UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 1, 2000
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)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding for each of the registrant's classes of common
stock, as of the latest practicable date:
Common Stock, $.01 par value -- 9,693,248 shares as of August 2, 2000
<PAGE>
Table of Contents
Chromcraft Revington, Inc.
Page Number
-----------
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Earnings - Three and
Six Months Ended July 1, 2000 and July 3, 1999 . . . . . 3
Condensed Consolidated Balance Sheets - July 1, 2000,
December 31, 1999 and July 3, 1999 . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended July 1, 2000 and July 3, 1999 . . . . . . . 5
Notes to Condensed Consolidated Financial Statements -
July 1, 2000 . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Earnings (unaudited)
Chromcraft Revington, Inc.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 65,667 $ 55,881 $139,407 $117,779
Cost of sales 49,573 42,034 105,198 88,417
-------- -------- -------- --------
Gross margin 16,094 13,847 34,209 29,362
Selling, general and administrative expenses 9,121 7,665 18,760 15,847
-------- -------- -------- --------
Operating income 6,973 6,182 15,449 13,515
Interest expense 513 80 991 164
-------- -------- -------- --------
Earnings before income tax expense 6,460 6,102 14,458 13,351
Income tax expense 2,536 2,410 5,675 5,291
-------- -------- -------- --------
Net earnings $ 3,924 $ 3,692 $ 8,783 $ 8,060
======== ======== ======== ========
Earnings per share of common stock
Basic $ .40 $ .35 $ .90 $ .75
======== ======== ======== ========
Diluted $ .40 $ .34 $ .88 $ .73
======== ======== ======== ========
Shares used in computing earnings per share
Basic 9,713 10,602 9,812 10,687
======== ======== ======== ========
Diluted 9,865 10,923 9,935 11,015
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
Condensed Consolidated Balance Sheets (unaudited)
Chromcraft Revington, Inc.
(In thousands)
<TABLE>
<CAPTION>
July 1, July 3, December 31,
2000 1999 1999
-------- -------- --------
Assets
------
<S> <C> <C> <C>
Cash $ - $ - $ 1,148
Accounts receivable 33,165 29,701 29,574
Inventories 57,234 39,004 50,450
Other assets 4,036 5,417 3,642
-------- -------- --------
Current assets 94,435 74,122 84,814
Property, plant and equipment, net 44,185 37,103 44,480
Intangibles and other assets 29,182 21,585 29,841
-------- -------- --------
Total assets $167,802 $132,810 $159,135
======== ======== ========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 9,644 $ 8,526 $ 8,200
Accrued liabilities 15,433 11,478 15,851
Revolving credit facility 28,100 - 26,700
-------- -------- --------
Current liabilities 53,177 20,004 50,751
Revolving credit facility - 6,600 -
Deferred compensation and other liabilities 9,879 8,069 8,614
-------- -------- --------
Total liabilities 63,056 34,673 59,365
Stockholders' equity 104,746 98,137 99,770
-------- -------- --------
Total liabilities and stockholders' equity $167,802 $132,810 $159,135
======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
Condensed Consolidated Statements of Cash Flows (unaudited)
Chromcraft Revington, Inc.
(In thousands)
Six Months Ended
--------------------
July 1, July 3,
2000 1999
-------- --------
Operating Activities
Net earnings $ 8,783 $ 8,060
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 3,153 2,291
Deferred income taxes 83 266
Changes in assets and liabilities
Accounts receivable (3,591) (2,817)
Inventories (6,784) (874)
Accounts payable and accrued liabilities 1,026 102
Other 825 (240)
-------- --------
Cash provided by operating activities 3,495 6,788
-------- --------
Investing Activities
Capital expenditures (2,278) (1,986)
Proceeds from sales of property, plant and equipment 42 1,038
-------- --------
Cash used in investing activities (2,236) (948)
-------- --------
Financing Activities
Net borrowings under revolving credit facility 1,400 1,200
Proceeds from exercise of stock options - 700
Repurchase of common stock (3,807) (7,740)
-------- --------
Cash used in financing activities (2,407) (5,840)
-------- --------
Decrease in cash (1,148) -
Cash at beginning of period 1,148 -
-------- --------
Cash at end of period $ - $ -
======== ========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
Notes to Condensed Consolidated Financial Statements (unaudited)
Chromcraft Revington, Inc.
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statement presentation.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended July 1, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the consolidated
financial statements and footnotes thereto included in Chromcraft Revington's
annual report on Form 10-K for the year ended December 31, 1999.
