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 April 1, 1994
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: 0-22138
Triangle Pacific Corp.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
94-2998971
(I.R.S. Employer Identification No.)
16803 Dallas Parkway, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
(214) 931-3000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
14,661,329 Shares on April 1, 1994
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations
for the three months ended April 1, 1994 and
for the three months ended April 2, 1993 4
Consolidated Balance Sheets
April 1, 1994 and December 31, 1993 5
Consolidated Statements of Cash Flows
for the three months ended April 1, 1994 and
for the three months ended April 2, 1993 6
Consolidated Statement of Changes in
Shareholders' Investment for the three months
ended April 1, 1994. 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 13
PART II OTHER INFORMATION 16
SIGNATURES 17
<PAGE>
PART I FINANCIAL INFORMATION
Item I. Financial Statements
Triangle Pacific Corp. and Subsidiary
Consolidated Financial Statements
for the Three Months ended April 1, 1994
The consolidated financial statements included herein have been
prepared by the Company without audit. They contain all
adjustments which are, in the opinion of the management,
necessary to a fair statement of the results of the operations
for the interim periods. The operating results for the interim
periods are not necessarily indicative of results to be expected
for a full year. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated
financial statements and the notes thereto, included in the
Company's Form 10-K as of December 31, 1993.
TRIANGLE PACIFIC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
Three Months Ended
April 1, April 2,
1994 1993
Net sales $ 90,710 $ 78,482
Costs and expenses
Cost of sales 68,627 60,535
Selling, general and administrative 13,113 11,631
Amortization of goodwill 380 405
Interest 4,897 4,895
87,017 77,466
Income before income taxes 3,693 1,106
Provision for income taxes 1,551 643
Net income $ 2,142 $ 373
Net income per share $ 0.15 $ 0.04
Weighted average shares outstanding 14,653 6,708
Pro-forma income data:
Net income $ 2,142 $ 373
Pro-forma adjustments re: 1993
recapitalization - 101
Pro-forma net income $ 2,142 $ 474
Pro-forma net income per share $ 0.15 $ 0.03
Weighted average shares outstanding 14,653 14,648
The accompanying notes to consolidated financial statements are
an integral part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS April 1, December 31,
Current assets: 1994 1993
Cash and cash equivalents $ 1,602 $ 785
Receivables (net of allowances
of $2,769 and $3,323
respectively) 40,529 39,454
Inventories 62,507 64,072
Prepaid expenses 3,972 4,273
Total current assets 108,610 108,584
Property, plant and equipment
Land 13,452 13,452
Buildings 43,628 43,382
Equipment, furniture and
fixtures 68,413 65,759
125,493 122,593
Less: accumulated depreciation 15,144 13,171
110,349 109,422
Other assets:
Goodwill 60,200 60,580
Trademark 30,533 30,733
Other 13,135 11,654
Deferred financing costs 7,782 8,126
Total assets $ 330,609 $ 329,099
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 1,379 $ 1,467
Accounts payable 14,616 13,336
Accrued liabilities 16,576 19,699
Income taxes payable 1,551 -
Total current liabilities 34,122 34,502
Long-term debt, net of current portion 162,589 162,897
Deferred income taxes 43,668 43,653
Total liabilities 240,379 241,052
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares
14,661,329 at April 1, 1994
and 14,657,607 at December 31,
1993 147 146
Additional paid-in capital 93,094 93,054
Accumulated deficit:
Post June 8, 1992 (3,011) (5,153)
Total shareholders investment 90,230 88,047
Total liabilities and
shareholders' investment $ 330,609 $ 329,099
The accompanying notes to consolidated financial statements are an integral
part of theses balance sheets.
TRIANGLE PACIFIC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
April 1, April 2,
1994 1993
Cash flows from operating activities
Net income $ 2,142 $ 373
Adjustments:
Depreciation 1,973 1,957
Deferred income taxes 15 643
Amortization of goodwill and trademark 580 605
Amortization of deferred financing cost 358 -
Amortization of original issue discount - 398
Provision for doubtful accounts 207 235
Changes in assets and liabilities:
Receivables (1,282) (2,629)
Inventories 1,565 (5,450)
Prepaid expenses 300 (489)
Other assets (24) 2,574
Accounts payable 1,280 (2,311)
Accrued liabilities 442 179
Accrued liabilities - interest (3,565) 1,170
Income taxes payable 1,551 -
Deferred compensation - (1,881)
Net cash provided by (used in)
operating activities 5,542 (4,626)
Cash flows from investing activities:
Additions to property, plant &
equipment (2,899) (485)
Construction deposits (1,457) (902)
Net cash used in investing activities (4,356) (1,387)
Cash flows from financing activities:
Long-term debt borrowings - 6,500
Long-term debt payments (396) (382)
Exercise of stock options 41 -
Refinancing costs (14) -
Net cash provided by (used in)
financing activities (369) 6,118
Net increase in cash $ 817 $ 105
Cash and cash equivalents, beginning
of period 785 547
Cash and cash equivalents, end of period $ 1,602 $ 652
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,049 $ 3,251
Income taxes 10 -
The accompanying notes to consolidated financial statements are
an integral part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
FOR THE THREE MONTHS ENDED APRIL 1, 1994
(in thousands)
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
Balance,
December 31, 1993 $ 146 $ 93,054 $ (5,153) $ 88,047
Net income - - 2,142 2,142
Exercise of stock
options 1 40 - 41
Balance,
April 1, 1994 $ 147 $ 93,094 $ (3,011) $ 90,230
The accompanying notes to consolidated financial statements are
an integral part of this statement.
