Public companies have mixed results in 2006
High Point
By Jay McIntosh -- Furniture Today, May 21, 2007
— Soft sales and the industry's continuing — and costly — transition away from domestic manufacturing led to lower earnings for seven of the dozen Top 25 companies that publicly report financial results.
The other five, however, saw their earnings improve. For some, the gains were a testimony to the companies' ability to adapt to new economic conditions.
Posting the biggest turnaround in 2006 was Natuzzi, the Italian upholstery giant, which earned 12.3 million euros as it reversed a 14.6 million-euro loss the previous year. Worldwide sales grew 9.8%, despite a much smaller gain in the United States.
Ernesto Greco, CEO of Natuzzi, credited the improvement to the positive sales performance and said better inventory management led to a stronger cash flow in 2006. However, the challenging environment early this year, as well as the continued strength of the euro against the dollar and other currencies, is expected to lead to weaker orders in the first part of 2007, he said.
"In this challenging market, we remain committed to invest in the repositioning of the Natuzzi brand and reorganization of our sales activities and we continue to be focused on the current restructuring process of our operations, so to regain competitiveness and profitability," Greco said in announcing the earnings earlier this year.
That could be a mantra for several companies that continue to take charges for restructuring activities or other moves related to business changes.
The largest one-time charges in the most recent year were by La-Z-Boy. During the 12-month period ended Jan. 31, which includes part of two La-Z-Boy fiscal years, the company took a pretax $22.7 million writedown on the value of goodwill in its Bauhaus upholstery division, whose sales fell because of department store changes, and also reported a $14.4 million loss from discontinued operations.
La-Z-Boy reported a $3.6 million net loss for the 12-month period, making it one of two companies in the red for the year. Chromcraft Revington reported a $3.4 million loss after taking pretax charges of $7.4 million for restructuring and impairment.
Earning the biggest profit was perennial high performer Leggett & Platt, whose earnings climbed nearly 20% to $300.3 million. Leggett credited lower charges related to restructuring and workers' compensation, plus a $10 million refund of Canadian lumber duties, for achieving the double-digit improvement despite a total sales increase of just 3.9%.
Samson Holding, the China-based parent of Lacquer Craft, reported a profit gain of 15.7%, outpacing its 9.9% increase in sales. In Samson's annual report, Chairman Samuel Kuo attributed the earnings improvement to several factors, including a broader product offering, promotion of its brands and expansion of its production and warehouse facilities.
Hooker Furniture managed a 12.8% earnings gain in the year ended Nov. 30 despite $6.9 million in pretax restructuring and asset impairment charges associated with plant closures, which was up from $5.3 million in such charges in 2005.
"It was a year of positive momentum," said Hooker President and CEO Paul Toms Jr. The company attributed the profit improvement primarily to a variety of cost controls and lower interest expense.
Hooker, which is changing the end date of its fiscal year from November to January, reported an $18.4 million loss for the two-month transition period of December and January because of one-time charges of $18.4 million for ending an employee stock ownership plan and an additional $3 million in restructuring charges.
Slower sales contributed to earnings declines at Stanley, Furniture Brands International, Bassett and Ethan Allen. Performance for most of the companies weakened in the second half of the calendar year.
| Top 25 earnings for 2006 | ||||
|---|---|---|---|---|
| Dollar amounts in millions for companies that publicly report earnings. Figures in parentheses are losses or declines. | ||||
| Company | Net income | Change from 2005 | Operating income | Change from 2005 |
| 1. Includes pretax licensing and commission income of $23.1 million in 2006 and $20.2 million in 2005, and pretax restructuring costs of $3.7 million in 2006 and $7 million in 2005. 2. For the 12 months ended Dec. 31. Includes pretax restructuring and impairment charges of $13.6 million in 2006 and $4.2 million in 2005. 3. Includes pretax restructuring and asset impairment charges of $7.4 million in 2006 and $21.4 million in 2005. 4. Includes pretax income of $4.4 million in 2006 as the company's share of antidumping duties collected by the U.S. government on wood bedroom furniture imported from China. 5. Includes pretax restructuring and asset impairment charges of $6.9 million in 2006 and $5.3 million in 2005. 6. In euros. 7. For the fiscal year ended Nov. 25, 2006. Includes pretax income of $1.5 million in 2006 as the company's share of antidumping duties collected by the U.S. government on wood bedroom furniture imported from China. Also includes pretax restructuring and asset impairment charges of $1.4 million in 2006 and $2 million in 2005, and pretax nonoperating income of $6.9 million in 2006 and $8.1 million in 2005. 8. Includes pretax restructuring and impairment charges of $7.4 million in 2006. 9. For the 12 months ended Jan. 31, 2007. Includes pretax charges for restructuring of $2.9 million in the 2007 period and $5.3 million in 2006. Includes a $22.7 million charge in the 2007 12 months for writedown of intangibles. Also includes a $14.4 million after-tax loss from discontinued operations in 2007 and earnings from discontinued operations of $442,000 in 2006. |
||||
| Leggett & Platt | 300.3 | 19.5% | 508.9 | 14.6% |
| Samson Holding (Lacquer Craft) | 103.1 | 15.7% | 104.6 | 10.1% |
| Dorel1 | 88.9 | (2.7%) | 179.0 | (7.5%) |
| Ethan Allen2 | 73.7 | (8.8%) | 134.6 | (2.6%) |
| Furniture Brands International3 | 55.1 | (10.4%) | 83.7 | (15.7%) |
| Stanley4 | 16.8 | (27.8%) | 22.8 | (39.3%) |
| Hooker5 | 14.1 | 12.8% | 29.7 | 12.3% |
| Natuzzi6 | 12.3 | — | 16.5 | — |
| Bassett7 | 5.4 | (44.7%) | (0.7) | — |
| Flexsteel | 5.2 | 10.6% | 9.4 | 38.8% |
| Chromcraft Revington8 | (3.4) | — | (4.3) | — |
| La-Z-Boy9 | (3.6) | — | 41.6 | (23.5%) |
