Chromcraft Revington, Inc. Reports 13.4% Sales Decrease

Furniture World News

Chromcraft Revington, Inc. reported sales for the three months ended September 30, 2006 of $35,348,000, representing a 13.4% decrease as compared to sales of $40,836,000 for the prior year period. Third quarter shipments were lower as compared to the prior year primarily due to competitive pressure and a weak retail furniture environment. Sales of all furniture categories, particularly in occasional furniture, were lower as compared to the prior year third quarter. As previously announced on September 1, 2006, the Company’s board of directors approved the restructuring of certain of the Company's operations. The purposes of the restructuring are to reduce fixed costs, to improve the utilization of a global supply chain and to increase overall asset utilization. The restructuring program includes the shutdown, relocation, consolidation and outsourcing of certain furniture manufacturing and distribution operations. As a result, the Company recorded a restructuring and impairment charge of $5,773,000 pre-tax or $3,492,000 after-tax, representing a $.79 loss per share, for the three months ended September 30, 2006. Most of the restructuring and impairment charge represents non-cash items. In connection with the restructuring, the Company determined that it is unlikely that certain state net operating loss carryforwards will now be utilized. As a result, the Company recorded a non-cash income tax charge of $325,000, or $.08 loss per share, for the three months ended September 30, 2006 related to establishing a valuation allowance for such state net operating loss carryforwards. After recognizing the aforementioned restructuring and impairment charge and tax valuation allowance, the net loss for the third quarter of 2006 was $4,457,000, or $1.01 loss per share, as compared to net earnings of $1,191,000, or $.27 per share on a diluted basis for the prior year period. Excluding the impact of the restructuring and impairment charge and the tax valuation allowance, the Company would have had a net loss of $640,000, or $.14 loss per share, for the three months ended September 30, 2006. In addition, operating results for the third quarter of 2006 were impacted by a reduced production level, which affected fixed cost absorption and manufacturing efficiencies, an unfavorable sales mix, and higher manufacturing costs and professional fees. For the nine months ended September 30, 2006, the net loss and loss per share were $2,652,000 and $.60, respectively, as compared to net earnings of $5,540,000, or $1.28 per share on a diluted basis, for the prior year period. Excluding the impact of the restructuring and impairment charge and the tax valuation allowance, the Company would have had net earnings of $1,165,000, or $.26 per share on a diluted basis, for the first nine months of 2006. Mr. Benjamin Anderson-Ray, Chairman and Chief Executive Officer, said that the restructuring activities are an important step in repositioning the Company in the global furniture marketplace and in strengthening its ability to remain competitive. The Company’s overall strategy requires a transformation of its business model to increased global sourcing activities, as well as a conversion of U.S. operations towards an increased focus on distribution and logistics of imported products and a shift in its manufacturing operations towards use of demand flow and value added mass customization techniques. Looking forward, Mr. Anderson-Ray said that fourth quarter operating results will be negatively impacted by the previously announced closure of the Company’s Warrenton, NC wood processing plant on December 8, 2006. The Company expects to incur restructuring costs and related asset impairment charges of $1.0 million to $1.5 million in the three months ending December 31, 2006. He added that in addition to the Warrenton restructuring costs, the Company expects to incur fourth quarter expenses to shutdown, vacate and prepare for sale various facilities in connection with the restructuring activities announced on September 1, 2006. Mr. Anderson-Ray pointed out that, after considering the impact of these restructuring costs, the Company expects to incur an operating loss for the three months ending December 31, 2006. He added that as the Company continues to adapt to the global furniture marketplace and integrate functions common to its various products, additional restructuring charges, asset impairments, transition costs and/or increased operating expenses may be necessary in the future. Chromcraft Revington businesses design, manufacture and market residential and commercial furniture throughout the United States. The Company wholesales its products under the "Chromcraft," "Peters-Revington," "Silver Furniture," "Cochrane Furniture" and "Sumter" brand names.