Chromcraft Revington, Inc. Reports Sales Increase and Lower Third Quarter Net Loss.
Furniture Industry News Update -
Furniture World Magazine
Chromcraft Revington, Inc. reported its results for the third quarter of 2012. Sales for the third quarter of 2012 were $13,673,000 or 3.4% higher than the same period last year, extending the positive increases over the prior year quarter that began in the fourth quarter of 2011. Sales for the nine months ended September 29, 2012 were $41,729,000 or 5.6% higher than the first nine months of 2011. Our net loss was $717,000 and $3,437,000 for the three and nine month periods ended September 29, 2012, respectively, or 31.2% and 16.2% lower, respectively, than the same periods in 2011.
The reduced net loss of $0.7 million in the third quarter of 2012 compared to a net loss of $1.0 million in the third quarter of 2011 was primarily due to an income tax benefit of $0.2 million resulting from the final allocation of the purchase price of Executive Office Concepts, Inc. (“EOC”) acquired in March 2012, and to a lesser extent, an increase in gross margin resulting from higher sales. The reduced net loss for the first nine months of 2012 compared to the prior year period is primarily due to the gross margin contributed by EOC products, lower import sourcing expense and the income tax benefit from the final allocation of the EOC purchase price.
The increase in sales for the third quarter of 2012 as compared to the prior year period was primarily due to increased shipments of commercial furniture, in particular office suites and waiting area furniture resulting from our acquisition of EOC. Residential shipments for the third quarter of 2012 were comparable to the third quarter of 2011, resulting from an increase in sales of home entertainment furniture offset by lower sales of dining room furniture. Residential furniture sales were lower in the third quarter of 2012 compared to the second quarter of 2012, primarily due to lower sales of dining room furniture. We continue to face the challenges resulting from weak consumer demand for residential furniture in our product categories and price segment, which we believe is consistent with industry trends, the continuing economic difficulties which reflect the ongoing labor market struggles and reduced consumer access to credit. These factors led to a slight decrease in residential orders in the third quarter of 2012 compared to the second quarter of 2012.
Commercial product orders increased in the third quarter of 2012 resulting in the highest quarterly orders since the third quarter of 2011.
Cash used in operating activities in the first nine months of 2012 was $1.1 million as compared to $2.6 million used in the prior year period. The improved cash flow was primarily due to an increase in cash from net working capital and a lower operating loss. The Company had net borrowings on its revolving credit facility of $1.5 million in the first nine months of 2012 which was primarily used to fund the $1.1 million used for operating activities, the purchase of EOC and the payment of fees related to our new revolving credit facility with Gibraltar Business Capital, LLC and the termination of our credit facility with First Business Capital. Outstanding borrowings on the revolving credit facility at September 29, 2012 were approximately $2.4 million.
Commenting on these results, Ronald H. Butler, Chairman and Chief Executive Officer, said, “Despite the continuing low consumer confidence in the economy and the very difficult retail operating environment, we increased sales in the third quarter of 2012 as compared to the prior year period, largely due to increased sales of our commercial furniture products to the health care industry, primarily through our purchase of EOC. The ongoing difficult operating environment in the residential furniture market will continue to be challenging into the first quarter of 2013. We believe the recent signs of marginal improvement in the housing market are tempered by the uncertainty over the outcome of the upcoming federal “fiscal cliff” at the end of 2012 and its impact on consumer spending.
“Our acquisition of California-based EOC, with its commercial product lines, especially an extensive health care line, complement our current product line of seating, tables, and waiting area furniture. In addition, the three year contract we were awarded late in 2011 with the Premier healthcare alliance is expected to boost our sales in this product line. The health care sector continues to grow significantly and we believe this alliance continues to position the commercial line of our Chromcraft division favorably for the future.”
Chromcraft Revington® businesses design, manufacture and import residential and commercial furniture marketed primarily in the U.S. The Company wholesales its residential furniture products under Chromcraft®, Cochrane®, Peters-Revington®, Southern Living®, and CR Kids & Beyond® primary brands. It sells commercial furniture under the Chromcraft® and Executive Office Concepts brands. The Company sources furniture from overseas suppliers, with domestic contract specialty facilities, and operates a U.S. manufacturing facility for its commercial furniture and motion based casual dining furniture in Mississippi and a manufacturing facility for office suites and other commercial furniture lines in California.
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