Note 2. 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
152,000 and 123,000 for the three and six months ended July 1, 2000,
respectively, and 321,000 and 328,000 for the three and six months ended July 3,
1999, respectively.
Certain stock options to purchase shares of common stock were outstanding during
the second quarter and first six months of 2000 and 1999, but were not included
in the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the common shares during
those periods and, therefore, the effect would be antidilutive. Options
excluded from the computation of diluted earnings per share were as follows:
2000 1999
-------------------- --------------------
Average Average
Exercise Exercise
Shares Price Shares Price
-------- -------- -------- --------
Second quarter 326,060 $ 13.91 105,064 $ 18.09
First six months 386,060 $ 13.41 105,064 $ 18.09
6
<PAGE>
Note 3. Inventories
The components of inventory consisted of the following:
(In thousands)
--------------------------------
July 1, July 3, December 31,
2000 1999 1999
-------- -------- --------
Raw materials $ 18,876 $ 12,834 $ 18,521
Work in process 8,742 6,342 8,069
Finished goods 32,087 21,648 25,866
-------- -------- --------
Inventories at FIFO cost 59,705 40,824 52,456
LIFO reserve (2,471) (1,820) (2,006)
-------- -------- --------
$ 57,234 $ 39,004 $ 50,450
======== ======== ========
Note 4. Accrued Liabilities
Accrued liabilities consisted of the following:
(In thousands)
--------------------------------
July 1, July 3, December 31,
2000 1999 1999
-------- -------- --------
Employee benefit plans $ 5,296 $ 2,923 $ 5,434
Salaries, wages and commissions 2,208 1,882 1,907
Vacation and holiday pay 1,135 1,099 1,162
Workers' compensation plans 1,382 1,299 1,451
Other accrued liabilities 5,412 4,275 5,897
-------- -------- --------
$ 15,433 $ 11,478 $ 15,851
======== ======== ========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Chromcraft Revington designs, manufactures and sells residential and commercial
furniture through its wholly owned subsidiaries Chromcraft Corporation
("Chromcraft"), Peters-Revington Corporation ("Peters-Revington"), Silver
Furniture Co., Inc. ("Silver Furniture"), Cochrane Furniture Company, Inc.
("Cochrane Furniture") and Korn Industries, Incorporated ("Korn Industries").
7
<PAGE>
The following table sets forth the results of operations of Chromcraft Revington
for the three and six months ended July 1, 2000 and July 3, 1999 expressed as a
percentage of sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 75.5 75.2 75.5 75.1
-------- -------- -------- --------
Gross margin 24.5 24.8 24.5 24.9
Selling, general and administrative expenses 13.9 13.7 13.4 13.4
-------- -------- -------- --------
Operating income 10.6 11.1 11.1 11.5
Interest expense .8 .2 .7 .2
-------- -------- -------- --------
Earnings before income tax expense 9.8 10.9 10.4 11.3
Income tax expense 3.8 4.3 4.1 4.5
-------- -------- -------- --------
Net earnings 6.0 % 6.6 % 6.3 % 6.8 %
======== ======== ======== ========
</TABLE>
The operations of Korn Industries, acquired September 2, 1999, are included in
the Condensed Consolidated Statements of Earnings from the date of acquisition.
Three and Six Months Ended July 1, 2000 Compared to Three and Six Months Ended
July 3, 1999
------------------------------------------------------------------------------
Sales
Consolidated sales for the three and six months ended July 1, 2000 increased
17.5% and 18.4%, respectively, from the corresponding periods of the prior year.
Sales amounts for 2000 include the operations of Korn Industries, acquired
September 2, 1999. Excluding Korn Industries, sales for the second quarter and
first six months of 2000 were slightly higher as compared to the prior year
periods. Incoming orders and shipments for the second quarter of 2000 were
impacted by a general softening in demand in the residential furniture industry.
For the three and six months ended July 1, 2000, shipments of bedroom, dining
room and commercial furniture were higher, while shipments of occasional and
upholstered furniture were lower as compared to the prior year periods.
In general, selling prices for the first six months of 2000 were slightly higher
as compared to the prior year period.
Gross Margin
Gross margin as a percentage of sales was 24.5% for the three and six month
periods ended July 1, 2000 as compared to 24.8% and 24.9% for the three and six
month periods ended July 3, 1999, respectively. The decrease in the gross
margin percentage for the second quarter and first half of 2000 was primarily
due to the inclusion of Korn Industries' operating results. Second quarter
margin improvements at Cochrane Furniture and Silver Furniture partially offset
the gross margin percentage decrease.
