Stanley Furniture Announces Second Quarter Net Sales Decline

Furniture World Magazine

Stanley Furniture Company, Inc. reported sales and earnings for the second quarter of 2008. Net sales of $59.1 million decreased 12.7% from the second quarter of 2007. Loss per share of $.01 compares to a loss of $.23 per share in the prior year quarter. The prior year quarter includes a charge of $.43 per share for the final termination of the Company’s defined benefit pension plan. For the first half of 2008, net sales of $121.7 million decreased 14.8% from the comparable prior year period. Earnings per share for the first half of 2008 of $.09 compares to a loss of $.07 per share in the first half of 2007. The 2008 first half includes restructuring charges of $.02 per share. The pension termination charge amounted to $.42 per share for the comparable 2007 six month period. Year-to-date operating income declined to $3.4 million, or 2.8% of net sales, excluding restructuring charges of $0.3 million. This compares to operating income in the first half of 2007 of $6.6 million, or 4.6% of net sales, excluding the 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. The Company recently announced several steps to improve its cost structure in response to current industry conditions. Those steps included plans to consolidate its North Carolina manufacturing operations from two facilities to one, elimination of two executive positions and offering a voluntary early retirement incentive for qualified salaried associates. The Company expects the manufacturing consolidation and transition to be completed by December 31, 2008 and anticipates pre-tax restructuring charges in the second half of 2008 to be in the range of $6 million to $8 million. Once the transition period is over, the Company expects annual pre-tax savings of $5 million to $6 million from the manufacturing consolidation. “Historically low levels of consumer confidence, housing activity and personal disposable income has led to an industry-wide weakness in consumer demand for residential furniture not seen since the early ‘80’s,” explained Stanley Furniture’s president and CEO Jeffrey R. Scheffer. “We are making difficult moves from top to bottom and throughout our business to remain profitable at lower sales volumes and to be well-positioned for continued success when demand eventually improves.” Cash flow from operations was used to pay cash dividends of $2.1 million, make scheduled debt payments of $1.4 million and increase cash on hand by $2.2 million during the first half of 2008. Working capital, excluding cash and current maturities of long-term debt, decreased to $57.3 million at the end of the second quarter of 2008 compared to $71.6 million at the end of the second quarter of 2007 primarily due to a decrease in accounts receivable and inventories reflecting lower sales. Approximately $19.0 million is currently authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock. Business Outlook “We believe the current weakness in consumer demand for residential furniture is likely to continue for the balance of the year and, consequently, we have lowered our sales and earnings guidance for the year,” 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. Total year 2008 guidance: Net sales are expected to be in the range of $230 million to $237 million, compared to $282.8 million in 2007. Operating loss is expected to be in the range of $2 million to $6 million (including restructuring charges of $6 million to $8 million). Earnings per share is expected to range from a loss of $.25 to $.46 (including restructuring charges of $.32 to $.43) compared to earnings of $.55 (including pension plan termination and restructuring charges of $.65 and CDSOA income of $.66) for 2007. Third quarter ending September 27, 2008 guidance: Net sales are expected to be in the range of $53 million to $57 million, compared to sales of $73.2 million in the third quarter of 2007. Operating loss is expected to be in the range of $5.2 million to $7.8 million (including restructuring charges of $5.0 million to $7.0 million). Earnings per share is expected to range from a loss of $.32 to $.46 (including restructuring charges of $.27 to $.37) compared to earnings of $.16 in the third quarter of 2007. 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, Va. and Robbinsville and Lexington, N.C. Its common stock is traded on the Nasdaq stock market under the symbol STLY.