Stanley Furniture Announces Record Sales & Earnings

Furniture World Magazine

Stanley Furniture Company, Inc. reported record sales and earnings for 2005. Sales were at the low end and earnings exceeded management’s previous guidance range provided in mid October 2005. Net sales of $333.6 million rose 9.1% over the prior year. Earnings per share grew 11.3% to $1.77 in 2005 from $1.59 in 2004. Fourth quarter sales of $81.4 million decreased 2.2% from record fourth quarter sales in 2004. However, earnings per share grew 7.0% to $.46 compared to $.43 in the fourth quarter of 2004. Operating income for 2005 improved to $37.4 million, or 11.2% of net sales, from $34.7 million, or 11.3% of net sales, for the prior year. The favorable impact of higher sales in 2005 was mitigated by higher raw material costs, compensation costs, energy costs, freight costs, increased warehouse expense and tariffs imposed on wooden bedroom furniture imported from China. Strong cash flow from operations for 2005 was used to purchase $23.0 million of the Company’s common stock (including $13.0 million in the fourth quarter), pay cash dividends of $3.1 million, repay $4.3 million of debt, and increase cash on hand $4.9 million. Working capital, excluding cash and current maturities of long-term debt, decreased $3.7 million in 2005 primarily due to lower inventories. Approximately $17.2 million is currently authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock. At December 31, 2005, the Company was in anet cash position with total debt outstanding of $$12.6 million. Business Outlook “We are pleased to report a record year of sales and earnings”, commented Jeffrey R. Scheffer, President and Chief Executive Officer. “While industry sales trends were positive in 2005, we believe the consistent execution of our strategy has resulted in market share gains that drove most of our sales growth. Fourth quarter sales declined 2.2% ending a string of fourteen consecutive quarters of year over year sales growth, punctuating an industry slow down that began during the third quarter. As a result, we enter 2006 cautiously, mindful of an uncertain demand environment yet confident in our ability to continue to gain market share and anticipate another good year.” Management offers the following guidance for total year 2006. • Net sales are expected to be in the range of $340 million to $350 million, an increase of 2% to 5% over the prior year. • Operating income is expected to be in the range of $37.3 million to $38.3 million. • The Company’s effective tax rate is expected to be in the range of 35.0% to 35.3% in 2006. • Earnings per share are expected to be in the range of $1.84 to $1.90 compared to $1.77 for 2005. Management offers the following guidance for the quarter ending April 1, 2006. • Net sales are expected to be in the range of $81 million to $84 million, ranging from a decrease of 2% to an increase of 1% over the first quarter of 2005. • Operating income is expected to be in the range of $8.7 million to $9.3 million. • Earnings per share are expected to be in the range of $.43 to $.46 compared to $.43 in the year-ago quarter. Other Information All earnings per share amounts are on a diluted basis and adjusted for the two-for-one stock split distributed on June 6, 2005. 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 and Martinsville, Va. and Robbinsville and Lexington, N.C. Its common stock is traded on the Nasdaq stock market under the symbol STLY.