8
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales were 13.9%
for the second quarter of 2000 as compared to 13.7% for the second quarter of
1999. The increase in selling, general and administrative expenses as a
percentage of sales for the three months ended July 1, 2000, as compared to the
prior year period, was due, in part, to higher catalog and selling aid expenses
at Chromcraft. Selling, general and administrative expenses remained at 13.4%
of sales for the six month periods ended July 1, 2000 and July 3, 1999.
Interest Expense
Interest expense during the three and six months ended July 1, 2000 was $513,000
and $991,000, respectively, as compared to $80,000 and $164,000 for the three
and six months ended July 3, 1999, respectively. The increased interest expense
for 2000 was primarily due to higher average bank borrowings during the period
primarily as a result of the Korn Industries acquisition and the repurchase of
Chromcraft Revington's common stock.
Income Tax Expense
Chromcraft Revington's effective tax rate was 39.3% for the three and six month
periods ended July 1, 2000 and 39.5% and 39.6% for the three and six month
periods ended July 3, 1999, respectively. The decrease in the effective tax
rate for 2000 was due to lower state income taxes.
Liquidity and Capital Resources
Operating activities provided $3,495,000 of cash during the six months ended
July 1, 2000 as compared to $6,788,000 during the six months ended July 3, 1999.
The decrease in cash generated from operating activities during the first half
of 2000 as compared to the prior year period was primarily due to an increase in
working capital investment in accounts receivable and inventories. Accounts
receivable increased $3,591,000 during the first six months of 2000 as compared
to an increase of $2,817,000 during the same period last year. The increase was
primarily due to the higher sales volume. Inventories increased $6,784,000
during the period as compared to an increase of $874,000 during the first six
months of 1999. The increased inventory level was due, in part, to a planned
buildup of finished goods inventory at Korn Industries to better serve
customers.
Investing activities used $2,236,000 and $948,000 of cash during the six months
ended July 1, 2000 and July 3, 1999, respectively. Capital expenditures were
$2,278,000 for the first six months of 2000 as compared to $1,986,000 during the
first half of 1999. Chromcraft Revington expects capital expenditures to be
approximately $4,500,000 for the year ending December 31, 2000. During the
first six months of 1999, Chromcraft Revington received cash proceeds of
$1,038,000 in connection with several asset disposals as compared to $42,000
during the first six months of 2000.
Financing activities used $2,407,000 and $5,840,000 of cash during the first six
months of 2000 and 1999, respectively, primarily to acquire shares of Chromcraft
Revington's common stock. During the first six months of 2000, Chromcraft
Revington purchased, under a stock repurchase plan, 423,900 shares of its common
9
<PAGE>
stock for $3,807,000. During the same period of 1999, 486,800 shares of common
stock were purchased for $7,740,000. At July 1, 2000, Chromcraft Revington had
unused capacity under its revolving credit facility, after reduction for
outstanding letters of credit, of $29,364,000. The revolving credit facility
matures December 20, 2000. Management expects that a new long-term bank
agreement will be in place before the present facility expires.
Forward-Looking Statements
Certain matters included in this discussion are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Certain forward-looking statements are contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations." These forward-
looking statements can be generally identified as such because the context of
the statements includes words such as "plans," "may," "anticipates," "estimates"
and "expects" or words of similar import. All forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reported or expected as of the date of this report.
Among the risks and uncertainties that could cause actual results to differ
materially from those reported or anticipated are (i) general economic
conditions, (ii) cyclical nature of the furniture industry, and (iii)
competition in the furniture industry.
Part II. Other Information
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
(a) Chromcraft Revington held its annual meeting of stockholders on
May 5, 2000.
(b) At the annual meeting, the holders of the common stock of Chromcraft
Revington elected five directors to serve until the next annual meeting
of stockholders and until their successors are duly elected and
qualified. Set forth below are the votes cast for each director.
