10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 3, 2010
or
|
|
|
o |
|
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
incorporation or organization)
|
|
(IRS Employer Identification No.) |
1330 Win Hentschel Blvd., Ste. 250, West Lafayette, IN 47906
(Address, including zip code, of registrants principal executive offices)
(765) 807-2640
(Registrants 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company þ |
|
|
|
|
(Do not check if a
smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
The number of shares outstanding for each of the registrants classes of common stock, as of the
latest practicable date:
Common Stock, $.01 par value 6,389,393 as of August 6, 2010
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (unaudited)
Chromcraft Revington, Inc.
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 3, |
|
|
July 4, |
|
|
July 3, |
|
|
July 4, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Sales |
|
$ |
14,008 |
|
|
$ |
14,598 |
|
|
$ |
27,915 |
|
|
$ |
31,251 |
|
|
Cost of sales |
|
|
11,339 |
|
|
|
12,923 |
|
|
|
22,540 |
|
|
|
28,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
2,669 |
|
|
|
1,675 |
|
|
|
5,375 |
|
|
|
2,757 |
|
|
Selling, general and administrative expenses |
|
|
3,937 |
|
|
|
4,061 |
|
|
|
7,548 |
|
|
|
8,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(1,268 |
) |
|
|
(2,386 |
) |
|
|
(2,173 |
) |
|
|
(5,461 |
) |
|
Interest expense, net |
|
|
(75 |
) |
|
|
(78 |
) |
|
|
(150 |
) |
|
|
(155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,343 |
) |
|
$ |
(2,464 |
) |
|
$ |
(2,323 |
) |
|
$ |
(5,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share of common stock |
|
$ |
(.29 |
) |
|
$ |
(.53 |
) |
|
$ |
(.50 |
) |
|
$ |
(1.22 |
) |
|
Shares used in computing loss per share |
|
|
4,685 |
|
|
|
4,613 |
|
|
|
4,676 |
|
|
|
4,603 |
|
See accompanying notes to condensed consolidated financial statements.
3
Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
July 3, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
6,489 |
|
|
$ |
3,636 |
|
|
Accounts receivable, less allowance of $450 in 2010 and 2009 |
|
|
7,500 |
|
|
|
7,661 |
|
|
Refundable income taxes |
|
|
|
|
|
|
6,578 |
|
|
Inventories |
|
|
13,263 |
|
|
|
13,294 |
|
|
Prepaid expenses and other |
|
|
1,218 |
|
|
|
990 |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
28,470 |
|
|
|
32,159 |
|
|
Property, plant and equipment, net |
|
|
7,956 |
|
|
|
8,293 |
|
|
Other assets |
|
|
570 |
|
|
|
667 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
36,996 |
|
|
$ |
41,119 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,620 |
|
|
$ |
3,364 |
|
|
Accrued liabilities |
|
|
2,736 |
|
|
|
3,905 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
5,356 |
|
|
|
7,269 |
|
|
Deferred compensation |
|
|
524 |
|
|
|
599 |
|
|
Other long-term liabilities |
|
|
1,685 |
|
|
|
1,669 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
7,565 |
|
|
|
9,537 |
|
|
Stockholders equity |
|
|
29,431 |
|
|
|
31,582 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
36,996 |
|
|
$ |
41,119 |
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
4
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
July 3, |
|
|
July 4, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,323 |
) |
|
$ |
(5,616 |
) |
Adjustments to reconcile net loss to
net cash provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
472 |
|
|
|
526 |
|
Non-cash share based and ESOP compensation expense |
|
|
172 |
|
|
|
68 |
|
Provision for doubtful accounts |
|
|
43 |
|
|
|
314 |
|
Non-cash inventory write-downs |
|
|
221 |
|
|
|
576 |
|
Non-cash asset impairment charges |
|
|
|
|
|
|
3 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
118 |
|
|
|
3,029 |
|
Refundable income taxes |
|
|
6,578 |
|
|
|
|
|
Inventories |
|
|
(190 |
) |
|
|
5,920 |
|
Prepaid expenses and other |
|
|
(228 |
) |
|
|
(143 |
) |
Accounts payable and accrued liabilities |
|
|
(1,913 |
) |
|
|
(2,753 |
) |
Long-term liabilities and assets |
|
|
38 |
|
|
|
(123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities |
|
|
2,988 |
|
|
|
1,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(135 |
) |
|
|
(105 |
) |
Proceeds on disposal of assets |
|
|
|
|
|
|
487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) investing activities |
|
|
(135 |
) |
|
|
382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
2,853 |
|
|
|
2,183 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the period |
|
|
3,636 |
|
|
|
879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period |
|
$ |
6,489 |
|
|
$ |
3,062 |
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
Condensed Consolidated Statement of Stockholders Equity (unaudited)
Chromcraft Revington, Inc.
