<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 1, 2000
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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: 333-37135
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Omega Cabinets, Ltd.
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(Exact name of registrant as specified in its charter)
Delaware 42-1423186
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization Identification Number)
1205 Peters Drive, Waterloo, Iowa 50703
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(Address of principal executive offices)
(Zip Code)
(319) 235-5700
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(Registrants telephone number, including area code)
Not Applicable.
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether 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 [ _ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ _ ] No [ _ ] Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. On May 15, 2000, all of the
voting stock of Omega Cabinets, Ltd. was held by Omega Holdings, Inc.
("Holdings"), a Delaware corporation. As of March 15, 2000, Omega Cabinets, Ltd.
had 1,000 shares of Common Stock issued and outstanding.
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements are presented herein:
Condensed Consolidated Balance Sheets as of April 1, 2000
and January 1, 2000
Condensed Consolidated Statements of Income for the three months
ended April 1, 2000 and April 3, 1999
Condensed Consolidated Statements of Cash Flows for the three
months ended April 1, 2000 and April 3, 1999
Notes to Condensed Consolidated Financial Statements
2
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Omega Cabinets, Ltd.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 1 January 1
2000 2000
(Unaudited) (Note)
-------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 2,479,960 $ 2,234,669
Accounts receivable 28,066,093 20,172,798
Inventories (Note 2) 19,594,961 18,191,451
Other current assets 3,346,565 3,537,936
-------------------------------------
Total current assets 53,487,579 44,136,854
Property, plant and equipment 60,028,302 57,284,421
Less accumulated depreciation 11,876,049 10,876,410
-------------------------------------
48,152,253 46,408,011
Deferred financing costs, net 6,830,147 7,114,428
Goodwill, net 92,287,503 92,929,361
Other assets 914,431 862,162
Total assets $201,671,913 $191,450,816
=====================================
Liabilities and stockholder's equity (deficit)
Current liabilities:
Accounts payable and accrued expenses $ 25,159,062 $ 19,919,035
Current portion of long-term debt 15,782,679 11,387,384
-------------------------------------
Total current liabilities 40,941,741 31,306,419
Deferred income taxes 4,600,759 4,207,780
Long-term debt, less current portion 158,900,719 161,796,436
Stockholder's equity (deficit):
Common stock, $.01 par value; 10,000 shares
authorized; 1,000 shares issued and outstanding 10 10
Additional paid-in capital 82,524,555 82,598,542
Less stock notes receivable (1,887,644) (1,862,583)
Predecessor basis adjustment (11,031,662) (11,031,662)
Accumulated other comprehensive loss- foreign
currency translation adjustment (1,197,774) (1,319,083)
Retained earnings (deficit) (71,178,791) (74,245,043)
-------------------------------------
Total stockholder's equity (deficit) (2,771,306) (5,859,819)
-------------------------------------
Total liabilities and stockholder's equity (deficit) $201,671,913 $191,450,816
=====================================
</TABLE>
Note: The balance sheet at January 1, 2000 has been derived from the audited
financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
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Omega Cabinets, Ltd.
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three months ended
April 1 April 3
2000 1999
----------------------------------------
<S> <C> <C>
Net sales $73,442,894 $60,448,521
Cost of goods sold 54,262,490 43,152,806
----------------------------------------
Gross profit 19,180,404 17,295,715
Selling, general and administrative expenses 8,973,347 7,406,044
Amortization of goodwill 647,050 541,752
----------------------------------------
Operating income 9,560,007 9,347,919
Interest expense 4,399,913 4,294,406
Foreign currency transaction losses (gains) 117,201 (206,456)
----------------------------------------
Income before income taxes 5,042,893 5,259,969
Income tax expense 1,976,641 2,037,234
----------------------------------------
Net income $ 3,066,252 $ 3,222,735
========================================
</TABLE>
See accompanying notes.
4
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Omega Cabinets, Ltd.
