Craftmade International Reports Fiscal 2011 Third Quarter Results

COPPELL, Texas, May 23, 2011 /PRNewswire/ -- Craftmade International, Inc. (OTCQX: CRFT) today reported the following results for its fiscal 2011 third quarter ended March 31, 2011:

Third Quarter 2011 Consolidated Results

Net income for the quarter ended March 31, 2011 was $335,000 compared to net income of $494,000 for the quarter ended March 31, 2010.  On a fully diluted basis, net  earnings per share was $0.06 for the quarter ended March 31, 2011, compared to earnings per share of $0.09 for the same period of 2010.   

Weighted average diluted shares outstanding for the third quarter were 5,767,000, compared to 5,756,000 for the 2010 third quarter.

Net sales for the Company were $46,043,000 for the quarter ended March 31, 2011, down 18% from $56,085,000 for the quarter ended March 31, 2010. The decrease is due to lower sales in the Mass segment, with Specialty sales growing over prior year.

Chief Executive Officer J. Marcus Scrudder commented, "Market conditions in the housing industry are still very challenging, with U.S. single-family housing starts declining approximately 21 percent over the same period of 2010.  Despite the difficult economic environment, we're seeing both revenue and margin growth in our Specialty segment, which is a key profit driver for Craftmade. This growth combined with continuing cost reduction efforts across the company, allowed us to generate a gain for the quarter that is roughly on par with our prior year results."

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

Gross profit of the Company was $7,855,000 for the quarter ended March 31, 2011, down from $8,660,000 for the quarter ended March 31, 2010. Gross profit as a percentage of net sales was up 1.7% to 17.1% for the quarter ended March 31, 2011, from 15.4% for the quarter ended March 31, 2010, primarily due to an increase in margins in the Specialty furniture segment, and a lower proportion of Mass segment sales, which carry lower margins than Specialty sales. The increases in Specialty furniture margins were driven by a combination of increased prices, and production cost efficiency gains.

Total selling, general and administrative ("SG&A") expenses of the Company decreased $589,000 to $6,467,000 or 14.0% of net sales for the quarter ended March 31, 2011, from $7,056,000 or 12.6% of net sales for the same period last year. This decrease was driven primarily by a $521,000 decrease in accounting and legal expense versus the same quarter in the prior year. During the prior year quarter the Company incurred various legal, accounting and administrative expenses related to an unsolicited and unsuccessful tender offer.  Additional savings also included lower variable expenses driven by lower Mass sales.  These savings were partially offset by a $224,000 increase in bad debt expense, primarily related to additional reserves against bad debt losses on Robb & Stucky Furniture.  On February 18, 2011 Robb & Stucky Furniture, a retailer of Woodard outdoor furniture, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.  

Net income attributable to noncontrolling interest was $103,000 for the quarter ended March 31, 2011, down from $196,000 for the same period in the previous year.  The decrease in noncontrolling interest resulted from lower profits at Design Trends as a result of a decline in net sales.

Third Quarter 2011 Segment Results

Net sales from the Specialty segment grew 10% to $17,347,000 in the quarter ended March 31, 2011 compared to $15,807,000 for the quarter ended March 31, 2010.

Net sales of the Mass segment were $28,696,000 for the quarter ended March 31, 2011, down 29% from $40,278,000 for the quarter ended March 31, 2010. This decrease was driven primarily by lower furniture orders from certain key retailers who had forecasted lower purchases due to remaining inventory still on hand from last season.

Based on initial results of line reviews with Mass furniture customers for products to be sold during the 2012 season, the Company believes that its Mass furniture sales for fiscal 2012 will be significantly lower. However, the overall impact on gross profit will be less pronounced, as these items carried among the lowest gross margins of any products sold. The Company is still in discussions with several Mass customers concerning 2012 offerings for multiple categories of products, therefore the impact on overall future profitability is uncertain at this time.

Mr. Scrudder concluded, "We continue to focus on those activities that drive additional margin expansion and further adjusting our SG&A cost structure relative to our current sales pace.  We expect that the financial benefits associated with these actions, along with an improvement in our target markets will enable the Company to achieve profitability in the long term.  In addition, the Company remains committed to reviewing any strategic options that could increase shareholder value.  We thank our employees for their hard work and our shareholders for their continued support."

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 or OTCQX, 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.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Craftmade International, Inc.