Stanley Furniture Company, Inc. (Nasdaq-NGS: STLY) today reported sales and operating results for the third quarter of 2010.

Net sales of $34.9 million declined 9.3% from the third quarter of 2009. Net loss for the quarter was $4.9 million, or $.48 per share, compared to a net loss of $5.1 million, or $.49 per share, in the third quarter of 2009.

Operating loss for the third quarter of 2010 amounted to $6.4 million, compared to operating loss of $7.5 million in the third quarter of 2009. The 2010 third quarter loss includes accelerated depreciation and charges related to the Company’s restructuring plan announced in May 2010 totaling $2.3 million. The 2009 third quarter loss included restructuring expenses of $1.1 million.

Cash on hand was $16.9 million and total debt was $15.0 million on October 2, 2010. Working capital, excluding cash and current maturities of long-term debt, decreased $5.8 million (13%) from the third quarter of 2009 primarily due to lower inventories and accounts receivable in response to lower sales.

“In May of this year, we set our path towards profitability by announcing a comprehensive restructuring plan,” said Glenn Prillaman, President and Chief Executive Officer. “We are pleased with the progress we have made to date, as evidenced by a smaller operating loss and less use of cash in the third quarter compared to the first and second quarters of this year.”

“We continue to transition our two major product lines in opposite operational directions to better align them with the factors that drive demand for each product line,” said Prillaman. “As previously reported, the majority of our Young America product line transition has been completed and all of those products are now domestically made. The increased prices on this product line and improved operating efficiencies at our Robbinsville, NC plant drove the improvement in our operating results for the third quarter. In addition, we continue to move as planned through our transition related to the movement of our Stanley Furniture adult product line from a partially domestic to a completely globally sourced model. We are on schedule to cease manufacturing at our Stanleytown, VA factory in December 2010. We anticipate operating inefficiencies stemming from the wind-down of this plant and the disruption created by this move may reduce sales and increase our operating loss in the fourth quarter compared to the third quarter of 2010. However, our partner factories overseas are already making a significant portion of this product line, and we anticipate a smooth operational transition as we shift our remaining domestic production to these suppliers,” he added.

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.

Conference Call Details

The Company will host a conference call Thursday morning, November 4, 2010 at 9:00 a.m. 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 www.stanleyfurniture.com. The dial-in-number for the replay (available through November 11, 2010) is (877) 660-6853, the account reference number is 275 and the conference number is 359329.

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 our success in transitioning our adult product line to offshore vendors, costs relating to the transitioning of the Stanleytown facility to a warehouse and distribution center, our success in transitioning certain Young America products to our domestic manufacturing facilities, the cyclical nature of the furniture industry, lower sales due to worsening of current economic conditions, business failures or loss of large customers, 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 countries from which we source products, international trade policies of the United States and countries from which we source products, prepayment of our debt in the event we are not able to renegotiate financial covenants that become effective in the third quarter of 2011, the inability to obtain sufficient quantities of quality raw materials in a timely manner, the inability to raise prices in response to inflation and increasing costs, failure to anticipate or respond to changes in consumer tastes and fashions in a timely manner, environmental, health, and safety compliance costs, extended business interruption at manufacturing facilities and changes in credit market conditions. 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)
 
 
    Three Months Ended     Nine Months Ended
Oct. 2,     Sept. 26, Oct. 2,     Sept 26,
2010 2009 2010 2009
 
Net sales $ 34,897 $ 38,455 $ 109,323 $ 120,545
 
Cost of sales 35,586 39,056 117,494 112,829
                       
Gross profit (loss) (689 ) (601 ) (8,171 ) 7,716
 
Selling, general and administrative expenses 5,756 6,875 18,172 22,345
Goodwill impairment charge               9,072        
Operating loss (6,445 ) (7,476 ) (35,415 ) (14,629 )
 
Other (income)/expense, net 17 (45 ) (19 ) (133 )
Interest income 3 3 44
Interest expense   857     953     2,830     2,809  
Loss before income taxes (7,319 ) (8,381 ) (38,223 ) (17,261 )
 
Income tax benefit   (2,385 )   (3,308 )   (2,757 )   (6,789 )
Net loss $ (4,934 ) $ (5,073 ) $ (35,466 ) $ (10,472 )
 
Diluted loss per share $ (0.48 ) $ (0.49 ) $ (3.43 ) $ (1.01 )
 
Weighted average number of shares   10,345     10,332     10,341     10,332  
 
 
STANLEY FURNITURE COMPANY, INC.
Supplemental Information
Reconciliation of GAAP to Non-GAAP Operating Results
 
