Chromcraft Revington, Inc. Announces Corporate Restructuring

Furniture World News

Chromcraft Revington, Inc. announced that, on August 29, 2006, its board of directors approved the restructuring of certain of the Company's operations. This action is consistent with the Company's stated strategy of improving the utilization of a global supply chain to enhance customer selection and service, as well as reduce fixed costs and improve overall asset utilization. This strategic transformation of the Company's business model involves a significant expansion of 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. As part of the restructuring program, the Company will begin to outsource globally its Sumter brand bedroom and dining room furniture currently produced at its Sumter, South Carolina facilities to contract manufacturers located primarily in Asia. Furniture manufacturing operations in Sumter, South Carolina will cease on October 31, 2006. In addition, the Company will begin distributing the Sumter brand furniture consolidated with other products from its existing Lincolnton, North Carolina distribution facilities, by January 1, 2007. The Company believes this will provide its customers with improved customer service and speed of delivery. The Company plans to sell its 521,000 square foot facilities in Sumter, South Carolina, as well as related equipment, and layoff approximately 200 Associates at this site. This represents approximately 17% of the Company's total workforce. Jeff Faw, President of Sumter, will continue to provide overall leadership of the Sumter brand product line. The restructuring program also includes closing the Company's warehouse and distribution center in Knoxville, Tennessee, which distributes Silver brand occasional furniture, by December 31, 2006. The Company intends to combine its Silver and Peters-Revington occasional furniture product lines to provide greater selection, consolidated shipments and improved delivery speed to its customers by distributing these products from its existing facilities in Delphi, Indiana. The Company plans to sell its 160,000 square foot building in Knoxville, Tennessee and layoff approximately 16 Associates at that location. Bill Massengill, President of Peters-Revington Furniture, will lead the integrated product line. Bobby Ivins, President of Silver Furniture, will transition his role to President of CR Global Services and lead the expansion of the Company's global product development, sourcing, quality control and logistics activities including direct container programs. The final component of this restructuring program involves relocating the Company's upholstered furniture operations to another one of its buildings located nearby in Lincolnton, North Carolina by November 30, 2006. This move will consolidate operations and reduce overhead expenses, while improving the overall manufacturing process and customer service for this growing product line. The Company plans to sell its 152,000 square foot upholstery plant, but few Associate layoffs are anticipated in connection with this relocation. The Company's other facilities are not impacted by this restructuring program. The Company expects to incur total restructuring costs and related asset impairment charges of $6.0 million to $7.5 million pretax to write-down buildings, equipment and inventories and to record severance benefits to terminated Associates and relocation costs. Most of these charges will be recorded in the third quarter of 2006. A portion of these charges and expenses are expected to result in cash expenditures of approximately $1.2 million, which includes approximately $0.2 million for capital expenditures associated with the relocated upholstery manufacturing site. These cash expenditures do not include expected cash proceeds from the sale of the buildings and equipment ranging from $3.5 million to $4.5 million. General, administrative and relocation costs associated with the wind down of these operations will be recorded as incurred. The restructuring charges associated with the asset impairment of buildings and equipment are expected to range from $2.5 million to $3.0 million pretax. In connection with the restructuring, an inventory write-down of approximately $2.5 million to $3.5 million pretax is expected to be recognized to reflect the anticipated net realizable value of certain inventories. In addition, severance for terminated Associates and relocation costs are expected to total approximately $1.0 million. In connection with the restructuring of its operations in Sumter, South Carolina, the Company has determined it is unlikely that certain state net operating loss carry-forwards will be utilized. As a result, the Company expects to recognize a non-cash income tax charge of approximately $0.3 million related to establishing a valuation allowance for a deferred tax asset during the third quarter of 2006. After the restructuring, the Company will employ approximately 975 Associates and operate approximately 1.8 million square feet of manufacturing and distribution facilities, in addition to its corporate headquarters in West Lafayette, Indiana and showroom space in High Point, North Carolina; Chicago, Illinois; and Las Vegas, Nevada. The Company expects to improve its ability to deliver domestically produced and imported furniture because of the restructuring. The Company continues to be committed to leveraging a hybrid strategy utilizing significantly greater global sourcing combined with value added U.S. assembly and distribution operations. Ben Anderson-Ray, the Company's Chairman and Chief Executive Officer, stated, "We believe this restructuring is an important step in repositioning the Company in the global furniture marketplace and in strengthening our ability to remain competitive. Importantly, we believe that these actions will enable us to provide our customers with better value, broader product selection and improved delivery services. Our overall strategy is to position the Company to be market focused utilizing a best-in-class hybrid of the global industry supply chain and value-added domestic operations to provide customers with great product value, superior product selection in the market niches we serve and exceptional delivery services. The restructuring program we are announcing today is a necessary step in implementing this strategy." 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.