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Stanley Furniture Posts Lower Sales & Earnings For 3rd Quarter

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Stanley Furniture Company, Inc. reported sales and earnings for the third quarter of 2007. Sales and earnings were within management’s guidance range provided in mid-July 2007. Net Sales of $73.2 million decreased 3.6% and earnings per share of $.16 declined 38.5% for the third quarter of 2006. For the first nine months of 2007, net sales of $216.0 million decreased 8.8% from the comparable prior year period. Earnings per share fell to $.09 compared to $1.01 for the first nine months of 2006. The 2007 results include a charge to earnings of $6.6 million ($4.5 million net of taxes), or $.42 per share, recorded in the second quarter of this year for final termination of the Company’s defined benefit pension plan. Operating income declined to $3.1 million, or 4.3% of net sales, in the third quarter of 2007 compared to $5.0 million, or 6.5% of net sales, in the year-ago quarter. Year-to-date operating income (excluding pension termination charge of $6.6 million) decreased to $9.8 million, or 4.5% of net sales, compared to $19.9 million, or 8.4% of net sales, in the first nine months of 2006. Lower margins resulted primarily from lower sales and production levels, raw material inflation and increased compensation costs. These factors were partially offset by lower bad debt expense, and cost control initiatives implemented in response to lower sales. Year-to-date cash flow from operations and $25 million in proceeds from a private note placement in April 2007 was used to repurchase 639,331 shares of the Company’s common stock for $13.6 million, pay cash dividends of $3.2 million, make scheduled debt payments of $1.4 million and increase cash on hand by $9.0 million. Working capital excluding cash and current maturities of long term debt increased $4.4 million during the first nine months of 2007 primarily due to an increase in accounts receivable and inventories. Approximately $19.0 million is currently authorized by the Company’s Board of Directors to repurchase shares of the Company’s common stock. Business Outlook “Business conditions in the third quarter were about as anticipated,” commented Jeffrey R. Scheffer, President and Chief Executive Officer. “While we are disappointed with lower sales and earnings, we believe this is a result of current industry-wide conditions. We do not foresee any improvement in the demand environment anytime soon and have lowered our expectations for the balance of 2007,” concluded Scheffer. In response to the continued industry-wide slowdown, the Company recently announced plans to reduce its workforce and consolidate manufacturing operations by bringing its Martinsville production to Stanleytown and expanding warehouse operations at the Martinsville facility. The Company expects to record a pre-tax restructuring and impairment charge including operational inefficiencies of about $6 million ($ 4.1 million after tax), or $.39 per share, about half of which will be non-cash in nature. Most of the earnings impact is expected to occur in the fourth quarter of 2007 and the first quarter of 2008. Management offers the following guidance for the fourth quarter of 2007. This guidance excludes any potential receipt of funds under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) involving tariffs collected by the U.S. government on wooden bedroom furniture imported from China. - Fourth quarter 2007 net sales are expected to be in the range of $62 million to $66 million, a decrease of 6.5% to 12.2% compared to the fourth quarter of 2006. - Operating income is expected to be a loss of $4.0 million to $4.6 million for the fourth quarter of 2007. This includes a restructuring and impairment charge of approximately $4 million for the Martinsville consolidation. - Fourth quarter earnings per share are expected to be a loss of $.31 to $.35 per share (including approximately $.26 per share of restructuring and impairment charge) compared to earnings of $.14 per share in the fourth quarter of 2006.

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