ECRU, Miss. — Promotional upholstery producer American Furniture, a subsidiary of publicly-traded Compass Diversified Holdings, recorded third-quarter sales of $32.1 million, a drop of 2.8% from last year's third quarter.
In a filing with the Securities and Exchange Commission, Compass said the decline was due to a drop in motion upholstery sales. The company had a small increase in sales of stationary upholstery and recliners.

Compass said the company had an operating loss of $42.7 million for the quarter. However, that was due largely to a one-time, non-cash write-down of $42.4 million against the value of goodwill and intangibles.

In last year's third quarter, American had an operating profit of $1.22 million.

Gross margin for the most recent quarter was 13.9%, compared with 19% in the same quarter last year.

For the nine months ended Sept. 30, sales totaled $109.4 million. That's an increase of 0.7% from $108.6 million in the first nine months of 2009. Compass said stationary upholstery sales rose $3.6 million and recliner sales rose $700,000, but that was partially offset by a $3.7 million drop in motion upholstery sales.

"The increase in stationary product sales is due primarily to an improved retail environment ... particularly during the first quarter of 2010," Compass said in the SEC filing. "The decrease in motion product sales is the result of the softer retail environment in the more expensive product categories such as our motion products, and the increasing presence of Asian import product, which often offers a better overall value proposition to customers."

The non-cash write-down led to a nine-month operating loss of $38.8 million. That compares with an operating profit of $5.38 million in the first nine months of 2009.