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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 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 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
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
On March 10, 1998, the Registrant had outstanding 5,667,568 shares of common
stock. The aggregate market value of the voting stock held by nonaffiliates
of the Registrant was $97.3 million as of that date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of the Registrant dated April 3, 1998 are
incorporated by reference in Part III of this report.
INDEX
Page Number
PART I -----------
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders . . . . 5
Executive Officers of the Registrant . . . . . . . . . . . . . . . 6
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 11
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . 11
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . 11
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . 11
Item 13. Certain Relationships and Related Transactions . . . . . . 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART I
Item 1. Business
- - ----------------
General
Chromcraft Revington, Inc. ("Chromcraft Revington"), incorporated in 1992 under
the laws of Delaware, is engaged in the design, manufacture and sale of residen-
tial and commercial furniture through its wholly-owned subsidiaries, Chromcraft
Corporation ("Chromcraft"), Peters-Revington Corporation ("Peters-Revington"),
Silver Furniture Co., Inc. ("Silver Furniture") and Cochrane Furniture Company,
Inc. ("Cochrane Furniture"). Chromcraft Revington is headquartered in Delphi,
Indiana.
In 1992, Chromcraft Revington acquired all of the outstanding common stock of
Chromcraft and Peters-Revington from Consolidated Furniture Corporation
(formerly Mohasco Corporation) pursuant to merger agreements. Concurrently,
Chromcraft Revington completed its initial public offering and restructured
its long-term debt. Chromcraft Revington had no operations prior to 1992.
Chromcraft, a manufacturer of casual dining and commercial furniture, is
located in Senatobia, Mississippi. Peters-Revington, a manufacturer of
occasional furniture, is located in Delphi, Indiana. Chromcraft and Peters-
Revington were both founded in 1946.
On April 3, 1995, Chromcraft Revington acquired Silver Furniture, a manufac-
turer and importer of occasional tables. Silver Furniture has manufacturing
and warehousing operations in Knoxville, Tennessee. On November 8, 1996,
Chromcraft Revington acquired Cochrane Furniture, a manufacturer of dining
room, bedroom and upholstered furniture. Cochrane Furniture has manufacturing
facilities in Lincolnton and Warrenton, North Carolina. Additional financial
information on these acquisitions is included in Notes 2 and 3 to the consoli-
dated financial statements on pages F-6 and F-7.
Chromcraft Revington and its subsidiaries (collectively the "Company") operate
in one business segment, the manufacture and sale of furniture. No material
amount of the Company's sales is dependent upon a single customer. Export
sales represent approximately 1% of total sales.
Products and Distribution
Occasional Furniture
The Company designs, manufactures and sells medium-priced occasional furniture,
including tables, bookcases, entertainment centers, library and modular wall
units, curio cabinets and home office furniture in traditional, contemporary
and country styles under the Peters-Revington brand name. These products are
manufactured primarily from American hardwoods, such as oak, cherry and maple.
Many Peters-Revington table collections include twelve or more pieces in
matching styles. In addition, different products incorporate the same design
and styling themes, thereby enabling consumers to coordinate several pieces of
furniture for the same room. Peters-Revington products are sold in the United
States and Canada through independent sales representatives primarily to
independent furniture retailers and regional furniture stores.
The Company also designs, manufactures, imports and sells entry level-to-medium
priced occasional tables under the Silver Furniture brand name. These products
are generally designed with a contemporary appeal, utilizing special finishes
and unique styling. Silver Furniture tables are constructed using a variety of
materials, including wood, medium density fiber board, glass and metal. The
Company sources its internally designed imported tables primarily from factories
located in the Far East and Mexico. In 1997, Silver Furniture added entertain-
ment storage centers to its product line. Silver Furniture products are sold
primarily in the United States and Canada through company sales personnel to
national and regional furniture retailers and through independent sales rep-
resentatives to independent furniture retailers.
2
Casual Dining Furniture
The Company's casual dining furniture is sold under the Chromcraft brand name
and is designed for use in dining rooms, family rooms, recreation rooms,
kitchens and apartments without formal dining areas. The product line consists
primarily of coordinated dining suites in a contemporary or traditional style
that include tables with laminated, wood or glass table tops, stationary and
tilt-swivel chairs, pedestal chairs and barstools. Chairs are upholstered in
a variety of fabrics and vinyls, while tables are manufactured from metal,
wood, glass, faux marble and other materials, and come in a variety of shapes.
Chromcraft competes at the medium-to-higher price points in casual dining.
Chromcraft's casual dining furniture is sold in the United States through
company sales personnel and independent sales representatives to national,
regional, independent and specialty dining retail furniture stores.
Bedroom Furniture
The Company manufactures and sells solid wood bedroom furniture primarily in
oak, cherry or maple under the Cochrane Furniture brand name. Bedroom furniture
includes beds, dressers, night stands and mirrors primarily in traditional
styling. Cochrane Furniture competes primarily at the medium price points in
bedroom furniture. Products are sold mainly in the United States through
independent sales representatives to national, regional and independent furni-
ture retail stores.
Dining Room Furniture
The Company manufactures and sells medium-priced solid wood dining room furni-
ture primarily in oak, cherry and maple under the Cochrane Furniture brand name
mainly in traditional or country styling. Dining room tables are offered in
solid wood or a high pressure laminate table top with a solid wood edge.
Cochrane offers a broad line of armed and side chairs, buffets, chinas and
serving pieces. Products are sold primarily in the United States through inde-
pendent sales representatives to national, regional and independent furniture
retail stores.
Upholstered Furniture
The Company manufactures and sells upholstered sofas, chairs and ottomans under
the Cochrane Furniture brand name. Styled in traditional or contemporary pat-
terns in a wide selection of fabrics, Cochrane generally uses a heat tempered
coil seat construction to evenly distribute body weight. Cochrane uses
primarily hardwoods in the construction of its furniture frames. Seat cushions
are made with high-density, high-resilience polyurethane foam, wrapped in
polyester fiber for consistent comfort. Cochrane upholstered furniture competes
at the mid-to-higher price points. Products are sold through independent sales
representatives to national, regional and independent furniture retail stores.
Commercial Furniture
The Company's commercial furniture products, sold under the Chromcraft brand
name, include stationary and tilt-swivel office chairs, conference and meeting
room tables and lounge-area seating products for airports and other public
waiting areas. Chairs are offered in both contemporary and transitional styles
and are upholstered in various grades and colors of fabric or leather. They
include executive models with high backs, management models, ergonomic computer
task chairs and secretarial models with no arm rests. Products are sold through
company sales personnel and independent sales representatives to office product
dealers, wholesalers/distributors and various contract customers.
3
Manufacturing
The Company's manufacturing operations include cutting, shaping, sanding,
lacquering, finishing and final assembly of wood furniture, metal fabricating,
plating, powder-coat painting, chair foam production for its casual dining
furniture and cutting and sewing of upholstery fabric. The Company also
operates a rough mill and wood working plant which processes green lumber into
parts for internal use in the Company's bedroom, dining room and upholstered
furniture production.
Raw Materials
Major raw materials are wood, steel, fabrics, glass, medium-density fiber
board, wood finishing materials, cartons, foam for cushions and paddings, and
mechanisms. Suppliers are selected for their ability to deliver high quality
products on a timely basis and at competitive prices. The Company believes
that supplies of raw materials are available in sufficient quantities from an
adequate number of suppliers. The Company did not experience any significant
shortage of raw materials during 1997.