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended
April 1 April 3
2000 1999
------------------------------------------
<S> <C> <C>
Operating activities
Net income 3,066,252 $ 3,222,735
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,944,963 1,532,635
Noncash interest income on stock notes receivable (25,061) -
Deferred income taxes 391,184 410,000
Changes in operating assets and liabilities:
Accounts receivable (7,932,578) (5,869,263)
Inventories (1,430,294) (642,406)
Other assets 134,607 230,455
Accounts payable, accrued expenses and other
liabilities 5,277,293 3,521,511
------------------------------------------
Net cash provided by operating activities 1,426,316 2,405,667
Investing activities
Purchases of property, plant and equipment (2,820,877) (1,957,275)
Payments for acquisition of business - (50,323,500)
------------------------------------------
Net cash used in investing activities (2,820,877) (52,280,775)
Financing activities
Payments for deferred financing costs - (2,725,979)
Payments of long-term debt (3,118,322) (2,292,448)
Proceeds from long-term debt 4,820,560 43,062,408
Capital contributions by parent 7,148 14,288,412
Payment to parent to redeem common stock and
options at parent level (81,135) -
------------------------------------------
Net cash provided by financing activities 1,628,251 52,332,393
Effect of foreign exchange rate changes on cash 11,601 (28,050)
------------------------------------------
Net increase in cash 245,291 2,429,235
Cash at beginning of period 2,234,669 650,703
------------------------------------------
Cash at end of period $ 2,479,960 $ 3,079,938
==========================================
</TABLE>
See accompanying notes.
5
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Omega Cabinets, Ltd.
Notes to Condensed Consolidated
Financial Statements (Unaudited)
April 1, 2000
1. Accounting Policies
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 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 statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended April 1, 2000 are not
necessarily indicative of the results that may be expected for the full 2000
fiscal year. For further information, refer to the Company's consolidated
financial statements and footnotes thereto for the year ended January 1, 2000.
2. Inventories
Inventories consist of the following:
April 1 January 1
2000 2000
----------------------------------
Raw materials $ 8,505,092 $ 8,893,729
Work-in-process 7,277,261 6,144,663
Finished goods 3,812,608 3,153,059
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$19,594,961 $18,191,451
==================================
3. 1999 Acquisition
On January 29, 1999, the Company acquired Kitchen Craft of Canada, Ltd.
("Kitchen Craft") for a purchase price of approximately $54.2 million. The
transaction was accounted for as a purchase. The accounts and transactions of
Kitchen Craft are included in the accompanying condensed consolidated financial
statements from the date of acquisition.
4. Comprehensive Income
Comprehensive income was $3,187,561 and $2,953,754 for the three months ended
April 1, 2000 and April 3, 1999, respectively.
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Omega Cabinets, Ltd.
Notes to Condensed Consolidated
Financial Statements (Unaudited) (continued)
5. Guarantor and Non-Guarantor Subsidiaries
The Company's $100 million senior subordinated notes are fully and
unconditionally guaranteed by Panther Transport, Inc. ("Panther"), the Company's
only wholly-owned subsidiary prior to 1999. Separate financial statements or
summarized financial information for Panther have not been presented since its
operations are inconsequential and its accounts and transactions represent less
than 1% of each of the consolidated total assets, liabilities, equity, net
sales, operating income, and net income of the Company. Management believes that
the separate financial statements and summarized financial information of
Panther are not material to investors.
Beginning in fiscal 1999 as a result of the Kitchen Craft acquisition, the
Company also has two wholly-owned subsidiaries which do not guarantee the senior
subordinated notes. These non-guarantor subsidiaries generally comprise the
Kitchen Craft business. Set forth below are consolidating condensed financial
statements as of April 1, 2000 and for the three months ended April 1, 2000 and
April 3, 1999, which separately reflect Kitchen Craft (amounts in thousands):
<TABLE>
<CAPTION>
The Kitchen
Company* Craft Eliminations Consolidated
----------------------------------------------------------------------------
Condensed Consolidating Balance Sheet
April 1, 2000
<S> <C> <C> <C> <C>
Current assets:
Cash $ 405 $ 2,075 $ - $ 2,480
Accounts receivable 19,957 8,109 - 28,066
Inventories 14,414 5,181 - 19,595
Other 2,545 802 - 3,347
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Total current assets 37,321 16,167 - 53,488
Property, plant and equipment, net 36,322 11,830 - 48,152
Goodwill, net 50,180 42,108 - 92,288
Other noncurrent assets 45,580 468 (38,304) 7,744
Total assets $169,403 $70,573 $(38,304) $201,672
============================================================================
Current liabilities:
Accounts payable and accrued expenses $ 18,895 $ 6,416 $ (152) $ 25,159
Current portion of long-term debt 12,968 2,815 - 15,783
----------------------------------------------------------------------------
Total current liabilities 31,863 9,231 (152) 40,942
Long-term debt, less current portion 146,920 36,563 (24,582) 158,901
Other noncurrent liabilities 3,268 1,333 - 4,601
Total stockholder's equity (deficit) (12,648) 23,446 (13,570) (2,772)
----------------------------------------------------------------------------
Total liabilities and stockholder's equity
(deficit) $169,403 $70,573 $(38,304) $201,672
============================================================================
</TABLE>
* Includes Panther which is inconsequential as described above.
