[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
54-1272589
|
||||
(State
or
other jurisdiction of incorporation)
|
(I.R.S.
Employer Identification No.)
|
(unaudited)
|
|||||||
September
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
5,400
|
$
|
12,556
|
|||
Accounts
receivable, less allowances of $2,502 and $1,566
|
38,271
|
36,957
|
|||||
Inventories:
|
|||||||
Finished
goods
|
45,491
|
52,609
|
|||||
Work-in-process
|
5,453
|
7,609
|
|||||
Raw
materials
|
8,822
|
9,743
|
|||||
Total
inventories
|
59,766
|
69,961
|
|||||
Prepaid
expenses and other current assets
|
1,759
|
1,435
|
|||||
Deferred
income taxes
|
2,442
|
2,462
|
|||||
Total
current
assets
|
107,638
|
123,371
|
|||||
Property,
plant and equipment, net
|
48,438
|
50,744
|
|||||
Goodwill
|
9,072
|
9,072
|
|||||
Other
assets
|
6,362
|
7,301
|
|||||
Total
assets
|
$
|
171,510
|
$
|
190,488
|
|||
LIABILITIES
|
|||||||
Current
liabilities:
|
|||||||
Current
maturities of long-term debt
|
$
|
2,857
|
$
|
2,857
|
|||
Accounts
payable
|
18,227
|
16,405
|
|||||
Accrued
salaries, wages and benefits
|
9,636
|
11,144
|
|||||
Other
accrued
expenses
|
2,287
|
1,765
|
|||||
Total
current
liabilities
|
33,007
|
32,171
|
|||||
Long-term
debt, exclusive of current maturities
|
7,143
|
8,571
|
|||||
Deferred
income taxes
|
9,386
|
10,164
|
|||||
Other
long-term liabilities
|
6,559
|
6,833
|
|||||
Total
liabilities
|
56,095
|
57,739
|
|||||
STOCKHOLDERS’
EQUITY
|
|||||||
Common
stock, $.02 par value, 25,000,000 shares
authorized
11,131,810
and
12,252,000 shares issued and outstanding
|
223
|
245
|
|||||
Retained
earnings
|
115,370
|
132,682
|
|||||
Accumulated
other comprehensive loss
|
(178
|
)
|
(178
|
)
|
|||
Total
stockholders’ equity
|
115,415
|
132,749
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
171,510
|
$
|
190,488
|
Three
Months
|
Nine
Months
|
||||||||||||
Ended
|
Ended
|
||||||||||||
September
|
October
|
September
|
October
|
||||||||||
30,
2006
|
1,
2005
|
30,
2006
|
1,
2005
|
||||||||||
Net
sales
|
$
|
75,911
|
$
|
85,615
|
$
|
236,911
|
$
|
252,200
|
|||||
Cost
of sales
|
60,951
|
65,131
|
184,575
|
190,619
|
|||||||||
Gross
profit
|
14,960
|
20,484
|
52,336
|
61,581
|
|||||||||
Selling,
general and administrative expenses
|
9,996
|
11,106
|
32,447
|
33,396
|
|||||||||
Operating
income
|
4,964
|
9,378
|
19,889
|
28,185
|
|||||||||
Other
income, net
|
91
|
71
|
252
|
190
|
|||||||||
Interest
income
|
76
|
96
|
332
|
250
|
|||||||||
Interest
expense
|
537
|
548
|
1,570
|
1,663
|
|||||||||
Income
before
income taxes
|
4,594
|
8,997
|
18,903
|
26,962
|
|||||||||
Income
taxes
|
1,598
|
3,195
|
6,578
|
9,573
|
|||||||||
Net
income
|
$
|
2,996
|
$
|
5,802
|
$
|
12,325
|
$
|
17,389
|
|||||
Earnings
per share:
|
|||||||||||||
Basic
|
$
|
.26
|
$
|
.45
|
$
|
1.04
|
$
|
1.35
|
|||||
Diluted
|
$
|
.26
|
$
|
.44
|
$
|
1.01
|
$
|
1.31
|
|||||
Weighted
average shares outstanding:
|
|||||||||||||
Basic
|
11,396
|
12,811
|
11,861
|
12,886
|
|||||||||
Diluted
|
11,657
|
13,198
|
12,147
|
13,294
|
|||||||||
Cash
