American's sales fall 18.3%
Larry Thomas -- Furniture Today, May 26, 2011
ECRU, Miss. — Promotional upholstery producer American Furniture recorded a first-quarter operating loss of nearly $8 million as sales tumbled 18.3%.
In a filing with the Securities and Exchange Commission, parent company Compass Diversified Holdings said the bulk of the operating loss stemmed from a pair of non-cash impairment charges totaling $7.7 million.
Without the impairment charges, the operating loss would have been $298,000. In the first quarter of 2010, American had an operating profit of $2.7 million.
First-quarter sales totaled $35.9 million, down from $44 million in last year's first quarter.
In the regulatory filing, Compass said the sales decline was due to an "extremely soft current retail environment" and increased price competition in the promotional furniture category.
Sales to American's largest retail customer, Value City Furniture, were $7 million below last year's first quarter, according to the filing.
The impairment charges consisted of a $5.9 million write-down of goodwill and a $1.8 million write-down of the value of its trade name.
The goodwill write-down eliminated goodwill from American's books. In 2010, the company wrote down $35.5 million in goodwill. The operating loss at American was largely responsible for the $6.6 million first-quarter net loss reported by Compass.