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 July 3, 1999
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
- - ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1100 North Washington Street, Delphi, IN 46923
- - --------------------------------------------------------------------------
(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 require-
ments 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 -- 10,303,548 shares as of August 11, 1999
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
Six Months Ended July 3, 1999 and June 27, 1998 . . . . . . 3
Condensed Consolidated Balance Sheets - July 3, 1999,
December 31, 1998 and June 27, 1998 . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended July 3, 1999 and June 27, 1998 . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements -
July 3, 1999 . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 7
Part II. Other Information
Item 4. Submissions of Matters to a Vote of Security Holders . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . 10
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 Six Months Ended
-------------------- --------------------
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
-------- -------- -------- --------
Sales $ 55,881 $ 57,500 $117,779 $118,302
Cost of sales 42,034 43,193 88,417 88,681
-------- -------- -------- --------
Gross margin 13,847 14,307 29,362 29,621
Selling, general and administrative expenses 7,665 7,668 15,847 15,885
-------- -------- -------- --------
Operating income 6,182 6,639 13,515 13,736
Interest expense 80 179 164 332
-------- -------- -------- --------
Earnings before income tax expense 6,102 6,460 13,351 13,404
Income tax expense 2,410 2,577 5,291 5,348
-------- -------- -------- --------
Net earnings $ 3,692 $ 3,883 $ 8,060 $ 8,056
======== ======== ======== ========
Earnings per share of common stock
Basic $ .35 $ .35 $ .75 $ .71
======== ======== ======== ========
Diluted $ .34 $ .33 $ .73 $ .69
======== ======== ======== ========
Shares used in computing earnings per share
Basic 10,602 11,214 10,687 11,274
======== ======== ======== ========
Diluted 10,923 11,643 11,015 11,680
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
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Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
July 3, June 27, December 31,
1999 1998 1998
-------- -------- --------
Assets
------
Accounts receivable $ 29,701 $ 31,613 $ 26,884
Inventories 39,004 38,491 38,130
Deferred income taxes and other assets 5,417 3,507 4,713
-------- -------- --------
Current assets 74,122 73,611 69,727
Property, plant and equipment, net 37,103 36,619 37,094
Intangibles and other assets 21,585 23,322 22,824
-------- -------- --------
Total assets $132,810 $133,552 $129,645
======== ======== ========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 8,526 $ 8,798 $ 6,939
Accrued liabilities 11,478 12,370 12,963
-------- -------- --------
Current liabilities 20,004 21,168 19,902
Revolving credit facility 6,600 13,400 5,400
Deferred income taxes and other liabilities 8,069 5,209 7,226
-------- -------- --------
Total liabilities 34,673 39,777 32,528
-------- -------- --------
Stockholders' equity
Common stock and capital in excess of par value 2,300 14,201 9,340
Retained earnings 95,837 79,574 87,777
-------- -------- --------
Total stockholders' equity 98,137 93,775 97,117
-------- -------- --------
Total liabilities and stockholders' equity $132,810 $133,552 $129,645
======== ======== ========
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Six Months Ended
--------------------
July 3, June 27,
1999 1998
-------- --------
Operating Activities
Net earnings $ 8,060 $ 8,056
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 2,291 2,256
Deferred income taxes 266 163
Changes in assets and liabilities
Accounts receivable (2,817) (4,708)
Inventories (874) (3,319)
Accounts payable and accrued liabilities 102 48
Other (240) (693)
-------- --------
Cash provided by operating activities 6,788 1,803
-------- --------
Investing Activities
Capital expenditures (1,986) (1,016)
Proceeds from sales of property, plant and equipment 1,038 -
-------- --------
Cash used in investing activities (948) (1,016)
-------- --------
Financing Activities
Net borrowings under revolving credit facility 1,200 4,400
Proceeds from exercise of stock options 700 92
Repurchase of common stock (7,740) (5,279)
-------- --------
Cash used in financing activities (5,840) (787)
-------- --------
Net change in cash $ - $ -
======== ========
See accompanying notes to condensed consolidated financial statements.
