Stanley Furniture Reports Third Quarter Operating Loss

Furniture World News

Stanley Furniture Company, Inc. reported sales and earnings for the third quarter of 2008. Sales and earnings were within management’s guidance range provided in mid-July 2008. Net sales of $54.5 million decreased 25.6% from the third quarter of 2007. Loss per share of $.34 compares to earnings of $.16 per share in the prior year quarter. The current year quarter includes a charge of $.27 per share for costs related to the consolidation of two manufacturing facilities into one and other restructuring actions announced in the third quarter of 2008. For the first nine months of 2008, net sales of $176.2 million decreased 18.4% from the comparable prior year period. Loss per share for the first nine months of 2008 was $.24 compared to earnings of $.09 per share for the same period of 2007. The 2008 period includes restructuring charges of $.29 per share and the 2007 period includes a pension termination charge of $.42 per share. Year-to-date operating income was $3.0 million, or 1.7% of net sales, excluding pre-tax restructuring charges of $5.5 million. This compares to operating income for the first nine months of 2007 of $9.8 million, or 4.5% of net sales, excluding the pre-tax pension termination charge of $6.6 million. The decrease in operating income and margin resulted primarily from lower sales and production levels, higher raw material cost, and other inflationary cost increases. These factors were partially offset by higher average selling prices and cost reduction initiatives. “Excluding restructuring charges, operating income was near a break-even level due to the significant decline in sales,” explained Albert L. Prillaman, Chairman andCEO. “The manufacturing consolidation and other difficult moves we are making throughout our business are progressing on plan. This restructuring will lower our costs going forward and position the business for success when demand eventually improves. Meanwhile, we continued to generate positive cash flow and improve ouralready strong financial position in the third quarter.” Year-to-date cash flow from operations was used to pay cash dividends of $3.1 million, make scheduled debt payments of $1.4 million, fund capital expenditures of$1.5 million and increase cash on hand by $5.1 million. Working capital, excluding cash and current maturities of long-term debt, decreased to $53.8 million at the endof the third quarter of 2008 compared to $73.0 million at the end of the third quarter of 2007, primarily due to a decrease in inventories and accounts receivable reflecting lower sales. Business Outlook “Order rates over the last ten days have deteriorated significantly; however, we believe our mid-July guidance range for total year 2008 earnings before restructuring charges remains reasonable assuming there is some near term resolution of the credit crisis,” concluded Prillaman. However, management now expects total charges for the restructuring and related activities announced in the third quarter for 2008 to range from $7 million to $9 million. This represents anincrease of $1 million from last quarter’s estimate to account for a severance payment due to the resignation of our former president. Approximately $5.2 million of these charges were recorded in the third quarter of 2008. A portion of the remaining estimated charges may be recorded into 2009 depending upon the timing of the final disposition of assets associated with a plant closure. Management anticipates offering guidance for 2009 in conjunction with reporting 2008 total year results in late January 2009. Other Information All earnings per share amounts are on a fully 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, N.C. Its common stock is traded on the Nasdaq stock market under the symbol STLY.