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 27, 1997
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.
(Exact name of Registrant as specified in its charter)
Delaware 35-1848094
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1100 North Washington Street, Delphi, IN 46923
(Address, including zip code, of Registrant's principal executive offices)
(765) 564-3500
(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:
Outstanding at
Class November 3, 1997
Common Stock, $.01 Par Value 5,671,473
TABLE OF CONTENTS
Page Number
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Earnings. . . . . . . . . 3
Condensed Consolidated Balance Sheets. . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows. . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
Sales $ 52,821 $ 40,789 $ 166,364 $ 123,002
Cost of sales 39,419 29,621 124,856 89,175
--------- --------- --------- ---------
Gross margin 13,402 11,168 41,508 33,827
Selling, general and administrative expenses 7,160 5,373 23,011 16,852
--------- --------- --------- ---------
Operating income 6,242 5,795 18,497 16,975
Interest income (expense), net (323) 25 (988) 20
--------- --------- --------- ---------
Earnings before income tax expense 5,919 5,820 17,509 16,995
Income tax expense 2,368 2,328 7,004 6,798
--------- --------- --------- ---------
Net earnings $ 3,551 $ 3,492 $ 10,505 $ 10,197
========= ========= ========= =========
Earnings per share of common stock
Primary $ .60 $ .59 $ 1.78 $ 1.73
========= ========= ========= =========
Fully diluted $ .60 $ .59 $ 1.77 $ 1.73
========= ========= ========= =========
Average shares and equivalents outstanding
Primary 5,881 5,889 5,913 5,886
========= ========= ========= =========
Fully diluted 5,905 5,898 5,932 5,896
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Sept. 27, Sept. 28, Dec. 31,
1997 1996 1996
Assets --------- --------- ---------
------
Cash and cash equivalents $ - $ 561 $ -
Accounts receivable 32,232 24,454 29,784
Inventories 35,731 21,285 32,396
Deferred income taxes and other assets 3,170 1,492 4,688
--------- --------- ---------
Current assets 71,133 47,792 66,868
Property, plant and equipment, net 37,330 22,891 39,498
Intangibles and other assets 24,159 23,284 23,576
--------- --------- ---------
Total assets $ 132,622 $ 93,967 $ 129,942
========= ========= =========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 7,871 $ 6,431 $ 9,900
Accrued liabilities 15,277 10,522 16,625
--------- --------- ---------
Current liabilities 23,148 16,953 26,525
Revolving credit facility 18,000 - 20,200
Deferred income taxes and other liabilities 4,939 2,861 5,292
--------- --------- ---------
Total liabilities 46,087 19,814 52,017
--------- --------- ---------
Stockholders' equity
Common stock and capital in excess of par value 19,154 21,016 21,049
Retained earnings 67,381 53,137 56,876
--------- --------- ---------
Total stockholders' equity 86,535 74,153 77,925
--------- --------- ---------
Total liabilities and stockholders' equity $ 132,622 $ 93,967 $ 129,942
========= ========= =========
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. 27, Sept. 28,
1997 1996
--------- ---------
Operating Activities
Net earnings $ 10,505 $ 10,197
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 3,351 2,654
Deferred income taxes 997 (187)
Changes in assets and liabilities, net
Accounts receivable (2,448) (6,084)
Inventories (3,335) (1,357)
Accounts payable and accrued liabilities (3,377) (598)
Other 104 (554)
--------- ---------
Cash provided by operating activities 5,797 4,071
--------- ---------
Investing Activities
Capital expenditures (1,783) (2,435)
Disposal of property, plant and equipment 81 251
--------- ---------
Cash used in investing activities (1,702) (2,184)
--------- ---------
Financing Activities
Payments under revolving credit facility (2,200) (1,500)
Proceeds from stock options exercised - 174
Repurchase and cancellation of common stock (1,895) -
--------- ---------
Cash used in financing activities (4,095) (1,326)
--------- ---------
Increase in cash and cash equivalents - 561
Cash and cash equivalents at beginning of period - -
--------- ---------
Cash and cash equivalents at end of period $ - $ 561
========= =========
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 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 nine month period ended September 27, 1997 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant's annual report on Form 10-K for
the year ended December 31, 1996.
