Chromecraft Revington Sales Dip 20%

Furniture World News

Chromcraft Revington, Inc. reported sales for the three and nine months ended September 29, 2007 of $28.4 million and $95.0 million, respectively, representing a decrease of 20% and 22%, respectively, from the same periods last year. Residential furniture shipments in 2007 were lower due to a weak retail environment, competitive pressure from imports and the impact of restructuring the Company. Commercial furniture sales were higher for the three and nine months ended September 29, 2007 as compared to the prior year periods primarily due to an increase in seating product shipments. The Company reported a net loss for the three and nine months ended September 29, 2007 of $2.1 million, or $.46 loss per share, and $6.6 million, or $1.46 loss per share, respectively. For the year earlier periods, the net loss for the three and nine months ended September 30, 2006 was $4.5 million, or $1.01 loss per share, and $2.7 million, or $.60 loss per share, respectively. The net loss for the three months ended September 29, 2007 was primarily due to the lower sales volume, an unfavorable product sales mix, price discounting, a non-cash charge for inventory write-downs, severance and other business transition related costs. In addition, the lower sales volume resulted in a reduced domestic production level, which unfavorably impacted fixed cost absorption and manufacturing operations. For the three months ended September 29, 2007, the Company recorded a non-cash charge for inventory write-downs of $.7 million pre-tax to reflect anticipated net realizable value on disposition. For the nine months ended September 29, 2007, the Company recorded a non-cash charge for inventory write-downs of $3.1 million pre-tax and a non-cash charge for asset impairments of $1.1 million pre-tax to reduce the carrying value of long term assets to expected disposition value. Mr. Kane, SVP & CFO, said “At September 29, 2007, the Company had cash of $7.7 million and continues to have no bank indebtedness.” He pointed out that the Company anticipates a tax operating loss for 2007 and plans to carry back its tax loss to taxable income years for a refund of taxes paid in 2006 and 2005. Mr. Kane commented that at September 29, 2007 the Company recorded refundable income taxes of $4.3 million. He added that most of these tax cash refunds are expected in 2008. As previously reported, the Company is undergoing a transformation of its business model, which it anticipates will allow it to be more competitive in the global furniture industry. The Company continues to reduce its reliance on U.S. manufacturing by shifting its business toward use of the global supply chain, progressively outsourcing existing furniture lines and developing new products based on an outsourced model. The Company is also progressively consolidating and transitioning its U.S. based operations to built-to-order customization and distribution activities. At the same time, the Company is changing its organization from autonomous operating divisions to a unified functional organization and transforming its management structure and staffing to support the new business model. In 2007, the Company consolidated its residential sales, product development and marketing functions, combined its product showrooms and launched new products under a CR Home banner using extensive consumer research. Supply chain, operations and other administrative areas are also transitioning to a centralized management structure. As part of its transformation, the Company has incurred asset impairment charges, inventory write-downs, plant shutdown costs, employee severance costs and other restructuring related costs and reported operating losses in 2007 and 2006. Additional transition costs, reduced revenue, increased operating expenses, restructuring charges and asset impairments will likely occur as the Company continues its transformation. The Company believes that the shift in its business model will allow it to compete more effectively by providing a combination of imported and U.S. based customized products to the market. Also, the new business model is expected to have a more variable cost structure, which the Company anticipates will provide greater flexibility in competing in the furniture industry. Commenting on recent financial results Mr. Anderson-Ray, CEO, stated, “Our financial results, in addition to those factors described above, continue to reflect the impact and incremental costs of the changes taking place in the Company, as well as a poor retail market. While the retail market continues to be very difficult it is important for the Company to work through its transition in order to position it for the future.” He further commented that “We believe that we are putting in place the foundation for a business that is a unified organization, and is consumer and customer driven using a combination of sourced and customized built-to-order products. We continue to work on the integration of our back office operations and building new capabilities and disciplines. We expect that the combination of these elements will improve the Company’s long term competitiveness.” 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.