Stanley Furniture Reports First Quarter Sales Increase

Furniture World Magazine

Stanley Furniture Company,Inc. reported record sales for the first quarter of 2006. Sales and earnings were within management’s previous guidance provided in late January 2006. Net sales of $83.5 million increased 0.7% from record first quarter sales in 2005. Earnings per share of $.43 equaled the record earnings in the first quarter of last year. Operating income declined to $8.6 million, or 10.3% of net sales, in the first quarter of 2006 from $9.4 million, or 11.3% of net sales, in the first quarter of 2005. Lower margins resulted from operational inefficiencies, lower production levels, and higher raw material,compensation and energy costs. Working capital, excluding cash and current maturities of long-term debt, decreased $4.0 million during the first quarter to $77.5 million from $81.5 million at December 31, 2005. Totalinventories of $65.1 million have decreased $4.8 million and $6.6 million since December 31,2005 and the year-ago quarter, respectively. Strong cash flow in the first quarter was used to purchase $1.3 million of the Company’s common stock, pay cash dividends of $982,000 and increase the Company’s cash on hand $9.4 million. Approximately $15.9 million remains authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock. At April 1, 2006, total debt outstanding was $11.4million and cash on hand amounted to $21.9 million. Business Outlook “We are pleased to report record sales, solid earnings and exceptionally strong cash flow for the first quarter of 2006,” commented Jeffrey R. Scheffer, chairman, president and chief executive officer. “The softness in industry sales that began in the latter half of last year has continued into 2006 with inconsistent demand patterns. Recent business conditions have been softer than we anticipated and has caused us to modestly lower our sales projections for 2006. Recently, we began reinvigorating our continuous improvement efforts using lean manufacturing principles, to improve processes and efficiencies. Near term, as these efforts allow us to continue reducing inventories, we anticipate lower production levels and operating margins. How quickly and to what extent we are able to lower costs, improve quality and reduce inventories is difficult to project, but we are confident this will position the Company to better compete primarily as a domestic manufacturer, execute our strategy and deliver value,” concluded Scheffer. Management offers the following guidance for total year 2006. -Net sales are expected to be in the range of $335 million to $345 million, an increase of 0.4% to 3.4% over the prior year. -Operating income is expected to be in the range of $35.8 million to $36.8 million. -The Company’s effective tax rate is expected to be 35.1% in 2006. -Earnings per share are expected to be in the range of $1.78 to $1.84 compared to $1.77 for 2005. Management offers the following guidance for the quarter ending July 1, 2006. -Net sales are expected to be in the range of $79.5 million to $82.0 million, a decrease of 2% to 5% over the second quarter of 2005. -Operating income is expected to be in the range of $7.0 million to $7.6 million. -Earnings per share are expected to be in the range of $.35 to $.38 compared to record earnings of $.44 per share in the year-ago quarter. 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 and Martinsville, Va. and Robbinsville and Lexington, N.C. Its