7
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Omega Cabinets, Ltd.
Notes to Condensed Consolidated
Financial Statements (Unaudited) (continued)
5. Guarantor and Non-Guarantor Subsidiaries (continued)
<TABLE>
<CAPTION>
The Kitchen
Company* Craft Eliminations Consolidated
----------------------------------------------------------------------
Condensed Consolidating Statements of Income
Three months ended April 1, 2000
<S> <C> <C> <C> <C>
Net sales $50,114 $23,329 $ - $73,443
Cost of goods sold 38,577 15,686 - 54,263
----------------------------------------------------------------------
Gross profit 11,537 7,643 - 19,180
Selling, general and administrative expenses 6,197 3,423 - 9,620
Interest expense 3,590 810 - 4,400
Foreign currency transaction losses - 117 - 117
----------------------------------------------------------------------
Income before income taxes 1,750 3,293 - 5,043
Income tax expense 657 1,320 - 1,977
----------------------------------------------------------------------
Net income $ 1,093 $ 1,973 $ - $ 3,066
======================================================================
Three months ended April 3, 1999
Net sales $46,853 $13,596 $ - $60,449
Cost of goods sold 34,187 8,966 - 43,153
----------------------------------------------------------------------
Gross profit 12,666 4,630 - 17,296
Selling, general and administrative expenses 5,783 2,165 - 7,948
Interest expense 3,657 637 - 4,294
Foreign currency transaction gains - (206) - (206)
----------------------------------------------------------------------
Income before income taxes 3,226 2,034 - 5,260
Income tax expense 1,224 813 - 2,037
----------------------------------------------------------------------
Net income $ 2,002 $ 1,221 $ - $ 3,223
======================================================================
Condensed Consolidating Statements of Cash Flows
Three months ended April 1, 2000
Operating activities:
Net cash provided by operating activities $ 1,017 $ 409 $ - $ 1,426
Investing activities - purchases of property
plant and equipment (2,282) (539) - (2,821)
Financing activities:
Proceeds from long-term debt 3,026 1,795 - 4,821
Redemptions of stock, net of capital (75) - - (75)
contributions
Intercompany funding (541) 541 - -
Payments of long-term debt (2,236) (882) - (3,118)
----------------------------------------------------------------------
Net cash provided by financing activities 174 1,454 - 1,628
Effect of foreign exchange - 12 - 12
----------------------------------------------------------------------
Net increase (decrease) in cash (1,091) 1,336 - 245
Cash at beginning of period 1,496 739 - 2,235
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Cash at end of period $ 405 $ 2,075 $ - $ 2,480
======================================================================
</TABLE>
8
<PAGE>
Omega Cabinets, Ltd.
Notes to Condensed Consolidated
Financial Statements (Unaudited) (continued)
5. Guarantor and Non-Guarantor Subsidiaries (continued)
<TABLE>
<CAPTION>
The Kitchen
Company* Craft Eliminations Consolidated
---------------------------------------------------------------------------
Condensed Consolidating Statements of Cash Flows
Three months ended April 3, 1999
<S> <C> <C> <C> <C>
Operating activities:
Net cash provided by operating activities $ 4,291 $ (1,886) $ - $ 2,405
Investing activities:
Purchases of property, plant and equipment (1,617) (340) - (1,957)
Payments for acquisition of business (467) (49,856) - (50,323)
---------------------------------------------------------------------------
Net cash used in investing activities (2,084) (50,196) - (52,280)
Financing activities:
Proceeds from long-term debt 24,146 18,916 - 43,062
Capital contributions 14,288 13,571 (13,571) 14,288
Intercompany funding (36,208) 22,637 13,371 -
Payments of long-term debt (2,292) - - (2,292)
Payments for deferred financing costs (2,170) (556) - (2,726)
---------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (2,236) 54,568 - 52,332
Effect of foreign exchange - (28) - (28)
---------------------------------------------------------------------------
Net increase (decrease) in cash (29) 2,458 - 2,429
Cash at beginning of period 651 - - 651
---------------------------------------------------------------------------
Cash at end of period $ 622 $ 2,458 $ - $ 3,080
===========================================================================
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The following discussion should be read in conjunction with the
accompanying Condensed Consolidated Financial Statements for the period ended
April 1, 2000 and the Company's audited consolidated financial statements and
Annual Report on Form 10-K for the year ending January 1, 2000.
