Stanley Furniture Enters Into Rights Agreement To Protect Net Operating Losses
December 05 2016 - 4:34PM
Stanley Furniture Company, Inc. (Nasdaq:STLY) (the “Company”)
announced today that its Board of Directors (the “Board”) has
adopted a Rights Agreement (the “Rights Agreement”) designed to
protect the company’s substantial net operating loss carryforwards
(“NOLs”). As of October 1, 2016, the Company had
approximately $20.4 million in NOLs, which can be used, in certain
circumstances, to offset future taxable income for U.S. federal
income tax purposes.
The Rights Agreement is intended to preserve and
protect the value of the Company’s NOLs by deterring an “ownership
change” within the meaning of Section 382 of the Internal Revenue
Code that could lead to the loss of the Company’s NOLs and a
resulting reduction in the Company’s value. In general, an
ownership change would occur if one or more stockholders owning 5%
or more of the Company’s common stock were to increase their
cumulative ownership of Company common stock by more than 50
percentage points over their lowest ownership percentage within a
rolling three-year period. These provisions can be triggered
not only by merger and acquisition activity but by trading as
well.
The Board adopted the Rights Agreement after
considering, among other matters, the estimated value of the tax
benefits of the NOLs, the potential for the tax benefits to
decrease in value upon an ownership change and the risk of an
ownership change occurring. The Company believes that no
ownership change as defined in Section 382 has occurred as of the
date of this press release that would impair its current NOLs.
Under the Rights Agreement, Company stockholders
of record as of December 15, 2016 will receive one preferred share
purchase right for each share of common stock they own on such
date. If a person or group acquires beneficial ownership of
4.9% or more of the Company’s outstanding common stock (subject to
certain specified exceptions), the rights will become
exercisable. The rights will also become exercisable if a
person or group that already owns 4.9% or more of the Company’s
outstanding common stock acquires an additional 1% or more of the
Company’s outstanding common stock. If the rights become
exercisable, all holders of rights, other than the person or group
triggering the rights, will be entitled to purchase Company common
stock at a 50% discount. Rights held by the person or group
triggering the rights will become void and will not be
exercisable.
The rights will trade with the Company’s common
stock and Company stockholders do not need to take any action to
receive their rights. The Rights Agreement and the rights
will expire on the first day after the Company’s 2017 annual
meeting of stockholders unless the Company’s stockholders approve
the Rights Agreement at the meeting, in which case the Rights
Agreement and the rights will expire on December 5, 2019 (unless
the Company’s NOLs are utilized prior to that date). The
Board may amend the Rights Agreement in any way or redeem the
rights at any time unless and until the rights are triggered.
The Rights Agreement includes a procedure for
the Board to consider requests to exempt a particular transaction
from triggering the exercisability of the rights under the Rights
Agreement if the transaction (i) does not (x) create a significant
risk of the Company’s NOLs being impaired or (y) constitute a
default under the change-in-control covenant included in the
Company’s credit facility or (ii) is otherwise in the best
interests of the Company.
Additional information with respect to the
Rights Agreement will be included in a Current Report on Form 8-K
filed by the Company with the Securities and Exchange
Commission.
Review of Strategic
Opportunities
In June 2016, the Company announced that its
Board engaged Stephens Inc. as financial advisor in connection
with the consideration of potential strategic and capital
allocation opportunities. In connection with the announcement
of the adoption of the Rights Agreement, the Company
indicated that this strategic review is ongoing, including
consideration of a possible sale, merger or other business
combination involving the Company. The Company has not
made a decision to pursue any particular transaction, and there can
be no assurance that the consideration of potential alternatives
will result in any transaction being pursued or completed.
The Company has not set a timetable for completion of the
consideration process, and it does not expect to comment further
unless and until the Board has approved a specific transaction, or
it otherwise deems further disclosure appropriate or required by
law.
About Stanley Furniture Company,
Inc.
Established in 1924, Stanley Furniture Company,
Inc. is a leading design, marketing and overseas sourcing resource
in the middle-to-upscale segment of the wood residential market.
The Company offers a diversified product line supported by an
overseas sourcing model and markets its brands through the
wholesale trade’s network of brick-and-mortar furniture retailers,
online retailers and interior designers worldwide, as well as
through direct sales to the consumer through a localized approach
to ecommerce fulfillment. The Company’s common stock is
traded on the NASDAQ stock market under the symbol STLY.
Stanley Furniture Company, Inc.
Investor Contact: Anita W. Wimmer
(336) 884-7698
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