Inventory and Seasonal Requirements
The Company maintains a finished goods inventory for occasional, dining and
bedroom furniture in order to respond quickly to customer delivery needs. Most
casual dining, upholstered and commercial furniture is made to customer speci-
fications and, therefore, not carried in stock. The Company does maintain a
limited number of casual dining, upholstered and commercial furniture items for
quick delivery programs. The Company's sales have historically not been subject
to material seasonal fluctuations.
Competition
The Company encounters competition in the sale of all its products. Many of
the Company's competitors, some of which are larger and have greater financial
resources, produce a number of products which are not competitive with the
Company's products. In many cases, such companies do not disclose the portion
of their sales attributable to products similar to those manufactured by the
Company. It is, therefore, impractical to state with any certainty the
Company's relative position in a particular product line. Competition in the
Company's products is in the form of the quality of its products, service and
selling prices.
Backlog
The Company's backlog of sales orders was approximately $25.0 million at
December 31, 1997, as compared to approximately $24.3 million at December 31,
1996. Order backlog at any particular time is not necessarily indicative of
the level of future shipments.
Environment
The Company believes it is in compliance in all material respects with all
federal, state and local environmental laws and regulations which impose limit-
ations on the discharge of pollutants into the air and water, and establish
standards for the treatment of hazardous wastes.
4
Employees
The Company and its subsidiaries employ a total of approximately 2,300 people.
Production employees at the Company's Knoxville, Tennessee location are repre-
sented by a labor union under a collective bargaining agreement. The Company
considers its relations with its employees to be good.
Item 2. Properties
- - ------------------
The following table summarizes the Company's facilities as of December 31, 1997.
Square Type of Owned/
Location Feet Operations Furniture Leased
- - -------- ------ ---------- --------- ------
Delphi, IN 490,000 Mfg./whse. Occasional Owned
Knoxville, TN 160,000 Mfg./whse. Occasional Owned
Knoxville, TN 56,000 Whse. Occasional Leased
(expires 1998)
Lincolnton, NC 368,000 Mfg./whse. Dining room/ Owned
Bedroom
Lincolnton, NC 152,000 Mfg. Upholstery Owned
Lincolnton, NC 159,000 Mfg./whse. Upholstery Owned
Senatobia, MS 560,000 Mfg./whse. Casual dining/ Leased
Commercial (expires 2061)
Warrenton, NC 166,000 Mfg. Dining room/ Owned
Bedroom
The Company also leases trucks, trailers and other transportation equipment and
showroom facilities in High Point, North Carolina and Chicago, Illinois.
Management believes the properties and equipment of its subsidiaries are well
maintained, in good operating condition, and adequate to support present
operations.
Item 3. Legal Proceedings
- - -------------------------
The Company is not a party to any lawsuits, other than ordinary routine litiga-
tion incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
- - -----------------------------------------------------------
Not applicable.
5
Executive Officers of Chromcraft Revington, Inc.
- - ------------------------------------------------
Michael E. Thomas 56 President, Chief Executive Officer and Director
since the Company's organization in 1992.
H. Martin Michael 56 Executive Vice President and Director since the
Company's organization in 1992. President of
Chromcraft since July, 1990.
Frank T. Kane 44 Vice President-Finance, Chief Financial Officer
and Secretary since the Company's organization
in 1992.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
- - --------------------------------------------------------------------------------
The following table sets forth the high and low sales prices of the Company's
common stock, as reported on the New York Stock Exchange.
1997 1996
-------------------- --------------------
High Low High Low
-------- -------- -------- --------
First quarter 31 1/2 27 5/8 26 7/8 22 1/2
Second quarter 29 5/8 26 1/4 25 3/8 23
Third quarter 30 7/16 26 1/16 25 1/2 22
Fourth quarter 32 5/8 30 1/4 28 3/8 24 1/2
There were approximately 66 security holders of record of the Company's common
stock as of March 10, 1998.
The Company intends to retain cash for internal and external growth and develop-
ment of its business and currently does not anticipate paying cash dividends.
At December 31, 1997, unrestricted retained earnings available for dividends
were $31,617,000.
6
Item 6. Selected Financial Data
- - -------------------------------
(Dollars in thousands, except per share data)
Year Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Operating Results
Sales $ 225,629 $ 175,899 $ 152,609 $ 134,112 $ 126,329
Cost of sales 169,802 128,217 111,787 96,567 92,173
--------- --------- --------- --------- ---------
Gross margin 55,827 47,682 40,822 37,545 34,156
Selling, general and
administrative expenses 30,200 24,235 20,478 18,316 17,706
--------- --------- --------- --------- ---------
Operating income 25,627 23,447 20,344 19,229 16,450
Interest expense, net 1,265 221 236 252 958
--------- --------- --------- --------- ---------
Earnings before income tax expense 24,362 23,226 20,108 18,977 15,492
Income tax expense 9,720 9,290 8,134 7,786 6,622
--------- --------- --------- --------- ---------
Net earnings $ 14,642 $ 13,936 $ 11,974 $ 11,191 $ 8,870
========= ========= ========= ========= =========
Earnings per share of common stock
Basic $ 2.56 $ 2.43 $ 2.09 $ 1.96 $ 1.55
========= ========= ========= ========= =========
Diluted $ 2.49 $ 2.37 $ 2.05 $ 1.92 $ 1.52
========= ========= ========= ========= =========
Shares used in computing earnings per share
Basic 5,709 5,737 5,726 5,714 5,705
Diluted 5,877 5,870 5,849 5,828 5,820
Financial Position (December 31,)
Working capital $ 43,931 $ 40,343 $ 21,920 $ 17,466 $ 11,914
Total assets 126,144 129,942 85,825 69,257 65,258
Total debt 9,000 20,200 1,500 - 6,554
Stockholders' equity 90,906 77,925 63,782 51,622 40,351
Other Data
Operating income (% of sales) 11.4% 13.3% 13.3% 14.3% 13.0%
Depreciation and amortization $ 4,383 $ 3,729 $ 3,853 $ 4,415 $ 4,767
Capital expenditures $ 2,712 $ 3,060 $ 5,514 $ 3,393 $ 3,049
The earnings per share amounts prior to 1997 have been restated as required to
comply with Statement of Financial Accounting Standards No. 128 "Earnings per
Share." For further discussion of earnings per share and the impact of
Statement No. 128, see the notes to the consolidated financial statements
beginning on page F-5.
7
Item 7. 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, Peters-Revington,
Silver Furniture and Cochrane Furniture. The Company's operating results
include the operations of Cochrane Furniture, acquired November 8, 1996, and
Silver Furniture, acquired April 3, 1995, from the dates of their acquisition
(see Notes 2 and 3 to the consolidated financial statements on pages F-6
and F-7).
The following table sets forth the Company's results of operations for the
years ended December 31, 1997, 1996 and 1995 expressed as a percentage of the
Company's sales.
Year Ended December 31,
--------------------------------------
1997 1996 1995
-------- -------- --------
Sales 100.0 % 100.0 % 100.0 %
Cost of sales 75.3 72.9 73.3
-------- -------- --------
Gross margin 24.7 27.1 26.7
Selling, general and
administrative expenses 13.3 13.8 13.4
-------- -------- --------
Operating income 11.4 13.3 13.3
Interest expense, net .6 .1 .1
-------- -------- --------
Earnings before income tax expense 10.8 13.2 13.2
Income tax expense 4.3 5.3 5.4
-------- -------- --------
Net earnings 6.5 % 7.9 % 7.8 %
======== ======== ========
1997 compared to 1996
Consolidated sales in 1997 increased 28.3% to $225,629,000 from $175,899,000 in
1996. The sales increase was mainly due to the Cochrane Furniture acquisition.
On a comparable basis, excluding the Cochrane Furniture operations, consolidated
sales for 1997 were slightly lower than the prior year period as a result of a
decrease in occasional furniture shipments. Shipments of casual dining and
commercial furniture were slightly higher in 1997 as compared to the year ago
period. The Company increased selling prices during 1997 to offset slightly
higher costs to the extent possible in a competitive market.