1999 Kitchen Craft Acquisition
9
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On January 29, 1999, the Company consummated the acquisition of Kitchen
Craft of Canada, Ltd. ("Kitchen Craft") as further described in the Notes to
Condensed Consolidated Financial Statements. The acquisition was accounted for
as a purchase, with Kitchen Craft consolidated with the Company effective from
the acquisition date forward. Accordingly, the Company's results of operations
for the first quarter of fiscal 1999 reflect two months of Kitchen Craft
results.
Results of Operations
Net Sales for the three months ended April 1, 2000 ("first quarter 2000") were
$73.4 million compared to $60.4 million for the comparable period in 1999
("first quarter 1999"), an increase of 21.5%. The increase in net sales in the
first quarter 2000 was primarily attributable to the acquisition of Kitchen
Craft and strong consumer spending on remodeling projects. First quarter 2000
net sales included $23.3 million for Kitchen Craft compared to $13.6 million for
the two months during first quarter 1999. Net sales for the Omega lines (custom
and semi-custom cabinetry and bath vanities) were $23.9 million in the first
quarter 2000 compared with $21.7 million for first quarter 1999, a 10.5%
increase. Omega custom and semi-custom net sales increased 17.6% and 9.7%,
respectively, driven primarily by additional selling locations at Home Depot
EXPO, Sears' The Great Indoors, and the BKBG Buying Group, an organization that
represents over 150 independent kitchen and bath dealers. Vanity sales increased
6.3% driven by strong sales at major homecenter accounts. The increase in
Omega's net sales was partially offset by $.5 million related to the Company's
decision to exit various Home Depot stores in order to better serve Home Depot's
EXPO Design Centers and independent dealers. HomeCrest stock net sales were
$26.2 million for first quarter 2000 compared with $25.2 for first quarter 1999,
a 3.9% increase, which increase was partially offset by the Company's decision
to discontinue the Affinity frameless product offering as well as softening new
home starts.
Gross Profit for first quarter 2000 was $19.2 million compared to $17.3 million
for first quarter 1999, an increase of 10.9%. As a percentage of net sales,
gross profit decreased to 26.1% in the first quarter 2000 from 28.6% in first
quarter 1999 with lower gross margins at every division. HomeCrest's gross
profit decreased to 20.4% in first quarter 2000 compared to 23.9% in first
quarter 1999 driven primarily by higher labor costs due to the short-term impact
of new and inexperienced production employees hired to support the Company's
growth. Omega's gross profit decreased to 25.7% in first quarter 2000 compared
to 30.4% in fiscal first quarter 1999 driven primarily by higher material prices
and usage related to Omega's new hardwood processing center. Kitchen Craft
gross margins decreased to 32.8% in first quarter 2000 compared to 34.1% for
first quarter 1999 driven primarily by lower volume and margins at Kitchen
Craft's twelve company-owned retail stores as well as higher material costs.
Selling, General and Administrative Expenses for first quarter 2000 were $9.0
million compared to $7.4 million for first quarter 1999, an increase of 21.2%.
As a percentage of net sales, selling, general and administrative expenses were
12.2% for the first quarter 2000 compared to 12.3% for first quarter 1999.
Selling, general and administrative expenses as a percentage of net sales at
Omega and HomeCrest for first quarter 2000 was 11.6%, similar to first quarter
1999 while Kitchen Craft improved to 13.5% for first quarter 2000 compared to
14.6% for first quarter 1999.
