Chromcraft Revington, Inc. Reports Third Quarter Sales Decrease

Furniture World Magazine

Chromcraft Revington, Inc. reported consolidated sales for the three months ended September 27, 2008 of $23,071,000, representing an 18.8% decrease as compared to sales of $28,412,000 for the year earlier period. Net loss for the three months ended September 27, 2008 was $10,167,000, or $2.23 loss per share, as compared to a loss of $2,081,000, or $.46 loss per share, for the prior year period. For the nine months ended September 27, 2008, consolidated sales were $76,139,000, representing a 19.9% decrease from sales of $95,028,000 for the year ago period. Net loss for the first nine months of 2008 was $18,450,000, or $4.06 loss per share, as compared to $6,560,000, or $1.46 loss per share, in the prior year period. Sales for the third quarter of 2008 were lower as compared to the prior year period primarily due to a weak economic environment, competitive pressure from imports, restructuring activities and unsuccessful product introductions. Residential furniture shipments decreased in all categories as compared to the year earlier periods. Commercial furniture sales increased in the third quarter of 2008 as compared to the prior year period primarily due to higher shipments of seating products. Gross margin for the three months ended September 27, 2008 as compared to the prior year period was negatively impacted by asset impairment charges, restructuring costs, the lower sales volume and competitive pressure from the globalization of the residential furniture market. Selling, general and administrative expenses were lower in the third quarter of 2008 as compared to the year earlier period primarily due to a decrease in compensation and selling related expenses. Asset impairment and restructuring charges include expected costs related to the closure of the Company's Lincolnton, North Carolina furniture manufacturing operation by November 29, 2008 and the Lincolnton warehousing and distribution operations in the first half of 2009. The Company plans to sell its buildings and equipment in Lincolnton and lay off approximately 185 employees at this site. Warehousing and distribution operations at Lincolnton will be consolidated into existing distribution centers. As previously reported, the Company also closed its Delphi, Indiana furniture manufacturing operation on May 30, 2008 and converted this site to a warehouse and distribution facility. Restructuring activities and related charges for the Delphi site were substantially completed in the third quarter of 2008. Dining room and occasional furniture manufactured at the Lincolnton and Delphi facilities are being outsourced. Beginning in the third quarter of 2008, the Company reorganized its management by replacing its CEO and senior managers in sales, marketing, operations and supply chain, and eliminated various salaried positions. Severance related costs in connection with the management reorganization are included in restructuring expenses as termination benefits. Total asset impairment and restructuring expenses for the three and nine months ended September 27, 2008 were $6,631,000 and $8,647,000, respectively. For the three months ended September 27, 2008, the Company recorded an asset impairment charge of $4,400,000 to record buildings and equipment at expected fair value. Restructuring expenses for the third quarter 2008 include a $1,901,000 write-down of raw and in-process inventories to anticipated net realizable value and a $330,000 charge for termination benefits and exit and disposal costs. The Company expects to incur total asset impairment and restructuring expenses of $9,680,000 for the restructuring activities implemented in 2008. A portion of these charges and expenses, resulting in cash expenditures of approximately $2,650,000, do not include expected cash proceeds from restructuring asset sales of approximately $3,965,000. After completing the 2008 restructuring activities, the Company will be manufacturing and distributing dining room and commercial furniture from its Senatobia, Mississippi facility; warehousing and distributing occasional and bedroom furniture from its Delphi, Indiana facility; operating a product quality and sourcing office in Dongguan, China; and performing administrative and finance functions at its corporate headquarters office in West Lafayette, Indiana. The Company's residential furniture business is being negatively impacted by the globalization of furniture manufacturing. In 2006, the Company began reducing its furniture manufacturing operations and shifting the products manufactured at these facilities to overseas suppliers. Additional transition costs, reduced revenue, increased operating expenses, restructuring charges and asset impairments may occur as the Company continues its transition. Commenting on these results, Ronald H. Butler, the Chairman and Chief Executive Officer of the Company, said that the restructuring activities implemented in 2008 are necessary to position the Company to compete more effectively in the global furniture marketplace. He added that the Company is responding to the current weak business environment by implementing spending controls and overhead expense reductions in personnel. He said that management is also focusing on business improvements in supply chain, product development and sales related activities. Butler pointed out that the Company has several sources of cash and liquidity to complete its business transition and fund its future short-term operating activities. - At September 27, 2008, the Company has unused borrowing capacity of approximately $14,231,000 under a bank line of credit. - The Company expects to receive asset sale proceeds of approximately $3,300,000 in 2009 from the sale of its Lincolnton, North Carolina buildings, machinery and equipment. - At September 27, 2008, the Company has refundable income taxes of $3,462,000, primarily from net operating loss carrybacks, which are expected to be received in the fourth quarter of 2008. - The Company plans to sell excess inventories and generate cash of approximately $3,000,000 in 2009. - Future capital spending for information technology upgrades will be delayed to 2010. Chromcraft Revington businesses design, manufacture and market residential and commercial furniture throughout North America. The Company wholesales its residential furniture products under the CR Home banner with "Chromcraft," "Peters-Revington," "Silver Furniture," "Cochrane" and "Sumter Cabinet" brand names. It sells commercial furniture under the Chromcraft brand name.