Gross margin increased $8,145,000 to $55,827,000, or 24.7% of sales, in 1997,
from $47,682,000, or 27.1%, in 1996. The gross margin percentage decrease was
primarily attributable to the inclusion of Cochrane Furniture's operating
results. Raw material prices were slightly higher as compared to the prior
year period.
Selling, general and administrative expenses as a percentage of sales, for 1997,
were 13.3% as compared to 13.8% for the year earlier period. Excluding Cochrane
Furniture, the cost percentage decrease was due, in part, to lower incentive
compensation and a decrease in the provision for doubtful accounts.
Interest expense in 1997 was $1,265,000 as compared to $221,000 in 1996. The
increase in interest expense for 1997 was attributable to the Cochrane Furniture
indebtedness. Average interest rates on bank borrowings were slightly higher
in 1997 as compared to 1996.
The effective tax rate in 1997 was 39.9% as compared to 40.0% in 1996.
Net earnings increased to $14,642,000 in 1997, or 6.5% of sales, as compared to
$13,936,000 in 1996, or 7.9% of sales. The decrease in the profitability margin
was primarily attributable to the inclusion of Cochrane Furniture's operating
results. To improve profitability at Cochrane Furniture, various initiatives
have been implemented including cost reduction, consolidation of manufacturing
operations and the discontinuation of non-profitable and low margin products.
8
Diluted earnings per share were $2.49 in 1997 and $2.37 in 1996. Average common
shares used in the calculation of diluted earnings per share included dilutive
potential common shares (stock options) of 168,000 in 1997 and 133,000 in 1996.
1996 compared to 1995
Consolidated sales for 1996 were $175,899,000, up 15.3% from 1995. Acquisitions
accounted for approximately three-fourths of the current year's sales growth.
Internal growth was primarily due to an increase in volume and modest price
increases. The sales increase in 1996 was led by higher sales of casual dining
and commercial office furniture. Occasional furniture sales were slightly ahead
of the prior year period. Recent product introductions of wrought iron casual
dining sets and curio cabinets contributed to higher sales in 1996.
Gross margin increased $6,860,000 to $47,682,000, or 27.1% of sales, in 1996,
from $40,822,000, or 26.7% of sales, in 1995. The 1996 percentage improvement
was primarily due to a more favorable product sales mix and improved operating
efficiencies at the Company's Chromcraft and Silver Furniture subsidiaries.
The 1996 gross margin percentage increase was partially offset by the inclusion
of Cochrane Furniture's operating results. Raw material prices remained fairly
stable during the year.
Selling, general and administrative expenses as a percentage of sales increased
to 13.8% from 13.4% in 1995. The percentage increase was due to higher
corporate related expenses and incentive compensation, and an increase in the
allowance for doubtful accounts. Corporate related expenses were higher in
1996 primarily due to an increase in compensation costs. The increase in the
allowance for doubtful accounts was due, in part, to discontinuing a receivable
factoring agreement which transferred the risk of credit loss to the factor.
Interest expense was $221,000 as compared to $236,000 in 1995. In 1996,
interest expense was primarily due to borrowings attributable to the Cochrane
Furniture acquisition, partially offset by interest income on short-term invest-
ments. During 1996, the Company invested excess cash flow from operations in
short-term investments. Interest rates on bank borrowings were lower in 1996
as compared to 1995.
The effective tax rate in 1996 was 40.0% compared to 40.5% in 1995. The lower
effective tax rate in 1996 was due to a decrease in state income taxes.
Net earnings increased to $13,936,000, or $2.37 per share on a diluted basis,
as compared to $11,974,000, or $2.05 per share on a diluted basis, in 1995.
Average common shares used in the calculation of diluted earnings per share
included dilutive potential common shares (stock options) of 133,000 shares in
1996 and 123,000 in 1995.
Liquidity and Capital Resources
The operating activities of the Company provided $15,466,000 of cash for the
year ended December 31, 1997, an increase of $5,938,000 from the amount provided
in 1996. Cash generated from operations improved in 1997 due to a lower invest-
ment in working capital, increased earnings, higher depreciation expense and the
realization of deferred income tax assets. Higher inventories at 1997 year end
were primarily due to a planned increase in finished goods to provide better
service to customers. The investment in working capital in 1996 was higher
primarily due to a reduction in trade accounts payable at Cochrane Furniture,
from its acquisition date, to eliminate past due balances and to obtain
discounts on the early payment of invoices.
9
The investing activities used $2,605,000 and $6,286,000 of cash during the years
ended December 31, 1997 and 1996, respectively. Capital expenditures, primarily
for equipment purchases, were $2,712,000 and $3,060,000 for 1997 and 1996,
respectively. Capital expenditures in 1998 are expected to be approximately
$4,500,000. In November 1996, the Company purchased Cochrane Furniture, a manu-
facturer of dining room, upholstery and bedroom furniture. The purchase price
consisted of a cash payment to Cochrane Furniture stockholders and related
acquisition expenses of $3,483,000 and the assumption of Cochrane Furniture's
liabilities.
Financing activities used $12,861,000 of cash during 1997, primarily to reduce
bank indebtedness 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 1997, the Company
retired 70,800 shares of common stock purchased for $1,895,000.
Cash used by financing activities during 1996 totalled $3,242,000, primarily
for the reduction of bank indebtedness. In 1996, substantially all of the
Cochrane Furniture bank and other indebtedness, assumed at the acquisition
date, was refinanced with borrowings under the Company's revolving credit
facility. The refinancing was required under the Company's revolving credit
agreement, which restricts indebtedness outside of the facility. Financing
costs were more favorable under the facility as compared to the Cochrane
Furniture indebtedness.
The Company has a revolving credit facility with a commitment level of
$60,000,000 that matures on December 20, 2000. The interest rate under the
facility is determined at the time of each borrowing and is based on one of a
variety of floating rate indices or a bank prime lending rate. Total borrowings
under the facility were $9,000,000 at December 31, 1997. Unused capacity under
the revolving credit facility, after reduction for outstanding letters of
credit, equalled $49,119,000 at the end of 1997.
Management expects that cash flow from operations and availability under its
revolving credit facility will continue to be sufficient to meet future
business needs. The Company plans to grow its businesses internally and through
acquisitions. Accordingly, the Company plans to retain cash in the business
and currently does not anticipate paying cash dividends on its common stock.
In 1998, absent an acquisition, the Company expects to generate excess cash
flow from operations, which will be used to reduce bank indebtedness, repurchase
Company common stock, or for general corporate purposes.
Year 2000 Issue
The Company has been modifying its computer information systems to ensure the
proper processing of transactions relating to the year 2000 and beyond. The
Company expects its year 2000 date conversion project to be completed on a
timely basis. The conversion costs are not expected to be material to the
financial statements. However, there can be no assurances that systems of other
companies on which the Company's systems rely also will be timely converted or
that any such failure to convert by another company would not have an adverse
effect on the Company's systems.
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.
These forward-looking statements can be generally identified as such because
the context of the statements includes the words such as "anticipates," "plans"
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) competi-
tion in the furniture industry.