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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 six month period ended July 3,
1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
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, 1998.
Note 2. Shares Used in Computing Earnings per Share
Weighted average shares used in the calculation of diluted earnings
per share included dilutive potential common shares (stock options) of
approximately 321,000 and 429,000 for the three months ended July 3,
1999 and June 27, 1998, respectively, and 328,000 and 406,000 shares
for the six months ended July 3, 1999 and June 27, 1998, respectively.
Note 3. Inventories
The components of inventory consisted of the following:
(In thousands)
--------------------------------
July 3, June 27, December 31,
1999 1998 1998
-------- -------- --------
Raw materials $ 12,834 $ 13,933 $ 12,502
Work in process 6,342 6,316 6,097
Finished goods 21,648 20,058 21,181
-------- -------- --------
Inventories at FIFO cost 40,824 40,307 39,780
LIFO reserve (1,820) (1,816) (1,650)
-------- -------- --------
$ 39,004 $ 38,491 $ 38,130
======== ======== ========
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Note 4. Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands)
--------------------------------
July 3, June 27, December 31,
1999 1998 1998
-------- -------- --------
Employee benefit plans $ 2,923 $ 3,357 $ 4,114
Salaries, wages and commissions 1,882 1,767 1,837
Vacation and holiday pay 1,099 1,234 1,263
Workers' compensation plans 1,299 1,255 1,158
Advertising and promotions 681 1,211 863
Other accrued liabilities 3,594 3,546 3,728
-------- -------- --------
$ 11,478 $ 12,370 $ 12,963
======== ======== ========
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following table sets forth the results of operations of Chromcraft
Revington for the three and six months ended July 3, 1999 and June 27,
1998 expressed as a percentage of sales.
Three Months Ended Six Months Ended
-------------------- --------------------
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
-------- -------- -------- --------
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 75.2 75.1 75.1 75.0
-------- -------- -------- --------
Gross margin 24.8 24.9 24.9 25.0
Selling, general and administrative expenses 13.7 13.3 13.4 13.4
-------- -------- -------- --------
Operating income 11.1 11.6 11.5 11.6
Interest expense .2 .3 .2 .3
-------- -------- -------- --------
Earnings before income tax expense 10.9 11.3 11.3 11.3
Income tax expense 4.3 4.5 4.5 4.5
-------- -------- -------- --------
Net earnings 6.6 % 6.8 % 6.8 % 6.8 %
======== ======== ======== ========
Three and Six Months Ended July 3, 1999 Compared to Three and Six
Months Ended June 27, 1998.
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Sales
Consolidated sales for the three and six months ended July 3, 1999
decreased 2.8% and .4%, respectively, as compared to the prior year
periods. The sales decrease for the second quarter and first half of
1999 was primarily due to lower shipments of upholstered furniture,
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commercial furniture and entry-level-priced occasional furniture.
Shipments of dining room furniture and medium-priced occasional
furniture were higher during the second quarter and first six months
of 1999, as compared to the same periods last year. Shipments of
bedroom furniture were slightly lower for the second quarter but
higher in the first half of 1999 as compared to the prior year periods.
Upholstered furniture sales were lower for the three and six months
ended July 3, 1999 as compared to the prior year periods primarily
due to the repositioning of the product line price points and styling.
Commercial furniture sales were lower in 1999 due, in part, to a
general softening in demand in the office furniture industry. Sales
of entry-level-priced occasional furniture declined primarily due to
competitive price pressure and unsuccessful new product introductions.
Gross Margin
Gross margin as a percentage of sales was 24.8% and 24.9% for the
three and six month periods ended July 3, 1999, respectively, as
compared to 24.9% and 25.0% for the three and six month periods ended
June 27, 1998, respectively. The slight decrease in the gross margin
for 1999 was due, in part, to labor inefficiencies and unabsorbed
fixed overhead costs as a result of the lower sales volume at the
Chromcraft and Silver Furniture subsidiaries. Labor inefficiencies
were due, in part, to employee attrition resulting from the tight
labor market. The gross margin percentage decrease was partially
offset by continued margin improvement at the Cochrane Furniture
subsidiary. Overall, raw material costs were slightly higher as
compared to a year ago.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the first six months
of 1999 remained at approximately the same level as compared to the
prior year period.
