UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-13970
CHROMCRAFT REVINGTON, INC.
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(Exact name of registrant as specified in its charter)
Delaware 35-1848094
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1100 North Washington Street, Delphi, IN 46923
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(Address, including zip code, of registrant's principal executive offices)
(765) 564-3500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding for each of the registrant's classes of common
stock, as of the latest practicable date:
Common Stock, $.01 par value -- 9,573,248 shares as of July 31, 2001
Table of Contents
Chromcraft Revington, Inc.
Page Number
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings - Three and Six
Months Ended June 30, 2001 and July 1, 2000..................... 3
Condensed Consolidated Balance Sheets - June 30, 2001,
July 1, 2000 and December 31, 2000.............................. 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2001 and July 1, 2000..................... 5
Notes to Condensed Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders............. 11
Item 5. Other Information............................................... 11
Item 6. Exhibits and Reports on Form 8-K................................ 11
Signatures.................................................................. 12
2
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Earnings (unaudited)
Chromcraft Revington, Inc.
(In thousands, except per share data)
Three Months Ended Six Months Ended
--------------------- ---------------------
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
-------- -------- -------- --------
Sales $ 51,369 $ 65,667 $114,270 $139,407
Cost of sales 40,091 49,573 88,493 105,198
-------- -------- -------- --------
Gross margin 11,278 16,094 25,777 34,209
Selling, general and
administrative expenses 7,007 9,121 15,472 18,760
-------- -------- -------- --------
Operating income 4,271 6,973 10,305 15,449
Interest expense 194 513 504 991
-------- -------- -------- --------
Earnings before income tax expense 4,077 6,460 9,801 14,458
Income tax expense 1,591 2,536 3,823 5,675
-------- -------- -------- --------
Net earnings $ 2,486 $ 3,924 $ 5,978 $ 8,783
======== ======== ======== ========
Earnings per share
of common stock
Basic $ .26 $ .40 $ .62 $ .90
======== ======== ======== ========
Diluted $ .26 $ .40 $ .62 $ .88
======== ======== ======== ========
Shares used in computing
earnings per share
Basic 9,573 9,713 9,573 9,812
======== ======== ======== ========
Diluted 9,695 9,865 9,700 9,935
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
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Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
June 30, July 1, December 31,
2001 2000 2000
-------- -------- --------
Assets
Cash $ -- $ -- $ 441
Accounts receivable 25,663 33,165 25,552
Inventories 52,082 57,234 55,379
Other assets 4,244 4,036 3,447
-------- -------- --------
Current assets 81,989 94,435 84,819
Property, plant and equipment, net 43,452 44,185 44,747
Intangibles and other assets 29,317 29,182 30,526
-------- -------- --------
Total assets $154,758 $167,802 $160,092
======== ======== ========
Liabilities and Stockholders' Equity
Accounts payable $ 5,740 $ 9,644 $ 6,474
Accrued liabilities 12,463 15,433 13,694
Revolving credit facility -- 28,100 --
-------- -------- --------
Current liabilities 18,203 53,177 20,168
Revolving credit facility 9,400 -- 19,200
Deferred compensation and other liabilities 10,932 9,879 10,479
-------- -------- --------
Total liabilities 38,535 63,056 49,847
Stockholders' equity 116,223 104,746 110,245
-------- -------- --------
Total liabilities and stockholders' equity $154,758 $167,802 $160,092
======== ======== ========
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Six Months Ended
----------------------
June 30, July 1,
2001 2000
-------- --------
Operating Activities
Net earnings $ 5,978 $ 8,783
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 3,036 3,153
Deferred income taxes 139 83
Changes in assets and liabilities
Accounts receivable (111) (3,591)
Inventories 3,297 (6,784)
Accounts payable and accrued liabilities (1,965) 1,026
Other 74 825
-------- --------
Cash provided by operating activities 10,448 3,495
-------- --------
Investing Activities
Capital expenditures (1,099) (2,278)
Proceeds from sales of property, plant and equipment 10 42
-------- --------
Cash used by investing activities (1,089) (2,236)
-------- --------
Financing Activities
Net borrowings (repayments) under revolving credit facility (9,800) 1,400
Repurchase of common stock -- (3,807)
-------- --------
Cash used by financing activities (9,800) (2,407)
-------- --------
Decrease in cash (441) (1,148)
Cash at beginning of period 441 1,148
-------- --------
Cash at end of period $ -- $ --
======== ========
See accompanying notes to condensed consolidated financial statements.
5
Notes to Condensed Consolidated Financial Statements (unaudited)
Chromcraft Revington, Inc.
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statement presentation.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.
The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in Chromcraft Revington's annual report on Form 10-K
for the year ended December 31, 2000.
