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Stanley Furniture Announces Higher Third Quarter 2012 Operating Loss

Furniture Industry News Update - Furniture World Magazine
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Article Summary: Company says overall sales drop of 8% was due primarily to short-term disturbances related to consecutive initial production runs of new Young America products.


Stanley Furniture Company, Inc.  reported sales and operating results for the third quarter of 2012.

Third quarter 2012 highlights:
  • Net sales were $24.0 million, an 8.0% decrease compared to 2011 and a 1.8% decrease on a sequential quarter basis.

  • Gross margin dropped slightly to 14.0% of net sales compared to 14.7% in 2011.

  • Selling, general and administrative expenses were $4.6 million (19.3% of net sales) compared to $5.0 million (19.0% of net sales) in 2011.

  • Operating loss for the third quarter was $1.3 million compared to a loss of $1.1 million 2011.

  • As of September 29, 2012, the company’s financial position reflected $44.9 million in cash, restricted cash and short-term investments.

  • No shares were purchased during the quarter under the Company’s $5.0 million share repurchase program.

Year to date 2012 highlights:
  • Net sales were $75.2 million compared to $80.0 million in 2011.

  • Gross margin improved to 14.0% of net sales compared to 12.0% in 2011, excluding restructuring charges in both years.

  • Selling, general and administrative expenses improved to 18.2% of net sales compared to 18.5% in 2011.

  • Net of restructuring charges in both years, operating loss narrowed to $3.2 million compared to the loss of $5.2 million in 2011.

  • Capital expenditures and investments in new systems totaled $5.0 million.
Overview

“As expected, we improved our service position on the Stanley line which had been a factor hindering growth in this part of our business throughout the year. While retail activity in our segment of the industry was softer than we anticipated, we did see increased sales in our Stanley line,” commented Glenn Prillaman, President and Chief Executive Officer. “The overall decline in sales for the quarter can be attributed to our Young America line, but this was expected due to the short-term disturbances related to consecutive initial production runs of new product in our factory and the difficulties one would expect at retail when exchanging all floor samples for that new product at a time when consumer traffic is slow. However, our Young America backlog grew significantly during the quarter and now stands at the highest level since we consolidated all products into our single factory in Robbinsville.”

“We are in close contact with our customer base, having visited with them at High Point’s Fall Market. They are increasingly complimentary of the quality enhancements to our product, our new designs and our improved service positions for both product lines, but they reminded us that it does take time to regain the confidence of the retail salesperson even though our work to reposition the product lines is now effectively complete,” Prillaman continued.

Balance Sheet

Cash, restricted cash and short-term investments at quarter-end were $44.9 million, up from $17.3 million at December 31, 2011. CDSOA proceeds of $39.9 million were received in the second quarter of 2012 for funds that were previously withheld under the antidumping duty order for wooden bedroom furniture imported from China. Capital investments associated with modernizing our manufacturing facility in Robbinsville, North Carolina were $3.2 million year to date. Additionally, the company has spent $1.8 million on new systems in 2012.

Outlook

“Looking forward, given the lack of momentum in our segment of the retail marketplace in recent months, we could see overall sales ranging from flat to slightly down from the same quarter a year ago. However, we expect to reduce our Young America backlog to a more normal level during the current quarter contributing to improved financial results for Young America. Additionally, we are in an excellent service position on the Stanley line should retail activity improve,” concluded Prillaman.

About the Company: Established in 1924, Stanley Furniture Company, Inc. is a leading designer and manufacturer of wood furniture targeted at the premium segment of the residential market. The company offers two major product lines. Its Stanley Furniture brand represents its fashion-oriented adult furniture and competes through an overseas sourcing model in the upscale market through superior finish, styling and piece assortment. Its Young America brand is positioned as the leader in the infant and youth segment and differentiates through a domestic manufacturing model catering to parent preferences such as child safety, color, choice and quick delivery of customized special orders. The company’s common stock is traded on the NASDAQ stock market under the symbol STLY.

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