10
Item 8. Financial Statements and Supplementary Data
- - ----------------------------------------------------
The financial statements and schedule are listed in Part IV, Items 14(a) (1)
and (2).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- - ------------------------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
- - ------------------------------------------------------------
The sections entitled "Election of Directors" on pages 2 and 3 and "Common Stock
Beneficially Owned by Directors and Executive Officers" on pages 6 and 7 of the
Company's Proxy Statement dated April 3, 1998 are incorporated herein by refer-
ence, and have been omitted pursuant to Instruction G of Form 10-K since the
Company intends to file with the Commission a definitive Proxy Statement
pursuant to Regulation 14A not later than 120 days following the end of its
1997 fiscal year.
Item 11. Executive Compensation
- - --------------------------------
The sections entitled "Executive Compensation" on pages 7 through 10, "Compen-
sation Committee Report on Executive Compensation" on pages 10 through 12 and
"Stock Performance Graph" on page 12 of the Company's Proxy Statement dated
April 3, 1998 are incorporated herein by reference, and have been omitted
pursuant to Instruction G of Form 10-K since the Company intends to file with
the Commission a definitive Proxy Statement pursuant to Regulation 14A not
later than 120 days following the end of its 1997 fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- - ------------------------------------------------------------------------
The sections entitled "Common Stock Beneficially Owned by Directors and
Executive Officers" on pages 6 and 7 and "Voting Securities and Principal
Stockholders" on pages 1 and 2 of the Company's Proxy Statement dated April 3,
1998 are incorporated herein by reference, and have been omitted pursuant to
Instruction G of Form 10-K since the Company intends to file with the Commission
a definitive Proxy Statement pursuant to Regulation 14A not later than 120 days
following the end of its 1997 fiscal year.
Item 13. Certain Relationships and Related Transactions
- - --------------------------------------------------------
None.
11
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- - --------------------------------------------------------------------------
(a) 1. and 2. List of Financial Statements and Financial Statement Schedule:
The following Consolidated Financial Statements of the Company are included in
this report on Form 10-K:
Page Reference
--------------
Consolidated Statements of Earnings for the years ended
December 31, 1997, 1996, and 1995 F-1
Consolidated Balance Sheets at December 31, 1997 and 1996 F-2
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996, and 1995 F-3
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996, and 1995 F-4
Notes to Consolidated Financial Statements F-5
Independent Auditors' Report F-13
Quarterly Financial Information (unaudited) F-14
The following consolidated financial statement schedule of the Company
is included in response to Item 14(d):
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
(a) 3. Listing of Exhibits
(3)(i) Certificate of Incorporation of the Registrant, as amended, filed
as Exhibit No. 3.1 to Form S-1, registration number 33-45902, as
filed with the Securities and Exchange Commission on February 21,
1992, is incorporated herein by reference.
(3)(ii) By-laws of the Registrant, filed as Exhibit No. 3.2 to Form S-1,
registration number 33-45902, as filed with the Securities and
Exchange Commission on February 21, 1992, is incorporated herein
by reference.
12
(4.7) Credit Agreement, dated December 20, 1995 among the Registrant,
the Banks party thereto and NBD Bank N.A., as agent for the
Banks, filed as Exhibit No. 4.7 to Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference.
(10.1) Lease dated February 15, 1962 between Board of Supervisors of Tate
County, Mississippi as Landlord and Chromcraft Corporation as
Tenant, filed as Exhibit No. 10.1 to Form S-1, registration number
33-45902, as filed with the Securities and Exchange Commission on
February 21, 1992, is incorporated herein by reference.
(10.3) Form of Registration Rights Agreement between Registrant and 399
Venture Partners, Inc., formerly Citicorp Investments, Inc., filed
as Exhibit No. 10.3 to Form S-1, registration number 33-45902, as
filed with the Securities and Exchange Commission on February 21,
1992, is incorporated herein by reference.
(10.12) Contract dated April 3, 1961 between City of Senatobia, Tate
County, Mississippi, the Board of Supervisors of Tate County,
Mississippi, and Chromcraft Corporation, filed as Exhibit No.
10.12 to Form S-1, Pre-Effective Amendment No. 1, registration
number 33-45902, as filed with the Securities and Exchange
Commission on March 17, 1992, is incorporated herein by reference.
(10.13) Lease dated September 9, 1966 between the Board of Supervisors of
Tate County, Mississippi as Landlord and Chromcraft Corporation
as Tenant, filed as Exhibit No. 10.13 to Form S-1, Pre-Effective
Amendment No. 1, registration number 33-45902, as filed with the
Securities and Exchange Commission on March 17, 1992, is incorpor-
ated herein by reference.
(10.14) Contract dated May 5, 1969 between the Board of Supervisors of
Tate County, Mississippi and Chromcraft Corporation, filed as
Exhibit No. 10.14 to Form S-1, Pre-Effective Amendment No. 1,
registration number 33-45902, as filed with the Securities and
Exchange Commission on March 17, 1992, is incorporated herein by
reference.
(10.15) Contract and Lease Agreement dated April 17, 1972 between Tate
County, Mississippi as Landlord and Chromcraft Corporation as
Tenant, filed as Exhibit No. 10.15 to Form S-1, Pre-Effective
Amendment No. 1, registration number 33-45902, as filed with the
Securities and Exchange Commission on March 17, 1992, is
incorporated herein by reference.
Executive Compensation Plans and Arrangements
(10.4) Chromcraft Revington, Inc. 1992 Stock Option Plan, as amended,
filed as Exhibit No. 10.4 to Form 10-K for the year ended Decem-
ber 31, 1992, is incorporated herein by reference.
(10.5) Form of Registrant's Executive Incentive Plan, filed as Exhibit
No. 10.5 to Form S-1, Pre-Effective Amendment No. 1, registration
number 33-45902, as filed with the Securities and Exchange
Commission on March 17, 1992, is incorporated herein by reference.
(10.7) Chromcraft Revington, Inc. Supplemental Executive Retirement Plan
effective May 1, 1993, filed as Exhibit No. 10.7 to Form 10-Q for
the quarter ended July 3, 1993, is incorporated herein by
reference.
13
(10.75) Supplemental Executive Retirement Plan Trust Agreement, dated
April 16, 1993 between the Registrant and Bank One, Indianapolis,
National Association, filed as Exhibit No. 10.75 to Form 10-Q for
the quarter ended July 3, 1993, is incorporated herein by
reference.
(10.8) Employment Agreement, dated March 31, 1992, between the Registrant
and Michael E. Thomas, filed as Exhibit No. 10.8 to Form 10-K for
the year ended December 31, 1992, is incorporated herein by
reference.
(10.85) Supplemental Retirement Benefits Agreement, dated August 21, 1992,
between the Registrant and Michael E. Thomas, filed as Exhibit No.
10.85 to Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
(10.9) Employment Agreement, dated March 31, 1992, between the Registrant
and H. Martin Michael, filed as Exhibit No. 10.9 to Form 10-K for
the year ended December 31, 1992, is incorporated herein by
reference.
(10.95) Supplemental Retirement Benefits Agreement, dated August 21, 1992,
between the Registrant and H. Martin Michael, filed as Exhibit No.
10.95 to Form 10-K for the year ended December 31, 1992, is
incorporated herein by reference.
(21.1) Subsidiaries of the Registrant.
(23.1) Consent of Independent Auditors.
(24.1) Powers of Attorney.
