Craftmade International Announces Net Sales and Earnings Results for Its Fiscal 2010 Third Quarter

COPPELL, Texas, May 14 /PRNewswire-FirstCall/ -- Craftmade International, Inc. (OTCQX: CRFT) today reported the following results for its fiscal 2010 third quarter ended March 31, 2010:

Third Quarter 2010 Consolidated Results

Net income for the third quarter increased by $629,000 to $494,000, as compared to a net loss of $135,000 for the third quarter of 2009.  On a fully diluted basis, net income per share increased by $0.11 to $0.09 for the 2010 third quarter, compared to a net loss of $0.02 in the year-ago quarter.  Excluding approximately $503,000 of expenses related to an unsolicited and unsuccessful tender offer, net income would have been approximately $821,000 or $0.14 per share for the quarter, an improvement of $0.16 per share. Weighted average diluted shares outstanding were 5,756,000.

Net sales for the quarter increased $4,085,000, or 8%, to $56,085,000, compared to $52,000,000 reported in the same quarterly period last year.  Sales were up in both Specialty and Mass segments, as a result of stabilization in the housing market and increased presence of the Company's products in the Mass channel.

Chief Executive Officer J. Marcus Scrudder commented, "We are pleased with our overall quarterly results, especially in light of the depressed housing environment and the unsolicited tender offer.  Excluding expenditures related to the unsolicited bid, Craftmade delivered its best performance since the quarter ended June 30, 2007. Excluding approximately $503,000 related to the unsolicited hostile tender offer, we were able to reduce overall expenses by almost 17% compared to the same quarter a year ago.  Excluding these incremental expenses, our quarterly earnings per share would have been $0.05 higher."

Mr. Scrudder continued, "We achieved increased sales and earnings in this difficult environment due to our low cost business model and aggressive cost cutting in all areas of our operations.  As we stated in previous announcements, our low cost structure provides us with strong financial leverage as our market conditions improve.  We believe our positive results for the quarter are an indication that our markets are stabilizing and we anticipate some moderate improvements in housing and consumer spending for the remainder of calendar 2010.  These positive economic trends give us more optimism for our business going into fiscal 2011."

Gross Profit; Selling, General and Administrative ("SG&A") Expense and Interest Expense

Gross profit as a percentage of net sales was 15.4% for the quarter ended March 31, 2010, down 1.1% from 16.5% for the quarter ended March 31, 2009, primarily due to a decrease in margins in the Specialty furniture segment and an increase in the mix of the lower margin Mass furniture business, partially offset by margin improvements in Mass lighting.

Total selling, general and administrative ("SG&A") expenses of the Company decreased $830,000 to $7,056,000 or 12.6% of net sales for the quarter ended March 31, 2010, from $7,886,000 or 15.2% of net sales for the same period last year. This improvement would have been $1,333,000 without the expenditure related to the unsolicited bid and unsolicited tender offer.  These incremental expenditures were due to increased expenses for legal and financial advisors, as well as additional various administrative expenses. These incremental expenses were offset by savings from significant cost cutting efforts across all categories, including savings in salaries and wages and contract labor related to headcount reductions, lower advertising spending, and reductions in travel.

SG&A savings were partially offset by higher commissions due to rate increases versus the prior year. The Company expects to continue to see significant savings in SG&A expense versus last year, due to the continuing impact of the extensive cost cutting efforts, as well as the impact of moving its listing from NASDAQ to OTCQX and deregistering from the SEC.

Although average debt balances were slightly lower than during the same period last year, net interest expense of the Company increased $161,000 to $494,000 for the quarter ended March 31, 2010, from $333,000 for the quarter ended March 31, 2009.   This increase is due to higher average borrowing rates.

Net income attributable to noncontrolling interest was $196,000 for the quarter ended March 31, 2010, up from $89,000 for the same period in the previous year. The increase in net income attributable to noncontrolling interest resulted from higher profits at Design Trends as a result of improved margins.

Third Quarter 2010 Segment Results

Net sales from the Specialty segment were $15,807,000 for the quarter ended March 31, 2010, up 4% compared to $15,170,000 for the quarter ended March 31, 2009.  Sales of fans, lighting related products and outdoor furniture in the Specialty segment showed modest growth this quarter, after several periods of decline. While sales continue to be affected by the extremely weak overall housing market, a difficult credit environment and reduced consumer spending, the Company is focused on introducing new products, expanding accounts and implementing selective price increases.  

Net sales of the Mass segment were $40,278,000 for the quarter ended March 31, 2010, up 9.4% from $36,830,000 for the quarter ended March 31, 2009. The growth in sales versus the prior year is primarily due to increased shipments of outdoor furniture, offset somewhat by lower sales in the lighting and accessory segments versus the year ago quarter.

"We continue to focus on enhancing our product development efforts which provide our customers with creative, fashion-forward and reliable products.  Our seasoned sales team is focused on expanding our marketshare by capitalizing on the new sales prospects created by the depressed housing market and leveraging our unique, cross-selling opportunities," continued Mr. Scrudder.  "Despite the financial impact of the unsolicited tender offer and the distractions it caused, we continued to execute our strategy for long-term growth. Our employees have made some extraordinary sacrifices throughout this recession, and we thank them for their tremendous efforts.  Moreover, Craftmade's Board and management team will continue to work hard to maximize shareholder value."

Founded in 1985, Craftmade International, Inc. is engaged in the design, manufacturing, distribution and marketing of a broad range of home decor products, including proprietary ceiling fans, lighting products and outdoor furniture.  The Company distributes its premium products through a network of independent showrooms and mass retail customers through its headquarters and distribution facility in Coppell, Texas and manufacturing plant in Owosso, Michigan.  

More information about Craftmade International, Inc. can be found at www.craftmade.com.

Various statements in this Press Release or incorporated by reference herein, in future filings with the SEC, in press releases, and in oral statements made by or with the approval of authorized personnel constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and are indicated by words or phrases such as "may," "will," "should," "could," "might," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "forecasts," "intends," "potential," "continue," and similar words or phrases and involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from the future results, performance or achievements expressed in or implied by such forward-looking statements.  These forward-looking statements include statements or predictions regarding among other items: revenues and profits; gross margin; customer concentration; customer buying patterns; sales and marketing expenses; general and administrative expenses; pricing and cost reduction activities; income tax provision and effective tax rate; realization of deferred tax assets; liquidity and sufficiency of existing cash, cash equivalents, and investments for near-term requirements; purchase commitments; product development and transitions; competition and competing technology; outcomes of pending or threatened litigation; and financial condition and results of operations as a result of recent accounting pronouncements.  These forward-looking statements are based largely on expectations and judgments and are subject to a number of risks and uncertainties, many of which are beyond our control.  Significant factors that cause our actual results to differ materially from our expectations are described in our Form 10-K under the heading of "Risk Factors."  We undertake no obligation to publicly update or revise these Risk Factors or any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Craftmade International, Inc.