Stanley Furniture Reports First Quarter Sales Decline

Furniture World Magazine

Stanley Furniture Company, Inc. reported sales and earnings for the first quarter of 2008. Sales and earnings were within management’s guidance range provided in January 2008. Net sales of $62.5 million decreased 16.7% from the first quarter of 2007. Earnings per share of $.10 includes $.02 for charges related to the previously announced manufacturing consolidation and compares to $.15 in the prior year quarter. Operating income declined to $2.3 million, or 3.6% of net sales, excluding restructuring charges of $0.2 million related to the consolidation of manufacturing operations. This compares to operating income of $3.1 million, or 4.1% of net sales, in the first quarter of 2007. The decrease in operating income and margin resulted primarily from lower sales and production levels. Higher raw material cost and other inflationary cost increases were offset by higher average selling prices. Cash flow from operations was used to pay cash dividends of $1.0 million and increase cash on hand by $0.5 million during the first quarter of 2008. Working capital, excluding cash and current maturities of long-term debt, decreased to $62.7 million at the end of the first quarter of 2008 compared to $66.8 million at the end of the first quarter of 2007 primarily due to a decrease in accounts receivable and inventories reflecting lower sales. Approximately $19.0 million is currently authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock. Business Outlook “Business conditions were about as anticipated for the first two months of the quarter,” commented Jeffrey R. Scheffer, President and Chief Executive Officer. “However, based on our customer order trends, it appears that consumer demand became noticeably weaker starting around the middle of March as consumer confidence hit a five year low and the weakness which began in housing and related areas appears to be spreading to other sectors of the economy. Consequently, we have lowered our 2008 sales and earnings guidance as set forth below.” “Despite the most challenging environment our industry has experienced in perhaps a generation, we remain profitable and have a strong financial position. I am confident we have a mission that differentiates us from the competition, a strategy that provides for profitable growth, and an enthusiastic and engaged management team that is preparing the Company for the eventual upturn in business,” concluded Scheffer. Management offers the following guidance. This guidance excludes any potential receipt of funds under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) involving tariffs collected by the U.S. government on wooden bedroom furniture imported from China. Total year 2008 guidance: Net sales are expected to be in the range of $233 million to $243 million, compared to $282.8 million in 2007. Operating income is expected to be in the range of $6 million to $8 million (excluding a pre-tax charge to earnings of $1.0 million for the manufacturing consolidation). Earnings per share is expected to be in the range of $.27 to $.38 per share (excluding a charge to earnings of $.07 for the manufacturing consolidation) compared to $.54 (excluding pension plan termination and restructuring charges of $.65 and CDSOA income of $.66) for 2007. Second quarter ending June 28, 2008 guidance: Net sales are expected to be in the range of $54 million to $58 million, compared to sales of $67.7 million in the second quarter of 2007. Operating income is expected to be in the range of $0.6 million to $1.3 million (excluding a pre-tax charge to earnings of $0.2 million for the manufacturing consolidation). Earnings per share is expected to be in the range of a loss of $.01 to earnings of $.04 per share (excluding a restructuring charge of about $.01) compared to $.20 (excluding the pension plan termination charge of $.42) in the second quarter of 2007. Other Information All earnings per share amounts are on a diluted basis. Established in 1924, Stanley Furniture Company, Inc. is a leading manufacturer of wood furniture targeted at the upper-medium price range of the residential market. Manufacturing facilities are located in Stanleytown, Va. and Robbinsville and Lexington, N.C. Its common stock is traded on the Nasdaq stock market under the symbol STLY.