(27.0) Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed with the Commission during the fourth
quarter of 1997.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Chromcraft Revington, Inc. has duly caused this annual report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
Chromcraft Revington, Inc.
--------------------------
(Registrant)
Date: March 24, 1998 By: /s/ Michael E. Thomas
--------------------------
Michael E. Thomas, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Chromcraft
Revington, Inc. and in the capacities and on the date indicated.
Signatures Title Date
- - ---------- ----- ----
/s/ Michael E. Thomas Director, President March 24, 1998
- - --------------------- and Chief Executive Officer --------------
Michael E. Thomas
*H. Martin Michael Director and Executive Vice
- - --------------------- President
H. Martin Michael
/s/ Frank T. Kane Vice President - Finance March 24, 1998
- - --------------------- (principal accounting and --------------
Frank T. Kane financial officer)
*Bruce C. Bruckmann Director
- - ---------------------
Bruce C. Bruckmann
*David L. Kolb Director
- - ---------------------
David L. Kolb
*Larry P. Kunz Director
- - ---------------------
Larry P. Kunz
*M. Saleem Muqaddam Director
- - ---------------------
M. Saleem Muqaddam
*Warren G. Wintrub Director
- - ---------------------
Warren G. Wintrub
By: /s/ Michael E. Thomas March 24, 1998
- - ------------------------- --------------
Michael E. Thomas, Attorney-in-fact*
15
Consolidated Statements of Earnings
Chromcraft Revington, Inc.
(In thousands, except per share data)
Year Ended December 31,
-----------------------------------------
1997 1996 1995
--------- --------- ---------
Sales $ 225,629 $ 175,899 $ 152,609
Cost of sales 169,802 128,217 111,787
--------- --------- ---------
Gross margin 55,827 47,682 40,822
Selling, general and administrative expenses 30,200 24,235 20,478
--------- --------- ---------
Operating income 25,627 23,447 20,344
Interest expense, net 1,265 221 236
--------- --------- ---------
Earnings before income tax expense 24,362 23,226 20,108
Income tax expense 9,720 9,290 8,134
--------- --------- ---------
Net earnings $ 14,642 $ 13,936 $ 11,974
========= ========= =========
Earnings per share of common stock
Basic $ 2.56 $ 2.43 $ 2.09
========= ========= =========
Diluted $ 2.49 $ 2.37 $ 2.05
========= ========= =========
Shares used in computing earnings per share
Basic 5,709 5,737 5,726
Diluted 5,877 5,870 5,849
See accompanying notes to the consolidated financial statements
F-1
Consolidated Balance Sheets
Chromcraft Revington, Inc.
(In thousands, except share data)
December 31,
-------------------------
1997 1996
--------- ---------
Assets
Cash and cash equivalents $ - $ -
Accounts receivable, less allowances of $1,462 and $1,781 26,905 29,784
Inventories 35,172 32,396
Deferred income taxes 1,942 3,935
Other assets 1,032 753
--------- ---------
Current assets 65,051 66,868
Property, plant and equipment, at cost,
less accumulated depreciation 37,445 39,498
Goodwill and tradenames, less accumulated amortization
of $6,137 and $5,363 22,128 21,902
Other assets 1,520 1,674
--------- ---------
Total assets $ 126,144 $ 129,942
========= =========
Liabilities and Stockholders' Equity
Accounts payable $ 8,450 $ 9,900
Accrued liabilities 12,670 16,625
--------- ---------
Current liabilities 21,120 26,525
Revolving credit facility 9,000 20,200
Deferred income taxes 2,014 2,203
Other liabilities 3,104 3,089
--------- ---------
Total liabilities 35,238 52,017
--------- ---------
Stockholders' equity
Preferred stock, $1.00 par value, authorized 100,000
shares, none issued or outstanding - -
Common stock, $.01 par value, authorized 20,000,000 shares,
issued and outstanding 5,684,268 and 5,742,273 shares 57 57
Capital in excess of par value 19,331 20,992
Retained earnings 71,518 56,876
--------- ---------
Total stockholders' equity 90,906 77,925
--------- ---------
Total liabilities and stockholders' equity $ 126,144 $ 129,942
========= =========
See accompanying notes to the consolidated financial statements
F-2
Consolidated Statements of Stockholders' Equity
Chromcraft Revington, Inc.
(Dollars in thousands)
Common Stock Capital in Total
--------------------- Excess of Retained Stockholders'
Shares Amount Par Value Earnings Equity
--------- ------ --------- -------- ------------
Balance at January 1, 1995 5,718,040 $ 57 $ 20,599 $ 30,966 $ 51,622
Exercise of stock options 11,233 - 186 - 186
Net earnings 11,974 11,974
--------- ------ -------- -------- --------
Balance at December 31, 1995 5,729,273 57 20,785 42,940 63,782
Exercise of stock options 13,000 - 207 - 207
Net earnings 13,936 13,936
--------- ------ -------- -------- --------
Balance at December 31, 1996 5,742,273 57 20,992 56,876 77,925
Repurchase and cancellation of stock (70,800) - (1,895) (1,895)
Exercise of stock options 12,795 - 234 - 234
Net earnings 14,642 14,642
--------- ------ -------- -------- --------
Balance at December 31, 1997 5,684,268 $ 57 $ 19,331 $ 71,518 $ 90,906
========= ====== ======== ======== ========
See accompanying notes to the consolidated financial statements
F-3
Consolidated Statements of Cash Flows
Chromcraft Revington, Inc.
(In thousands)
Year Ended December 31,
--------------------------------------
1997 1996 1995
-------- -------- --------
Operating Activities
Net earnings $ 14,642 $ 13,936 $ 11,974
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 4,383 3,729 3,853
Deferred income taxes 1,782 (8) (452)
Changes in assets and liabilities, net of effect of
acquired companies
Accounts receivable 2,879 (960) (1,834)
Inventories (2,776) (1,837) (75)
Accounts payable (1,450) (5,886) 2,180
Accrued liabilities (3,955) 736 (1,499)
Other (39) (182) 143
-------- -------- --------
Cash provided by operating activities 15,466 9,528 14,290
-------- -------- --------
Investing Activities
Capital expenditures (2,712) (3,060) (5,514)
Disposal of property, plant and equipment 107 257 -
Investment in acquired companies - (3,483) (9,350)
Funds held in escrow - - (2,000)
-------- -------- --------
Cash used in investing activities (2,605) (6,286) (16,864)
-------- -------- --------
Financing Activities
Net borrowing (repayment) under revolving credit facilities (11,200) 18,700 1,500
Refinance indebtedness of acquired companies - (22,149) (1,190)
Repurchase and cancellation of stock (1,895) - -
Proceeds from exercise of stock options 234 207 186
-------- -------- --------
Cash provided (used) in financing activities (12,861) (3,242) 496
-------- -------- --------
Decrease in cash and cash equivalents - - (2,078)
Cash and cash equivalents at beginning of year - - 2,078
-------- -------- --------
Cash and cash equivalents at end of year $ - $ - $ -
======== ======== ========
See accompanying notes to the consolidated financial statements
F-4
Notes to Consolidated Financial Statements
Chromcraft Revington, Inc.
Note 1. Summary of Significant Accounting Policies
Business
Chromcraft Revington, Inc. manufactures and sells occasional furniture, casual
dining furniture, bedroom furniture, dining room furniture, upholstered furni-
ture and commercial furniture. Products are sold primarily through furniture
dealers throughout the United States and Canada.
Consolidation
The consolidated financial statements include the accounts of Chromcraft
Revington, Inc. and its wholly-owned subsidiaries (together, the "Company").