10
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Interest Expense for first quarter 2000 was $4.4 million compared to $4.3
million for first quarter 1999, a 2.5% increase driven primarily by additional
borrowings related to the January 29, 1999 acquisition of Kitchen Craft.
Income Taxes for first quarter 2000 was $2.0 million, similar to first quarter
1999. First quarter 2000 reflects a normalized tax rate of 39.2% compared with
38.7% in first quarter 1999 resulting from a higher tax rate at Kitchen Craft.
Net Income for first quarter 2000 was $3.1 million compared to $3.2 million for
first quarter 1999, a 1.2% decline related to the factors discussed above.
Results of Operations - Pro Forma
The results discussed above only include Kitchen Craft results since the
January 29, 1999 acquisition. To provide more insight into the underlying
performance of the consolidated group, a pro forma summary for first quarter
2000 and 1999 are shown below treating Kitchen Craft as if it was acquired on
January 1, 1999.
First First
Quarter Quarter
($ in millions) 2000 1999 Increase
---- ----- --------
Net Sales:
Omega/HomeCrest $50.1 $46.9 7.0%
Kitchen Craft 23.3 19.1 22.1%
----- -----
Consolidated $73.4 $66.0 11.3%
EBITDA (1):
Omega/HomeCrest $ 6.7 $ 8.0 -16.3%
Kitchen Craft 4.8 3.5 34.5%
----- -----
Consolidated $11.4 $11.5 -0.6%
EBITDA Margin (1):
Omega/HomeCrest 13.3% 17.0%
Kitchen Craft 20.4% 18.5%
Consolidated 15.5% 17.4%
________
(1) EBITDA Margin represents EBITDA as a percentage of net sales. EBITDA
represents income from operations before interest expense (including
amortization of deferred financing costs), income taxes, depreciation,
amortization of goodwill, non-cash stock option and warrant expense and
certain unusual or nonrecurring expenses. EBITDA is presented because it
is a widely accepted financial indicator of a leveraged company's ability
to service and/or incur
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<PAGE>
indebtedness and because management believes that EBITDA is a relevant
measure of the Company's ability to generate cash without regard to the
Company's capital structure or working capital needs. EBITDA as presented
may not be comparable to similarly titled measures used by other companies,
depending upon the non-cash charges included. When evaluating EBITDA
investors should consider that EBITDA (i) should not be considered in
isolation but together with other factors which may influence operating and
investing activities, such as changes in operating assets and liabilities
and purchase of property and equipment, (ii) is not measure of performance
calculated in accordance with generally accepted accounting principles,
(iii) should not be construed as an alternative or substitute for income
from operations, net income or cash flows from operating activities in
analyzing the Company's operating performance, financial position or cash
flows and (iv) should not be used as an indicator of the Company's
operating performance or as a measure of its liquidity.
Pro Forma Net Sales for first quarter 2000 were $73.4 million compared to $66.0
million for first quarter 1999, an increase of 11.3%. All three divisions
experienced strong sales growth driven by increased remodeling spending as well
as the introduction of new products and an increase in new selling locations.
Kitchen Craft sales increased 22.1% for the first quarter 2000 driven primarily
by 48% growth to U.S. dealers, the addition of new selling locations, and an
increase in the average cabinet selling price. Kitchen Craft sales to the
Canadian market decreased 3% as lower margin multi-unit project business was
reduced and cabinet prices increased.
Pro Forma EBITDA for first quarter 2000 was $11.4 million compared to $11.5
million for first quarter 1999, a decrease of 0.6%. As a percentage of net
sales, EBITDA was 15.5% for first quarter 2000 compared to 17.4% for first
quarter 1999. Kitchen Craft EBITDA and EBITDA as a percentage of net sales
increased dramatically during first quarter 2000 compared to first quarter 1999
primarily as a result of higher sales of semi-custom cabinetry to U.S. dealers
that have substantially higher margins than stock cabinetry sales in Canada.
Both the Omega and HomeCrest divisions experienced EBITDA margin declines, due
primarily to gross profit margin declines as previously discussed.
Liquidity and Capital Resources
The Company's primary cash needs are working capital, capital expenditures
and debt service. The Company has financed these cash requirements primarily
through internally generated cash flow and funds borrowed under the Company's
credit facilities.