Six Months Ended
July 3, 2010
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in |
|
|
Unearned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Excess of |
|
|
ESOP |
|
|
Retained |
|
|
Treasury Stock |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Par Value |
|
|
Shares |
|
|
Earnings |
|
|
Shares |
|
|
Amount |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2010 |
|
|
7,947,923 |
|
|
$ |
80 |
|
|
$ |
17,085 |
|
|
$ |
(14,679 |
) |
|
$ |
50,256 |
|
|
|
(1,819,154 |
) |
|
$ |
(21,160 |
) |
|
$ |
31,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP compensation
expense |
|
|
|
|
|
|
|
|
|
|
(256 |
) |
|
|
339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted
stock awards |
|
|
260,624 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based
compensation |
|
|
|
|
|
|
|
|
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,323 |
) |
|
|
|
|
|
|
|
|
|
|
(2,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 3, 2010 |
|
|
8,208,547 |
|
|
$ |
82 |
|
|
$ |
16,916 |
|
|
$ |
(14,340 |
) |
|
$ |
47,933 |
|
|
|
(1,819,154 |
) |
|
$ |
(21,160 |
) |
|
$ |
29,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
Notes to Condensed Consolidated Financial Statements (unaudited)
Chromcraft Revington, Inc.
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of
Chromcraft Revington, Inc. and its wholly-owned subsidiaries (together, the Company) and have
been prepared in accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q and the
requirements of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United States of America for
complete financial statement presentation.
In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the six
month period ended July 3, 2010 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2010.
The balance sheet at December 31, 2009 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.
The interim financial statements contained in this report should be read in conjunction with
the audited consolidated financial statements and footnotes thereto included in Chromcraft
Revingtons annual report on Form 10-K for the year ended December 31, 2009.
The Company has made certain reclassifications to the 2009 Consolidated Financial Statements
in order to conform to the 2010 presentation.
Note 2. Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months
or less to be cash equivalents.
Note 3. Inventories
Inventories at July 3, 2010 and December 31, 2009 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
July 3, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Raw materials |
|
$ |
3,965 |
|
|
$ |
4,364 |
|
Work-in-process |
|
|
1,145 |
|
|
|
903 |
|
Finished goods |
|
|
8,153 |
|
|
|
8,027 |
|
|
|
|
|
|
|
|
|
|
$ |
13,263 |
|
|
$ |
13,294 |
|
|
|
|
|
|
|
|
Inventory reserves decreased $424,000, on a net basis, in the six months ended July 3, 2010,
primarily attributable to a reduction of slow moving and unprofitable products.
