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 29, 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 October 31, 2001
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 29, 2001 and September 30, 2000........ 3
Condensed Consolidated Balance Sheets - September 29, 2001,
September 30, 2000 and December 31, 2000...................... 4
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 29, 2001 and September 30, 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.... 11
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. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
------------- ------------- ------------- -------------
Sales $ 52,282 $ 62,062 $ 166,552 $ 201,469
Cost of sales 41,251 48,012 129,744 153,210
------------- ------------- ------------- -------------
Gross margin 11,031 14,050 36,808 48,259
Selling, general and
administrative expenses 7,079 9,013 22,551 27,773
------------- ------------- ------------- -------------
Operating income 3,952 5,037 14,257 20,486
Interest expense 127 540 631 1,531
------------- ------------- ------------- -------------
Earnings before income tax expense 3,825 4,497 13,626 18,955
Income tax expense 1,491 1,765 5,314 7,440
------------- ------------- ------------- -------------
Net earnings $ 2,334 $ 2,732 $ 8,312 $ 11,515
============= ============= ============= =============
Earnings per share
of common stock
Basic $ .24 $ .28 $ .87 $ 1.18
============= ============= ============= =============
Diluted $ .24 $ .28 $ .86 $ 1.16
============= ============= ============= =============
Shares used in computing
earnings per share
Basic 9,573 9,701 9,573 9,775
Diluted 9,674 9,851 9,691 9,908
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Sept. 29, Sept. 30, Dec. 31,
2001 2000 2000
------------ ------------ ------------
Assets
------
Cash $ - $ - $ 441
Accounts receivable 27,291 33,582 25,552
Inventories 47,691 58,423 55,379
Other assets 3,336 3,593 3,447
------------ ------------ ------------
Current assets 78,318 95,598 84,819
Property, plant and equipment, net 42,705 44,015 44,747
Intangibles and other assets 29,103 30,831 30,526
------------ ------------ ------------
Total assets $ 150,126 $ 170,444 $ 160,092
============ ============ ============
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 6,669 $ 9,212 $ 6,474
Accrued liabilities 14,342 16,825 13,694
Revolving credit facility - 26,000 -
------------ ------------ ------------
Current liabilities 21,011 52,037 20,168
Revolving credit facility - - 19,200
Other long term liabilities 10,558 11,456 10,479
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Total liabilities 31,569 63,493 49,847
Stockholders' equity 118,557 106,951 110,245
------------ ------------ ------------
Total liabilities and stockholders' equity $ 150,126 $ 170,444 $ 160,092
============ ============ ============
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Nine Months Ended
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Sept. 29, Sept. 30,
2001 2000
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Operating Activities
Net earnings $ 8,312 $ 11,515
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 4,514 4,662
Deferred income taxes 443 (41)
Changes in assets and liabilities
Accounts receivable (1,739) (4,008)
Inventories 7,688 (7,973)
Accounts payable and accrued liabilities 1,000 1,986
Other 35 1,020
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Cash provided by operating activities 20,253 7,161
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Investing Activities
Capital expenditures (1,509) (3,322)
Proceeds from disposals of property, plant and equipment 15 47
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Cash used by investing activities (1,494) (3,275)
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Financing Activities
Net repayment under revolving credit facility (19,200) (700)
Proceeds from exercise of stock options - 111
Repurchase of common stock - (4,445)
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Cash used by financing activities (19,200) (5,034)
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Decrease in cash (441) (1,148)
Cash at beginning of period 441 1,148
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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 nine month periods ended September 29, 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 had 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
101,000 and 118,000 for the three and nine months ended September 29, 2001,
respectively, and 150,000 and 133,000 for the three and nine months ended
September 30, 2000, respectively.
Certain stock options to purchase shares of common stock were outstanding during
the third quarter and first nine 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
---------- ----------- ----------- ----------
Third quarter 462,160 $ 12.74 326,060 $ 13.91
First nine months 376,060 $ 13.48 376,060 $ 13.48
Note 4. Inventories
The components of inventories consisted of the following:
(In thousands)
-----------------------------------------
Sept. 29, Sept. 30, Dec. 31,
2001 2000 2000
----------- ----------- -----------
Raw materials $ 14,701 $ 19,256 $ 17,729
Work in process 8,383 9,401 9,083
Finished goods 27,177 32,490 30,870
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Inventories at FIFO cost 50,261 61,147 57,682
LIFO reserve (2,570) (2,724) (2,303)
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$ 47,691 $ 58,423 $ 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.
7
Note 6. Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands)
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Sept. 29, Sept. 30, Dec. 31,
2001 2000 2000
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Employee benefit plans $ 2,391 $ 5,153 $ 4,450
Salaries, wages and commissions 1,688 2,334 1,586
Vacation and holiday pay 1,411 1,513 1,035
Workers' compensation plans 1,134 1,400 1,013
Deferred income taxes 860 280 1,018
Other accrued liabilities 6,858 6,145 4,592
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$ 14,342 $ 16,825 $ 13,694
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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 nine months ended September 29, 2001 and September 30, 2000
expressed as a percentage of sales.
