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 September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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 -- 9,583,248 shares as of October 31, 2000
Table of Contents
Chromcraft Revington, Inc.
Page Number
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Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings - Three and
Nine Months Ended September 30, 2000 and October 2, 1999 . . 3
Condensed Consolidated Balance Sheets - September 30, 2000,
December 31, 1999 and October 2, 1999 . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 2000 and October 2, 1999 . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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 Nine Months Ended
---------------------- ----------------------
Sept. 30, Oct. 2, Sept. 30, Oct. 2,
2000 1999 2000 1999
--------- --------- --------- ---------
Sales $ 62,062 $ 59,279 $ 201,469 $ 177,058
Cost of sales 48,012 45,752 153,210 134,169
--------- --------- --------- ---------
Gross margin 14,050 13,527 48,259 42,889
Selling, general and
administrative expenses 9,013 7,705 27,773 23,552
--------- --------- --------- ---------
Operating income 5,037 5,822 20,486 19,337
Interest expense 540 260 1,531 424
--------- --------- --------- ---------
Earnings before income tax expense 4,497 5,562 18,955 18,913
Income tax expense 1,765 2,197 7,440 7,488
--------- --------- --------- ---------
Net earnings $ 2,732 $ 3,365 $ 11,515 $ 11,425
========= ========= ========= =========
Earnings per share of common stock
Basic $ .28 $ .33 $ 1.18 $ 1.08
========= ========= ========= =========
Diluted $ .28 $ .32 $ 1.16 $ 1.05
========= ========= ========= =========
Shares used in computing earnings
per share
Basic 9,701 10,249 9,775 10,542
========= ========= ========= =========
Diluted 9,851 10,499 9,908 10,845
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Sept. 30, Oct. 2, Dec. 31,
2000 1999 1999
--------- --------- ---------
Assets
------
Cash $ - $ - $ 1,148
Accounts receivable 33,582 36,728 29,574
Inventories 58,423 52,747 50,450
Other assets 3,593 3,396 3,642
--------- --------- ---------
Current assets 95,598 92,871 84,814
Property, plant and equipment, net 44,015 44,595 44,480
Intangibles and other assets 30,831 29,547 29,841
--------- --------- ---------
Total assets $ 170,444 $ 167,013 $ 159,135
========= ========= =========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 9,212 $ 10,318 $ 8,200
Accrued liabilities 16,825 15,554 15,851
Revolving credit facility 26,000 - 26,700
--------- --------- ---------
Current liabilities 52,037 25,872 50,751
Revolving credit facility - 34,000 -
Deferred compensation and other liabilities 11,456 8,194 8,614
--------- --------- ---------
Total liabilities 63,493 68,066 59,365
Stockholders' equity 106,951 98,947 99,770
--------- --------- ---------
Total liabilities and
stockholders' equity $ 170,444 $ 167,013 $ 159,135
========= ========= =========
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Nine Months Ended
----------------------
Sept. 30, Oct. 2,
2000 1999
--------- ---------
Operating Activities
Net earnings $ 11,515 $ 11,425
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 4,662 3,574
Deferred income taxes (41) 141
Changes in assets and liabilities
Accounts receivable (4,008) (5,027)
Inventories (7,973) (3,977)
Accounts payable and accrued liabilities 1,986 (2,267)
Other 1,020 587
--------- ---------
Cash provided by operating activities 7,161 4,456
--------- ---------
Investing Activities
Capital expenditures (3,322) (2,592)
Proceeds from sales of property, plant and equipment 47 1,173
Investment in acquired company - (8,525)
--------- ---------
Cash used by investing activities (3,275) (9,944)
========= =========
Financing Activities
Net (repayments) borrowings under revolving credit facility (700) 28,600
Refinance acquired company indebtedness - (13,517)
Proceeds from exercise of stock options 111 700
Repurchase of common stock (4,445) (10,295)
--------- ---------
Cash provided (used) by financing activities (5,034) 5,488
--------- ---------
Decrease in cash (1,148) -
Cash at beginning of period 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 generally accepted accounting principles,
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 nine month periods ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
The balance sheet at December 31, 1999 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, 1999.
Note 2. 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
150,000 and 133,000 for the three and nine months ended September 30, 2000,
respectively, and 250,000 and 303,000 for the three and nine months ended
October 2, 1999, respectively.