7
Note 4. Property, Plant and Equipment
Property, plant and equipment at July 3, 2010 and December 31, 2009 consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
July 3, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Land |
|
$ |
324 |
|
|
$ |
324 |
|
Buildings and improvements |
|
|
18,438 |
|
|
|
18,438 |
|
Machinery and equipment |
|
|
23,178 |
|
|
|
23,069 |
|
Leasehold improvements |
|
|
769 |
|
|
|
711 |
|
Construction in progress |
|
|
352 |
|
|
|
384 |
|
|
|
|
|
|
|
|
|
|
|
43,061 |
|
|
|
42,926 |
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation
and amortization |
|
|
(35,105 |
) |
|
|
(34,633 |
) |
|
|
|
|
|
|
|
|
|
$ |
7,956 |
|
|
$ |
8,293 |
|
|
|
|
|
|
|
|
Construction in progress includes the capitalized costs for a new information technology
system carried at net realizable value based on managements expectation of the potential use and
benefits from the system. The timing of any future expenditures on the system is uncertain and is
being evaluated by management.
Note 5. Accrued Liabilities
Accrued liabilities at July 3, 2010 and December 31, 2009 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
July 3, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Employee-related benefits |
|
$ |
692 |
|
|
$ |
1,043 |
|
Property tax |
|
|
233 |
|
|
|
483 |
|
Commissions |
|
|
285 |
|
|
|
317 |
|
Compensation related |
|
|
85 |
|
|
|
441 |
|
Other accrued liabilities |
|
|
1,441 |
|
|
|
1,621 |
|
|
|
|
|
|
|
|
|
|
$ |
2,736 |
|
|
$ |
3,905 |
|
|
|
|
|
|
|
|
8
Note 6. Bank Debt
The Company has a revolving loan facility with a bank (Bank Facility) that allows it to
borrow up to $30,000,000 based on eligible accounts receivable and inventories. The interest rate
under the Bank Facility is determined based, at the Companys option, on either the banks prime
rate or the London Interbank Offered Rate (LIBOR). The Bank Facility is secured by substantially
all of the assets of the Company and expires in 2012.
At July 3, 2010, the Company had approximately $8,024,000 in unused availability under the
Bank Facility, which reflects a $500,000 reduction for a letter of credit outstanding in connection
with a self-insured workers compensation program. Certain covenants and restrictions, including a
fixed charge coverage ratio as defined in the loan agreement, will become effective if availability
under the Bank Facility is less than $5,000,000. The Company did not comply with the fixed charge
coverage ratio at July 3, 2010; however, the Companys availability under the Bank Facility
exceeded $5,000,000 at July 3, 2010 and, accordingly, the covenant regarding this ratio did not
apply at the end of the second quarter of 2010.
Note 7. Employee Stock Ownership Plan
Chromcraft Revington sponsors the Employee Stock Ownership and Savings Plan (the Plan) which
consists of the following two components: (i) a leveraged employee stock ownership plan qualified
under Section 401(a) of the Internal Revenue Code (the Code) which is designed to invest
primarily in Company stock (the ESOP); and (ii) a qualified cash or deferred compensation
arrangement under Code Section 401(k) (the 401(k) Plan). The Plan covers substantially all
employees who have completed six months of service with the Company. For the plan year ended
December 31, 2009, the Companys matching contribution with respect to participants pre-tax
contributions to the 401(k) Plan was made to the ESOP in the second quarter of 2010. The Company
matching contribution with respect to participants pre-tax contributions to the 401(k) Plan for
the plan year ending December 31, 2010 is expected to be made to the ESOP.
When the Plan was established, Chromcraft Revington loaned $20,000,000 to the ESOP Trust to
finance the ESOPs purchase of common stock of the Company. The loan to the ESOP Trust provides
for repayment to Chromcraft Revington over a 30-year term at a fixed rate of interest of 5.48% per
annum. Chromcraft Revington makes annual contributions to the ESOP Trust equal to the ESOP Trusts
repayment obligation under the loan to the ESOP from the Company. The shares of common stock owned
by the ESOP Trust are pledged to the Company as collateral for the Companys loan to the ESOP
Trust. As the ESOP loan is repaid, shares are released from collateral and allocated to ESOP
accounts of active employees based on the proportion of total debt service paid in the year.
