Stanley Furniture Company, Inc. (STLY)

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Stanley Furniture (STLY)

Q3 2013 Earnings Call

October 15, 2013 9:00 am ET


Micah S. Goldstein - Chief Financial Officer, Chief Operating Officer, Principal Accounting Officer, Secretary and Director

Glenn Charles Prillaman - Chief Executive Officer, President and Director


John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

Barry George Haimes - Sage Asset Management, LLC

Steve Hale

Brad Hathaway



Greetings, and welcome to the Stanley Furniture Third Quarter Investor Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Micah Goldstein, Chief Operating Officer and Financial Officer for Stanley Furniture. Thank you, Mr. Goldstein, you may begin.

Micah S. Goldstein

Thanks, Rob. Good morning. Glenn and I appreciate you all taking the time to join us this morning, while we review the results of our third quarter.

During the call this morning, we may make some forward-looking statements that are subject to risks and uncertainties. A discussion of the factors that could cause actual results to differ materially from our expectations is contained in our SEC filing and the press release announcing these results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise those forward-looking statements to reflect events or circumstances after this morning's call.

Glenn, I'll turn it over to you to kick us off.

Glenn Charles Prillaman

Good morning, everyone, and thank you for joining us. Our business showed important signs of improvement during the quarter. And after 3 years of strategic change necessary to position both our Stanley and Young America brands for growth, we are starting to see the benefits of our work.

I'd like to take you through a few of those. First, sales have stabilized, and we should begin growing in the near term. Second, service to customers improved through our domestic manufacturing model supporting our Young America brand, as our customer noticed better order fulfillment rates as the quarter ended. Third, the difficulties we experienced in Q2, after the launch of our new operating system in May, continued in Q3, and that did affect -- negatively affect sales, but it greatly dissipated as the quarter progressed. We entered Q4 with our customer well informed of order status, invoicing and acknowledging, stock availability and lead times for future production. Orders from earlier in the summer that were delayed due to the issues we experienced with the operating system were delivered to customers, allowing us to now focus only on fulfilling new orders. These are the improvements in the way day-to-day business is conducted that customers have needed to experience in order for us to begin growing. Fourth, our new customer care department in our new corporate office served our customer and our sales representatives in the field increasingly well as the quarter progressed. With refinements to our operating system not yet made at the beginning of the quarter, hold times, e-mail responses and our ability to speak with credibility regarding the information surrounding the sale of our products were issues, yet as we exited the period, customer satisfaction has greatly improved. Fifth, we -- as we got it, our cash use during the quarter declined significantly compared to prior quarters. Our balance sheet remains strong. And again, I want to remind you that our plan to become profitable does not hinge upon capital spending outside of protecting the value of the investments we've already made. Lastly, business in our segment remains difficult, and our read is that there is a fair amount of uncertainty in the retail sector at the moment. However, we, again, greet customers and introduce new product this week at High Point Market. The accomplishments I've mentioned are advancements in our business we and our customers can now see, financial results will follow.

I congratulate our team and thank our customers. And now, I'll turn the call back over to Micah to comment further on operations and the financials.

Micah S. Goldstein

Thanks, Glenn. The most substantial news from the past quarter has to do with the progress we made on our new enterprise system and how that progress has allowed our customers to begin experiencing how well our operations are performing. Specifically, during the quarter, we corrected the issues that were affecting the way we allocated inventory to customer orders. This was a big hurdle that hampered shipments and orders during the previous 2 quarters. We also solidified our demand planning processes and have improved the accuracy of product availability information to our customers. Our Robbinsville factory continues to gain efficiencies in spite of the low unit volume. The plant's maintaining its production schedule and has completely embraced the culture of continuous improvement. This transformation is showing in our metrics on quality, schedule attainment and labor efficiencies. The team is increasingly focused on attacking material waste in light of recent inflation on lumber.

With 4 markets per year now, our team supporting the Stanley brand remains busy developing and bringing new product to market, as well as keeping us in service on all existing groups. We have maintained the necessary inventory levels to provide good service and still believe our finishes and quality specifications represent a great value in the marketplace. So that's the operations summary.

Now as I recap the financials, I'll highlight the comparisons to prior year, which are what we discussed in the press release and 10-Q, but I also want to make some comments on sequential performance to highlight the improvements after the completion of our office/showroom consolidation and the new systems implementation.

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