Directors For Withheld
------------------ --------- --------
David L. Kolb 8,429,187 29,855
Larry P. Kunz 8,429,187 29,855
M. Saleem Muqaddam 8,429,187 29,855
Michael E. Thomas 8,429,187 29,855
Warren G. Wintrub 8,429,187 29,855
Item 5. Other Information
If a stockholder proposal is introduced at the 2001 Annual Meeting
without any discussion of the proposal in the proxy statement, and if
the proponent does not notify Chromcraft Revington on or before
February 21, 2001, as required by Rule 14a-4(c)(1) under the Securities
Exchange Act of 1934, of the intent to raise such proposal at the
Annual Meeting, then proxies received by Chromcraft Revington for the
2001 Annual Meeting will be voted by the persons named as proxies in
their discretion in regard to such proposal. Notice is to be given to
10
<PAGE>
Chromcraft Revington in writing at its principal office, 1100 North
Washington Street, Delphi, Indiana 46923, directed to the attention of
the Secretary.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.55 Chromcraft Revington, Inc. Long Term Executive Incentive Plan
(as amended and restated effective January 1, 2000).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
July 1, 2000.
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 14, 2000 /s/ Frank T. Kane
--------------- ----------------------------
Frank T. Kane
Vice President - Finance
(Duly Authorized Officer and
Chief Financial Officer)
11
<PAGE>
EXHIBIT (10.55)
CHROMCRAFT REVINGTON, INC.
LONG TERM EXECUTIVE INCENTIVE PLAN
(As Amended and Restated Effective January 1, 2000)
ARTICLE I
Introduction
1.1 Objective. The Long Term Executive Incentive Plan of Chromcraft
Revington, Inc. is designed to focus the efforts of the Key Executives of the
Company and its Subsidiaries on continued, long term improvement in the
profitability of the Company and its Subsidiaries with the objective of
providing an adequate return to shareholders on their investment in the Company.
The Plan provides for the award and payment of long term incentive compensation
in the form of current and deferred cash compensation and options to acquire
shares of the Company's common voting stock. This constitutes an amendment and
restatement of the Plan and is effective with respect to Awards granted on
account of Permormance Periods ended after December 31, 1999.
1.2 Administration of the Plan. The Plan shall be administered by the
Committee. The Committee shall, subject to the limitations contained in the
Plan, have the discretion to determine the Performance Factors and Award Rates
and to establish the Performance Standards under the Plan. The Committee shall
also (i) adopt such rules and regulations as are appropriate for the proper
administration of the Plan, and (ii) make such determinations and take such
actions in connection with the Plan as it deems necessary, provided that the
Committee may take action only upon the vote of a majority of its members.
The Committee may also, in its sole discretion, make such adjustments to
Awards, Award Rates, and Performance Standards or Factors and such other terms
and conditions of the Plan that the Committee determines to be necessary and
reasonable.
While the Committee may appoint individuals to act on its behalf in the
administration of the Plan, it shall have the sole, final and conclusive
authority to administer, construe and interpret the Plan. The Committee's
determinations and interpretations shall be final and binding on all persons,
including the Company, its shareholders and persons having any interest in
Awards. Any notice or document required to be given to or filed with the
Committee will be properly given or filed if delivered or mailed, by certified
mail, postage prepaid, to the Committee at 1100 N. Washington Street, Delphi,
Indiana, 46923-0238.
Definitions
1.3 Definitions. Whenever the initial letter of the following words or
phrases is capitalized in the Plan, including any Supplements, they shall have
the respective meanings set forth below unless otherwise defined herein:
<PAGE>
(a) "Award" means the cash compensation component and the stock
option component paid and granted, respectively, to a Key Executive
pursuant to the Plan.
(b) "Award Rates" means the amount of cash and the estimated value
of stock options (prior to any adjustments which may be made by the
Committee under Section 3.8(e)), expressed as a percentage which
ranges from zero percent (0.0%) to one hundred fifty percent (150%)
of Base Salary for a calendar year, as determined by the Committee,
applicable to a Key Executive for the Performance Period which ends
with such calendar year.
(c) "Base Salary" means the regular base salary actually paid by the
Company or a Subsidiary to an employee while such employee is a Key
Executive during a specified period, exclusive of additional forms of
compensation such as bonuses, payments under the Plan, other
incentive payments, automobile allowances, tax gross ups and other
fringe benefits. Base Salary shall be calculated without regard to
deductions pursuant to (i) Section 401(k) salary deferral
contributions under the Chromcraft Revington Savings Plan and the
Cochrane Furniture 401(k) Profit Sharing Plan; (ii) Section 125
salary deferral contributions under the Chromcraft Revington Earnings
Reduction Plan, the Silver Furniture Co., Inc. Employee Benefit Plan
and the Cochrane Furniture Company Flexible Benefits Plan; and (iii)
salary deferral contributions under the SERP or the Silver SERP.
(d) "Board" means the Board of Directors of the Company.