Note 2. Withdrawal of Purchase Offer from Court Square Capital Limited
On July 17, 2001, Court Square Capital Limited, a unit of Citigroup, notified
the Company that it decided to withdraw its proposal to acquire the issued and
outstanding capital stock of Chromcraft Revington, Inc. not owned by Court
Square Capital Limited. Under the proposal, holders of Chromcraft Revington's
publicly traded common stock would have received cash of $10.30 per share in a
transaction to take the Company private. Court Square Capital Limited owns 59.5%
of Chromcraft Revington's common stock.
Note 3. Earnings per Share of Common Stock
Weighted average shares used in the calculation of diluted earnings per share
included dilutive potential common shares (stock options) of approximately
122,000 and 127,000 for the three and six months ended June 30, 2001,
respectively, and 152,000 and 123,000 for the three and six months ended July 1,
2000, respectively.
Certain stock options to purchase shares of common stock were outstanding during
the second quarter and first six months of 2001 and 2000, but were not included
in the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the common shares during
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those periods and, therefore, their effect would be antidilutive. Options
excluded from the computation of diluted earnings per share were as follows:
2001 2000
---------------------- -----------------------
Average Average
Exercise Exercise
Shares Price Shares Price
-------- --------- -------- ----------
Second quarter 376,060 $ 13.48 326,060 $ 13.91
First six months 376,060 $ 13.48 386,060 $ 13.41
Note 4. Inventories
The components of inventories consisted of the following:
(In thousands)
------------------------------------
June 30, July 1, December 31,
2001 2000 2000
-------- -------- --------
Raw materials $ 15,931 $ 18,876 $ 17,729
Work in process 8,805 8,742 9,083
Finished goods 29,820 32,087 30,870
-------- -------- --------
Inventories at FIFO cost 54,556 59,705 57,682
LIFO reserve (2,474) (2,471) (2,303)
-------- -------- --------
$ 52,082 $ 57,234 $ 55,379
======== ======== ========
Note 5. Property, Plant and Equipment
Depreciation and amortization of property, plant and equipment is provided on a
straight-line basis over the estimated useful lives of the assets as follows:
buildings and improvements, 15 to 45 years; machinery and equipment, 3 to 12
years; and leasehold improvements, 5 to 10 years.
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Note 6. Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands)
-------------------------------------
June 30, July 1, December 31,
2001 2000 2000
-------- -------- --------
Employee benefit plans $ 1,985 $ 5,296 $ 4,450
Salaries, wages and commissions 1,513 2,208 1,586
Vacation and holiday pay 1,223 1,135 1,035
Workers' compensation plans 994 1,382 1,013
Deferred income taxes 643 -- 1,018
Other accrued liabilities 6,105 5,412 4,592
------- ------- -------
$12,463 $15,433 $13,694
======= ======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
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Chromcraft Revington designs, manufactures and sells residential and commercial
furniture through its wholly owned subsidiaries Chromcraft Corporation,
Peters-Revington Corporation, Silver Furniture Co., Inc., Cochrane Furniture
Company, Inc. and Korn Industries, Incorporated.
The following table sets forth the results of operations of Chromcraft Revington
for the three and six months ended June 30, 2001 and July 1, 2000 expressed as a
percentage of sales.
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
-------- ------- -------- -------
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 78.0 75.5 77.4 75.5
-------- ------- -------- -------
Gross margin 22.0 24.5 22.6 24.5
Selling, general and
administrative expenses 13.7 13.9 13.6 13.4
-------- ------- -------- -------
Operating income 8.3 10.6 9.0 11.1
Interest expense .4 .8 .4 .7
-------- ------- -------- -------
Earnings before
income tax expense 7.9 9.8 8.6 10.4
Income tax expense 3.1 3.8 3.4 4.1
-------- ------- -------- -------
Net earnings 4.8 % 6.0 % 5.2 % 6.3 %
======== ======= ======== =======
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Three and Six Months Ended June 30, 2001 Compared to Three and Six Months Ended
July 1, 2000
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Consolidated sales for the three months ended June 30, 2001 were $51,369,000, a
decrease of 21.8% from sales of $65,667,000 for the three months ended July 1,
2000. For the first six months of 2001, consolidated sales were $114,270,000, an
18.0% decrease from sales of $139,407,000 for the same period last year.
Shipments of occasional, dining room, bedroom, upholstered and commercial
furniture were lower during the second quarter and first six months of 2001 as
compared to the corresponding periods of 2000. The decline in sales was
primarily due to the economic and retail slowdown that began in the second half
of last year. The consolidated sales order backlog at June 30, 2001 was lower as
compared to July 1, 2000.
In general, selling prices for the first six months of 2001 were slightly higher
as compared to the prior year period.
Gross margin as a percentage of sales was 22.0% and 22.6% for the three and six
month periods ended June 30, 2001, respectively, as compared to 24.5% for the
three and six month periods ended July 1, 2000. The decline in the gross margin
percentage for the second quarter and first half of 2001 was primarily due to
unabsorbed fixed overhead resulting from the lower sales volume.
