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 March 31, 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 May 1, 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
Months Ended March 31, 2001 and April 1, 2000........... 3
Condensed Consolidated Balance Sheets - March 31, 2001,
December 31, 2000 and April 1, 2000..................... 4
Condensed Consolidated Statements of Cash Flows - Three
Months Ended March 31, 2001 and April 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
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 10
Signatures............................................................. 11
2
Part I. Financial Information
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Item 1. Financial Statements
Condensed Consolidated Statements of Earnings (unaudited)
Chromcraft Revington, Inc.
(In thousands, except per share data)
Three Months Ended
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March 31, April 1,
2001 2000
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Sales $62,901 $73,740
Cost of sales 48,402 55,625
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Gross margin 14,499 18,115
Selling, general and administrative expenses 8,465 9,639
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Operating income 6,034 8,476
Interest expense 310 478
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Earnings before income tax expense 5,724 7,998
Income tax expense 2,232 3,139
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Net earnings $ 3,492 $ 4,859
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Earnings per share of common stock
Basic $ .36 $ .49
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Diluted $ .36 $ .49
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Shares used in computing earnings per share
Basic 9,573 9,911
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Diluted 9,705 10,006
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See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
March 31, April 1, December 31,
2001 2000 2000
--------- -------- ------------
Assets
------
Cash $ -- $ -- $ 441
Accounts receivable 27,742 35,513 25,552
Inventories 54,310 51,082 55,379
Other assets 3,636 3,463 3,447
-------- -------- --------
Current assets 85,688 90,058 84,819
Property, plant and equipment, net 44,163 44,099 44,747
Intangibles and other assets 29,641 29,580 30,526
-------- -------- --------
Total assets $159,492 $163,737 $160,092
======== ======== ========
Liabilities and Stockholders' Equity
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Accounts payable $ 7,553 $ 10,883 $ 6,474
Accrued liabilities 17,481 19,530 13,694
Revolving credit facility -- 23,400 --
-------- -------- --------
Current liabilities 25,034 53,813 20,168
Revolving credit facility 10,300 -- 19,200
Deferred compensation and other liabilities 10,421 8,943 10,479
-------- -------- --------
Total liabilities 45,755 62,756 49,847
Stockholders' equity 113,737 100,981 110,245
-------- -------- --------
Total liabilities and stockholders' equity $159,492 $163,737 $160,092
======== ======== ========
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Three Months Ended
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March 31, April 1,
2001 2000
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Operating Activities
Net earnings $ 3,492 $ 4,859
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 1,518 1,567
Deferred income taxes 149 244
Changes in assets and liabilities
Accounts receivable (2,190) (5,939)
Inventories 1,069 (632)
Accounts payable and accrued liabilities 4,866 6,066
Other 164 511
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Cash provided by operating activities 9,068 6,676
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Investing Activities
Capital expenditures (609) (876)
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Cash used by investing activities (609) (876)
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Financing Activities
Net repayment under revolving credit facility (8,900) (3,300)
Repurchase of common stock -- (3,648)
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Cash used by financing activities (8,900) (6,948)
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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 $ -- $ --
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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, 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 month period ended March 31, 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. Purchase Offer from Court Square Capital Limited
Chromcraft Revington received on December 22, 2000 a proposal from Court Square
Capital Limited, a unit of Citigroup, under which the holders of Chromcraft
Revington's publicly traded common stock would receive cash of $10.30 per share
in a transaction to take Chromcraft Revington private. Court Square Capital
Limited is presently conducting its due diligence review of Chromcraft
Revington. 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
132,000 and 95,000 for the three months ended March 31, 2001 and April 1, 2000,
respectively.
Certain stock options to purchase shares of common stock were outstanding during
the first three 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 those
periods and, therefore, their effect would be antidilutive. Options excluded
from the computation of diluted earnings per share and their weighted average
exercise prices at March 31, 2001 and April 1, 2000 were 376,060 shares at
$13.48 and 472,160 shares at $12.70, respectively.
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Note 4. Inventories
The components of inventories consisted of the following:
(In thousands)
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March 31, April 1, December 31,
2001 2000 2000
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Raw materials $ 16,736 $ 18,125 $ 17,729
Work in process 9,631 8,429 9,083
Finished goods 30,439 26,661 30,870
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Inventories at FIFO cost 56,806 53,215 57,682
LIFO reserve (2,496) (2,133) (2,303)
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$ 54,310 $ 51,082 $ 55,379
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Note 5. Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands)
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March 31, April 1, December 31,
2001 2000 2000
--------- -------- -----------
Employee benefit plans $ 3,759 $ 4,653 $ 4,450
Salaries, wages and commissions 2,117 2,562 1,586
Income taxes payable 1,844 2,567 --
Vacation and holiday pay 1,332 1,583 1,035
Workers' compensation plans 1,079 1,614 1,013
Deferred income taxes 1,045 858 1,018
Other accrued liabilities 6,305 5,693 4,592
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$17,481 $19,530 $13,694
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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").