(e) A "Change in Control of the Company" as used herein shall be
deemed to have occurred when (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than 399
Venture Partners, Inc., shall be the beneficial owners, directly or
indirectly, of voting equity securities of the Company representing
more than twenty-five percent (25%) of the Company's then issued and
outstanding voting equity securities; (ii) any merger, consolidation
or combination of the Company occurs unless the Company is the
surviving entity, with no change in the Company's executive officers
or a majority of its directors; (iii) any sale or other disposition
of all or substantially all of the assets of the Company occurs; or
(iv) during any two (2) year period, a majority of the members of the
Board of Directors of the Company shall be changed by filling
vacancies or newly created directorships unless such change in the
membership is approved by a majority of the directors then in office.
(f) "Company" means, unless otherwise stated, Chromcraft Revington,
Inc., a corporation organized and existing under the laws of the
State of Delaware, or any successor (by merger, consolidation,
purchase or otherwise) to such corporation which shall have assumed
the obligations of such corporation under the Plan and the
Subsidiaries of the Company.
2
<PAGE>
(g) "Committee" means the Compensation Committee of the Board.
(h) "EBIT" means the earnings before net interest charges and taxes
of the Company (on a consolidated basis) or Subsidiary (on an
individual basis), as may be applicable, for a specified period as
reflected on the Company's or Subsidiary's financial statements for
such period.
(i) "Effective Date" means January 1, 1998, which is the original
effective date of the Plan.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Financial Plan" means that portion of the financial plans of
the Company and each of its Subsidiaries which relates to a specified
period, as presented to and approved by the Board prior to the year
to which the financial plan first relates. It is noted that the
Company's Financial Plan is presented, and will be used under the
Plan, on a consolidated basis which takes into account the Financial
Plans of the Subsidiaries; and, the Financial Plan for each
Subsidiary is presented, and will be used under the Plan, solely with
respect to such Subsidiary.
(l) "For Cause" means:
(i) the willful and continued failure of a Key Executive to
perform his required duties as an officer or employee of
the Company or any Subsidiary;
(ii) any action by a Key Executive which involves willful
misfeasance or gross negligence;
(iii) the requirement of or direction by a federal or state
regulatory agency, which has jurisdiction over the Company
or any Subsidiary, to terminate the employment of the Key
Executive;
(iv) the conviction of the Key Executive for the commission of
any criminal offense which involves dishonesty or breach
of trust;
(v) any intentional breach by the Key Executive of a material
term, condition or covenant of any agreement between the
Key Executive and the Company or any Subsidiary; or
(vi) any breach by the Key Executive of a provision of his
employment agreement with the Company or Subsidiary which
requires the forfeiture of his benefits hereunder or under
the Option Plan.
3
<PAGE>
(m) "Key Executive" means those executive employees of the Company
and Subsidiaries who are designated by the Committee as Key
Executives.
(n) "Option Plan" means the 1992 Chromcraft Revington, Inc. Stock
Option Plan, as amended.
(o) "Peer Group" means the Company and the corporations in the
furniture industry determined by the Committee from time to time to
constitute the members of the Peer Group.
(p) "Performance Factors" means the financial performance factors
with respect to the Company and the Subsidiaries as determined by the
Committee for each Performance Period.
(q) "Performance Period" shall mean the following periods:
(i) The 1998 Performance Period shall be the 1998 calendar
year;
(ii) The 1999 Performance Period shall be the twenty-four (24)
consecutive month period ending December 31, 1999; and
(iii) The 2000 Performance Period and all subsequent Performance
Periods shall be, respectively, the thirty-six (36)
consecutive month period ending December 31, 2000 and each
thirty-six (36) consecutive month period ending on each
December 31 thereafter.
(r) "Performance Standard(s)" means the threshold, target and
maximum financial performance levels with respect to the Company and
the Subsidiaries as determined by the Committee for each Performance
Period.
(s) "Permanent and Total Disability" means any disability that would
qualify as permanent and total disability under the long term
disability plan sponsored by the Company.
(t) "Plan" means the long term executive incentive plan contained in
this instrument and any subsequent amendment to this instrument,
which shall have been adopted by the Board or Committee as provided
in Section 4.1, known as the Chromcraft Revington, Inc. Long Term
Executive Incentive Plan.
(u) "ROE" means return on equity, calculated by taking a
corporation's net earnings for a twelve month period divided by the
average of beginning and ending shareholders' equity as reflected on
the financial statements of the corporation for such period. For a
4
<PAGE>
Performance Period, ROE is the average of the fiscal year ROE
percentages during the applicable period.