dividend declared and paid per common share
|
$
|
.08
|
$
|
.06
|
$
|
.24
|
$
|
.18
|
|||||
Nine Months
Ended
|
||||||||||
September 30,
|
October
1,
|
|||||||||
2006
|
2005
|
|||||||||
Cash
flows from operating activities:
|
||||||||||
Cash
received from customers
|
$
|
234,933
|
$
|
247,093
|
||||||
Cash
paid to suppliers and employees
|
(199,742
|
)
|
(214,001
|
)
|
||||||
Interest
paid, net
|
(1,335
|
)
|
(1,431
|
)
|
||||||
Income
taxes paid, net
|
(8,612
|
)
|
(8,447
|
)
|
||||||
Net
cash
provided by operating activities
|
25,244
|
23,214
|
||||||||
Cash
flows from investing activities:
|
||||||||||
Capital
expenditures
|
(2,023
|
)
|
(3,791
|
)
|
||||||
Purchase
of other assets
|
(17
|
)
|
(33
|
)
|
||||||
Net
cash used by
investing activities
|
(2,040
|
)
|
(3,824
|
)
|
||||||
Cash
flows from financing activities:
|
||||||||||
Repayment
of senior notes
|
(1,428
|
)
|
(2,828
|
)
|
||||||
Purchase
and retirement of common stock
|
(28,282
|
)
|
(9,996
|
)
|
||||||
Proceeds
from insurance policy loans
|
1,241
|
1,110
|
||||||||
Dividends
paid
|
(2,859
|
)
|
(2,330
|
)
|
||||||
Proceeds
from exercised stock options
|
713
|
6,335
|
||||||||
Tax
benefit from exercise of stock options
|
255
|
|||||||||
Net
cash used by
financing activities
|
(30,360
|
)
|
(7,709
|
)
|
||||||
Net
increase (decrease) in cash
|
(7,156
|
)
|
11,681
|
|||||||
Cash
at beginning of period
|
12,556
|
7,632
|
||||||||
Cash
at
end of period
|
$
|
5,400
|
$
|
19,313
|
||||||
Reconciliation
of net income to net cash provided by
operating activities:
|
||||||||||
Net
income
|
$
|
12,325
|
$
|
17,389
|
||||||
Depreciation
|
4,368
|
4,228
|
||||||||
Deferred
income
taxes
|
(758
|
)
|
(524
|
)
|
||||||
Tax
benefit from
exercise of stock options
|
(255
|
)
|
||||||||
Stock-based
compensation
|
268
|
|||||||||
Loss
on disposal
of assets
|
23
|
|||||||||
Changes
in
assets and liabilities:
|
||||||||||
Accounts
receivable
|
(1,314
|
)
|
(5,062
|
)
|
||||||
Inventories
|
10,195
|
882
|
||||||||
Prepaid
expenses
and other current assets
|
(406
|
)
|
(1,085
|
)
|
||||||
Accounts
payable
|
1,822
|
2,907
|
||||||||
Accrued
salaries, wages and benefits
|
(1,262
|
)
|
2,301
|
|||||||
Other
accrued
expenses
|
777
|
2,349
|
||||||||
Other
assets
|
(265
|
)
|
(56
|
)
|
||||||
Other
long-term
liabilities
|
(274
|
)
|
(115
|
)
|
||||||
Net
cash
provided by operating activities
|
$
|
25,244
|
$
|
23,214
|
1.
|
Preparation
of Interim Unaudited Consolidated Financial
Statements
|
2.
|
Stock-based
Compensation
|
Three
Months
Ended
|
Nine
Months
Ended
|
||||||
October
|
October
|
||||||
1,
2005
|
1,
2005
|
||||||
Net
income as reported
|
$
|
5,802
|
$
|
17,389
|
|||
Deduct:
Total stock-based compensation expense
determined
|
|||||||
under
fair value
based method for all awards, net of related
|
|||||||
tax
effects
|
18
|
495
|
|||||
Pro
forma net income
|
$
|
5,784
|
$
|
16,894
|
|||
Earnings
per share:
|
|||||||
Basic
- as
reported
|
$
|
0.45
|
$
|
1.35
|
|||
Basic
- pro
forma
|
$
|
0.45
|
$
|
1.31
|
|||
Diluted
- as
reported
|
$
|
0.44
|
$
|
1.31
|
|||