The following table sets forth the results of operations of Chromcraft Revington
for the three months ended March 31, 2001 and April 1, 2000 expressed as a
percentage of sales.
Three Months Ended
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March 31, April 1,
2001 2000
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Sales 100.0% 100.0%
Cost of sales 76.9 75.4
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Gross margin 23.1 24.6
Selling, general and administrative expenses 13.5 13.1
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Operating income 9.6 11.5
Interest expense .5 .7
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Earnings before income tax expense 9.1 10.8
Income tax expense 3.5 4.2
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Net earnings 5.6% 6.6%
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Three Months Ended March 31, 2001 Compared to Three Months Ended April 1, 2000
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Consolidated sales for the three months ended March 31, 2001 were $62,901,000, a
decrease of 14.7% from sales of $73,740,000 for the three months ended April 1,
2000. First quarter 2001 shipments of occasional, dining room, bedroom,
upholstered and commercial furniture were lower as compared to the first quarter
last year. The sales decline was primarily due to the economic and retail
slowdown that began in the second half of last year. Occasional and dining room
furniture shipments were also negatively impacted by the bankruptcy of a major
furniture retailer during 2000 and by increased import and domestic competition.
The consolidated sales order backlog at March 31, 2001 was lower as compared to
April 1, 2000.
In general, selling prices for the first three months of 2001 were at
approximately the same level as during the prior year period.
Gross margin as a percentage of sales was 23.1% for the three months ended March
31, 2001 as compared to 24.6% for the three months ended April 1, 2000. The
decline in the gross margin percentage for the first quarter of 2001 was
primarily due to labor inefficiencies and unabsorbed fixed overhead resulting
from the lower sales volume.
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Selling, general and administrative expenses as a percentage of sales were 13.5%
and 13.1% for the three months ended March 31, 2001 and April 1, 2000,
respectively. The increase in selling, general and administrative expenses as a
percentage of sales for the first quarter of 2001 was primarily due to the
spreading of certain fixed selling and administrative costs over a lower sales
volume.
Interest expense during the first three months of 2001 was $310,000 as compared
to $478,000 for the first three months of 2000. The decreased interest expense
for 2001 was primarily due to lower average bank borrowings during the period.
Chromcraft Revington's effective tax rate was 39.0% and 39.2% for the three
month periods ended March 31, 2001 and April 1, 2000, respectively. The decrease
in the effective tax rate for 2001 was due to lower state income taxes.
Liquidity and Capital Resources
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Operating activities provided $9,068,000 of cash during the three months ended
March 31, 2001, an increase of $2,392,000 from the amount provided during the
three months ended April 1, 2000. The increase in cash generated from operating
activities during the first three months of 2001 as compared to the prior year
period was primarily due to a reduction in working capital investment, offset by
lower earnings. Accounts receivable increased $2,190,000 during the first
quarter of 2001 as compared to an increase of $5,939,000 during the same period
last year. The decrease in accounts receivable was primarily due to the lower
sales volume. Inventories decreased $1,069,000 during the period as compared to
an increase of $632,000 during the first three months of 2000.
During the quarter ended March 31, 2001, Chromcraft Revington invested $609,000
in capital expenditures as compared to $876,000 in the prior year period.
Chromcraft Revington expects capital expenditures to be less than $4,000,000 for
the year ending December 31, 2001.
Financing activities used $8,900,000 of cash during the three months ended March
31, 2001 to reduce bank indebtedness under a revolving credit facility. During
the first three months of 2000, financing activities used $3,300,000 of cash to
reduce bank indebtedness and $3,648,000 of cash to acquire shares of Chromcraft
Revington's common stock under a stock repurchase plan.
At March 31, 2001, Chromcraft Revington had unused capacity under its revolving
credit facility, after reduction for outstanding letters of credit, of
$34,671,000.
Second Quarter 2001 Outlook
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Due to the weak retail sales environment, Chromcraft Revington has scheduled
selected downtime during the second quarter of 2001 at several of its
manufacturing facilities to control inventories. Chromcraft Revington
anticipates that second quarter earnings per share on a diluted basis will be
between $.26 and $.31, as compared to $.40 last year.
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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
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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.
Part II. Other Information
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On January 12, 2001, Chromcraft Revington filed a Current Report
on Form 8-K reporting that the Company received a proposal dated
December 22, 2000 from Court Square Capital Limited, a unit of
Citigroup, under which the holders of Chromcraft Revington's
publicly traded common stock would receive cash of $10.30 per
share in a transaction to take Chromcraft Revington private.
Court Square Capital Limited owns 59.5% of Chromcraft Revington's
common stock.
On January 23, 2001, Chromcraft Revington filed a Current Report
on Form 8-K reporting that the Company and its directors have
been named as defendants in three virtually identical lawsuits
filed in connection with the Court Square Capital Limited
proposal dated December 22, 2000. The complaints allege, among
other things, that the defendants have breached their fiduciary
duties to Chromcraft Revington common shareholders in connection
with the proposed transaction.
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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: May 14, 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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