Certain stock options to purchase shares of common stock were outstanding
during the third quarter and first nine months of 2000 and 1999, 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 those periods and, therefore, the effect would be antidilutive. Options
excluded from the computation of diluted earnings per share were as follows:
2000 1999
---------------------- ----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- --------- --------- ---------
Third quarter 326,060 $ 13.91 147,926 $ 16.95
First nine months 376,060 $ 13.48 105,064 $ 18.09
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Note 3. Inventories
The components of inventories consisted of the following:
(In thousands)
-----------------------------------
Sept. 30, Oct. 2, Dec. 31,
2000 1999 1999
--------- --------- ---------
Raw materials $ 19,256 $ 18,942 $ 18,521
Work in process 9,401 8,484 8,069
Finished goods 32,490 27,364 25,866
--------- --------- ---------
Inventories at FIFO cost 61,147 54,790 52,456
LIFO reserve (2,724) (2,043) (2,006)
--------- --------- ---------
$ 58,423 $ 52,747 $ 50,450
========= ========= =========
Note 4. Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands)
-----------------------------------
Sept. 30, Oct. 2, Dec. 31,
2000 1999 1999
--------- --------- ---------
Employee benefit plans $ 5,153 $ 4,001 $ 5,434
Salaries, wages and commissions 2,334 2,531 1,907
Vacation and holiday pay 1,513 1,406 1,162
Workers' compensation plans 1,400 1,463 1,451
Other accrued liabilities 6,425 6,153 5,897
--------- --------- ---------
$ 16,825 $ 15,554 $ 15,851
========= ========= =========
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Chromcraft Revington designs, manufactures and sells residential and commercial
furniture through its wholly owned subsidiaries Chromcraft Corporation
("Chromcraft"), Peters-Revington Corporation ("Peters-Revington"), Silver
Furniture Co., Inc. ("Silver Furniture"), Cochrane Furniture Company, Inc.
("Cochrane Furniture") and Korn Industries, Incorporated ("Korn Industries").
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The following table sets forth the results of operations of Chromcraft
Revington for the three and nine months ended September 30, 2000 and October 2,
1999 expressed as a percentage of sales.
Three Months Ended Nine Months Ended
---------------------- ----------------------
Sept. 30, Oct. 2, Sept. 30, Oct. 2,
2000 1999 2000 1999
--------- --------- --------- ---------
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 77.4 77.2 76.0 75.8
--------- --------- --------- ---------
Gross margin 22.6 22.8 24.0 24.2
Selling, general and
administrative expenses 14.5 13.0 13.8 13.3
--------- --------- --------- ---------
Operating income 8.1 9.8 10.2 10.9
Interest expense .9 .4 .8 .2
--------- --------- --------- ---------
Earnings before
income tax expense 7.2 9.4 9.4 10.7
Income tax expense 2.8 3.7 3.7 4.2
--------- --------- --------- ---------
Net earnings 4.4 % 5.7 % 5.7 % 6.5 %
========= ========= ========= =========
The operations of Korn Industries, acquired September 2, 1999, are included in
the Condensed Consolidated Statements of Earnings from the date of acquisition.
Three and Nine Months Ended September 30, 2000 Compared to Three and
Nine Months Ended October 2, 1999
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Sales
Consolidated sales for the three and nine months ended September 30, 2000
increased 4.7% and 13.8%, respectively, from the corresponding periods of 1999.
The increase in sales was primarily due to the Korn Industries acquisition,
which was completed on September 2, 1999. Excluding Korn Industries, sales
for the third quarter and first nine months of 2000 were lower as compared to
the prior year periods. Incoming orders and shipments for the third quarter
of 2000 slowed in response to a weak retail sales environment. Looking
forward, Chromcraft Revington expects sales for the fourth quarter of 2000 to
be lower than the prior year period.
For the third quarter of 2000, higher shipments of bedroom furniture were
partially offset by lower shipments of occasional, dining room, upholstered
and commercial furniture as compared to the prior year period. For the first
nine months of 2000, shipments of bedroom and commercial furniture were higher,
while shipments of occasional, dining room and upholstered furniture were lower
when compared to the same period of 1999.
In general, selling prices for the first nine months of 2000 were slightly
higher as compared to the prior year period.
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Gross Margin
Gross margin as a percentage of sales was 22.6% and 24.0% for the three and
nine month periods ended September 30, 2000, respectively, as compared to 22.8%
and 24.2% for the three and nine month periods ended October 2, 1999,
respectively. The decrease in the gross margin percentage for the third
quarter and first nine months of 2000 was primarily due to the inclusion of
Korn Industries' operating results. Margin improvements at Cochrane Furniture
for the third quarter and first nine months of 2000 partially offset the gross
margin percentage decrease.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales were
14.5% and 13.8% for the third quarter and first nine months of 2000,
respectively, as compared to 13.0% and 13.3% for the same periods last year.