All significant intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
Inventories
All inventories (materials, labor and overhead) are valued at the lower of cost
or market. Inventories valued using the last-in, first-out (LIFO) basis
represent approximately 67% and 70% of total inventories at December 31, 1997
and 1996, respectively. Remaining inventories are valued using the first-in,
first-out (FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment is stated on the basis of cost. Depreciation is
computed principally by the straight-line method for financial reporting
purposes and by accelerated methods for tax purposes.
Revenue Recognition
Revenue from sales is recognized when the goods are shipped to the customer.
Intangibles
Intangible assets are stated on the basis of cost. The excess of purchase
price over the fair value of net assets acquired (goodwill) and tradenames are
being amortized on a straight-line basis principally over 40 years. The Company
reviews the carrying value of goodwill whenever changes in circumstances indi-
cate that the carrying amount may not be recoverable. When factors indicate
that the recoverability of goodwill should be evaluated, the Company uses an
estimate of the acquired business' undiscounted cash flows in determining
whether an impairment loss is required.
Deferred Income Taxes
Deferred income taxes are recognized for the future tax consequences attribu-
table to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.
F-5
Earnings Per Share of Common Stock
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of stock options. All earnings per share amounts for all
periods have been presented and, where appropriate, restated to conform to the
Statement 128 requirements.
Stock Options
The Company applies Accounting Principles Board Opinion No. 25 in accounting
for stock options and discloses the fair value of options granted as permitted
by Statement of Financial Accounting Standards No. 123.
Financial Instruments
The carrying amounts reported in the balance sheets for accounts receivable,
accounts payable and borrowings under a bank revolving credit facility approxi-
mate their fair values. Concentration of credit risk with respect to trade
accounts receivable is limited due to the large number of entities comprising
the Company's customer base.
Note 2. Acquisition of Cochrane Furniture Company, Inc.
On November 8, 1996, the Company acquired Cochrane Furniture Company, Inc.
("Cochrane Furniture") for $3,483,000 in cash (including acquisition related
expenses) and the assumption of $38,756,000 of Cochrane Furniture's liabilities.
Cochrane Furniture is a manufacturer of dining room, bedroom and upholstered
furniture.
The operations of Cochrane Furniture are included in the Consolidated Statements
of Earnings from the date of acquisition. The transaction was accounted for as
a purchase and the purchase price has been allocated to assets acquired and lia-
bilities assumed based on their fair market values at the date of acquisition.
The following unaudited pro forma results of operations for the year ended
December 31, 1996 gives effect to the Cochrane Furniture acquisition as if it
had occurred on January 1, 1996. The unaudited pro forma results of operations
for the year ended December 31, 1995 combine the operating results of Cochrane
Furniture for the fiscal year ended March 30, 1996 and the Company's operating
results for the year ended December 31, 1995 and gives effect to the Cochrane
Furniture acquisition as if it had occurred at the beginning of the period.
Operating results of Cochrane Furniture for the quarter ended March 30, 1996
are included in each of the unaudited pro forma results of operations.
(In thousands,
except per share data)
-------------------------
1996 1995
--------- ---------
Sales $ 245,658 $ 238,307
Net earnings 11,409 8,034
Earnings per share of common stock
Basic 1.99 1.40
Diluted 1.94 1.37
The pro forma information is presented for comparative purposes only and is not
necessarily indicative of the operating results that would have occurred had the
Cochrane Furniture acquisition been consummated as of the above dates, nor is
it necessarily indicative of future operating results.
F-6
Note 3. Acquisition of Silver Furniture Co., Inc.
On April 3, 1995, the Company acquired Silver Furniture Co., Inc. ("Silver
Furniture"), a manufacturer and importer of occasional furniture tables, for
$11,350,000 in cash (including acquisition expenses). The operations of Silver
Furniture are included in the Consolidated Statements of Earnings from the date
of acquisition. The transaction was accounted for as a purchase and the excess
cost over fair value of the net assets acquired is being amortized on a
straight-line basis over a 20-year period. The unaudited pro forma results of
operations for the year ended December 31, 1995, assuming the purchase of
Silver Furniture had been consummated as of the beginning of the period, are
sales of $159,774,000, net earnings of $12,114,000, and basic and diluted
earnings per share of $2.12 and $2.07, respectively.
The pro forma information is presented for comparative purposes only and is not
necessarily indicative of the operating results that would have occurred had
the Silver Furniture acquisition been consummated as of the above date, nor is
it necessarily indicative of future operating results.
Note 4. Inventories
Inventories at December 31, 1997 and 1996 consisted of the following:
(In thousands)
-----------------------
1997 1996
-------- --------
Raw materials $ 11,033 $ 10,622
Work-in-process 5,810 5,797
Finished goods 19,880 17,311
-------- --------
Inventories at FIFO cost 36,723 33,730
LIFO reserve (1,551) (1,334)
-------- --------
$ 35,172 $ 32,396
======== ========
Note 5. Property, Plant and Equipment
Property, plant and equipment at December 31, 1997 and 1996 consisted of the
following:
(In thousands)
-----------------------
1997 1996
-------- --------
Land $ 2,013 $ 1,886
Buildings and improvements 29,755 30,588
Machinery and equipment 37,415 35,404
Leasehold improvements 465 436
Construction in progress 205 171
-------- --------
69,853 68,485
Less accumulated depreciation and amortization (32,408) (28,987)
-------- --------
$ 37,445 $ 39,498
======== ========
F-7
Note 6. Accrued Liabilities
Accrued liabilities at December 31, 1997 and 1996 consisted of the following:
(In thousands)
-----------------------
1997 1996
-------- --------
Employee benefit plans $ 3,999 $ 5,890
Salaries, wages and commissions 1,497 1,628
Vacation and holiday pay 1,234 1,503
Workers' compensation plans 1,268 1,127
Advertising and promotion 978 1,383
Other accrued liabilities 3,694 5,094
-------- --------
$ 12,670 $ 16,625
======== ========
Note 7. Income Taxes
Components of the provision for income taxes for the years ended
December 31, 1997, 1996 and 1995 were as follows:
(In thousands)
-----------------------------------
1997 1996 1995
------- ------- -------
Current:
Federal $ 6,683 $ 7,902 $ 7,432
State 1,255 1,396 1,154
------- ------- -------
7,938 9,298 8,586
------- ------- -------
Deferred:
Federal 1,517 (4) (385)
State 265 (4) (67)
------- ------- -------
1,782 (8) (452)
------- ------- -------
Total provision for income taxes $ 9,720 $ 9,290 $ 8,134
======= ======= =======
A reconciliation of the provision for income taxes included in the Consolidated
Statements of Earnings and the amount computed by applying the U.S. Federal
income tax rate for the years ended December 31, 1997, 1996 and 1995 is
summarized below:
(In thousands)
-----------------------------------
1997 1996 1995
------- ------- -------
Tax expense, at U.S. statutory rate $ 8,527 $ 8,129 $ 7,038
State taxes, net of federal benefit 967 915 874
Non-deductible amortization of goodwill 222 222 222
Other, net 4 24 -
------- ------- -------
Total provision for income taxes $ 9,720 $ 9,290 $ 8,134
======= ======= =======
F-8
The tax effects of temporary differences that give rise to significant portions
of net deferred tax assets (liabilities) at December 31, 1997 and 1996 are
summarized below:
(In thousands)
---------------------
1997 1996
------- -------
Deferred tax assets attributable to:
Accounts receivable $ 565 $ 688
Assets held for sale 722 104
Accrued vacation and holiday pay 514 616
Deferred compensation 565 345
Net operating loss carryforwards 1,044 901
Other 2,445 3,081
------- -------
Total gross deferred tax assets 5,855 5,735
------- -------
Deferred tax liabilities attributable to:
Inventories (827) (173)
Property, plant and equipment (4,075) (2,781)
Other (1,025) (1,049)
------- -------
Total gross deferred tax liabilities (5,927) (4,003)
------- -------
Net deferred tax assets (liabilities) $ (72) $ 1,732
======= =======
In connection with the acquisition of Cochrane Furniture Company, Inc., the
Company acquired certain net operating loss carryforwards with expiration dates
through 2010.
