Craftmade International Announces Net Sales and Earnings Results for Its Fiscal 2011 Year End and Pending Tender Offer

COPPELL, Texas, Oct. 7, 2011 /PRNewswire/ -- Craftmade International, Inc. (OTCQX: CRFT) today reported the following results for its fourth quarter and fiscal year ended June 30, 2011:

Fiscal Year 2011 Consolidated Results

Net loss for the current fiscal year was $9,579,000, compared to net income of $61,000 for the 2010 fiscal year, a decrease of $9,640,000. The most significant driver in the year over year change was a pre-tax goodwill impairment charge of $9,045,000 that the company recorded in the quarter ended June 30, 2011. On a fully diluted basis, net loss per share was $1.68 for the 2011 fiscal year, compared to a net income of $0.01 for the 2010 fiscal year, a decrease of $1.69. Weighted average diluted shares outstanding for the current fiscal year were 5,705,000 versus 5,729,000 for the 2010 fiscal year.

Net sales for the fiscal year decreased $26,957,000, or 17.5%, to $126,963,000 compared to $153,920,000 reported in the last fiscal year. This decrease was primarily due to a decline in Mass segment sales, primarily outdoor furniture sales.  The decrease is partially offset by an increase Specialty segment sales.

Goodwill Impairment

The Company learned during the fourth quarter of fiscal 2011 that it will have significantly lower sales to the Mass segment in fiscal 2012 than it had in fiscal 2011. The Company continues to review its strategy for participation in the Mass segment. The Company will continue to participate in key line reviews for Mass product, and may pick up additional sales in the future, however current trends make it difficult to project future gains.

Given this uncertainty, the Company has chosen to revise its long-term projections for revenues and earnings in this segment as part of its annual testing for impairment of goodwill. The resulting valuation implies a deficit of equity value compared to book value. Given the implied deficit the Company has determined that it is appropriate to fully impair the goodwill of $9,045,000 associated with the Mass reporting unit as of June 30, 2011.

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

Gross profit of the Company as a percentage of net sales increased 1.5% to 20.7% for fiscal year 2011 compared to 19.2% in fiscal year 2010. This was primarily due to a favorable increase in margins for the Company's Specialty segment, as well as a favorable change in the mix between the higher margin Specialty business and the lower-margin Mass business.

Total selling, general and administrative ("SG&A") expenses of the Company decreased $955,000 to $25,116,000 or 19.8% of net sales for the fiscal year ended June 30, 2011, compared to $26,071,000 or 16.9% of net sales for the same period last year. This decrease in expenses was partially driven by a reduction in accounting, legal and consulting expenditures which were high in the prior year related to a tender offer by a third party.  

Net interest expense of the Company increased $167,000 to $1,922,000 for the fiscal year ended June 30, 2011, compared to $1,755,000 for the fiscal year ended June 30, 2010, due to higher average balances versus the prior year.

Net income attributable to noncontrolling interest was $244,000 for the year ended June 30, 2011, down from $773,000 for the same period in the previous year. The decrease in net income attributable to noncontrolling interest resulted from lower profits at Design Trends.

Fiscal 2011 Fourth Quarter Results

Net loss for the quarter ended June 30, 2011 was $8,162,000, compared to net income of $145,000 for the quarter ended June 30, 2010, a decrease of $8,307,000. On a fully diluted basis, net loss per share was $1.43 for the current quarter, compared to net income of $.03 for the 2010 fourth quarter, a decrease of $1.46. The primary driver in the year over year change was a pre-tax goodwill impairment charge of $9,045,000 that the company recorded in the fourth quarter.

Net sales for the quarter ended June 30, 2011 were $31,405,000, compared to $41,295,000 in the prior year quarter, a decrease of $9,890,000 or 24%. This decrease was primarily due to a decline in Mass segment sales, primarily outdoor furniture sales.  The decrease is partially offset by an increase Specialty segment sales.

Gross profit as a percentage of net sales increased by 2.7% to 22.7%, compared to 20.0% for the same quarter last year. This was primarily due to a favorable increase in margins for the Company's Specialty segment, as well as a favorable change in the mix between the higher margin Specialty business and the lower-margin Mass business.

Total SG&A expenses for the fourth quarter decreased by $245,000 to $6,906,000 for the quarter, compared to $7,151,000 in the prior year quarter.

Net interest expense of the Company increased $13,000 to $557,000 for the quarter ended June 30, 2011, compared to $544,000 for the quarter ended June 30, 2010. Net loss attributable to noncontrolling interest was $160,000 for the quarter ended June 30, 2011, down from net income attributable to noncontrolling interest of $125,000 for the same period in the previous year.

Pending Tender Offer

On October 3, 2011 Craftmade's Board of Directors (the "Board") received a letter from Litex Industries, Limited ("Litex"), announcing that it intends to initiate a cash tender offer in which Litex's subsidiary, Litex Acquisition #1, LLC, will offer to purchase all outstanding shares of Craftmade's common stock for a price of $4.25 per share.  The offer is expected to be initiated on or about October 11, 2011, and the offer and withdrawal rights are scheduled to expire at 5:00 P.M., New York City time, on or about November, 6, 2011, unless the offer is extended. The Board expects to issue a letter to Craftmade stockholders on or about October 11 recommending that stockholders accept this tender offer.  The Board's favorable recommendation is subject to certain conditions.  For additional details please refer to the tender offer materials and the Board's recommendation to stockholders which will be filed on OTCQX.com as soon as they are available.

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.