The increase in selling, general and administrative expenses as a percentage
of sales for 2000, as compared to the prior year period, was primarily due to
a one-time pretax charge of $850,000 to increase the allowance for doubtful
accounts related to receivables from a national furniture retailer that filed
for bankruptcy protection during the third quarter.
Interest Expense
Interest expense for the three and nine months ended September 30, 2000 was
$540,000 and $1,531,000, respectively, as compared to $260,000 and $424,000
for the three and nine months ended October 2, 1999, respectively. The
increased interest expense for 2000 was mainly due to higher average bank
borrowings during the period primarily as a result of the Korn Industries
acquisition and the repurchase of Chromcraft Revington's common stock.
Income Tax Expense
Chromcraft Revington's effective tax rate was 39.2% and 39.3% for the three and
nine month periods ended September 30, 2000, respectively, and 39.5% and 39.6%
for the three and nine month periods ended October 2, 1999, respectively. The
decrease in the effective tax rate for 2000 was due to lower state income taxes.
Liquidity and Capital Resources
Operating activities provided $7,161,000 of cash during the nine months ended
September 30, 2000, an increase of $2,705,000 from the amount provided during
the prior year period. The increase in cash generated from operating
activities during the first nine months of 2000 as compared to the prior year
period was primarily due to an increase in depreciation and amortization and
a smaller investment in working capital. The investment in working capital
during the first nine months of 1999 was higher primarily due to a reduction
in Korn Industries' trade payables, assumed at the acquisition date, to
eliminate past due amounts and to obtain discounts on the early payment of
invoices. For the first nine months of 2000, inventories increased $7,973,000.
The build-up in inventories in 2000 was due, in part, to the weak retail sales
environment. Generally, inventories are purchased or produced based on
9
internal sales forecasts which were higher than actual results. Chromcraft
Revington plans to adjust production levels and reduce inventory levels in the
fourth quarter of this year.
Investing activities used $3,275,000 and $9,944,000 of cash during the nine
months ended September 30, 2000 and October 2, 1999, respectively. Investing
activities for the first nine months of 1999 included expenditures of
$8,525,000 related to the acquisition of Korn Industries by CRI Corporation-
Sumter, a wholly-owned subsidiary of Chromcraft Revington, Inc.
Capital expenditures were $3,322,000 for the first nine months of 2000 as
compared to $2,592,000 during the same period of 1999. Chromcraft Revington
expects capital expenditures to be approximately $4,500,000 for the year ending
December 31, 2000. During the first nine months of 1999, Chromcraft Revington
received cash proceeds of $1,173,000 in connection with several asset disposals
as compared to $47,000 during the first nine months of 2000.
Financing activities used $5,034,000 of cash during the nine months ended
September 30, 2000, primarily to acquire shares of Chromcraft Revington's common
stock under a stock repurchase program and to reduce bank indebtedness under a
revolving credit facility. During the first nine months of 2000, Chromcraft
Revington purchased 488,900 shares of its common stock for $4,445,000.
Financing activities provided $5,488,000 of cash during the nine months ended
October 2, 1999. During that period, Chromcraft Revington borrowed $28,600,000
under its bank revolving credit facility in connection with the acquisition of
Korn Industries and the repurchase of Chromcraft Revington's common stock. As
part of the acquisition, Korn Industries' bank indebtedness of $13,517,000 was
refinanced with borrowings under Chromcraft Revington's revolving credit
facility, which restricts indebtedness outside of the facility. During the
first nine months of 1999, Chromcraft Revington purchased 688,200 shares of
common stock for $10,295,000.
At September 30, 2000, Chromcraft Revington had unused capacity under its
revolving credit facility, after reduction for outstanding letters of credit,
of $31,439,000. The revolving credit facility matures December 20, 2000.
Management expects that a new long-term bank agreement will be in place before
the present facility expires.
Forward-Looking Statements
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.
10
Part II. Other Information
---------------------------
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
September 30, 2000.
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: November 8, 2000 /s/ Frank T. Kane
---------------- ----------------------------
Frank T. Kane
Vice President - Finance
(Duly Authorized Officer and
Chief Financial Officer)
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