Stanley Furniture Reports 2008 Operating Results

Furniture World Magazine

Stanley Furniture Company, Inc. reported sales and earnings for 2008. Earnings were within management’s guidance range provided in mid-October 2008. Net Sales of $226.5 million decreased 19.9% compared to 2007. Earnings per share decreased 35% to $.36 compared to $.55 in 2007. Fourth quarter sales of $50.4 million declined 24.7% from the final quarter of 2007. Earnings per share rose 25% to $.60 from $.48 in the fourth quarter of 2007. Two items had a significant impact on 2008 earnings. Income of $11.5 million, net of legal expenses and related settlement payments, was recorded in 2008 from the receipt of funds under the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA) related to wooden bedroom furniture imported from China compared to $10.4 million in 2007. The Company recorded a restructuring charge of $7.3 million in 2008 primarily for costs related to the consolidation of two manufacturing facilities into one and other restructuring actions taken to lower the Company’s cost structure in response to lower sales. The Company incurred a restructuring charge of $3.6 million in 2007 for the conversion of a manufacturing facility to a warehousing operation. Also, the Company recorded a pension termination charge of $6.6 million in 2007. See attached tables for a reconciliation of reported to adjusted operating income, net income, and earnings per share for the fourth quarter and total year 2008 compared to 2007. Operating income as adjusted for 2008 amounted to $3.5 million, or 1.5% of net sales. This compares to 2007 operating income as adjusted of $10.9 million, or 3.9% of net sales. The decrease in operating income and margin resulted primarily from lower sales and production levels, and inflationary cost increases. These factors were partially offset by higher average selling prices and cost reduction initiatives. Cash flow from operations was used to pay cash dividends of $4.1 million, make scheduled debt payments of $1.4 million, fund capital expenditures of $2.3 million and increase cash on hand by $12.4 million. Working capital, excluding cash and current maturities of long-term debt, decreased $7.2 million, or 11.6%, primarily due to a decrease in accounts receivable and inventories reflecting lower sales. “The manufacturing consolidation and other difficult moves we have taken to lower our cost structure are mostly complete,” noted Albert L. Prillaman, chairman and chief executive officer. “We anticipate residual restructuring charges from the manufacturing consolidation to be less than $1 million in 2009, predominately in the first quarter. Operating income excluding restructuring charges was near a break-even level in the fourth quarter of 2008, due to the significant drop in sales. We believe this is indicative of the sales level required to produce break-even operating income going forward.” “Furniture demand is dependent upon housing activity, consumer confidence, and disposable income. These indicators are at historically low levels and do not appear poised for near-term improvement. We continue to experience a deteriorating demand environment and frankly anticipate further sales declines before seeing any improvement.” “Since earnings, or losses as the case may be, are likely to remain at depressed levels and due to the unprecedented uncertainty in the economy we believe attempting to provide specific sales and earnings guidance for 2009 is neither useful nor relevant. Our focus is on effective balance sheet management and preparing the business for success when demand eventually improves,” concluded Prillaman. The Company also announced that its Board of Directors voted to suspend payment of quarterly cash dividends on its common stock, effective immediately. The dividend suspension will provide annualized cash savings of approximately $4 million. “The decision to suspend quarterly cash dividends is part of our balance sheet management efforts and we believe is in the best interests of the Company and our shareholders in the current economic environment,” noted Prillaman. 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. Its common stock is traded on the Nasdaq stock market under the symbol STLY.