Diluted
- pro
forma
|
$
|
0.44
|
$
|
1.27
|
Expected
price volatility
|
36.1
|
% | |
Risk-free interest rate |
4.7
|
% | |
Weighted average expected life in years |
5.2
|
||
Dividend yield |
1.2
|
% |
Weighted
|
|||||||||||||
Average
|
|||||||||||||
Weighted
|
Remaining
|
Aggregate
|
|||||||||||
Number
of
|
Average
|
Contractual
|
Intrinsic
|
||||||||||
Shares
|
Exercise
price
|
Term
(in yrs)
|
Value
|
||||||||||
Outstanding
at January 1, 2006
|
855
|
$
|
14.71
|
5.7
|
|||||||||
Lapsed
|
(23)
|
|
$
|
17.49
|
|||||||||
Exercised
|
(54)
|
|
$
|
13.21
|
|||||||||
Granted
|
25
|
$
|
27.59
|
||||||||||
Outstanding
at September 30, 2006
|
803
|
$
|
15.14
|
5.2
|
$
|
4,960
|
|||||||
Exercisable
at September 30, 2006
|
729
|
$
|
14.14
|
4.8
|
$
|
5,223
|
Three
Months
|
Nine
Months
|
||||||||||||
Ended
|
Ended
|
||||||||||||
September
|
October
|
September
|
October
|
||||||||||
30,
2006
|
1,
2005
|
30,
2006
|
1,
2005
|
||||||||||
Proceeds
from stock options exercised
|
$
|
0
|
$
|
1,225
|
$
|
713
|
$
|
6,335
|
|||||
Tax
benefits related to stock options exercised
|
$
|
0
|
$
|
503
|
$
|
255
|
$
|
1,743
|
|||||
Intrinsic
value of stock options exercised
|
$
|
0
|
$
|
1,361
|
$
|
689
|
$
|
4,718
|
|
|||||||
September
|
December
|
||||||
|
30,
2006
|
31,
2005
|
|||||
Land
and buildings
|
$
|
40,800
|
$
|
39,894
|
|||
Machinery
and equipment
|
78,435
|
77,693
|
|||||
Office
furniture and equipment
|
2,053
|
1,916
|
|||||
Property,
plant
and equipment, at cost
|
121,288
|
119,503
|
|||||
Less
accumulated depreciation
|
72,850
|
68,759
|
|||||
Property,
plant
and equipment, net
|
$
|
48,438
|
$
|
50,744
|
|
|||||||
September
|
December
|
||||||
|
30,
2006
|
31,
2005
|
|||||
7.43%
senior notes due through November 18, 2007
|
$
|
2,857
|
$
|
2,857
|
|||
6.94%
senior notes due through May 3, 2011
|
7,143
|
8,571
|
|||||
Total
|
10,000
|
11,428
|
|||||
Less
current maturities
|
2,857
|
2,857
|
|||||
Long-term
debt,
exclusive of current maturities
|
$
|
7,143
|
$
|
8,571
|
Three
Months
|
Nine
Months
|
||||||||||||
Ended
|
Ended
|
||||||||||||
September
|
October
|
September
|
October
|
||||||||||
30,
2006
|
1,
2005
|
30,
2006
|
1,
2005
|
||||||||||
Interest
Cost
|
$
|
$232
|
$
|
230
|
$
|
696
|
$
|
715
|
|||||
Expected
return on plan assets
|
(245
|
) |
(248
|
) |
(736
|
) |
(761
|
) | |||||
Net
amortization and deferral
|
125
|
106
|
375
|
328
|
|||||||||
Net
Cost
|
112
|
88
|
335
|
282
|
|||||||||
Settlement Expense | 341 |
286
|
652 | 859 | |||||||||
Total
expense
|
$
|
453
|
$
|
374
|
$
|
987
|
$
|
1,141
|
Three
Months
|
Nine
Months
|
||||||||||||
Ended
|
Ended
|
||||||||||||
September
|
October
|
September
|
October
|
||||||||||
30,
2006
|
1,
2005
|
30,
2006
|
1,
2005
|
||||||||||
Service
cost
|
$
|
25
|
$
|
22
|
$
|
73
|
$
|
66
|
|||||
Interest
cost
|
43
|
46
|
130
|
138
|
|||||||||
Amortization
of transitions obligation
|
33
|
33
|
98
|
99
|
|||||||||
Amortization
of net actuarial loss
|
10
|
17
|
31
|
51
|
|||||||||
Net
periodic
postretirement benefit cost
|
$
|
111
|
$
|
118
|
$
|
332
|
$
|
354
|
6.