Three Months Ended Nine Months Ended
-------------------- ---------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
-------- -------- -------- --------
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 78.9 77.4 77.9 76.0
-------- -------- -------- --------
Gross margin 21.1 22.6 22.1 24.0
Selling, general and
administrative expenses 13.5 14.5 13.5 13.8
-------- -------- -------- --------
Operating income 7.6 8.1 8.6 10.2
Interest expense .3 .9 .4 .8
-------- -------- -------- --------
Earnings before
income tax expense 7.3 7.2 8.2 9.4
Income tax expense 2.8 2.8 3.2 3.7
-------- -------- -------- --------
Net earnings 4.5 % 4.4 % 5.0 % 5.7 %
======== ======== ======== ========
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Three and Nine Months Ended September 29, 2001 Compared to Three and Nine Months
Ended September 30, 2000
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Consolidated sales for the three months ended September 29, 2001 were
$52,282,000, a 15.8% decrease from sales of $62,062,000 for the three months
ended September 30, 2000. For the first nine months of 2001, consolidated sales
were $166,552,000, a decrease of 17.3% from sales of $201,469,000 for the same
period last year. Shipments of occasional, dining room, bedroom, upholstered and
commercial furniture were lower during the third quarter and first nine months
of 2001 as compared to the corresponding periods of 2000. The decline in sales
was primarily due to softness in retail sales as a result of the economic
slowdown. The consolidated sales order backlog at September 29, 2001 was lower
as compared to September 30, 2000. In general, selling prices for the first nine
months of 2001 were slightly higher as compared to the prior year period.
Gross margin as a percentage of sales was 21.1% and 22.1% for the three and nine
month periods ended September 29, 2001, respectively, as compared to 22.6% and
24.0% for the three and nine month periods ended September 30, 2000,
respectively. The decline in the gross margin percentage for the third quarter
and first nine months 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 13.5%
for the three and nine months ended September 29, 2001, as compared to 14.5% and
13.8% for the three and nine months ended September 30, 2000, respectively. The
decrease in selling, general and administrative expenses as a percentage of
sales for the three months ended September 29, 2001, as compared to the prior
year period, was primarily due to lower bad debt expense.
Interest expense during the third quarter and first nine months of 2001 was
$127,000 and $631,000, respectively, as compared to $540,000 and $1,531,000 for
the same periods last year. The decreased interest expense for 2001 was due to
lower average bank borrowings during the period and interest rate reductions.
Chromcraft Revington's effective income tax rate for the three and nine month
periods ended September 29, 2001 was 39.0% as compared to 39.2% and 39.3% for
the three and nine month periods ended September 30, 2000, respectively. The
decrease in the effective tax rate for 2001 was due to lower state income taxes.
Liquidity and Capital Resources
-------------------------------
Operating activities provided $20,253,000 of cash during the nine months ended
September 29, 2001, an increase of $13,092,000 from the year ago period. The
increase in cash flow from operating activities for 2001 was primarily due to a
reduction in working capital investment, offset, in part, by lower net earnings.
Due to the lower sales volume, accounts receivable increased $1,739,000 during
the first nine months of 2001 as compared to an increase of $4,008,000 for the
same period last year. Inventories decreased $7,688,000 during the period as
compared to an increase of $7,973,000 during the first nine months of last year,
reflecting the reduced operating activity.
9
Investing activities, primarily for capital expenditures, used $1,494,000 of
cash during the first nine months of 2001 as compared to $3,275,000 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 $19,200,000 of cash during the nine months ended
September 29, 2001 to reduce bank indebtedness. During the first nine months of
2000, financing activities used $4,445,000 of cash to acquire shares of
Chromcraft Revington's common stock under a stock repurchase plan and $700,000
to reduce bank indebtedness.
At September 29, 2001, Chromcraft Revington had unused capacity under its bank
revolving credit facility, after reduction for outstanding letters of credit, of
$45,491,000.
Fourth Quarter 2001 Outlook
---------------------------
Entering the fourth quarter, Chromcraft Revington's incoming orders and backlog
were below the year ago levels. Chromcraft Revington anticipates that fourth
quarter earnings per share on a diluted basis will be between $.18 and $.23, as
compared to $.41 last year.
New Financial Accounting Standards Board Statements
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The Financial Accounting Standards Board (FASB) recently issued Statement No.
141, "Business Combinations" and Statement No. 142, "Goodwill and Other
Intangible Assets." Statement No. 141 requires that the purchase method be used
for all business combinations initiated after June 30, 2001. Statement No. 142
requires, among other things, that goodwill no longer be amortized to earnings,
but instead be reviewed periodically for impairment. The amortization of
goodwill ceases upon adoption of Statement No. 142 on January 1, 2002. As of the
date of adoption, Chromcraft Revington expects to have unamortized goodwill of
$28,180,000, which will be subject to the transition provisions of Statements
141 and 142. Amortization expense related to goodwill was approximately
$1,248,000 and $978,000 for the year ended December 31, 2000 and the nine months
ended September 29, 2001, respectively. Chromcraft Revington is currently
evaluating the impact of these Statements on its financial statements.
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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Borrowings under Chromcraft Revington's bank 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.
Part II. Other Information
--------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On July 18, 2001, Chromcraft Revington filed a Current Report on
Form 8-K reporting that the Company had received notice from
Court Square Capital Limited ("Court Square"), a unit of
Citigroup, that Court Square had withdrawn its proposal to
acquire the issued and outstanding capital stock of Chromcraft
Revington not owned by Court Square and its affiliates.
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 13, 2001 /s/ Frank T. Kane
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Frank T. Kane
Vice President - Finance
(Duly Authorized Officer and
Chief Financial Officer)
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