CRAFTMADE INTERNATIONAL INC CRFT
August 03, 2009 - 11:31am EST by
kiss534
2009 2010
Price: 3.04 EPS DEFICIT $0.40
Shares Out. (in M): 6 P/E NA 7.5x
Market Cap (in M): 17 P/FCF NA NA
Net Debt (in M): 10 EBIT 2 5
TEV: 27 TEV/EBIT 18.0x 6.0x

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Description

  The past 18 months has seen the real estate market collapse on a seemingly historical basis. The landscape is littered with bankrupt companies that relied on the real estate engine for their sales. For those that have managed to navigate the economic minefield, the time has come to reevaluate some of the  survivors that will benefit as the industry rebounds in the coming months and years.

 

  Craftmade Intl (CRFT). has experienced the recent roller coaster with its share price dropping from a about $19 to a low of $1 within these 18 months. Craftmade , based in Texas, is a leading provider of indoor and outdoor home furnishings. The company divides it product lines between  Mass and Specialty divisions.

 

   The Mass segment distributes products to mass merchandisers such as Home Depot, Wal-Mart, Bed Bath & Beyond, Costco, Fred Meyer, Sears and Lowes which target private consumers with items such as fans, lamps, and shades. Products are marketed under three trade names; Trade Source Intl.( which handles outdoor lighting), PHI.( deals with lighting accessories), and Design Trends (represents the indoor lighting presence).

 

   The Specialty unit distributes mostly to trade clients. Their base is over 1600 electrical wholesalers and lighting showrooms, targeting sales to remodeling, new home construction, and hospitality customers. Products are sold under the Craftmade, Woodward Worldwide, Teiber, Durocraft, and Accolade trade names. The company also supplies many other items ranging from ventilation systems to smoke alarms to clocks and weather gauges.

 

  The company purchases product from Mexico, China and other Asian suppliers.  Products find their way into the new construction market as well as the renovation and remodel markets.

 

    Competition for CRFT is dependant on the product line. Some of the larger companies include Westinghouse, Casablanca, Catalina, and Minka. The total market footprint it distributes is wide and due to the high cost and high capacity demands, the barriers to entry are significant. CRFT takes an extreme view of its quality customer service, and frequently states  that it has the lowest return rate in the industry. The company has established brand loyalty because of the high quality of their products as well as quick delivery. In addition, it reinforces its product quality by offering either a lifetime or thirty year warranty. The company currently has over 10,000 SKU's but with an effective streamlining of operations has reduced JIT (just in time) to 24 - 48 hours shipping on products.

 

  

 

    Over the past several years, the company has made several acquisitions to increase their product offerings and expand their capacity. The latest of these takeover was in 2008 of Woodard LLC,. offering complementary outdoor products including garden and patio furniture (including cast iron, aluminum and wicker furniture) and providing additional manufacturing flexibility, CRFT has also now added entry into the lucrative hospitality sector.

 

    Finances, a  concern for many companies, was recently addressed successfully by Craftmade when  on July 21 they announced  a $40 million three year revolving loan agreement with Bank Of America. In addition, the company announced a $3.5 million three year term loan with its existing banker- Frost National Bank. The company commented that these loans "will provide essential support for working capital needs

during a challenging time, and they expand our banking relationships for the next three years".

 

   Due to the recent Woodard acquisition, the numbers are muddy. Pro forma results for the nine months ending March 2009 resulted in $119.4 million in sales down somewhat from the prior years' $125.4 million. Net income was a loss of $889,000 or $0.14 compared to a profit of $487,000 or $0.09 for the nine months. Management stated in the third quarter conference call that they would have hit profitability if they didn't have some unusual charges in the quarter. They went on to say that  they were continuing to reduce SG & A- probably as much as $3 million from about a total $30 million.

 

   Our revenue guestimate for year ended June would be $150 million down from an adjusted $164 million associated with a modest loss for the year ending. For the current 2009/2010 year our very tentative guess is $160 million. We will hold off on an earnings estimate pending better clairity on the housing turn and the success from their cost reductions.

 

 

  What intrigues us here is a company offering a quality product thru quality stores, with finances intact and with the bottom of a housing cycle insight. Having added patio furniture to the palette, cross selling between ceiling fans, lighting fixtures thru many retailers and hospitality outlets should now begin. Only 5.7 million shares outstanding  Long term debt $9.9 million and a net worth of $36.4 million as of March 2009. It probably would be too heroic to expect much in the current fiscal 2009/2010. However, possibly not out of the question between a housing market upturn and corporate cost reductions, would  to see pre tax margins of 4% on sales of $170 million resulting in an eps of  $0.75 for the following 2010-2011 fiscal.

 

Catalyst

1.housing turn

2.margin improvement

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    Description

      The past 18 months has seen the real estate market collapse on a seemingly historical basis. The landscape is littered with bankrupt companies that relied on the real estate engine for their sales. For those that have managed to navigate the economic minefield, the time has come to reevaluate some of the  survivors that will benefit as the industry rebounds in the coming months and years.

