Chromcraft Revington, Inc. Reports Second Quarter 19% Sales Decline

Furniture World News

Chromcraft Revington, Inc. recently reported sales for the three and six months ended June 30, 2007 of $32.8 million and $66.6 million, respectively, representing a decrease of 19% and 23%, respectively, from the same periods last year. Residential furniture shipments in 2007 were lower due to an industry-wide slow down at the retail level, competitive pressure from imports and the impact of restructuring the Company’s residential sales force to exclusive sales representation of its furniture brands. Commercial furniture shipments rose in 2007 as compared to the prior year period primarily due to higher shipments of seating products. Consolidated shipments in the second quarter of 2007 included $3.3 million of backlog reduction. The Company reported a net loss for the three and six months ended June 30, 2007 of $3.3 million, or $.73 loss per share, and $4.5 million, or $1.00 loss per share, respectively. For the corresponding periods last year, net earnings for the three and six months ended July 1, 2006 were $0.7 million, or $.15 per share on a diluted basis, and $1.8 million, or $.40 per share on a diluted basis, respectively. The net loss for the three months ended June 30, 2007 was primarily due to the lower sales volume, which impacted fixed cost absorption and manufacturing efficiencies, non-cash charges for inventory write-downs and asset impairments, an unfavorable product sales mix and higher product development, marketing and selling costs. For the three months ended June 30, 2007, the Company recorded non-cash charges for inventory write-downs of $2.0 million pre-tax to reflect anticipated net realizable value on disposition and asset impairment charges of $1.1 million pre-tax to reduce the carrying value of long term assets to fair value. At June 30, 2007, the Company had cash of $7.9 million and no bank indebtedness. Ben Anderson-Ray, Chairman and CEO, said that soft retail business conditions and costs associated with the Company’s transformation of its business model impacted second quarter results. Mr. Anderson-Ray stated, “Over the last several months we have made significant progress in transforming our business model. We continue to shift the business toward use of the global supply chain by outsourcing products and reducing reliance on U.S.-based manufacturing. Simultaneously, we are moving our organization from autonomous operating divisions to a unified organization.” He further commented, “We have moved the overall organization to a functional structure including unifying sales and marketing organizations for our commercial and residential businesses, shifting our residential sales force to an exclusive representation, outsourcing products that were manufactured domestically, launching several new globally sourced casual dining, occasional and bedroom furniture programs, and reducing employment levels by 37% as compared to a year ago. These changes in our organization and operational focus are designed to build a more adaptable and competitive company to address the dynamic furniture marketplace.” Mr. Anderson-Ray also pointed out that a part of the Company’s transformation is a strong commitment to utilizing research based consumer understanding to develop products using a global supply chain and built-to-order customization capabilities. Mr. Anderson-Ray commented, “We are committed to building a consumer driven company with the ability to use research based product development practices and global supply logistics to give our consumers what they want. In essence, we are building a consumer marketing and logistics business that can provide furniture for every room of the home in our residential business.” To implement this vision, the Company is rapidly developing new products and shifting its U.S. manufacturing operations to a greater use of the global supply chain. He further commented that as the Company transforms its business model it has incurred inventory write-downs, asset impairments, employee severance costs, and higher product development, marketing and selling costs. He added that as the Company continues its transition to a new business model and integrates functions common to the various product lines, additional transition costs, reduced revenue, increased operating expenses, restructuring charges and asset impairments will likely occur. Chromcraft Revington businesses design, manufacture, source and market residential as well as commercial furniture throughout the United States. The Company wholesales its residential furniture products under the CR Home banner with "Chromcraft," "Peters-Revington," "Silver Furniture," "Cochrane Furniture" and "Sumter" as brand names. It sells commercial furniture under the “Chromcraft” brand name.