Note 2. Average Shares and Equivalents Outstanding
Average shares used in the calculation of primary earnings per share included
common stock equivalents (stock options) of approximately 188,000 and 149,000
shares for the three months ended September 27, 1997 and September 28, 1996,
respectively, and 192,000 and 150,000 shares for the nine months ended
September 27, 1997 and September 28, 1996, respectively.
Note 3. Inventories
Inventories consisted of the following:
(in thousands)
-------------------------------------
Sept. 27, Sept. 28, Dec. 31,
1997 1996 1996
--------- --------- ---------
Raw materials $ 10,740 $ 5,799 $ 10,622
Work-in-process 6,337 4,052 5,797
Finished goods 20,088 13,078 17,311
--------- --------- ---------
Inventories at FIFO cost 37,165 22,929 33,730
LIFO reserve (1,434) (1,644) (1,334)
--------- --------- ---------
$ 35,731 $ 21,285 $ 32,396
========= ========= =========
6
Note 4. Accrued Liabilities
Accrued liabilities consisted of the following:
(in thousands)
-------------------------------------
Sept. 27, Sept. 28, Dec. 31,
1997 1996 1996
--------- --------- ---------
Employee benefit plans $ 4,003 $ 3,709 $ 5,890
Salaries, wages and commissions 2,049 1,519 1,628
Vacation and holiday pay 1,887 983 1,503
Workers' compensation plans 1,115 869 1,127
Advertising and promotion 1,690 804 1,383
Other accrued liabilities 4,533 2,638 5,094
--------- --------- ---------
$ 15,277 $ 10,522 $ 16,625
========= ========= =========
Note 5. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is effective for financial statements
for periods ending after December 15, 1997. Statement No. 128 supersedes
current accounting standards for the computation, presentation and disclosure
requirements for earnings per share. Chromcraft Revington, Inc. (the
"Company") will adopt Statement No. 128 during the fourth quarter of 1997
and, based on current circumstances, does not believe the effect of the
adoption will be material.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - ------------------------------------------------------------------------
General
The Company manufactures and sells residential and commercial furniture
through its wholly-owned subsidiaries Chromcraft Corporation ("Chromcraft"),
Peters-Revington Corporation, Silver Furniture Co., Inc. and Cochrane
Furniture Company, Inc. ("Cochrane Furniture"). The following table sets
forth the consolidated results of operations for the three and nine months
ended September 27, 1997 and September 28, 1996 expressed as a percentage of
sales.
7
Three Months Ended Nine Months Ended
---------------------- ----------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 74.6 72.6 75.0 72.5
--------- --------- --------- ---------
Gross margin 25.4 27.4 25.0 27.5
Selling, general and administrative expenses 13.6 13.2 13.9 13.7
--------- --------- --------- ---------
Operating income 11.8 14.2 11.1 13.8
Interest income (expense), net (.6) .1 (.6) -
--------- --------- --------- ---------
Earnings before income tax expense 11.2 14.3 10.5 13.8
Income tax expense 4.5 5.7 4.2 5.5
--------- --------- --------- ---------
Net earnings 6.7 % 8.6 % 6.3 % 8.3 %
========= ========= ========= =========
The Company's operating results for the three and nine months ended September
27, 1997 include the operations of Cochrane Furniture, which was acquired by
the Company as of November 8, 1996. For further information, refer to the
Registrant's Current Report on Form 8-K and Amendment No. 1 on Form 8-K/A
reporting the acquisition of Cochrane Furniture.
Three and Nine Months Ended September 27, 1997 Compared to Three and Nine
Months Ended September 28, 1996.