Net cash provided by operating activities for the first quarter 2000 was
$1.4 million compared to $2.4 million for first quarter 1999. The decrease of
$1.0 million was driven primarily by a net increase in operating assets and
liabilities related to sales growth.
The Company used cash in investing activities of $2.8 million for first
quarter 2000 compared to $52.3 million for first quarter 1999, a decrease of
$49.5 million. First quarter 1999 included $50.3 million related to financing
of the Kitchen Craft acquisition and $2.0 million for capital expenditures.
Capital expenditures for first quarter 2000 were $2.8 million and included a
30,000 square foot capacity expansion and productivity program at HomeCrest's
Goshen, Indiana facility.
12
<PAGE>
Cash provided by financing activities was $1.6 million for first quarter
2000 compared to $52.3 million for first quarter 1999. This $50.7 million
reduction was due primarily to financing of the January 1999 Kitchen Craft
acquisition and related financing costs.
The Company's ability to make scheduled payments of principal of, or to pay
the interest or premium, if any, on, or to refinance, its indebtedness, or to
fund planned capital expenditures will depend on its future performance, which,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations, management believes that cash flow from
operations and available cash, together with available borrowings under its bank
loans, will be adequate to meet the Company's anticipated future requirements
for working capital, budgeted capital expenditures and scheduled payments of
principal and interest on its indebtedness for the next several years. There can
be no assurance, however, that the Company's business will generate sufficient
cash flow from operations or that future borrowing will be available under its
bank loans in an amount sufficient to enable the Company to service its
indebtedness or make anticipated capital expenditures.
At April 1, 2000, the Company's long-term debt consisted of (i) the $100.0
million of senior subordinated notes; (ii) a U.S. senior credit facility,
consisting of a $52.4 million term note facility (the "U.S. Term Facility") and
a $20.0 million revolving facility (the "U.S. Revolving Facility"); and (iii) a
Canadian senior credit facility, consisting of a (Cdn) $19.4 million term
facility (the "Canadian Term Facility") and a (Cdn) $15.0 million revolving
facility (the "Canadian Revolving Facility").
As of April 1, 2000, the Company had additional borrowing availability of
$12.5 million under the U.S. Revolving Facility and (Cdn) $13.0 million under
the Canadian Revolving Facility. In addition, the Company had cash of $2.5
million that was available to further reduce the U.S. and Canadian Revolving
Facilities. The U.S. Term Facility requires quarterly principal payments that
began in April 1999 at $1.0 million per quarter and increase at each September
anniversary. Subsequent payments will be approximately $1.3 million, $1.4
million, $1.8 million and $2.1 million per quarter during the four quarter
periods beginning September 1999, 2000, 2001, and 2002, respectively, with $2.6
million payments due the last two quarters in 2003. Finally, four equal
quarterly payments of $6.1 million are required during 2004 to fully amortize
the term loan on December 31, 2004. Additional payments are also due each year
based on 75% of the Company's defined excess cash flow, if any. A $1.1 million
excess cash flow payment was made during March 2000. The Canadian Term Facility
requires quarterly payments that began in April 1999 at approximately (Cdn) $0.4
million per quarter and increasing at each anniversary. Subsequent payments will
be approximately (Cdn) $0.5 million, (Cdn) $0.6 million, (Cdn) $0.7 million,
(Cdn) $0.9 million and (Cdn) $2.2 million per quarter during 2000, 2001, 2002,
2003, and 2004. Both the U.S. and Canadian Term Facilities mature on December
31, 2004. The Revolving Facilities will mature on December 26, 2003 and have no
scheduled interim amortization.
Computer Systems and Year 2000
As described in the Form 10-Q for the quarter ended October 2, 1999, the
Company had developed plans to address potential exposures of its computer
systems related to the Year 2000. Since entering the year 2000, the Company has
not experienced any significant disruptions to its
13
<PAGE>
business nor is it aware of any significant year 2000-related disruptions
impacting its customers and suppliers. Furthermore, the Company did not
experience any material impact on inventories at fiscal year end. The Company
will continue to monitor its systems and operations until it is reasonably
assured that no significant business interruptions will occur as a result of any
year 2000 issues.
Total costs of the Year 2000 project were $2.0 million with no significant
additional expense expected in 2000.
