STANLEYTOWN, Va., July 17 /PRNewswire-FirstCall/ -- Stanley Furniture
Company, Inc. (Nasdaq: STLY) today reported sales and earnings for the
second quarter of 2006. Both sales and earnings slightly exceeded
management's updated guidance range provided in mid June 2006.
Second quarter sales and earnings were below the record levels from the
year-ago quarter. Net sales of $77.5 million declined 7.4% and earnings per
share of $.32 decreased 27.3% from the second quarter of last year.
For the first half of 2006, net sales of $161.0 million decreased 3.4%
from the comparable prior year period. Earnings per share declined 13.8% to
$.75 compared to $.87 in the first half of 2005.
Second quarter operating income was $6.3 million, or 8.1% of net sales,
compared to $9.4 million, or 11.2% of net sales, in the year ago quarter.
Year-to-date operating income declined to $14.9 million, or 9.3% of net
sales, from $18.8 million, or 11.3% of net sales in the first half of 2005.
Lower margins resulted from lower sales, decreased production levels, and
higher raw material, compensation and energy costs. As a result of
improving processes and reducing lead times, production levels decreased
more sharply than the sales decline particularly in the second quarter and
led to lower margins due to the under absorption of factory overhead costs.
Working capital, excluding cash and current maturities of long-term
debt, decreased $4.6 million during the first half of 2006 to $76.9 million
from $81.5 million at December 31, 2005. Total inventories of $61.5 million
have decreased $8.5 million and $10.8 million since December 31, 2005 and
the year- ago quarter, respectively. Strong cash flow in the first six
months of 2006 along with $1.9 million of cash on hand was used to purchase
$16.2 million of the Company's common stock, pay cash dividends of $1.9
million, and reduce debt $1.4 million.
As announced earlier today, the Company's Board of Directors has
authorized $50 million to be used to repurchase shares of the Company's
common stock. At July 1, 2006 total debt outstanding was $10.0 million and
cash on hand amounted to $10.6 million.
The Company also announced today its decision to terminate its defined
benefit pension plan. No benefits have accrued under this plan since it was
frozen in December 1995, at which time Company contributions to a 401k
savings plan became the primary retirement benefit. The Company anticipates
making additional cash contributions to the pension plan in the range of $1
million to $3 million between now and the final termination. The Company
expects to record a charge to earnings in the range of $6 million to $8
million pre-tax, or $3.9 million to $5.2 million net of taxes ($.33 to $.43
per share), upon final termination. The termination will be a standard
termination for purposes of the Pension Benefit Guaranty Corporation. It is
expected to take 12 to 18 months to obtain the necessary government
approvals and complete the plan termination. Pension expense related to
this plan for 2005 was approximately $1.2 million and is expected to be
about the same for 2006.
Business Outlook
"We are disappointed with the decline in sales; however, we believe
this is a result of overall current industry conditions," commented Jeffrey
R. Scheffer, chairman, president and chief executive officer. "Quite
frankly, we expect this weaker sales environment to persist for a while and
as a result we have lowered our sales and earnings guidance for the balance
of the year. We are very pleased with strong cash flow for the first half
of 2006 and the progress we have made in our continuous improvement efforts
using lean manufacturing principles. These efforts have already resulted in
a significant decrease in inventories while improving customer service
levels and we believe we are laying the ground work to further improve
processes and efficiencies."
Management offers the following guidance for total year 2006. This
guidance excludes any potential receipt of funds by us under the Continued
Dumping and Subsidy Offset Act involving tariffs collected by the U.S.
government on wooden bedroom furniture imported from China.
* Net sales are expected to be in the range of $323.5 million to $331
million, a decrease of 1% to 3% compared to the prior year.
* Operating income is expected to be in the range of $29.8 million to
$31.5 million.
* The Company's effective tax rate is expected to be 34.8% in 2006.
* Earnings per share are expected to be in the range of $1.52 to $1.61
compared to $1.77 for 2005.
Management offers the following guidance for the quarter ending
September 30, 2006.
* Net sales are expected to be in the range of $81.0 million to $83.5
million, a decrease of 2.5% to 5.4% from the third quarter of 2005.
* Operating income is expected to be in the range of $7.4 million to $8.0
million.
* Earnings per share are expected to be in the range of $.38 to $.41
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 common stock
is traded on the Nasdaq stock market under the symbol STLY.
Conference Call Details
The Company will host a conference call Tuesday morning, July 18, at
9:00 Eastern Time. The dial-in-number is (877) 407-8029. The call will also
be web cast and archived on the Company's web site at
http://www.stanleyfurniture.com. The dial-in-number for the replay
(available through July 25, 2006) is (877) 660-6853, the account reference
number is 275 and the conference number is 206464.