     

      Craftmade Intl (CRFT). has experienced the recent roller coaster with its share price dropping from a about $19 to a low of $1 within these 18 months. Craftmade , based in Texas, is a leading provider of indoor and outdoor home furnishings. The company divides it product lines between  Mass and Specialty divisions.

     

       The Mass segment distributes products to mass merchandisers such as Home Depot, Wal-Mart, Bed Bath & Beyond, Costco, Fred Meyer, Sears and Lowes which target private consumers with items such as fans, lamps, and shades. Products are marketed under three trade names; Trade Source Intl.( which handles outdoor lighting), PHI.( deals with lighting accessories), and Design Trends (represents the indoor lighting presence).

     

       The Specialty unit distributes mostly to trade clients. Their base is over 1600 electrical wholesalers and lighting showrooms, targeting sales to remodeling, new home construction, and hospitality customers. Products are sold under the Craftmade, Woodward Worldwide, Teiber, Durocraft, and Accolade trade names. The company also supplies many other items ranging from ventilation systems to smoke alarms to clocks and weather gauges.

     

      The company purchases product from Mexico, China and other Asian suppliers.  Products find their way into the new construction market as well as the renovation and remodel markets.

     

        Competition for CRFT is dependant on the product line. Some of the larger companies include Westinghouse, Casablanca, Catalina, and Minka. The total market footprint it distributes is wide and due to the high cost and high capacity demands, the barriers to entry are significant. CRFT takes an extreme view of its quality customer service, and frequently states  that it has the lowest return rate in the industry. The company has established brand loyalty because of the high quality of their products as well as quick delivery. In addition, it reinforces its product quality by offering either a lifetime or thirty year warranty. The company currently has over 10,000 SKU's but with an effective streamlining of operations has reduced JIT (just in time) to 24 - 48 hours shipping on products.

     

      

     

        Over the past several years, the company has made several acquisitions to increase their product offerings and expand their capacity. The latest of these takeover was in 2008 of Woodard LLC,. offering complementary outdoor products including garden and patio furniture (including cast iron, aluminum and wicker furniture) and providing additional manufacturing flexibility, CRFT has also now added entry into the lucrative hospitality sector.

     

        Finances, a  concern for many companies, was recently addressed successfully by Craftmade when  on July 21 they announced  a $40 million three year revolving loan agreement with Bank Of America. In addition, the company announced a $3.5 million three year term loan with its existing banker- Frost National Bank. The company commented that these loans "will provide essential support for working capital needs

    during a challenging time, and they expand our banking relationships for the next three years".

     

       Due to the recent Woodard acquisition, the numbers are muddy. Pro forma results for the nine months ending March 2009 resulted in $119.4 million in sales down somewhat from the prior years' $125.4 million. Net income was a loss of $889,000 or $0.14 compared to a profit of $487,000 or $0.09 for the nine months. Management stated in the third quarter conference call that they would have hit profitability if they didn't have some unusual charges in the quarter. They went on to say that  they were continuing to reduce SG & A- probably as much as $3 million from about a total $30 million.

     

       Our revenue guestimate for year ended June would be $150 million down from an adjusted $164 million associated with a modest loss for the year ending. For the current 2009/2010 year our very tentative guess is $160 million. We will hold off on an earnings estimate pending better clairity on the housing turn and the success from their cost reductions.

     

     

      What intrigues us here is a company offering a quality product thru quality stores, with finances intact and with the bottom of a housing cycle insight. Having added patio furniture to the palette, cross selling between ceiling fans, lighting fixtures thru many retailers and hospitality outlets should now begin. Only 5.7 million shares outstanding  Long term debt $9.9 million and a net worth of $36.4 million as of March 2009. It probably would be too heroic to expect much in the current fiscal 2009/2010. However, possibly not out of the question between a housing market upturn and corporate cost reductions, would  to see pre tax margins of 4% on sales of $170 million resulting in an eps of  $0.75 for the following 2010-2011 fiscal.

     

    Catalyst

    1.housing turn

    2.margin improvement

    Messages


    SubjectRE: questions
    Entry08/24/2009 06:56 PM
    Memberkiss534

    1.My focus on the financial side of CRFT was and is survivability. The July 21 three year loan agreement of $40 million

    from the Bank Of America allayed my concerns. As stated in the recommendation "...that they would have hit profitability...." in the third quater save some unusual charges. My concern is the timing of improvement in the housing market.

    2.In 2006 and 2007, the net after tax margin was 6.0% and 5.7% respectively. That number was given a good shaving with the new financing arrangement and the lower margin Woodard acquisition.

    3,Crft is an old line quality manufacturer of product with well known brands selling into the Home Depots, Lowes

    etc. Their product gurantees have stood the test of time.


    Subjectbid of 3.25
    Entry01/15/2010 05:05 PM
    Memberkiss534

    After close bid of $3.25 appears- Litex trying to steal company but can't fault them

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