Forward Looking Statements
When used in this quarterly report on Form 10-Q, the words "believes,"
"anticipates" and similar expressions are used to identify forward looking
statements. Such statements are subject to risks and uncertainties which could
cause actual results to differ materially from those projected. The Company
wishes to caution readers that the following important factors and others in
some cases have affected and in the future could affect the Company's actual
results and could cause the Company's results for future periods to differ
materially from those expressed in any forward statements made by the Company:
(i) inability to hire and retain adequately trained employees, (ii) economic
conditions in the remodeling and housing markets, (iii) availability of credit,
(iv) increases in interest rates, (v) cost of lumber and other raw materials,
(vi) inability to maintain state-of-the-art manufacturing facilities, (vii)
heightened competition, including intensification of price and service
competition, the entry of new competitors and the introduction of new products
by existing competitors, (viii) inability to capitalize on opportunities
presented by industry consolidation, (ix) loss or retirement of key executives
and (x) inability to grow by acquisition of additional cabinetry manufactures or
to effectively consolidate operations of businesses acquired.
14
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The Company is subject to interest rate market risk in connection with its
long-term debt. These financial instruments are entered into for purposes other
than trading. As of April 1, 2000, the Company's debt instruments consisted of
certain obligations which bear a fixed interest rate and others which bear
interest at variable rates. The following table provides information about the
Company's debt instruments that are sensitive to changes in interest rates, and
presents the principal cash flows and related interest rates by scheduled
maturity dates (in thousands):
Variable Rate (a) Fixed Rate (b)
Maturing in:
2000 $ 5,186 $ --
2001 8,065 --
2002 9,841 --
2003 20,842 --
2004 30,749 --
Thereafter -- 100,000
------- --------
Total $74,683 $100,000
======= ========
Fair value at April 1, 2000 $74,683 $ 97,000
(a) $35.3 million at LIBOR plus 1.75%, $24.6 million at LIBOR plus 2.00% and
$14.8 million at Canadian BA rate plus 2.00% (7.99% weighted average at
April 1, 2000).
(b) All at 10.5%.
The Company's interest expense is most sensitive to changes in the general
level of U.S. and certain foreign (LIBOR and Canadian BA) interest rates. In
this regard, changes in such interest rates affect the interest paid on certain
of its debt. To manage the impact of fluctuations in interest rates, the
Company continually monitors and may select a variety of rate options on its
variable-rate debt. In addition, the Company has maintained a majority of its
debt borrowings as fixed-rate debt. Although it has not historically done so,
the Company in the future may consider entering into interest rate swaps or
similar transactions in order to fix certain interest costs on variable-rate
debt.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to various legal actions arising in the ordinary
course of its business. The Company believes that the resolution of these legal
actions will not have a material adverse effect on the Company's financial
position or results of operations.
15
<PAGE>
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
16
<PAGE>
27.1 Financial Data Schedules.
______________
* Incorporated by reference to the similarly numbered exhibit in the
Company's Registration Statement on Form S-4, No. 333-37135, filed
October 3, 1997.
(b) Reports on Form 8-K.
None.
17
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OMEGA CABINETS, LTD.
By: /s/ Robert L. Moran
________________________________
Name: Robert L. Moran
Title: Chief Executive Officer
(Principal executive
officer and principal
financial officer)
Dated: May 16, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS PREPARED BY ERNST & YOUNG LLP AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<CASH> 2,479,960
<SECURITIES> 0
<RECEIVABLES> 29,852,093
<ALLOWANCES> 1,786,000
<INVENTORY> 19,594,961
<CURRENT-ASSETS> 53,487,579
<PP&E> 60,028,302
<DEPRECIATION> 11,876,049
<TOTAL-ASSETS> 201,671,913
<CURRENT-LIABILITIES> 40,941,741
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> (2,771,316)
<TOTAL-LIABILITY-AND-EQUITY> 201,671,913
<SALES> 73,442,894
<TOTAL-REVENUES> 73,442,894
<CGS> 54,262,490
<TOTAL-COSTS> 54,262,490
<OTHER-EXPENSES> 647,050
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,399,913
<INCOME-PRETAX> 5,042,893
<INCOME-TAX> 1,976,641
<INCOME-CONTINUING> 3,066,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,066,252
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