Selling, general and administrative expenses as a percentage of sales were 13.7%
and 13.6% for the second quarter and first six months of 2001, respectively, as
compared to 13.9% and 13.4% for the same periods last year. Although sales were
lower for the three and six month periods ended June 30, 2001, selling, general
and administrative expenses as a percentage of sales remained at approximately
the same level as compared to the prior year. This was primarily due to lower
incentive compensation and advertising related costs in 2001 which were offset
by the spreading of certain fixed selling and administrative costs over a lower
sales volume.
Interest expense for the three and six months ended June 30, 2001 was $194,000
and $504,000, respectively, as compared to $513,000 and $991,000 for the three
and six months ended July 1, 2000, respectively. The decrease in interest
expense for 2001 was due to lower average bank borrowings and interest rate
reductions.
Chromcraft Revington's effective income tax rate was 39.0% for the three and six
month periods ended June 30, 2001 as compared to 39.3% for the three and six
month periods ended July 1, 2000. The decrease in the effective tax rate for
2001 was due to lower state income taxes.
Liquidity and Capital Resources
-------------------------------
Operating activities provided $10,448,000 of cash during the six months ended
June 30, 2001, an increase of $6,953,000 from the amount provided for the first
half of last year. The increase in cash flow from operating activities in 2001
was primarily due to a reduction in working capital investment, offset, in part,
by lower net earnings. Accounts receivable, due to lower sales volume, increased
$111,000 during the first half of 2001 as compared to an increase of $3,591,000
during the same period of 2000. Inventories decreased $3,297,000 during the
period as compared to an increase of $6,784,000 during the first six months of
last year reflecting the lower sales activity.
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Investing activities, primarily for capital expenditures, were $1,089,000 during
the first six months of 2001 as compared to $2,236,000 during the same period
last year. Chromcraft Revington expects capital expenditures to be less than
$3,000,000 for the year ending December 31, 2001.
Financing activities used $9,800,000 of cash during the six months ended June
30, 2001 to reduce bank indebtedness under a revolving credit facility. During
the first six months of 2000, financing activities used $3,807,000 of cash to
acquire shares of Chromcraft Revington's common stock under a stock repurchase
program and $1,400,000 was borrowed under the revolving credit facility.
At June 30, 2001, Chromcraft Revington had unused capacity under its revolving
credit facility, after reduction for outstanding letters of credit, of
$36,048,000.
Third Quarter 2001 Outlook
--------------------------
Entering the third quarter, retail furniture sales continue to remain sluggish
and the Company's sales order backlog is lower as compared to a year ago.
Chromcraft Revington anticipates that third quarter earnings per share on a
diluted basis will be between $.21 and $.26, as compared to $.28 last year.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
--------------------------------------------------------------------------------
Certain matters included in this discussion are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Certain forward-looking statements are contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These
forward-looking statements can be generally identified as such because the
context of the statements includes words such as "plans," "may," "anticipates,"
"estimates" and "expects" or words of similar import. All forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reported or expected as of the
date of this report. Among the risks and uncertainties that could cause actual
results to differ materially from those reported or anticipated are (i) general
economic conditions, (ii) cyclical nature of the furniture industry, and (iii)
competition in the furniture industry.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Borrowings under Chromcraft Revington's revolving credit facility bear interest
at a variable rate and, therefore, are subject to changes in interest rates. The
impact of an interest rate change is not considered material.
10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) Chromcraft Revington held its annual meeting of stockholders on
May 1, 2001.
(b) At the annual meeting, the holders of the common stock of
Chromcraft Revington elected five directors to serve until the
next annual meeting of stockholders and until their successors
are duly elected and qualified. Set forth below are the votes
cast for each director.
Directors For Withheld
----------------------- --------- ---------
David L. Kolb 9,064,562 16,350
Larry P. Kunz 9,064,562 16,350
M. Saleem Muqaddam 8,058,057 1,022,855
Michael E. Thomas 8,060,557 1,020,355
Warren G. Wintrub 9,064,562 16,350
Item 5. Other Information
If a stockholder proposal is introduced at the 2002 Annual Meeting without any
discussion of the proposal in the proxy statement, and if the proponent does not
notify Chromcraft Revington on or before February 11, 2002, as required by Rule
14a-4(c)(1) under the Securities Exchange Act of 1934, of the intent to raise
such proposal at the Annual Meeting, then proxies received by Chromcraft
Revington for the 2002 Annual Meeting will be voted by the persons named as
proxies in their discretion in regard to such proposal. Notice is to be given to
Chromcraft Revington in writing at its principal office, 1100 North Washington
Street, Delphi, Indiana 46923, directed to the attention of the Secretary.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 2001.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Chromcraft
Revington, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Chromcraft Revington, Inc.
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(Registrant)
Date: August 2, 2001 /s/ Frank T. Kane
-------------- -------------------------------
Frank T. Kane
Vice President - Finance
(Duly Authorized Officer and
Chief Financial Officer)
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