Chromcraft Corporation and Peters-Revington Corporation have received notifica-
tion from the parent of a former consolidated tax group of which they were
previously members that, following an audit by the Internal Revenue Service
("IRS") of income tax returns of the former consolidated tax group, the IRS has
issued a revenue agent's report asserting that certain interest expense deduc-
tions should be recharacterized as non-deductible dividend distributions. A
protest has been filed with the IRS by the former parent on behalf of the
members of the former consolidated tax group. Settlement of this matter has
been agreed upon by the IRS and the parent of the former consolidated tax group
subject to approval by the Joint Committee of Congress on Taxation. Chromcraft
Corporation and Peters-Revington Corporation have a contractual right of indem-
nification against the former parent for any liability for federal and state
income taxes assessed against them for the periods covered in the revenue
agent's report.
Note 8. Revolving Credit Facility
The Company has an unsecured revolving loan facility ("Facility") with a group
of banks that allows the Company to borrow up to $60,000,000 for working capital
requirements, capital expenditures and acquisitions. At December 31, 1997, the
Company had $49,119,000 in availability under the Facility. The interest rate
under the Facility is determined at the time of borrowing, at the Company's
option, at either the bank prime rate or a rate based on the certificate of
deposit rate, the Fed Funds rate, or the London Interbank Offered Rate (LIBOR).
The weighted-average interest rate on borrowings outstanding as of December 31,
1997 and 1996 was 6.62% and 5.95%, respectively. A commitment fee, of up to
.20% per annum, is payable on the unused portion of the credit line. The
Company had outstanding letters of credit under the Facility of $1,881,000 and
$6,118,000 at December 31, 1997 and 1996, respectively. The Facility expires
December 20, 2000.
The Facility requires compliance with certain financial loan covenants related
to net worth, interest and fixed charge coverages and debt leverage. At
December 31, 1997, unrestricted retained earnings available for dividends were
$31,617,000.
F-9
Note 9. 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
168,000, 133,000 and 123,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
Stock options to purchase 38,160 shares of common stock at $26.19 per share and
79,312 shares at $23.25 per share were outstanding during 1996 and 1995,
respectively, 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 for those years and, therefore, the effect would be
antidulutive.
Note 10. Stock Options
The Company's 1992 Stock Option Plan (the "Plan") provides for the granting of
either incentive stock options ("ISO's") or stock options which do not qualify
as incentive stock options ("non-ISO's"). The total number of shares of common
stock which may be issued under stock options granted pursuant to the Plan is
550,000 shares. ISO's granted under the Plan vest over no greater than a
10-year period, and are granted at exercise prices no less than the fair market
value of the Company's common shares as of the date of grant. Non-ISO's vest
and are at exercise prices determined by the compensation committee of the Board
of Directors. At December 31, 1997 and 1996, there were 585 and 21,431 shares,
respectively, available for future grants.
The estimated per share weighted-average fair value of stock options granted
during 1997, 1996 and 1995 was $12.73, $11.28 and $11.39, respectively, on the
date of grant. The fair value of stock options on the date of grant was
estimated using the Black-Scholes model with the following weighted-average
assumptions:
1997 1996 1995
------ ------ ------
Expected life (years) 7 7 7
Interest rate 6.3% 6.2% 6.3%
Volatility 28.0% 30.0% 32.2%
The following table summarizes the pro forma effects assuming compensation cost
for such awards had been recorded based upon the estimated fair value:
(In thousands, except per share data)
------------------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
-------- -------- -------- -------- -------- --------
Net earnings $ 14,642 $ 14,345 $ 13,936 $ 13,670 $ 11,974 $ 11,913
Earnings per share
of common stock
Basic 2.56 2.51 2.43 2.38 2.09 2.08
Diluted 2.49 2.45 2.37 2.33 2.05 2.04
F-10
A summary of the Company's stock option activity, and related information for
the three years ended December 31, 1997 follows:
Weighted-
Average
Number Exercise
of Shares Price
--------- ----------
1995
Outstanding at beginning of year 410,884 $ 14.86
Granted 68,160 $ 24.01
Exercised (11,233) $ 13.08
Cancelled (10,591) $ 16.36
Outstanding at end of year 457,220 $ 16.24
Exercisable 230,077 $ 14.71
1996
Granted 27,500 $ 24.48
Exercised (13,000) $ 11.00
Outstanding at end of year 471,720 $ 16.86
Exercisable 323,098 $ 15.73
1997
Granted 21,431 $ 28.32
Exercised (12,795) $ 16.91
Cancelled (585) $ 26.19
Outstanding at end of year 479,771 $ 17.36
Exercisable 401,885 $ 15.89
Significant option groups outstanding at December 31, 1997 and related weighted-
average price and remaining life information follows:
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
------- ----------- ----------- -------- ------------
4-15-92 223,420 223,420 $ 11.00 4.3
2-19-93 63,600 63,600 $ 19.00 5.1
1-11-94 73,000 73,000 $ 23.25 6.0
All other 119,751 41,865 $ 24.47 8.0
Note 11. Employee Benefit Plans
The Company sponsors a number of tax-qualified defined contribution retirement
and savings plans. Employees may be eligible to participate in one or more of
these plans. Company contributions to these plans are based on either a
percentage of an employee's compensation or a matching portion of the employee's
contributions. The cost of these plans was $1,113,000 in 1997, $1,034,000 in
1996 and $1,110,000 in 1995.
The Company also provides supplemental retirement benefits and "make up"
benefits to key executives of the Company whose benefits are reduced by Internal
Revenue Service Code restrictions. Contributions and expenses under these
arrangements were $305,000 in 1997, $221,000 in 1996 and $225,000 in 1995.
F-11
Note 12. Registration Rights Agreement
The Company has entered into a Registration Rights Agreement dated April 23,
1992 (the "Agreement") between the Company and 399 Venture Partners, Inc., which
owned 2,847,709 shares or 50.1% of the Company's outstanding common stock at
December 31, 1997. The Agreement permits 399 Venture Partners, Inc. and trans-
ferees, as defined, to request certain registration rights under the Securities
Act of 1933 for all or part of their shares of common stock under certain
conditions. In connection with such registrations as may occur, the Company
will be obligated for the payment of all registration expenses incurred in the
performance of or compliance with this Agreement, subject to certain limitations
set forth therein.
Note 13. Supplemental Cash Flow Information
Interest paid during the years ended December 31, 1997, 1996 and 1995 was
$1,081,000, $180,000 and $245,000, respectively. Income taxes paid during the
years ended December 31, 1997, 1996 and 1995 were $8,510,000, $9,054,000 and
$8,277,000, respectively.
Note 14. Rental Commitments
The Company leases certain showroom facilities and transportation equipment
under non-cancelable operating leases. The future minimum lease payments under
non-cancelable leases for the years ending December 31, 1998, 1999, 2000, 2001
and 2002 are $1,281,000, $562,000, $143,000, $137,000 and $114,000, respec-
tively. It is expected that, in the normal course of business, leases that
expire will be renewed or replaced.