|
Stockholders’
Equity
|
Three
Months
|
Nine
Months
|
||||||||||||
Ended
|
Ended
|
||||||||||||
September
|
October
|
September
|
October
|
||||||||||
30,
2006
|
1,
2005
|
30,
2006
|
1,
2005
|
||||||||||
Weighted
average shares outstanding
for
basic
calculation
|
11,396
|
12,811
|
11,861
|
12,886
|
|||||||||
Add:
Effect of dilutive stock options
|
261
|
387
|
286
|
408
|
|||||||||
Weighted
average shares outstanding
Adjusted
for
diluted calculation
|
11,657
|
13,198
|
12,147
|
13,294
|
Accumulated
|
|||||||||||||
Capital
in
|
Other
|
||||||||||||
Common
|
Excess
of
|
Retained
|
Comprehensive
|
||||||||||
Stock
|
Par
Value
|
Earnings
|
Loss
|
||||||||||
Balance,
December 31, 2005
|
$
|
245
|
$
|
132,682
|
$
|
(178
|
)
|
||||||
Net
income
|
12,325
|
|
|||||||||||
Exercise
of stock options
|
1
|
$
|
712
|
||||||||||
Tax
benefit on exercise of stock
options
|
255
|
||||||||||||
Stock
repurchases
|
(23
|
)
|
(1,511
|
)
|
(26,748
|
)
|
|||||||
Stock
awards
|
246
|
||||||||||||
Stock-based
compensation
|
298
|
(30
|
)
|
||||||||||
Cash dividends paid, $.24 per share | (2,859 | ) | |||||||||||
Balance,
September 30, 2006
|
$
|
223
|
$
|
115,370
|
$
|
(178
|
)
|
Three
Months
|
Nine
Months
|
||||||||||||
Ended
|
Ended
|
||||||||||||
September
|
October
|
September
|
October
|
||||||||||
30,
2006
|
1,
2005
|
30,
2006
|
1,
2005
|
||||||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
Cost
of sales
|
80.3
|
76.1
|
77.9
|
75.6
|
|||||||||
Gross
profit
|
19.7
|
23.9
|
22.1
|
24.4
|
|||||||||
Selling,
general and administrative expenses
|
13.2
|
13.0
|
13.7
|
13.2
|
|||||||||
Operating
income
|
6.5
|
11.0
|
8.4
|
11.2
|
|||||||||
Other
income, net
|
.1
|
.1
|
.1
|
.1
|
|||||||||
Interest
income
|
.1
|
.1
|
.1
|
.1
|
|||||||||
Interest
expense
|
.7
|
.6
|
.6
|
.7
|
|||||||||
Income
before
income taxes
|
6.0
|
10.5
|
8.0
|
10.7
|
|||||||||
Income
taxes
|
2.1
|
3.7
|
2.8
|
3.8
|
|||||||||
Net
income
|
3.9
|
%
|
6.8
|
%
|
5.2
|
%
|
6.9
|
%
|
ITEM
3.
|
Quantitative
and Qualitative
Disclosures about Market Risk
|
ITEM
4.
|
Controls
and
Procedures
|
(a)
|
Evaluation
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 quarterly
report.
|
(b)
|
Changes
in internal controls over financial reporting. There
were no changes in our internal control over financial reporting
that
occurred during the third quarter that have materially affected,
or are
reasonably likely to materially affect, our internal control over
financial reporting.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
Maximum
number (or
|
||||
Total
number of
|
approximate
dollar
|
|||
Total
|
Shares
purchased
|
value)
of shares that
|
||
number
of
|
Average
|
as
part of publicly
|
may
yet be purchased
|
|
Shares
|
price
paid
|
announced
plans
|
under
the plans or
|
|
Period
|
Purchased
|
per
share
|
or
programs
|
programs
(a)
|
July
2 to August 5, 2006
|
218,500
|
$22.27
|
218,500
|
$45,133,367
|
August
6 to September 2, 2006
|
151,845
|
$22.51
|
151,845
|
$41,715,033
|
September
3 to September 30, 2006
|
178,000
|
$21.47
|
178,000
|
$37,893,302
|
Total
|
548,345
|
$22.08
|
548,345
|
(a)
|
On
July 17, 2006, we announced that our Board of Directors
increased our stock repurchase authorization to $50 million. Consequently,
we may purchase our common stock, from time to time, either directly
or
through agents, in the open market, through negotiated purchases
or
otherwise, at prices and on terms satisfactory to
us.
|
3.1
|
Restated
Certificate of Incorporation of the Registrant as
amended (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 to the Registrant’s Form 10-Q (Commission File No.
0-14938) for the quarter ended September 27, 2003).
|
|
10.1
|
Third
amendment, dated June 14, 2006, to the revolving
credit facility dated August 29, 2003, between the Registrant and
Wachovia
Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Form
8-K (Commission File No. 0-14938) filed on July 18, 2006).
|
|
31.1
|
Certification
by Jeffrey R. Scheffer, our Chief Executive
Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to
Section 302 of the Sarbanes-Oxley Act of 2002.(1)
|
|
31.2
|
Certification
by Douglas I. Payne, our Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to
Section 302 of the Sarbanes-Oxley Act of 2002. (1)
|
|
32.1
|
Certification
of Jeffrey R. Scheffer, 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. (1)
|
|
32.2
|
Certification
of Douglas I. Payne, 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. (1)
|
Date:
October 17, 2006
|
STANLEY
FURNITURE COMPANY, INC.
|
|
By:
/s/ Douglas I. Payne
|
||
Douglas
I. Payne
|
||
Executive
V.P. - Finance & Administration
And
Secretary
|
||
(Principal
Financial and Accounting
Officer)
|