Chromcraft Revington, Inc.

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Chromcraft Revington, Inc.

1100 N. Washington Street
Delphi, Indiana 46923
U.S.A.
(317) 564-3500
Fax: (317) 564-3722

Public Company
Incorporated: 1992
Employees: 1,400
Sales: $134.1 million
Stock Exchanges: New York
SICs: 2511 Wood Household Furniture; 2512 Upholstered Household Furniture; 2514 Metal Furniture; 2522 Office Furniture Except Wood; 2531 Public Building & Related Furniture

Chromcraft Revington, Inc., through its subsidiaries, designs, manufactures, and sells furniture for home and commercial use throughout the United States. Under the Chromcraft, Peters-Revington, and Silver brand names, its product lines compete in three market segments: casual dining furniture, occasional furniture, and commercial furniture. The company is among the lowest-cost producers in the furniture industry and regards itself as the second largest manufacturer of casual dining furniture.

Chromcraft Revington was formed in February 1992, when Mohasco Corporation announced it wanted to take two of its divisions, Chromcraft Corporation and Peters-Revington Corporation, public as one company. Within a month Chromcraft and Peters-Revington became wholly owned subsidiaries of the new company. At the same time, Chromcraft Revington completed its initial public offering of 2.5 million shares of its common stock at $11 per share on the NASDAQ exchange and restructured its long-term debt. Three years later, in April 1995, the company acquired the Silver Furniture Co., Inc., and in October 1995, Chromcraft Revington transferred its common stock to the New York Stock Exchange and changed its ticker symbol to CRC.

Although the company was relatively young, both Chromcraft and Peters-Revington had been making furniture since 1946. Chromcraft was founded in Mississippi and was credited with pioneering the casual dining market segment during the 1950s. It was the first company to make a tilt-swivel dining room chair, to introduce molded fire-retardant foam in upholstered products, and to plate with real brass. Peters-Revington was established in Delphi, Indiana, and used American hardwoods such as cherry, oak, and maple in the manufacture of coffee tables, end tables, and other occasional tables.

During the 1960s, after more than 15 years as independent companies, the two furniture makers would become involved in some of the major changes beginning to occur in the furniture industry. Before that time, the majority of the approximately 5,350 American furniture companies were still small, inefficient, and generally opposed to technological change. Few of the companies spent money on consumer research, development, or marketing. “This industry has always believed that there are only two ways to stimulate business. Bring out something new or cut prices,” David Brunn, president of Drexel Furniture Co., was quoted as saying in the February 1967 Forbes.

Most furniture companies were controlled or managed by their founders or the founders’ families. Only 18 companies were publicly owned in 1967 and two-thirds of the companies employed fewer than 20 people. Even the largest company, Kroehler Manufacturing Company, accounted for less than three percent of the industry’s sales. Most companies were based in the South and turned out lower-priced wood furniture, since southern forests provided inexpensive lumber and the lack of unions assured a cheap labor force. But while the furniture was inexpensive, its quality often left much to be desired. Companies in the North, with higher wages and material costs, tended to specialize in well-designed, high-quality furniture.

The furniture market was largely untapped. People needed beds, tables, chairs, bookcases, and dressers as they married, bought homes, and had children. But according to the Bureau of Labor Statistics, in 1967 people in urban areas spent an average of only $281 per year on furniture, less than the price of a color television. Attracted by the potential of an industry with an annual growth rate of over six percent, several major corporations began buying furniture companies, bringing a transfusion of capital, professional management, and national marketing to the industry. Magnavox, Massey-Ferguson, and confection maker Dolley Madison each bought furniture manufacturing concerns, and Litton Industries acquired wood, metal, and upholstery companies.

The Mohasco Corporation, which was then the maker of Mohawk Carpets and the largest carpet manufacturer in the country, was one of several corporations that saw furniture as the core of a new retail home-furnishings industry. Such an industry would offer consumers a coordinated package of furniture, carpet, textile, and home accessories. In 1963, Mohasco purchased Chromcraft, and Peters-Revington, along with Super Sagless Spring Corp., which made the mechanisms for reclining chairs and sleep sofas. Its buying spree continued with Barcolo Manufacturing, the maker of the Barcolounger reclining chair, and the Stratford Corporation, which manufactured the Stratoliner recliner. For a total cash outlay of $18.5 million, Mohasco assembled a multi-product furniture division with sales of over $60 million.

Mohasco’s furniture companies became separate divisions of the corporation. A few years later, Mohasco expanded its home-furnishings activities with the purchase of Cort Furniture Rental operations, and the initiation of an interior furnishings distribution business.

While the furniture divisions regularly made money, the carpet division was a continual earnings troublemaker. In 1980, Mohasco lost $2.2 million, its poorest performance in a decade, according to a 1984 Forbes article. In response, the company named Herbert Broner president and CEO. Broner, who had come to Mohasco in 1972, closed plants and cut 500 headquarter jobs. He also moved carpet staff to Atlanta and rental furniture staff to Washington, D.C., closer to the company’s major markets, and sold the interior furnishings distribution business. The $70 million proceeds from that sale helped cut corporate debt by half.