 

 
   

Three Months Ended
   

Nine Months Ended

Oct. 2,
   

Sept. 26,

Oct. 2,
   

Sept. 26,

2010

2009

2010

2009

Reconciliation of operating loss as reported to operating loss adjusted:
Operating loss as reported $ (6,445 ) $ (7,476 ) $ (35,415 ) $ (14,629 )
Goodwill impairment charge 9,072
Accelerated depreciation 1,686 1,023 3,773 1,023
Restructuring charge   579     33     1,762     198  
Operating loss as adjusted $ (4,180 ) $ (6,420 ) $ (20,808 ) $ (13,408 )

Reconciliation of net loss as reported to net loss adjusted:
Net loss as reported $ (4,934 ) $ (5,073 ) $ (35,466 ) $ (10,472 )
Goodwill impairment charge 9,072
Accelerated depreciation 1,137 621 3,501 621
Restructuring charge   390     20     1,635     120  
Net loss as adjusted $ (3,407 ) $ (4,432 ) $ (21,258 ) $ (9,731 )

Reconciliation of loss per share (EPS) as reported to loss per share adjusted:
EPS as reported $ (0.48 ) $ (0.49 ) $ (3.43 ) $ (1.01 )
Goodwill impairment charge 0.88
Accelerated depreciation 0.11 .06 0.34 0.06
Restructuring charge   0.04           0.16     0.01  
EPS as adjusted $ (0.33 ) $ (0.43 ) $ (2.05 ) $ (0.94 )
 
 

STANLEY FURNITURE COMPANY, INC.
Consolidated Condensed Balance Sheets
(in thousands)
 
 
    Oct. 2,     Sept. 26,     Dec. 31,
2010 2009 2009
 
Assets
Current assets:
Cash $ 16,889 $ 42,430 $ 41,827
Accounts receivable, net 16,076 18,052 15,297
Inventories 30,673 35,374 37,225
Prepaid expenses and other current assets 8,846 9,023 11,780
Deferred income taxes   3,763   3,726   3,433
 
Total current assets 76,247 108,605 109,562
 
Property, plant and equipment, net 25,641 33,255 31,375
Goodwill 9,072 9,072
Other assets   1,027   1,013   453
 
Total assets $ 102,915 $ 151,945 $ 150,462
 
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 15,000 $ 1,429 $ 1,429
Accounts payable 9,387 10,157 11,633
Accrued expenses   9,708   9,939   9,223
 
Total current liabilities 34,095 21,525 22,285
 
Long-term debt 26,428 26,428
Deferred income taxes 3,868 2,406 2,128
Other long-term liabilities 6,942 8,192 6,774
 
Stockholders' equity   58,010   93,394   92,847
 
Total liabilities and stockholders' equity $ 102,915 $ 151,945 $ 150,462
 
 
STANLEY FURNITURE COMPANY, INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
 
 
      Nine Months Ended
Oct. 2,       Sept. 26,
2010 2009
Cash flows from operating activities:
Cash received from customers $ 108,151 $ 124,071
Cash paid to suppliers and employees (125,495 ) (120,262 )
Interest paid (3,046 ) (2,725 )
Income taxes received (paid)   6,429     (2,531 )
Net cash used by operating activities   (13,961 )   (1,447 )
 
Cash flows from investing activities:
Capital expenditures (1,203 ) (1,702 )
Purchase of other assets (28 ) (55 )
Proceeds from sale of assets held for sale, net   1,147     1,303  
Net cash used by investing activities   (84 )   (454 )
 
Cash flows from financing activities:
Repayment of senior notes (12,857 ) (1,429 )
Proceeds from exercise of stock options 119
Proceeds from insurance policy loans 1,845 1,651
Other         96  
Net cash provided (used) by financing activities   (10,893 )   318  
 
Net decrease in cash (24,938 ) (1,583 )
Cash at beginning of period   41,827     44,013  
 
Cash at end of period $ 16,889   $ 42,430  
 

Reconciliation of net loss to net cash used by operating activities:
Net loss $ (35,466 ) $ (10,472 )
 
Goodwill impairment 9,072
Depreciation and amortization 6,815 4,291
Deferred income taxes 1,410 (192 )
Stock-based compensation 549 692
Other 30
Changes in working capital 3,885 4,739
Other assets (424 ) (404 )
Other long-term liabilities   168     (101 )
Net cash used by operating activities $ (13,961 ) $ (1,447 )
 

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