Chromcraft Revington, Inc. reported sales for the three months ended March 31, 2007 of $33,847,000, representing a 26.3% decrease as compared to sales of $45,921,000 for the prior year period. Ben Anderson-Ray, Chairman and Chief Executive Officer commented, "The sales decrease reflects a soft retail market climate and continued competitive pressures from imports, as well as the impact of a major change to our sales structure. During the quarter, we restructured and realigned our residential sales organizations. As part of our ongoing transformation we have taken actions to unify our sales function and shift to exclusive sales representation of our brands. While this dramatic step has sales volume implications, it is part of an overall plan that we believe will drive longer term performance improvements." Mr. Anderson-Ray went on to add, "In the past we used multi-line independent representatives who carried other furniture companies' products. These sales representatives were also managed by separate divisions of Chromcraft Revington. This made it difficult to coordinate activities between our brands in service to our customers and to cross-sell our brands. As an element of the Company's transformation, we restructured the residential sales activity with unified management and exclusive representation of the Company's brands. This transition better aligns the sales organization with the long term goals of the Company's new vision. The soft retail conditions may have aggravated the sales decline of this transition; however, we believe this shift will position us for improved performance when market conditions improve in the future." While shipments for the current quarter of residential products were lower, shipments of commercial products, which were unaffected by the sales realignment, were higher as compared to the same period last year.
Overall, the Company recorded a net loss for the three months ended March 31, 2007 of $1,178,000, or $.26 loss per share, as compared to net earnings of $1,129,000, or $.26 per share, for the same period a year ago. The net loss for the first quarter was primarily due to the lower residential sales volume, which impacted fixed cost absorption and manufacturing efficiencies, an unfavorable product sales mix, and higher product marketing and development costs. The Company's Sr. Vice President and Chief Financial Officer, Frank Kane, commented that first quarter results include a charge of $358,000 pre-tax, primarily for costs to shut down, vacate and prepare facilities held for sale relating to the Company's 2006 restructuring program. He added, "In the first quarter the Company generated $2,518,000 of cash and recorded a $357,000 pre-tax gain primarily from asset sales as part of the 2006 restructuring program." In addition, he commented, "The first quarter also reflects an increased investment in marketing programs and for new product development based on consumer research. We anticipate that these expenditures will result in improved overall competitiveness in the market over time." Mr. Kane added that at March 31, 2007 the Company's financial position remains strong with no bank indebtedness and $11 million of cash.
Commenting on the Company's change toward a new business model, Mr. Anderson-Ray said, "In 2006, we began a transformation of the Company toward a new vision based on a more integrated organizational model that utilizes research based consumer understanding to develop products using a global supply chain and U.S.-based built-to-order customization capabilities." To implement this vision, the Company is in the process of integrating its decentralized operations into a single functional organization and shifting its U.S. manufacturing operations to greater use of imported goods and built-to-order manufacturing capabilities.
Mr. Anderson-Ray also stated, "Four senior executives have been appointed to lead the key functions in the new structure. Dennis Valkanoff is responsible for the integration of our residential selling function, David Corbin is driving the development of a consumer based marketing and category management function, Rich Garrity is leading the transition of domestic U.S. operations to a greater use of the global supply chain and conversion to build-to-order operations, while Frank Kane continues to lead the financial and administrative function." Mr. Anderson-Ray commented, "Each of these highly experienced executives has a combination of experience within the furniture industry and outside the industry bringing us best practices to build what we believe will be a much stronger consumer driven durable goods company. These executives are leading dramatic changes within our Company as we move toward our vision of being one company with multiple brands that are consumer driven and providing value to the market with a combination of imported finished products and consumer customization capabilities."
The continued transformation of the business will require enhanced global sourcing capabilities, ongoing conversion of U.S. manufacturing operations to built-to-order and distribution activities, and completing the shift to a consumer focused, functionally driven organization. Mr. Anderson-Ray stated, "These elements are expected to provide us with a new foundation to effectively compete in the evolving furniture marketplace." He indicated that as the Company continues to transform its business model and integrates functions common to the various product lines, additional transition costs, reduced revenue, increased operating expenses, restructuring charges and asset impairments may 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.
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