Rental expense was $1,932,000, $1,248,000 and $921,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
F-12
Independent Auditors' Report
The Board of Directors and Stockholders
Chromcraft Revington, Inc.:
We have audited the consolidated financial statements of Chromcraft Revington,
Inc. and subsidiaries as listed in item 14(a) (1) and (2). In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in item 14(a) (1) and (2). These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Chromcraft
Revington, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial state-
ments taken as a whole, presents fairly, in all material respects, the informa-
tion set forth therein.
KPMG Peat Marwick LLP
Indianapolis, Indiana
February 3, 1998
F-13
Quarterly Financial Information (unaudited)
Chromcraft Revington, Inc.
(In thousands, except per share data)
---------------------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- ---------
1997
Sales $ 59,469 $ 54,074 $ 52,821 $ 59,265 $ 225,629
Gross margin 14,341 13,765 13,402 14,319 55,827
Operating income 6,498 5,757 6,242 7,130 25,627
Net earnings 3,708 3,246 3,551 4,137 14,642
Earnings per share
of common stock
Basic .65 .57 .62 .73 2.56
Diluted .63 .55 .61 .71 2.49
1996
Sales $ 42,291 $ 39,922 $ 40,789 $ 52,897 $ 175,899
Gross margin 11,646 11,013 11,168 13,855 47,682
Operating income 5,847 5,333 5,795 6,472 23,447
Net earnings 3,494 3,211 3,492 3,739 13,936
Earnings per share
of common stock
Basic .61 .56 .61 .65 2.43
Diluted .60 .55 .59 .64 2.37
F-14
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Chromcraft Revington, Inc.
(In thousands)
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Classification of Period Expenses Accounts Deductions of Year
---------------- ----------- ---------- ---------- ------------ ---------
Year ended December 31, 1997
Allowance for doubtful accounts $ 1,781 $ 169 $ - $ (488)(a) $ 1,462
Reserve for excess and obsolete
inventory (b) $ 3,123 $ - $ - $(3,123) $ -
Year ended December 31, 1996
Allowance for doubtful accounts $ 980 $ 760 $ 640(c) $ (599)(a) $ 1,781
Reserve for excess and obsolete
inventory (b) $ - $ 150 $ 2,973 $ - $ 3,123
Year ended December 31, 1995
Allowance for doubtful accounts $ 689 $ 393 $ 51(d) $ (153)(a) $ 980
(a) Represents charge offs, net of recoveries, to the allowance for doubtful
accounts
(b) Represents the reserve for excess and obsolete inventory associated with
the Cochrane Furniture acquisition
(c) Represents the allowance for doubtful accounts associated with the Cochrane
Furniture acquisition
(d) Represents the allowance for doubtful accounts associated with the Silver
Furniture acquisition
S-1
EXHIBIT (21.1)
SUBSIDIARIES OF THE REGISTRANT
The Registrant owns all of the issued and outstanding shares of capital stock
of each of the following corporations:
Chromcraft Corporation, a Delaware corporation
Peters-Revington Corporation, a Delaware corporation
Silver Furniture Co., Inc., a Tennessee corporation
Silver Furniture Manufacturing Co., Inc., a Tennessee corporation (a)
Cochrane Furniture Company, Inc., a North Carolina corporation
(a) A 100% owned subsidiary of Silver Furniture Co., Inc.
EXHIBIT (23.1)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Chromcraft Revington, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-8 of Chromcraft Revington, Inc. of our report dated February 3, 1998, relating
to the consolidated balance sheets of Chromcraft Revington, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of earnings, stockholders' equity, and cash flows and consolidated
financial statement schedule for each of the years in the three-year period
ended December 31, 1997, which report appears in the December 31, 1997 annual
report on Form 10-K of Chromcraft Revington, Inc.
KPMG Peat Marwick LLP
Indianapolis, Indiana
March 24, 1998
EXHIBIT (24.1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints FRANK T. KANE and MICHAEL E. THOMAS, or either of them,
his true and lawful attorneys-in-fact and agents, with full power of substitu-
tion and resubstitution, for him and in his name, place and stead, in any and
all capacities to sign the Chromcraft Revington, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and any and all amendments thereto,
to be filed with the Securities and Exchange Commission pursuant to the require-
ments of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
granting unto each of said attorneys-in-fact and agents, full power and autho-
rity to do and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause
to be done by virtue hereof.
Dated: March XX, 1998 Bruce C. Bruckmann, Director
EXHIBIT (24.1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints FRANK T. KANE and MICHAEL E. THOMAS, or either of them,
his true and lawful attorneys-in-fact and agents, with full power of substitu-
tion and resubstitution, for him and in his name, place and stead, in any and
all capacities to sign the Chromcraft Revington, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and any and all amendments thereto,
to be filed with the Securities and Exchange Commission pursuant to the require-
ments of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
granting unto each of said attorneys-in-fact and agents, full power and autho-
rity to do and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause
to be done by virtue hereof.
Dated: March 17, 1998 David L. Kolb, Director
EXHIBIT (24.1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints FRANK T. KANE and MICHAEL E. THOMAS, or either of them,
his true and lawful attorneys-in-fact and agents, with full power of substitu-
tion and resubstitution, for him and in his name, place and stead, in any and
all capacities to sign the Chromcraft Revington, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and any and all amendments thereto,
to be filed with the Securities and Exchange Commission pursuant to the require-
ments of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
granting unto each of said attorneys-in-fact and agents, full power and autho-
rity to do and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause
to be done by virtue hereof.
Dated: March 16, 1998 Larry P. Kunz, Director
EXHIBIT (24.1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints FRANK T. KANE and MICHAEL E. THOMAS, or either of them,
his true and lawful attorneys-in-fact and agents, with full power of substitu-
tion and resubstitution, for him and in his name, place and stead, in any and
all capacities to sign the Chromcraft Revington, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and any and all amendments thereto,
to be filed with the Securities and Exchange Commission pursuant to the require-
ments of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
granting unto each of said attorneys-in-fact and agents, full power and autho-
rity to do and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause
to be done by virtue hereof.
Dated: March 17, 1998 H. Martin Michael, Director
EXHIBIT (24.1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints FRANK T. KANE and MICHAEL E. THOMAS, or either of them,
his true and lawful attorneys-in-fact and agents, with full power of substitu-
tion and resubstitution, for him and in his name, place and stead, in any and
all capacities to sign the Chromcraft Revington, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and any and all amendments thereto,
to be filed with the Securities and Exchange Commission pursuant to the require-
ments of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
granting unto each of said attorneys-in-fact and agents, full power and autho-
rity to do and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause
to be done by virtue hereof.
Dated: March XX, 1998 M. Saleem Muqaddam, Director
EXHIBIT (24.1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints FRANK T. KANE and MICHAEL E. THOMAS, or either of them,
his true and lawful attorneys-in-fact and agents, with full power of substitu-
tion and resubstitution, for him and in his name, place and stead, in any and
all capacities to sign the Chromcraft Revington, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and any and all amendments thereto,
to be filed with the Securities and Exchange Commission pursuant to the require-
ments of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
granting unto each of said attorneys-in-fact and agents, full power and autho-
rity to do and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents, or his substitute, may lawfully do or cause
to be done by virtue hereof.
Dated: March 17, 1998 Warren G. Wintrub, Director