(v) "Sales" means the net sales of the Company or Subsidiary, as may
be applicable, for a specified period as reflected on the Company's
or Subsidiary's financial statements for such period.
(w) "SERP" means the Chromcraft Revington, Inc. Supplemental
Executive Retirement Plan and any amendments thereto.
(x) "Silver SERP" means the nonqualified deferred compensation plan
and any amendments thereto sponsored by Silver Furniture Co., Inc.
(y) "Subsidiary or Subsidiaries" mean Chromcraft Corporation
("Chromcraft"), Peters-Revington Corporation ("Peters-Revington"),
Cochrane Furniture Company, Inc. ("Cochrane"), Silver Furniture Co.,
Inc. ("Silver") and such other subsidiary corporations of the Company
which are designated by the Board or Committee.
ARTICLE II
Eligibility and Participation
Participation in the Plan is limited to Key Executives. Committee members
shall not be eligible to receive grants of Awards while serving as Committee
members. A Key Executive will become covered by the Plan effective as of the
later to occur of the following dates:
(a) The Effective Date; or
(b) The date on which an employee of the Company or Subsidiary is
designated by the Committee as a Key Executive.
A Key Executive who becomes covered by the Plan after the commencement of a
Performance Period but who would otherwise be entitled to the grant of an Award
for such Performance Period shall be entitled, subject to the other provisions
of the Plan, to the grant of a pro rata portion of any Award based on the ratio
that the number of calendar days in the Performance Period he was actively
employed as a Key Executive bears to the number of days in the Performance
Period.
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ARTICLE III
Calculation of Potential Award Grants
3.1 Components of Calculation of Potential Award Grants. For each
Performance Period, the Committee shall establish the following components for
calculating Award grants with respect to the Company and the Subsidiaries:
(a) Performance Factors for the Company and Subsidiaries.
(b) The relative weight accorded each Performance Factor.
(c) The target, threshold and maximum Award Rates for each Key
Executive expressed as a percentage of Base Salary for a specified
period.
(d) The Performance Standards which reflect the threshold, target
and maximum levels of the Company's consolidated or Subsidiary's
individual Performance Factors which must be satisfied for an Award
payment to be made.
(e) With respect to the stock option component, such other factors
as the Committee may determine in its discretion.
3.2 Communication of Award Opportunity Levels. Not later than April 15
of each Performance Period (except for the 1998 and 1999 Performance Periods),
the Award Rates, Performance Factors (and their respective weightings), and
Performance Standards of the Award shall be communicated by the Committee in
writing to Key Executives. Such communication shall not constitute the grant
of an Award. For all purposes of the Plan, the stock option component of Awards
shall be considered to be granted when (i) the Performance Standards applicable
thereto have been satisifed, and (ii) the stock option agreement relating
thereto has been executed and delivered.
3.3 Form of Payment of Awards. Subject to the limitations contained in
Sections 3.9 and 3.10, all Awards grants shall be made to eligible Key
Executives in the following two (2) components:
(a) Subject to the Key Executive's right to defer the receipt of the
payment as provided in Section 3.7, fifty percent (50%) in a single
lump sum in cash.
(b) Fifty percent (50%) in options to acquire shares of the
Company's common voting stock, as provided in Section 3.8.
3.4 Time of Payment of Awards. Subject to the Key Executive's right to
defer the receipt of a cash Award grant as provided in Section 3.7, the cash
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to be paid and stock options to be granted with respect to an Award grant shall
be paid and granted, respectively, not later than ninety (90) days after the end
of the Performance Period to which the Award grant relates.
3.5 Withholding of Taxes. Each Key Executive shall be solely responsible
for, and the Company will withhold from any amounts payable under the Plan, all
applicable federal, state, city and local income taxes and the Key Executive's
share of applicable employment taxes.
3.6 Limitation on Awards. The aggregate dollar amount of Award grant
payments under the Plan for any calendar year shall not exceed five percent (5%)
of the Company's consolidated EBIT for the calendar year prior to the year in
which the Award grant payments are scheduled to be made as calculated by the
Committee in good faith as of the date on which the stock option component of
the Awards for such calendar year are scheduled to be granted. In the event
Award grant payments for any year would exceed five percent (5%) of the
Company's consolidated EBIT, the dollar amount of each Award grant shall be
reduced based on the ratio that the total dollar amount of each Key Executive's
Award grant for the year bears to the total dollar amount of all Key Executives'
Award grants for such year. Provided further, if the Company's consolidated
EBIT is below the Performance Standard threshold level for the Performance
Period, then Award grants to Subsidiary Key Executives will be limited to
seventy-five percent (75%) of each Key Executive's earned Award.
