Stanley Furniture Company, Inc. has reported record sales and earnings for the third quarter of 2005. Sales and earnings were within management's previous guidance range provided in mid July 2005.
Net sales of $85.6 million increased 8.6% from the third quarter of 2004, marking the fourteenth consecutive quarter of sales growth over the comparable prior year quarter. Earnings per share grew 10.0% to $.44 compared to $.40 in the third quarter of last year.
For the first nine months of 2005, net sales of $252.2 million rose 13.3% over the comparable prior year period. Year-to-date earnings per share grew 12.9% to $1.31 from $1.16 in the comparable 2004 period.
Third quarter operating income rose to $9.4 million, or 11.0% of net sales. Operating income for the first nine months of 2005 increased to $28.2 million, or 11.2% of net sales, from $25.3 million, or 11.4% of net sales, in the comparable year-ago period. Operating margins have remained consistently strong, ranging from 11.0% to 11.3% of net sales, in each of the last four quarters. Higher raw material costs, compensation costs, energy costs, freight costs, increased warehouse expense and tariffs imposed on wooden bedroom furniture imported from China are negatively impacting operating income. For the first nine months of 2005, higher sales and increased production levels are helping to offset these higher costs. Operational inefficiencies and lower production levels in the third quarter of 2005 compared to the year ago period also negatively impacted operating margins. While the operating efficiencies are expected to improve, lower production levels are anticipated in the fourth quarter of 2005 versus the comparable prior year period.
Working capital, excluding cash and current maturities of long-term debt, decreased $1.9 million during the first nine months of 2005 to $83.3 million from $85.2 million at year end. Total inventories of $72.8 million have decreased approximately $0.9 million since December 31, 2004. Strong cash flow in the first nine months of 2005 was used to purchase $10.0 million of the Company's common stock, reduce debt $2.8 million, pay cash dividends of $2.3 million and increase the Company's cash on hand $11.7 million. Approximately $20.2 million is currently authorized by the Company's Board of Directors to repurchase shares of the Company's common stock. At October 1, 2005, the Company was in a net cash position with total debt outstanding of $12.9 million and cash on hand of $19.3 million.
"We are pleased to report another quarter of significant market share gains and strong operating margins," commented Jeffrey R. Scheffer, chairman, president and chief executive officer. "For the most recent four quarters our sales have increased 13.1% from the previous four quarter period. We believe the consistent execution of our strategy has resulted in market share gains that continue to drive most of our sales growth. We believe industry sales growth slowed during the third quarter and is in an uncertain period due to a sharp decline in consumer confidence levels. Near term we are focusing on keeping our inventories at appropriate levels while remaining hopeful that this will prove to be a short term disruption in demand. Accordingly, we have lowered our fourth quarter 2005 sales and earnings guidance as detailed below," concluded Scheffer.
All earnings per share amounts are on a diluted basis and adjusted for the two-for-one stock split distributed on June 6, 2005.
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.
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