Broner’s efforts appeared to work, as earnings for 1981 rose to a record $15 million, but in 1982 Mohasco posted a $9 million loss. In 1983, the company earned $13 million but had slipped from third to fourth place in the carpet industry, as Burlington Industries, World Carpets, and Shaw Industries had increasingly automated their carpet mills.

Chromcraft and Peters-Revington continued to grow, however. Chromcraft added more lines of commercial furniture, including office chairs and conference tables, as well as airport and lounge seating. Chromcraft held patented design features on its chairs and continued to obtain patents on new designs. In 1985 Peters-Revington began expanding its line by adding sets of shelves, often with cabinets or bureaus, that could be arranged along a wall in various combinations. These wall systems were followed in 1987 by entertainment systems, which combined in single pieces of furniture storage spaces for a television set, a stereo and related components, and video components. In 1989 the company began producing bookcases and library systems, and in 1991, curio stands.

In 1988, Mohasco received takeover bids from 17 companies. To avoid a hostile takeover, the company merged with MHS Holdings Corp., an affiliate of Citicorp Investments Inc., in a $516 million leveraged buyout, and went private. As a result of the buyout, Mohasco became a wholly-owned subsidiary of Fairwood Corporation.

During the year it took to complete that transaction, Broner stepped down as CEO, and Mohasco sold both Mohawk Carpets and Cort Furniture Rental to finance the takeover defense. The company also moved from Amsterdam, New York, where it had been headquartered since 1878, to Fairfax, Virginia, a suburb of Washington, D.C.

In September 1989, Robert W. Hatch, previously with General Mills’ furniture division and Interstate Bakeries, was named CEO of the scaled-down organization, which had annual sales of $400 million and 6,000 employees. In addition to Chromcraft and Peters-Revington, Mohasco’s remaining divisions were Barcolounger Corp., Stratford, and Super Sagless Corp. In a 1989 Washington Post article, Hatch indicated that the most marketable aspect of the firm’s production were the recliners and sofa beds, which were more economical because of their dual functions.

The late 1980s and early 1990s were a terrible time for the entire furniture industry. High interest rates slowed housing sales. Foreign competition increased until it accounted for onethird of the domestic furniture market, and prices for most wood doubled. The value of furniture industry shipments declined by 2.3 percent between 1989-1991, with metal furniture shipments, Chromcraft’s specialty, falling by over six percent in value. 1990 was the worst year for Chromcraft and Peters-Revington, with sales dropping from $117.1 million to $114.7 million and net earnings falling from $2.5 million to $229,000. Operations improved somewhat in 1991, with combined net earnings of the two subsidiaries of $1.9 million on sales of $117.7 million.

In February 1992, Mohasco decided to concentrate on its mechanized furniture products and announced it was seeking SEC permission to take Chromcraft and Peters-Revington public as one company. Chromcraft Revington, to be based in Delphi, Indiana, would continue to sell residential and commercial furniture under the Chromcraft and Peters-Revington trade names through its two wholly owned subsidiaries.

The president and CEO of the new company was Michael E. Thomas, who had served as president of Peters-Revington since 1981. H. Martin Michael, president of Chromcraft Corporation, was named executive vice-president, while Frank T. Kane became vice-president of finance and CFO. Before joining the company in 1992, Kane was employed by Amalgamated Investment Corp. and its wholly-owned subsidiary, Papercraft Corporation.

The Chromcraft subsidiary continued to manufacture mid-to-higher priced casual dining furniture and medium-priced commercial furniture and had 35 percent of the high-priced dining-room market. Its dining room furniture was designed for use in family rooms, recreation rooms, country kitchens, and apartments without formal dining rooms. Coordinated dining suites in contemporary or traditional styles included tables manufactured from metal, wood, glass, faux marble, and other materials, along with stationary and tilt-swivel chairs, pedestal chairs, or barstools. Chairs were upholstered in a variety of fabrics, leathers, and vinyls. In 1994 Chromcraft expanded its wrought iron offerings and introduced wicker and rattan products as well.

An employee sales force and independent representatives sold the Chromcraft furniture nationwide to specialty retailers of casual furniture, general furniture retailers, and departments stores, including J.C. Penney Inc., Harverty Furniture Inc., and Nebraska Furniture Mart.

Commercial furniture made up one-third of Chromcraft business. The commercial furniture products included stationary and tilt-swivel office chairs, conference tables, and loungearea seating products for airports, hospitals, and other public waiting areas. Chromcraft’s STAXX line, for example, provided stackable metal-frame chairs for auditoriums, classrooms, cafeterias, and meeting rooms. Office chairs were offered in both contemporary and traditional styles and were upholstered in various grades and colors of fabric or leather. They included executive models with high backs, management models, ergonomic computer task chairs, and secretarial models with no arm rests. A separate employee sales force and independent representatives sold the commercial furniture to a dealer network throughout the United States. These dealers in turn marketed the furniture to architects, specifiers, and designers, as well as to businesses.