3.7 Deferred Payment of Cash Award Grants. Subject to the limitations
contained in Sections 3.9 and 3.10, a Key Executive who is also covered by the
SERP or Silver SERP may elect that the cash component of any Award grant payment
to which he is entitled under the Plan be deferred under the SERP or Silver
SERP. All deferrals of the cash component of Award grants shall be governed by
and subject to all of the applicable provisions of the SERP and Silver SERP. To
the extent any provision of the Plan conflicts with any provision of the SERP
or Silver SERP, the applicable provisions of the SERP or Silver SERP shall
control. In order for cash Award grants to be deferred under the SERP or Silver
SERP, the Key Executive must execute and deliver (i) an agreement which contains
such terms and conditions as the committee responsible for administering the
SERP or Silver SERP shall prescribe, and (ii) such documents, certificates and
other writings as may be required by the Committee or the committee which
administers the SERP or Silver SERP.
3.8 Payment of Awards in Form of Stock Options. Except as otherwise
provided in this Section 3.8, all options which are the subject of Awards grants
shall be granted, governed and subject to all of the provisions of the Option
Plan as in effect from time to time and any successor thereto. Provided
further, all Awards of stock options granted under the Plan shall be made as
follows and subject to the following additional terms and conditions:
(a) In establishing the terms and conditions of the Awards of stock
options, the Committee shall have the same powers and discretion as
are conferred on the committee responsible for administering the
Option Plan by the Option Plan document.
(b) Each year, after the total dollar amount of all Awards to be
granted with respect to the Performance Period just ended has been
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calculated, the Company shall calculate the number of options to be
granted under Section 3.3 utilizing such factors as the Committee
shall determine in its discretion.
(c) All options which are the subject of Awards shall be designated
by the committee which administers the Option Plan as either
incentive stock options ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, or as options which do
not qualify as ISOs.
(d) In order for options which are the subject of Awards to be
validly granted, such options shall have been awarded by
the committee which administers the Option Plan and the Key Executive
must execute and deliver (i) an agreement which contains such terms
and conditions as the committee which administers the Option Plan
shall prescribe, and (ii) such documents, certificates and other
writings as may be required by the Committee or the committee which
administers the Option Plan.
(e) Notwithstanding any provision of the Plan or the Option Plan to
the contrary, the Committee may, in its sole discretion, at any time
before the payment of the stock option component of an Award (even if
the application Performance Standards have been satisfied, but the
corresponding options have not been granted), make one or more
adjustments to such option component. The Committee may make such
adjustments to take into account changes in the financial performance
of the Company or any Subsidiary, changes in the price at which the
Company's common stock is traded or any other factors which occur
after an Award opportunity is communicated and before such Award is
granted. Such adjustments may include, without limitations, changes
in the number, term, exercisability and exercise price of the stock
options or withdrawal and cancellation of all or any portion of the
options.
3.9 Payment on Termination of Employment. If a Key Executive terminates
employment before the last day of a Performance Period, he will not be entitled
to any Award under the Plan for such Performance Period unless one (1) or more
of the following circumstances apply:
(a) The Key Executive dies while actively employed.
(b) The Key Executive's termination is on account of Permanent and
Total Disability.
(c) Within thirty (30) days after his termination of employment, the
Key Executive commences or recommences employment with the Company or
a Subsidiary.
(d) The Key Executive's employment is terminated by the Company or
Subsidiary for reasons other than For Cause.
(e) The Key Executive retires on or after attaining age sixty-five
(65).
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(f) The Key Executive's employment is terminated for any reason
except For Cause within one (1) year of a Change in Control of the
Company.
If the Key Executive's termination of employment is on account of one or
more of the circumstances described in subsections (a) through (e), he will be
entitled only to a pro rata portion of the cash component of any Award, as
described in Section 3.3(a), to which he would otherwise be entitled for the
Performance Period. The Award grant shall be calculated based on the ratio that
the number of days during the Performance Period in which he was actually
employed bears to the total number of days in such Performance Period.
Provided, further, if the Key Executive's termination of employment is on
account of a Change in Control of the Company, as described in subsection (f),
he will also be entitled to a pro rata portion of any Award grant, as described
in Section 3.3(b), payable solely in cash, based on the ratio specified in the
preceding sentence.
