ECRU, Miss. — Promotional upholstery producer American Furniture, a subsidiary of publicly-traded Compass Diversified Holdings, said its sales dropped 3.6% to $136.9 million last year amid decreased demand for its motion furniture.
In a filing with the Securities and Exchange Commission, Compass said American's stationary upholstery sales were even with 2009, but motion upholstery and recliner sales decreased $4.6 million.

The decline was due to a softer retail environment and increased competition from Asian-made motion products, according to the filing.

Compass said 23% of American's sales last year were to a single retail customer - Columbus, Ohio-based Value City Furniture. The store chain accounted for 24% of American's sales in 2009.

American recorded an operating loss of $37.1 million last year, largely due to non-cash impairment charges of $38.8 million. In 2009, the furniture producer had operating income of $6.49 million.

"The retail furniture market continues to absorb downward pressure from lower consumer spending due principally to the limited access to credit available to new home buyers," Compass said in the filing.

According to the filing, Compass contributed $50.7 million in additional equity to American on Dec. 31. That boosted Compass' ownership stake from 84.5% to 91.4% on a fully diluted basis.

In exchange for the new equity, $49.7 million in debt and $1 million in unpaid management fees were wiped off American's books.