Interest Expense
Interest expense was lower in 1999 as compared to the prior year
periods due to a decrease in average bank borrowings.
Income Tax Expense
Chromcraft Revington's effective tax rate was 39.5% and 39.6% for
the three and six month periods ended July 3, 1999 and 39.9% for the
three and six month periods ended June 27, 1998. The decrease in the
effective tax rate for 1999 was due to lower state income taxes.
8
Liquidity and Capital Resources
Operating activities provided $6,788,000 of cash during the six months
ended July 3, 1999 as compared to $1,803,000 during the six months
ended June 27, 1998. The increase in cash generated from operating
activities during the first half of 1999 as compared to the prior year
period was mainly due to a smaller increase in working capital
investment, primarily in accounts receivable and inventories.
Investing activities used $948,000 and $1,016,000 of cash during the
six months ended July 3, 1999 and June 27, 1998, respectively.
Capital expenditures, primarily for machinery and data processing
equipment, were $1,986,000 for the six months ended July 3, 1999 as
compared to $1,016,000 during the year ago period. Chromcraft Revington
expects capital expenditures to be approximately $4,500,000 for the year
ending December 31, 1999. During the first half of 1999, Chromcraft
Revington received cash proceeds of $1,038,000 in connection with
several asset disposals.
Financing activities used $5,840,000 of cash during the six months
ended July 3, 1999 as compared to $787,000 for the prior year period.
During the first six months of 1999, Chromcraft Revington purchased,
under a stock repurchase plan, 486,800 shares of common stock for
$7,740,000. During the same period last year, 293,248 shares of
common stock were purchased for $5,279,000. At July 3, 1999,
Chromcraft Revington had unused capacity under its bank revolving
credit facility, after reduction for outstanding letters of credit,
of $51,493,000.
Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year.
Chromcraft Revington and its subsidiaries have been modifying and
replacing portions of its computer software and hardware systems so
that they will properly utilize dates beyond December 31, 1999.
Chromcraft Revington expects that the Year 2000 project will be completed
by the end of the third quarter 1999. Remaining expenses for Year 2000
compliance will be less than $100,000.
Chromcraft Revington has received information from significant suppliers
or third party service providers on their plans to address the Year 2000
issue. While Chromcraft Revington expects a successful resolution of
all issues, there can be no assurances that our systems or the systems
of other companies on which Chromcraft Revington relies on will be
timely converted or that the failure to convert by another company
would not have an adverse effect on operations. Chromcraft Revington
has initiated development of contingency plans in the event of a
business interruption due to the Year 2000 issue, including the
identification of alternate suppliers and manual workarounds.
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
9
Results of Operations," including expenditures to address, and the
impact of, Year 2000 computer issues. These forward looking
statements can be generally identified as such because the context of
the statements includes words such as "plans," "may," "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.
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 April 30, 1999.
(b) At the annual meeting, the holders of the common stock of
Chromcraft Revington elected seven 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
------------------ ---------- --------
Bruce C. Bruckmann 10,060,667 86,665
David L. Kolb 10,060,667 86,665
Larry P. Kunz 10,060,267 87,065
H. Martin Michael 10,060,667 86,665
M. Saleem Muqaddam 10,060,267 87,065
Michael E. Thomas 10,060,667 86,665
Warren G. Wintrub 10,060,667 86,665
Item 5. Other Information
If a stockholder proposal is introduced at the 2000 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 17, 2000, 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 2000 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.
10
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
July 3, 1999.
SIGNATURES
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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: August 16, 1999 /s/ Frank T. Kane
--------------- ----------------------------
Frank T. Kane
Vice President - Finance
(Duly Authorized Officer and
Chief Financial Officer)
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