3.10 Payment on Termination of Plan. Notwithstanding any other provision
of the Plan, if the Plan is terminated effective as of a date other than the
last day of a Performance Period, all Key Executives shall be entitled only to a
pro rata portion of the cash component of any Award grant, as described in
Section 3.3(a), for the Performance Period in which the termination of the Plan
occurs. The Award grant shall be calculated based, in the case of each Key
Executive, on the ratio that the number of days during the Performance Period in
which the Plan was in existence bears to the total number of days in such
Performance Period.
ARTICLE IV
Miscellaneous
4.1 Amendment or Termination. The Board or the Committee may, at any
time, without the approval of the stockholders of the Company (except as
otherwise required by applicable law, rule or regulations or listing
requirements of any National Securities Exchange on which are listed any of the
Company's equity securities including, without limitation, any shareholder
approval requirement of Rule 1 6b-3 or any successor safe harbor rule
promulgated under the Exchange Act), alter, amend, modify, suspend or terminate
the Plan, but may not, without the consent of a Key Executive to whom an Award
has been made, make any alteration which would adversely affect an Award
previously granted under the Plan.
4.2 Conflict with Employment Agreement. To the extent any provision of
the Plan conflicts with any provision of a written employment or other agreement
between a Key Executive and the Company or any Subsidiary, the provisions of the
employment agreement shall control.
4.3 Employment Rights. The Plan does not constitute a contract of
employment and participation in the Plan will not give a Key Executive the right
to be rehired or retained in the employ of the Company or any Subsidiary, nor
will participation in the Plan give any Key Executive any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.
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4.4 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person relying
thereon considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
4.5 Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine gender, the plural shall include the singular
and the singular shall include the plural.
4.6 Action by the Board or Committee. Any action required of or
permitted by the Board or Committee under this Plan shall be by resolution of
the Board or Committee or by a person or persons authorized by resolution of the
Board or Committee.
4.7 Controlling Laws. Except to the extent superseded by laws of the
United States, the laws of Indiana, without regard to the choice of law
principles thereof, shall be controlling in all matters relating to the Plan.
4.8 Mistake of Fact. Any mistake of fact or misstatement of fact shall
be corrected when it becomes known and proper adjustment made by reason thereof.
4.9 Severability. In the event any provision of the Plan shall be held
to be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
endorsed as if such illegal or invalid provision had never been contained in the
Plan.
4.10 Effect of Headings. The descriptive headings of the Articles and
Sections of the Plan are inserted for convenience of reference and
identification only and do not constitute a part of the Plan for purposes of
interpretation.
4.11 Non-transferability. No Award payment shall be transferable, except
by the Key Executive's will or the applicable laws of descent and distribution.
During the Key Executive's lifetime, his Award grant shall be payable only to
the Key Executive or his guardian or attorney-in-fact. The payment and any
rights and privileges pertaining thereto shall not be transferred, assigned,
pledged or hypothecated by him in any way, whether by operation of law or
otherwise and shall not be subject to execution, attachment or similar process.
4.12 No Liability. No member of the Board or the Committee or any officer
or Key Executive of the Company or Subsidiary shall be personally liable for any
action, omission or determination made in good faith in connection with the
Plan. The Company shall indemnify and hold harmless the members of the
Committee, the Board and the officers and Key Executives of the Company and its
Subsidiaries, and each of them, from and against any and all loss which results
from liability to which any of them may be subjected by reason of any act or
conduct (except willful misconduct or gross negligence) in their official
capacities in connection with the administration of the Plan, including all
expenses reasonably incurred in their defense, in case the Company fails to
provide such defense. By participating in the Plan, each Key Executive agrees
to release and hold harmless each of the Company, the Subsidiaries (and their
respective directors, officers and employees), the Board and the Committee,
from and against any tax or other liability, including without limitation,
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interest and penalties, incurred by the Key Executive in connection with his
participation in the Plan.
4.13 Funding. All amounts payable under the Plan will be paid by the
Company from its general assets. The Company is not required to segregate on
its books or otherwise establish any funding procedure for any amount to be used
for the payment of benefits under the Plan. The Company may, however, in its
sole discretion, set funds aside in investments to meet its anticipated
obligations under the Plan. Any such action or set-aside amount may not be
deemed to create a trust of any kind between the Company and any Key Executive
or beneficiary or to constitute the funding of any Plan benefits. Consequently,
any person entitled to a payment under the Plan will have no rights against the
assets of the Company greater than the rights of any other unsecured creditor of
the Company.
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