Unearned ESOP shares are reported as a reduction of stockholders equity as reflected in the
Consolidated Statement of Stockholders Equity of the Company. As shares are committed to be
released, Chromcraft Revington reports compensation expense equal to the current market price of
the shares, and the shares become outstanding for earnings per share computations. ESOP
compensation expense, a non-cash charge, for the three and six months ended July 3, 2010 was
$41,000 and $83,000, respectively, compared to $39,000 and $80,000, respectively for the prior year
periods.
9
ESOP shares at July 3, 2010 and December 31, 2009, respectively, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
July 3, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Allocated ESOP shares |
|
|
272 |
|
|
|
240 |
|
Unearned ESOP shares |
|
|
1,434 |
|
|
|
1,468 |
|
|
|
|
|
|
|
|
Total ESOP shares |
|
|
1,706 |
|
|
|
1,708 |
|
|
|
|
|
|
|
|
Unearned ESOP shares, at cost |
|
$ |
14,340 |
|
|
$ |
14,679 |
|
|
|
|
|
|
|
|
Fair value of unearned ESOP shares |
|
$ |
3,313 |
|
|
$ |
3,347 |
|
|
|
|
|
|
|
|
Note 8. Income Taxes
At July 3, 2010 and December 31, 2009, the Company maintained a full valuation allowance
against the entire net deferred income tax balance after considering relevant factors, including
recent operating results, the likelihood of the utilization of net operating loss tax
carryforwards, and the ability to generate future taxable income. The Company expects to maintain
a full valuation allowance on its entire net deferred tax assets in 2010, resulting in an effective
tax rate of zero for the three and six months ended July 3, 2010.
Note 9. Loss per Share of Common Stock
Due to the net loss in the three and six months ended July 3, 2010 and July 4, 2009, loss per
share, basic and diluted, are the same, as the effect of potential issuances of common stock would
be antidilutive.
Note 10. Recently Issued Accounting Standards
There have been no recent accounting standards or changes in accounting standards during the
six months ended July 3, 2010, that are of significance, or potential significance to the Company,
as compared to the recent accounting standards described in the Companys Annual Report on Form
10-K for the year ended December 31, 2009.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The Company is experiencing reduced demand for its products as a result of weak consumer
confidence and housing activity primarily due to the effects of the economic downturn.
Additionally, sales have declined due to the discontinuation of certain low margin products in 2009
and the globalization of the furniture industry. We expect that the current economic environment
for consumers will continue to be challenging through the remainder of 2010.
We have repositioned our residential furniture product line in an effort to improve
profitability by introducing better value imports, utilizing a product licensing arrangement for
marketing support, and replacing unprofitable and slow moving items offered in our product line
with higher velocity items to improve customer service. We have moved away from a high cost
manufacturing model to global sourcing with lower costs.
10
We continue to review and cut operating costs to be in line with our current revenue base as
the Company completes its business transition in 2010. The Companys new business model is
expected to result in a more variable cost structure and provide greater flexibility in competing
in the furniture industry. A prolonged economic downturn could cause outcomes to differ materially
from those expected above.
