Stanley Furniture Reports Net Sales Decrease

Furniture World Magazine

Stanley Furniture Company, Inc. reported sales and earnings for the first quarter of 2007. Earnings were within management's guidance range provided in January 2007. Net sales of $75.1 million decreased 10.1% from the first quarter of 2006. Earnings per share of $.15 compares to $.43 in the year-ago quarter. Both sales and earnings were at record levels in the first quarter of last year. Operating income declined to $3.1 million, or 4.1% of net sales, in the first quarter of 2007 from $8.6 million, or 10.3% of net sales, in the first quarter of 2006. Lower margins resulted from lower sales and production levels, operating inefficiencies and higher raw material and compensation costs. These factors were partially offset by lower performance based compensation expense due to lower earnings. Cash flow from operations together with cash on hand was used to repurchase 335,731 shares of the Company's common stock for $7.3 million and pay cash dividends of $1.1 million in the first quarter of 2007. Working capital, excluding cash and current maturities of long-term debt, decreased $1.8 million during the first quarter of 2007 primarily due to a reduction in inventories. Approximately $25.3 million is currently authorized by the Company's Board of Directors to repurchase shares of the Company's common stock. Business Outlook "Our business has stabilized over the past few months and we experienced little change in overall sales trends since late last year", commented Jeffrey R. Scheffer, President and Chief Executive Officer. "While we are disappointed with lower sales and earnings, we believe this is consistent with current industry-wide conditions." "Near term, we will continue to focus on controlling costs and inventories, and improving our product offerings. Longer term, we remain focused on reducing costs, eliminating waste, and improving productivity, quality, and service through our continuous improvement efforts applying lean business principles," 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. As previously announced, the Company anticipates recording a charge to earnings ($6.0 million to $6.5 million, pre-tax) upon final termination of the Company's defined benefit pension plan in the second quarter of 2007. Total year 2007 guidance: - Net sales are expected to be in the range of $300 million to $315 million, compared to $307.6 million in 2006. - Operating income is expected to be in the range of $18.5 million to $21.0 million (excluding a pre-tax charge to earnings of $6.0 million to $6.5 million for the pension plan termination). - Earnings per share are expected to be in the range of $1.00 to $1.15 (excluding a charge to earnings of $.37 to $.40 for the pension plan termination) compared to $1.17 for 2006, excluding income from CDSOA. Second quarter ending June 30, 2007 guidance: - Net sales are expected to be in the range of $69 million to $73 million, compared to sales of $77.5 million in the second quarter of 2006. - Operating income is expected to be in the range of $3.8 million to $4.4 million (excluding a pre-tax charge to earnings of $6.0 million to $6.5 million for the pension plan termination). - Earnings per share are expected to be in the range of $.19 to $.23 (excluding a charge to earnings of $.37 to $.40 for the pension plan termination) compared to $.32 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 common stock is traded on the Nasdaq stock market under the symbol STLY.