Stanley Furniture Announces Increased Emphasis on Import Initiative And Realignment of Manufacturing Facilities.

Furniture World Magazine

Stanley Furniture Company, Inc. announced a plan to expand offshore sourcing, realign manufacturing capacity and significantly lower operating costs. As a result of a successful offshore sourcing initiative that began over two years ago, the Company is integrating the importing of selected component parts and finished items in its product line that will lower costs, provide design flexibility, and offer a better value to customers. This initiative will create excess capacity in the Company's manufacturing facilities. Accordingly, the Company has decided to close its West End, North Carolina factory and consolidate the production from this facility into other company facilities without disrupting the supply of product to customers. Closing of the West End facility is expected to reduce the Company's costs by $4-5 million annually and will affect approximately 13%, or 400, of the Company's 3,100 employees. This action combined with normal employee attrition over the past year will result in a 20% reduction in the Company's workforce from December 2000. Production at the West End facility will be phased out during the first quarter 2002 with certain warehousing and other activities continuing until mid year 2002. The Company anticipates asset writedowns (through accelerated depreciation) and other restructuring charges, including severance and plant inefficiencies, totaling $7-9 million pretax, equal to approximately $.65 to $.85 per share. The charge will include cash costs of approximately $3-4 million. However, a significant portion of the machinery and equipment will be relocated from West End to other Company facilities and will reduce future capital expenditures by approximately $3-4 million. Current accounting guidelines require that assets held for use be depreciated over the remaining useful lives, which is through the anticipated closure date in the first quarter of 2002. Therefore, the Company expects a fourth quarter 2001 charge of approximately $3-4 million pretax, or $.30 to $.40 per share with the remainder of the cost occurring in 2002, predominantly in the first quarter. The Company also announced its revised outlook for fourth quarter 2001 sales and earnings. The Company now expects a sales decline of 15-19% in the fourth quarter of 2001 compared to last year and earnings per share of $.26-$.31 for the fourth quarter and $1.70-$1.75 for total year 2001, excluding asset writedowns, restructuring and unusual charges. "Profitability remains at healthy levels, our cash flow and balance sheet are strong and our market position is solid, yet performance this year has been adversely impacted by the economic recession, the financial failure and subsequent liquidation of our largest customer, and competitive pressure from imported products," said Albert L. Prillaman, chairman and chief executive officer. "We continue to believe the U.S. economy will rebound next year from the current recession and therefore, we continue to expect a sales increase of 5-8% and earnings per share of $2.30-$2.60 excluding restructuring charges for 2002." "We deeply regret the need to close the West End plant and eliminate these jobs. However, we believe this realignment of our manufacturing operations is absolutely essential for Stanley Furniture to remain a highly competitive manufacturer and an industry leader. The realignment of our manufacturing facilities will be painful short-term but significantly improves our cost structure in the future. We have been very deliberate in our approach tooffshore sourcing because of our commitment to service continuity and high quality standards. We believe a blend of focused, efficient domestic manufacturing facilities combined with lower cost offshore manufacturing maximizes design flexibility and value to the consumer," Prillaman concluded. All earnings per share amounts are on a fully diluted basis.