Chromcraft Revington Reports Lower Sales For 2006

Furniture World Magazine

Chromcraft Revington, Inc. reported sales for the three months ended December 31, 2006 of $38,889,000, representing a 4.4% decrease as compared to sales of $40,669,000 for the prior year period. Shipments for the current quarter were lower as compared to the prior year period primarily due to competitive pressure from imports and a weak retail furniture environment. Product category shipments of dining room, bedroom and upholstered furniture were lower in the fourth quarter and were partially offset by higher shipments of commercial and occasional furniture as compared to last year’s fourth quarter. For the year ended December 31, 2006, sales were $160,478,000, a 5.4% decrease from $169,565,000 reported for the prior year. The Company previously announced restructuring activities to shutdown, relocate, consolidate and outsource certain furniture manufacturing and distribution operations in order to reduce fixed costs, to improve the utilization of a global supply chain and to increase asset utilization. As a result, the Company recorded a restructuring and impairment charge of $1,599,000 pretax or $1,030,000 after-tax, representing a $.23 loss per share for the three months ended December 31, 2006. For the year ended December 31, 2006, total restructuring and impairment charges were $7,372,000 pre-tax or $4,703,000 after-tax representing a $1.07 loss per share. After recognizing this restructuring and impairment charge, the net loss for the fourth quarter of 2006 was $741,000 or $.17 loss per share, as compared to net earnings of $1,705,000, or $.38 per share on a diluted basis for the prior year period. Excluding the impact of the restructuring and impairment charge, the Company would have had net earnings of $289,000, or $.06 per share on a diluted basis, for the three months ended December 31, 2006. In addition, operating results for the fourth quarter of 2006 were impacted by the wind down of certain operations, which affected fixed cost absorption and manufacturing efficiencies, and higher professional fees and employment related costs. In connection with the restructuring, the Company utilized a deferred income tax asset for a state net operating loss carryforward for income realized at a subsidiary level on the cancellation of intercompany indebtedness. In addition, the Company determined that it is unlikely that the remaining portion of this state net operating loss carryforward will be utilized. As a result, the Company recorded a non-cash income tax charge of $325,000, or $.07 loss per share, for the year ended December 31, 2006 to reflect the establishment of a valuation allowance and the reduction of the deferred income tax asset. For the year ended December 31, 2006, the net loss and loss per share were $3,393,000 and $.77, respectively, as compared to net earnings of $7,245,000, or $1.66 per share on a diluted basis, for the prior year. Excluding the impact of the restructuring and impairment charge and the non-cash income tax charge, the Company would have had net earnings of $1,635,000 or $.37 per share on a diluted basis, for 2006. At December 31, 2006, the Company had cash and cash equivalents of $8,418,000 and no bank borrowings. Mr. Ben 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. In addition, the Company will continue to shift its manufacturing operations towards use of demand flow and value added mass customization techniques. “We believe our restructuring efforts, which are enabling the Company to transition at an aggressive pace of change, and our strong balance sheet will enable us to implement our strategic initiatives in the upcoming year,” said Anderson-Ray. “We are shifting to a more integrated approach with the creation of a single sales management function and a coordinated multi-brand marketing function. The Company’s divisional furniture manufacturing culture is transforming into a global consumer products brand culture that is intentional, disciplined and driven by functional leadership. Our vision is to offer consumer based differentiation and speed-to-market advantages for our customers with a combination of imported and domestic built-to-order mass customization products.” As part of the restructuring efforts, the Company has recently consolidated to three operations for improved service, outsourced certain product lines to improve their value proposition, opened a new Las Vegas market showroom, launched a new trade identity for its residential products under the ‘CR Home’ banner, and appointed key executives to lead the unified sales and marketing functions of all of its brands. “We are rapidly transforming the organization to better focus on consumers and customers with a family of related brands that work in a unified manner,” added Anderson-Ray. Anderson-Ray commented that business conditions remain soft at retail and that first quarter shipments are expected to be lower than the prior year period. He pointed out that, in connection with the restructuring activities, the Company expects to incur approximately $500,000 in additional expenses during the year ending December 31, 2007 for one-time termination benefits and costs to shutdown, vacate, and prepare the Company facilities held for sale. 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, reduced revenues 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 residential furniture products under the CR Home banner with "Chromcraft," "Peters-Revington," "Silver Furniture," "Cochrane Furniture" and "Sumter" as brand names.