- - -------------------------------------------------------------------------
Sales
Consolidated sales for the three and nine months ended September 27, 1997
increased 29.5% and 35.3%, respectively, as compared to the prior year
periods. The sales increase for both periods was mainly due to Cochrane
Furniture, which was acquired November 8, 1996. Higher sales in each of the
periods was partially offset by lower shipments of occasional furniture,
primarily due to soft market conditions at retail. Shipments at Chromcraft,
a manufacturer of casual dining and office furniture, were slightly ahead
for the nine months ended September 27, 1997 as compared to the year earlier
period.
Excluding Cochrane Furniture, the Company's sales order backlog at September
27, 1997 was at approximately the same level as a year ago.
Cost of Sales
Cost of sales as a percentage of sales was 74.6% and 75.0% for the three and
nine month periods ended September 27, 1997, respectively, as compared to
72.6% and 72.5% for the corresponding periods of the prior year. The cost
percentage increase for the third quarter and first nine months of 1997 was
primarily attributable to the inclusion of Cochrane Furniture's operating
results. To improve profitability at Cochrane Furniture, various initiatives
have been implemented including the consolidation of manufacturing operations
and the discontinuation of low margin products.
8
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales were
13.6% and 13.9% for the third quarter and nine months ended September 27,
1997, respectively, as compared to 13.2% and 13.7% for the third quarter and
nine months ended September 28, 1996, respectively. Excluding Cochrane
Furniture, the selling, general and administrative cost percentage was
slightly higher for the quarter and nine months ended September 27, 1997
due, in part, to the spreading of certain fixed selling and administrative
costs over a lower sales volume.
Interest Income (Expense), Net
The Company incurred interest expense during the third quarter of 1997 of
$323,000 as compared to earning interest income of $25,000 during the third
quarter of 1996. For the nine months ended September 27, 1997, interest
expense was $988,000 as compared to interest income of $20,000 for the first
nine months of 1996. Interest expense for the third quarter and first nine
months of 1997 was attributable to the Cochrane Furniture indebtedness. The
Company had no bank borrowings during the third quarter of 1996 and excess
cash was invested in short-term investments.
Income Tax Expense
The Company's effective tax rate was 40.0% for each of the three and nine
month periods ended September 27, 1997 and September 28, 1996.
Liquidity and Capital Resources
The operating activities of the Company provided $5,797,000 of cash during
the nine months ended September 27, 1997, an increase of $1,726,000 from the
amount provided in the prior year period. Cash generated from operations
improved in 1997 due, in part, to increased earnings, higher depreciation
expense and the utilization of a deferred income tax asset, principally
related to a reduction in Cochrane Furniture's inventory reserves that were
established at its acquisition date. Higher depreciation expense for the
first nine months of 1997 was attributable to Cochrane Furniture. These
improvements in operating cash flow during 1997 were partially offset by an
increased investment in net working capital.
The investing activities, primarily capital expenditures, used $1,702,000 of
cash during the first nine months of 1997 as compared to $2,184,000 during
the year ago period. The Company expects capital expenditures to be
approximately $2,500,000 for the year ending December 31, 1997 as compared to
$3,060,000 spent last year.
Financing activities used $4,095,000 of cash during the first nine months of
1997 to reduce indebtedness under the Company's bank revolving credit
facility and to acquire shares of the Company's common stock. In February
1997, the Company's board of directors approved the repurchase of up to
200,000 shares of the Company's common stock. During the first nine months
of 1997, the Company retired 70,800 shares of common stock purchased for
$1,895,000. For the year earlier period, cash used in financing activities
was primarily used to repay bank indebtedness under the Company's revolving
9
credit facility. At September 27, 1997, the Company had approximately
$39,000,000 in availability under its bank revolving credit facility.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
- - ------------------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHROMCRAFT REVINGTON, INC.
--------------------------
(Registrant)
Date: November 10, 1997 /s/ Frank T. Kane
--------------------------
Frank T. Kane
Vice President - Finance
(Duly Authorized Officer and
Chief Financial Officer)
10