Forward-Looking Statements
Certain statements made in this report are not based on historical
facts, but are forward-looking statements. These statements can be
identified by the use of forward-looking terminology such as "believes,"
"estimates," "expects," "may," "will," "should," or "anticipates," or the
negative thereof or other variations thereon or comparable terminology, or
by discussions of strategy. These statements reflect our reasonable
judgment with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. Such risks and uncertainties
include competition in the furniture industry including competition from
lower-cost foreign manufacturers, disruptions in offshore sourcing
including those arising from supply or distribution disruptions or those
arising from changes in political, economic and social conditions, as well
as laws and regulations, in China or countries from which we source
products, international trade policies of the United States and countries
from which we source products, manufacturing realignment, the inability to
raise prices in response to inflation and increasing costs, the cyclical
nature of the furniture industry, the inability to obtain sufficient
quantities of quality raw materials in a timely manner, failure to
anticipate or respond to changes to consumer tastes and fashions in a
timely manner, business failures or loss of large customers, environmental
compliance costs, extended business interruption at manufacturing
facilities, and the impact of interest rate changes on the cost of
terminating our defined benefit pension plan.
Any forward-looking statement speaks only as of the date of this press
release, and we undertake no obligation to update or revise any forward-
looking statements, whether as a result of new developments or otherwise.
STANLEY FURNITURE COMPANY, INC.
Consolidated Operating Results
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
Net sales $77,476 $83,635 $161,000 $166,585
Cost of sales 59,858 63,003 123,624 125,488
Gross profit 17,618 20,632 37,376 41,097
Selling, general and
administrative expenses 11,323 11,239 22,451 22,290
Operating income 6,295 9,393 14,925 18,807
Other income, net 68 54 161 119
Interest income 146 102 256 154
Interest expense 509 545 1,033 1,115
Income before income
taxes 6,000 9,004 14,309 17,965
Income taxes 2,063 3,177 4,980 6,378
Net income $3,937 $5,827 $9,329 $11,587
Diluted earnings per
share $0.32 $0.44 $0.75 $0.87
Weighted average number
of shares 12,264 13,255 12,397 13,316
STANLEY FURNITURE COMPANY, INC.
Consolidated Condensed Balance Sheets
(in thousands)
(unaudited)
July 1, July 2, Dec 31,
2006 2005 2005
Assets
Current assets:
Cash $10,627 $13,586 $12,556
Accounts receivable, net 37,958 39,132 36,957
Inventories 61,456 72,283 69,961
Prepaid expenses and other
current assets 1,631 1,745 1,435
Deferred income taxes 2,503 2,404 2,462
Total current assets 114,175 129,150 123,371
Property, plant and equipment, net 48,617 51,290 50,744
Goodwill 9,072 9,072 9,072
Other assets 6,753 6,560 7,301
Total assets $178,617 $196,072 $190,488
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term
debt $2,857 $2,857 $2,857
Accounts payable 16,851 19,549 16,405
Accrued expenses 9,816 12,936 12,909
Total current liabilities 29,524 35,342 32,171
Long-term debt 7,143 10,000 8,571
Deferred income taxes 9,737 10,218 10,164
Other long-term liabilities 6,743 6,619 6,833
Stockholders' equity 125,470 133,893 132,749
Total liabilities and
stockholders' equity $178,617 $196,072 $190,488
STANLEY FURNITURE COMPANY, INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
July 1, July 2,
2006 2005
Cash flows from operating activities:
Cash received from customers $159,732 $163,434
Cash paid to suppliers and employees (135,731) (138,696)
Interest paid, net (1,393) (1,519)
Income taxes paid, net (6,433) (6,350)
Net cash provided by operating activities 16,175 16,869
Cash flows from investing activities:
Capital expenditures (749) (2,721)
Other, net (17) (33)
Net cash used by investing activities (766) (2,754)
Cash flows from financing activities:
Repayment of senior notes (1,428) (2,828)
Purchase and retirement of common stock (16,175) (9,993)
Dividends paid (1,944) (1,560)
Proceeds from insurance policy loans 1,241 1,110
Tax benefit from exercise of stock options 255
Proceeds from exercise of stock options 713 5,110
Net cash used by financing activities (17,338) (8,161)
Net increase (decrease) in cash (1,929) 5,954
Cash at beginning of period 12,556 7,632
Cash at end of period $10,627 $13,586
Reconciliation of net income to
net cash provided by operating activities:
Net income $9,329 $11,587
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,912 2,815
Deferred income taxes (468) (514)
Stock-based compensation 297
Tax benefit from exercise of stock options (255)
Loss on disposal of assets 6
Changes in working capital 5,060 3,424
Other assets (616) (367)
Other long-term liabilities (90) (76)
Net cash provided by operating activities $16,175 $16,869
SOURCE Stanley Furniture Company, Inc.
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Related links:
http://www.stanleyfurniture.com
http://www.prnewswire.com/comp/117677.html /
CONTACT:
Douglas I. Payne, Executive Vice President -
Finance and Administration, +1-276-627-2157,
dpayne@stanleyfurniture.com, or Anita W. Wimmer, Vice President -
Controller and Treasurer, +1-276-627-2446,
awimmer@stanleyfurniture.com, both of Stanley Furniture Company,
Inc.
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