Results of Operations
The following table sets forth the Condensed Consolidated Statements of Operations of
Chromcraft Revington for the three and six months ended July 3, 2010 and July 4, 2009 expressed as
a percentage of sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 3, |
|
|
July 4, |
|
|
July 3, |
|
|
July 4, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
81.0 |
|
|
|
88.5 |
|
|
|
80.8 |
|
|
|
91.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
19.0 |
|
|
|
11.5 |
|
|
|
19.2 |
|
|
|
8.8 |
|
Selling, general and administrative expenses |
|
|
28.1 |
|
|
|
27.8 |
|
|
|
27.0 |
|
|
|
26.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(9.1 |
) |
|
|
(16.3 |
) |
|
|
(7.8 |
) |
|
|
(17.5 |
) |
Interest expense |
|
|
(0.5 |
) |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(9.6 |
)% |
|
|
(16.9 |
)% |
|
|
(8.3 |
)% |
|
|
(18.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales for the three and six months ended July 3, 2010 of $14,008,000 and
$27,915,000, respectively, represented a 4.0% and 10.7% decrease, respectively, from the same
periods last year. Shipments of residential furniture were lower as compared to the prior year
periods primarily due to weak consumer confidence and housing activity reflecting the effects of
the economic downturn; restructuring activities in 2009 including the elimination of slow moving
and unprofitable products; and import competition. Commercial furniture shipments were higher in
the three and six months ended July 3, 2010 as compared to the prior year periods primarily due to
an increase in shipments of seating products. The consolidated sales decrease for 2010 was
primarily due to lower unit volume.
Gross margin for the three month and six months ended July 3, 2010 was $2,669,000 and
$5,375,000, respectively, as compared to $1,675,000 and $2,757,000, respectively, for the prior year
periods. The higher gross margin in 2010 reflected our transition to a more variable cost global
sourcing model and a favorable product sales mix in 2010 compared to the prior year periods. Gross
margin for the six months ended July 4, 2009 was negatively impacted by unabsorbed fixed overhead
and restructuring expenses related to a plant shutdown. Gross margin for the second quarter of
2010 included $69,000 of inventory write-downs as compared to $413,000 in the prior year period
primarily to reflect slow moving and unprofitable products and excess inventory.
Selling, general and administrative expenses decreased $124,000 and $670,000 in the three and
six months ended July 3, 2010, respectively, compared to the same periods last year. The decrease
in selling, general and administrative expenses for the three months ended July 3, 2010 compared to
the same period in 2009 was primarily due to a decrease in bad debt expense. The decrease in
selling general and administrative expense for the first half of 2010 compared to the prior year
period is primarily due to lower professional fees and bad debt expense. Selling, general and
administrative expenses for the six months ended July 4, 2009 included a first quarter reduction of
accrued severance benefits of
$334,000 resulting from revisions to severance agreements with two former executives which
reduced the amounts payable to them.
11
The Company completed its restructuring activities, which began in 2008, during the second
quarter of 2009; therefore, no restructuring charges were incurred during the six months ended July
3, 2010. During the six months ended July 4, 2009, the Company recorded restructuring charges as
cost of goods sold of $330,000, and a net credit to selling, general and administrative expenses of
$224,000.
Net interest expense, which includes Bank Facility fees, was $75,000 and $150,000,
respectively, for the three and six months ended July 3, 2010 as compared to $78,000 and $155,000,
respectively, in the prior year periods.
At December 31, 2009 and 2008, the Company maintained a full valuation allowance against the
entire net deferred income tax balance after considering relevant factors, including recent
operating results, the likelihood of the utilization of net operating loss carryforwards, and the
ability to generate future taxable income. The Company expects to maintain a full valuation
allowance on its entire net deferred tax assets at December 31, 2010, resulting in an effective tax
rate of zero for the quarter and six months ended July 3, 2010 and the prior year periods.
Financial Condition, Liquidity and Capital Resources
Cash increased by $2,853,000 at July 3, 2010 as compared to December 31, 2009 primarily due to
the receipt of a federal income tax refund in the first quarter of 2010, partially offset by the
cash loss from operations and a reduction in current liabilities. Working capital, excluding cash,
decreased by $4,629,000 in the six months ended July 3, 2010 primarily due to a decrease in
refundable income taxes, partially offset by lower accounts payable and accrued liabilities.
Operating activities of the Company provided $2,988,000 of cash for the six months ended July
3, 2010 as compared to $1,801,000 of cash provided in the prior year period. The higher cash flow
from operating activities in 2010 was primarily due to the receipt of a federal income tax refund
of $6,578,000 and a reduced cash loss in the first six months of 2010, partially offset by lower
cash generated from working capital reductions as compared to the prior year period.
