||||||||||
Classification of the above expenses in the consolidated statement of income are as follows
(in thousands):
|
Cost of sales
|
$ | 10,449 | $ | 5,231 | $ | 5,860 | ||||||
|
Selling, general and administrative expenses
|
876 | 1,439 | ||||||||||
|
|
||||||||||||
|
Total restructuring and related charges
|
$ | 10,449 | $ | 6,107 | $ | 7,299 | ||||||
|
|
||||||||||||
F-17
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10.
Restructuring and Related Charges (continued)
Restructuring accrual activity for the years ended December 31, 2010 and 2009 follows (in thousands):
| Severance and other | ||||||||||||
| termination cost | Other cost | Total | ||||||||||
|
Accrual January 1, 2009
|
$ | 1,446 | $ | 1,446 | ||||||||
|
Charges to expense
|
1,889 | $ | 259 | 2,148 | ||||||||
|
Cash Payments
|
(2,265 | ) | (259 | ) | (2,524 | ) | ||||||
|
|
||||||||||||
|
Accrual December 31, 2009
|
1,070 | 1,070 | ||||||||||
|
|
||||||||||||
|
Charges
to expense
|
1,370 | 740 | 2,110 | |||||||||
|
Cash
payments
|
(1,201 | ) | (10 | ) | (1,211 | ) | ||||||
|
|
||||||||||||
|
Accrual
December 31, 2010
|
$ | 1,239 | $ | 730 | $ | 1,969 | ||||||
|
|
||||||||||||
The restructuring accrual for severance and other employee termination cost is
classified as “Other accrued expenses” and is expected to be paid in 2011.
11.
Income for Continued Dumping and Subsidy Offset Act (CDSOA)
We recorded income of $1.6 million, $9.3 million, and $11.5 million in 2010, 2009 and 2008,
respectively, from CDSOA payments and other related payments, net of legal expenses. These payments
came from the case involving Wooden Bedroom Furniture imported from China. The CDSOA provides for
distribution of monies collected by U.S. Customs and Border Protection for imports covered by
antidumping duty orders entering the United States through September 30, 2007 to qualified domestic
producers.
12.
Commitments and Contingencies
During 2010 we leased showroom and office space, and certain technology equipment. Beginning
in January 2011 we will also lease warehouse and distribution space. Rental expenses charged to
operations were $1.1 million, $1.2 million and $2.0 million in 2010, 2009 and 2008, respectively.
Future minimum lease payments are approximately as follows: 2011 — $1.1 million, 2012 — $973,000,
2013 — $915,000, 2014 — $928,000 and 2015 — $633,000.
In the normal course of business, we are involved in claims and lawsuits, none of which
currently, in management’s opinion, will have a material adverse affect on our Consolidated
Financial Statements.
F-18
Table of Contents
STANLEY FURNITURE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13.
Quarterly Results of Operations
(Unaudited)
We are providing updated summary selected quarterly financial information, which is included
below, reflecting the prior period reclassification of costs to warehouse and prepare goods for
shipping to customers from selling, general and administrative expenses to cost of sales.
| (in thousands, except per share data) | ||||||||||||||||
| 2010 Quarters: | First | Second | Third | Fourth | ||||||||||||
|
Net Sales
|
$ | 36,524 | $ | 37,902 | $ | 34,897 | $ | 27,689 | ||||||||
|
Gross loss
|
(3,039 | ) | (5,746 | ) | (1,297 | ) | (6,022 | ) | ||||||||
|
Net loss
|
(19,073 | )(1) | (11,459 | )(2) | (4,934 | )(2) | (8,324 | )(2)(5) | ||||||||
|
Net loss per share:
|
||||||||||||||||
|
Basic
|
$ | (1.85 | ) | $ | (1.11 | ) | $ | (.48 | ) | (.73 | ) | |||||
|
Diluted
|
(1.85 | ) | (1.11 | ) | (.48 | ) | (.73 | ) | ||||||||
|
2009 Quarters:
|
First | Second | Third | Fourth | ||||||||||||
|
Net Sales
|
$ | 39,764 | $ | 42,326 | $ | 38,455 | $ | 39,906 | ||||||||
|
Gross profit (loss)
|
3,850 | 2,601 | (1,502 | ) | (3,193 | ) | ||||||||||
|
Net loss
|
(2,376 | ) | (3,023 | ) | (5,073 | )(3) | (1,279 | )(4)(5) | ||||||||
|
Net loss per share:
|
||||||||||||||||
|
Basic
|
$ | (.23 | ) | $ | (.29 | ) | $ | (.49 | ) | (.12 | ) | |||||
|
Diluted
|
(.23 | ) | (.29 | ) | (.49 | ) | (.12 | ) | ||||||||
| (1) |
Includes a goodwill impairment charge of $9.1 million.
|
|
| (2) |
Includes restructuring and other charges for the conversion of a portion of our largest
manufacturing facility to a warehouse and distribution center. Second quarter includes
$3.2 million, third quarter includes $1.5 million, and fourth quarter includes $4.3
million.
|
|
| (3) |
Includes restructuring and other charges of $641 thousand, for the consolidation of two
warehouses.
|
|
| (4) |
Includes restructuring and other related charges of $3.0 million, for the consolidation
of two warehouses, and other downsizing initiatives implemented.
|
|
| (5) |
Continued Dumping and
Subsidy Offset Act receipts totaled $1.4 million and $5.7 million
for 2010 and 2009 respectively.
|
F-19
Table of Contents
STANLEY FURNITURE COMPANY, INC.
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For each of the Three Years in the Period Ended December 31, 2010
(in thousands)
| Column A | Column B | Column C | Column D | Column E | ||||||||||||
| Charged | ||||||||||||||||
| Balance at | (Credited) | Balance | ||||||||||||||
| Beginning | to Costs & | at End of | ||||||||||||||
| Descriptions | of Period | Expenses | Deductions | Period | ||||||||||||
|
2010
|
||||||||||||||||
|
Doubtful receivables
|
$ | 1,160 | $ | 29 | $ | 289 | (a) | $ | 900 | |||||||
|
Discounts, returns,
and allowances
|
587 | (247 | )(b) | 340 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 1,747 | $ | 218 | $ | 289 | $ | 1,240 | ||||||||
|
|
||||||||||||||||
|
Valuation allowance for
deferred tax assets
|
$ | 188 | $ | 11,410 | $ | 11,598 | ||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
2009
|
||||||||||||||||
|
Doubtful receivables
|
$ | 1,000 | $ | 604 | $ | 444 | (a) | $ | 1,160 | |||||||
|
Discounts, returns,
and allowances
|
644 | (57 | )(b) | 587 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 1,644 | $ | 547 | $ | 444 | $ | 1,747 | ||||||||
|
|
||||||||||||||||
|
Valuation allowance for deferred
tax assets
|
$ | 188 | $ | 188 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
2008
|
||||||||||||||||
|
Doubtful receivables
|
$ | 825 | $ | 756 | $ | 581 | (a) | $ | 1,000 | |||||||
|
Discounts, returns,
and allowances
|
657 | (13 | )(b) | 644 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 1,482 | $ | 743 | $ | 581 | $ | 1,644 | ||||||||
|
|
||||||||||||||||
| (a) |
Uncollectible receivables written-off, net of recoveries.
|
|
| (b) |
Represents net decrease in the reserve.
|
S-1
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. (removed and Reserved)Part IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules