Craftmade International Reports Fiscal 2011 Second Quarter Results

COPPELL, Texas, Feb. 23, 2011 /PRNewswire/ -- Craftmade International, Inc. (OTCQX: CRFT) today reported the following results for its fiscal 2011 second quarter ended December 31, 2010:

Second Quarter 2011 Consolidated Results

Net loss for the quarter ended December 31, 2010 was $1,040,000 compared to net earnings of $18,000 for the quarter ended December 31, 2009.  On a fully diluted basis, net loss per share was $0.18 for the quarter ended December 31, 2010, compared to breakeven results for the same period of 2009.  The majority of the loss was due to non-recurring expenses outside of operations, and an exceptional increase in bad debt expense. These two factors combined drove incremental expenses of $1,247,000 for the quarter.  

Weighted average diluted shares outstanding for the second quarter were 5,705,000, which was the same for the 2009 second quarter.

Net sales for the Company were $28,113,000 for the quarter ended December 31, 2010, down 21% from $35,492,000 for the quarter ended December 31, 2009. The decrease was due to lower sales in the Mass segment and the timing of certain shipments versus the prior year quarter.  Specialty segment sales were flat as compared to the same quarter in the prior year.

Chief Executive Officer J. Marcus Scrudder commented, "Our financial results for the six months ended December 31, 2010 were negatively impacted by expenses related to non-recurring strategic activities of the Company, as well as an exceptional bad debt item related to a large specialty customer.  Excluding these expenses of over $1,200,000 our results would have been much more in line with our expectations, given the seasonal nature of our business."

"While we expect market conditions to remain challenging in the near term, we continue to reduce overhead costs and invest our resources toward those activities which will grow sales and profitability.  We've seen good growth in our Specialty sales segment for the first half of Fiscal 2011 and the related improvement in gross margins, and we're looking forward to maintaining that momentum as we move into the outdoor furniture season," concluded Mr. Scrudder.

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

Gross profit as a percentage of net sales increased 1.5% to 20.9% for the quarter ended December 31, 2010, up from 19.4% for the quarter ended December 31, 2009, primarily due to growth in the higher margin Specialty segment.

Total selling, general and administrative ("SG&A") expenses of the Company were $6,044,000 for the quarter ended December 31, 2010, up $55,000 from $5,989,000 for the same period last year. Excluding increased bad debt expense of $577,000 primarily due to the bankruptcy of Robb & Stucky Furniture, the Company's SG&A expenses would have decreased $522,000 for the quarter ended December 31, 2010 versus the same quarter in the prior year. These savings are related to ongoing cost cutting efforts across the business, including the delisting and deregistration of the Company's stock in fiscal 2010 as well as lower commission expense for the Mass segment.

Net income attributable to noncontrolling interest was $95,000 for the quarter ended December 31, 2010, down from $234,000 for the same period in the previous year, due to lower sales in the Company's Design Trends subsidiary.

Other Expense

Other expense for the quarter of $670,000 were attributed to legal and investment banking advisory expenses and administrative expenses related to accommodating due diligence requests associated with certain strategic options being explored.  These activities did not result in any transaction and the Company is currently not in negotiations with any third party.  The Company remains committed to reviewing all strategic options that could increase shareholder value.

Second Quarter 2011 Segment Results

Net sales from the Specialty segment were $14,906,000 for the quarter ended December 31, 2010, which was roughly flat to the same quarter in the prior year. Year to date Specialty sales were up by 3.8% to $30,451,000, versus $29,327,000 in the prior year.

Net sales of the Mass segment were $13,207,000 for the quarter ended December 31, 2010, down $7,352,000 from $20,559,000 for the quarter ended December 31, 2009. This decrease was partially driven by lower furniture orders from certain key retailers who had forecasted lower purchases due to remaining inventory on hand from last season. In addition, roughly $1.8 million of product expected to be shipped to Mass accounts from China in December was delayed until the first week in January.

Mr. Scrudder concluded, "We remain committed to executing our strategy for growth, while looking at all options to increase shareholder value.  Although the current economic backdrop remains incredibly challenging, we believe our efforts have positioned us well to benefit from any improvement in market conditions."

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 OTCQX or, 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.  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.