Investing activities used cash of $135,000 for the six months ended July 3, 2010 as compared
to $382,000 of cash generated in the prior year period. Investing activities in 2009 include cash
received from the sale of idled machinery and equipment from restructuring activities of $487,000.
The Company used cash of $135,000 for capital expenditures during the first six months of 2010, as
compared to $105,000 spent in the prior year period. In 2010, the Company expects to spend
approximately $500,000 for capital expenditures.
At July 3, 2010, the Company had cash and cash equivalents of $6,489,000 and approximately
$8,024,000 in availability under its Bank Facility based on eligible accounts receivable and
inventories. There were no borrowings outstanding under the Bank Facility at the end of the second
quarter of 2010. The Bank Facility expires in 2012 and is secured by substantially all of the
assets of the Company. Certain covenants and restrictions, including a fixed charge coverage ratio
as defined in the bank loan agreement, will become effective if availability under the Bank
Facility is less than $5,000,000. The Company did not comply with the fixed charge coverage ratio
at July 3, 2010; however, the Companys
availability under the Bank Facility exceeded $5,000,000 at July 3, 2010 and, accordingly, the
covenant regarding this ratio did not apply at the end of the second quarter of 2010. The Company
expects to have availability under the Bank Facility in excess of $5,000,000 during the remainder
of 2010.
12
The Companys ability to borrow under the Bank Facility is dependent upon a borrowing base
calculation consisting of eligible accounts receivable and inventories, as well as compliance with
the terms of the Bank Facility. While the Company expects to comply with the Bank Facility, in the
event that it is in default, the bank could declare all obligations then outstanding to be
immediately due, terminate the Bank Facility extended to the Company and take certain other actions
as a secured creditor, which could adversely affect the Companys liquidity and business.
Among the provisions of the Bank Facility that the bank may consider in determining if the
Company is in default is whether any change in the Companys condition could reasonably be expected
to have a material adverse effect on the business, operations, condition (financial or otherwise)
or prospects of the Company or the value of any material collateral, or whether any event or
circumstance impairs the ability of the Company to repay any obligations owed under the Bank
Facility. If a default occurs, the Company could attempt to obtain a waiver from the bank, but
there is no assurance that the bank would grant such a waiver.
The Company believes that its cash and availability under its Bank Facility will be adequate
to meet its short term liquidity requirements. The Company has implemented expense controls and
limitations on capital expenditures to conserve cash during the current economic downturn. We will
need to increase sales and generate cash flow from operations in future periods in order to meet
our long term liquidity needs. In the absence of adequate cash flow from operations in the future,
we may need to further restrict expenditures, sell assets, or seek additional business funding.
Recently Issued Accounting Standards
There have been no recent accounting standards or changes in accounting standards during the
six months ended July 3, 2010, that are of significance, or potential significance to the Company,
as compared to the recent accounting standards described in the Companys Annual Report on Form
10-K for the year ended December 31, 2009.
Forward-Looking Statements
Certain information and statements contained in this report, including, without limitation, in
the section captioned Managements Discussion and Analysis of Financial Condition and Results of
Operations, 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
they include future tense or dates, or are not historical or current facts, or include words such
as believes, may, expects, intends, plans, anticipates, or words of similar import.
Forward-looking statements are not guarantees of performance or outcomes and are subject to certain
risks and uncertainties that could cause actual results or outcomes to differ materially from those
reported, expected, or anticipated as of the date of this report.