Chromcraft manufactured its furniture in Senatobia, Mississippi. Operations at its 530,000 square foot plant included metal fabricating, plating, painting, wood finishing, and chair foam production. Except for certain lines, most products were made to customer specifications within five weeks of the order and, therefore, were not carried in stock.

Peters-Revington manufactured moderately priced occasional furniture made of cherry, oak, and maple in traditional, contemporary, and country styles. Products included tables, bookcases, entertainment centers, library and modular wall units, and curio cabinets. Many table collections included 12 or more pieces in matching styles. In addition, different products incorporated the same design and styling themes, so that customers could furnish an entire room with coordinated pieces. In 1994, the company introduced a line of home office wood furniture and received strong orders for computer desks, allwood filing cabinets, and barrister bookcases. The Chromcraft Revington 1994 Annual Report indicated plans to add nonoccasional furniture, such as bedroom and dining room furniture, to the Peters-Revington line sometime in the future.

Peters-Revington sold its products through independent sales agents to a broad customer base of primarily smaller furniture retailers. At the end of 1994, that base numbered approximately 2,900 active accounts. The furniture was manufactured at a 380,000 square foot facility in Delphi, Indiana. Operations there included cutting, shaping, sanding, lacquering, finishing, and final assembly of wood furniture. In 1994, the company announced plans for a new, larger plant which was expected to be operational in the first quarter of 1996.

In its first full year operating as a corporation, company sales for 1993 increased 5.6 percent, to $126.3 million. The increase was due to higher unit volume and, to a lesser degree, price increases. All product lines-occasional furniture, dining furniture, and commercial furniture-had higher sales in 1993 than in 1992.

Sales in 1994 continued to increase, by 6.2 percent, with both divisions reporting higher sales than in 1993. While sales for all Peters-Revington’s occasional furniture lines were higher, its entertainment furniture sold particularly well. Chromcraft’s dining sales also grew, in part due to its new lines of wrought iron, wicker, and rattan furniture. A drop in airport gate seating offset higher sales of office chairs, leaving commercial furniture unchanged for 1994.

Remarking on the new company’s leadership, President Michael Thomas was “recognized in the industry as a cost-cutter who has streamlined manufacturing and dramatically improved profit margins,” according to Kathleen Berry of Investor’s Business Daily. In fact, Chromcraft and Peters-Revington were among the lowest-cost producers in the furniture industry. When wood prices jumped in 1993, Thomas cut back on labor and overhead costs to avoid passing price increases on to retailers. Between 1990 and 1994, earnings grew at a 70 percent rate as lower interest rates and a healthy housing market helped furniture sales skyrocket. Between 1992 and 1994, net earnings increased from $6.1 million to $11.2 million, and earnings per share from $1.07 to $1.91

Nevertheless, some analysts felt the company needed to be more aggressive in its marketing. “There is a limit to how much Mike can increase margins. Their growth rate could be higher with more marketing,” Kevin Duyches of George K. Baum & Co. asserted in a December 27, 1994 Investor’s Business Daily article. Sales distribution was concentrated in the Midwest and the East Coast, although some new products, such as the wicker and rattan pieces, helped sales in California, the Southwest, and Florida. According to Investor’s Business Daily, the company’s customer base increased about five percent between 1992 and 1994.

Duyches noted that the company had about $8 million to $9 million of excess cash a year, which was used to fund internal expansion. At the end of 1994, the company had no long-term debt. In April 1995, Chromcraft Revington acquired Silver Furniture Co., Inc., a manufacturer and importer of occasional tables, for a total price of $11.15 million. The Knoxville, Tennessee, company, which had 1994 sales of $30 million, merged with Chromcraft Revington as a wholly owned subsidiary. With the purchase of Silver Furniture, Chromcraft Revington’s long-term debt stood at $6.6 million at the end of the third quarter of 1995.

Sales for that same quarter were $39.1 million, an increase of 18.6 percent over the same period in 1994. For the ninemonth period ending September 30, sales had increased 11.4 percent to $112.4, with net earnings of $1.51 per share. These increases reflected the operations of the newest subsidiary, Silver Furniture. Excluding Silver, sales were lower for the quarter and nine months by three percent and 2.2 percent, respectively, as compared to the same periods in 1994. President Thomas blamed those numbers on the sluggishness of retail furniture sales overall.

As the first half of the 1990s ended, the residential furniture industry in the United States was still highly fragmented, with over 1,000 manufacturers. However, many of these companies did not compete directly with Chromcraft Revington. The commercial furniture segment of the industry was more concentrated and was dominated by a few very large companies, all of which had greater resources than Chromcraft. Within this environment, Chromcraft Revington was financially healthy and looking forward to using its new facility to add bedroom furniture to its product line. As an efficient, low-cost producer of brands associated with quality and design innovation, the company appeared well-positioned for continued expansion in its markets.