13
Among the risks and uncertainties that could cause actual results or outcomes to differ
materially from those reported, expected or anticipated are general economic
conditions, including the impact of the current recession in the U.S. and elsewhere; import and
domestic competition in the furniture industry; ability of the Company to execute its business
strategies, implement its new business model and successfully
complete its business transition; our ability to grow sales and reduce expenses to eliminate our operating loss; our ability to sell the
right product mix; supply disruptions with products manufactured in China and other Asian
countries; continued credit availability under the Companys Bank Facility; market interest rates;
consumer confidence levels; cyclical nature of the furniture industry; consumer and business
spending; changes in relationships with customers; customer acceptance of existing and new
products; new home and existing home sales; financial viability of the Companys customers and
their ability to continue or increase product orders; loss of key management; and other factors
that generally affect business; and certain risks set forth in our annual report on Form 10-K for
the year ended December 31, 2009.
We do not undertake any obligation to update or revise publicly any forward-looking statements
to reflect information, events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events or circumstances.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company had no bank indebtedness in the first six months of 2010 and, therefore, no
interest rate risk.
The Company sources certain raw materials and finished furniture, primarily from China. These
purchases are fixed-price contracts and other arrangements payable in U.S. dollars and, therefore,
the Company has no material foreign currency exchange rate risk exposure. The Company does not utilize foreign currency hedging instruments.
Item 4. Controls and Procedures
Chromcraft Revingtons principal executive officer and principal financial officer have
concluded, based upon their evaluation, that the Companys disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended), were effective as
of the end of the period covered by this
Form 10-Q.
There were no changes in Chromcraft Revingtons internal control over financial reporting that
occurred during the second quarter of 2010 that may have materially affected, or are reasonably
likely to materially affect, Chromcraft Revingtons internal control over financial reporting.
14
PART II. Other Information
Item 6. Exhibits
|
|
|
|
|
|
3.1 |
|
|
Certificate of Incorporation of the Registrant, as amended, filed as Exhibit 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. |
|
|
|
|
|
|
3.2 |
|
|
By-laws of the Registrant, as amended, filed as Exhibit 3.2 to Form 8-K, as filed with the
Securities and Exchange Commission on October 16, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
10.23 |
|
|
Chromcraft Revington, Inc. Employee Stock Ownership and Savings Plan ESOP Component Trust, dated May 13, 2010
by and between the Registrant and Reliance Trust Company (as successor Trustee) (filed herewith). |
|
|
|
|
|
|
10.34 |
|
|
Amendment No. 3 to the Term Loan and Security Agreement, dated May 13, 2010, by and between the Registrant and Reliance
Trust Company (as successor Trustee) (filed herewith). |
|
|
|
|
|
|
10.90 |
|
|
Restricted Stock Award Agreement, dated July 30, 2010 between the Registrant and Ronald H.
Butler (filed herewith). |
|
|
|
|
|
|
10.91 |
|
|
Employment Agreement, dated April 23, 2007 between the Registrant and William B. Massengill
(filed herewith). |
|
|
|
|
|
|
10.92 |
|
|
Form of Award Letter regarding short-term
incentive cash bonus opportunity under the 2007 Executive Incentive Plan (filed
herewith). |
|
|
|
|
|
|
10.97 |
|
|
Form of Performance Share and Restricted Stock Award Agreement under the 2007 Executive Incentive Plan (filed herewith). |
|
|
|
|
|
|
10.98 |
|
|
Form of Restricted Stock Award Agreement under the Directors Stock Plan (filed herewith). |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer required pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
|
|
|
|
|
|
31.2 |
|
|
Certification of Vice President Finance and Principal Financial Officer required pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
|
|
|
|
|
|
32.1 |
|
|
Certifications of Chief Executive Officer and Vice President Finance and Principal
Financial Officer required pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith). |
15
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.
(Registrant)
|
|
Date: August 17, 2010 |
By: |
/s/ Ronald H. Butler
|
|
|
|
Ronald H. Butler, |
|
|
|
Chairman and Chief Executive
Officer |
|
|
|
|
Date: August 17, 2010 |
By: |
/s/ Myron D. Hamas
|
|
|
|
Myron D. Hamas, |
|
|
|
Vice President Finance and
Principal Financial Officer |
|
16