TRIANGLE PACIFIC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - 1993 RECAPITALIZATION:
The Company filed, in 1993, two registration statements with
the Securities and Exchange Commission and sold to the public
7,939,750 shares of the Company's Common Stock and $160 million
aggregate principal amount of 10-1/2% Senior Notes due 2003 ("the
Offerings"). The net proceeds of the Offerings together with
borrowings under a new $90 million bank credit facility (the "New Credit
Facility") were used (i) to repay the entire unpaid balance under the
Company's previously-existing senior debt financing agreements, redeem
certain previously outstanding debentures and pay related accrued
interest, for a total of approximately $227 million, and (ii) for
working capital and general corporate purposes. As a result of
this repayment of debt the Company incurred an extraordinary loss
of $11.3 million, net of tax, as a result of the original issue
discount on certain of the repaid notes as well as the premium
required to redeem the debentures.
On June 14, 1993, the Company's Board of Directors approved
a reclassification pursuant to which each share of Series A
Common Stock was changed and converted into .67 of a share of
Common Stock. The transaction became effective upon completion
of the Offerings described above and has been reflected
retroactively in the accompanying consolidated financial
statements.
NOTE 2 -INVENTORIES:
Inventories are valued at the lower of cost or market. The
last-in, first-out (LIFO) method is used for certain lumber
inventories and the first-in, first-out (FIFO) method is used for
all other inventories. Inventories valued by the LIFO method
were $20,062,000 at April 1, 1994 and $23,965,000 at December 31,
1993. Had all inventories been valued by the FIFO method, which
approximates current cost, inventories would have been increased
by $5,138,000 at April 1, 1994 and December 31, 1993. Raw
materials inventories include purchased parts and supplies to be
used in manufactured products. Work-in-process and finished
goods inventories include material, labor and overhead costs
incurred in the manufacturing process. The major components of
inventories are as follows:
April 1, December 31,
1994 1993
(in thousands)
Raw materials $ 34,447 $ 42,045
Work-in-process 2,945 3,125
Finished goods 25,115 18,902
Total $ 62,507 $ 64,072
NOTE 3 - LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
April 1, December 31,
1994 1993
Mortgages payable $ 3,968 $ 4,364
Senior Notes, 10 1/2% due 8-1-2003 160,000 160,000
163,968 164,364
Less: Current portion of long-term debt (1,379) (1,467)
$162,589 $162,897
Letters of credit outstanding at April 1, 1994 and December
31, 1993 were $9.7 million and $9.8 million, respectively, under
a facility pursuant to which they can be renewed or replaced.
Senior Notes
The Senior Notes are senior unsecured obligations of the
Company with an aggregate principal of $160 million. The Senior
Notes mature in 2003 and bear interest at an annual rate of
10 1/2%, payable semi-annually. The Senior Notes were issued
under an Indenture (the "Indenture") between the Company and
Texas Commerce Trust Company NA, as Trustee (the "Trustee"). The
Senior Notes rank pari passu with all present and future senior
indebtedness of the Company and senior to all present and future
subordinated indebtedness of the Company. However, because
borrowings under the New Credit Facility are secured by inventory
and accounts receivable of the Company and the proceeds thereof,
the Senior Notes are effectively subordinated to such borrowings
to the extent of such security interest.
The Senior Notes are not redeemable prior to August 1, 1998.
Thereafter, the Senior Notes are redeemable at the option of the
Company at redemption prices specified in the Indenture. The
Senior Notes are not subject to any mandatory sinking fund
requirements.
Upon a "change of control" (as defined in the Indenture),
the Company is required to offer to purchase all outstanding
Senior Notes at 101% of the principal amount thereof, plus
accrued interest to the date of repurchase. In addition, the
Company may be required to offer to purchase the Senior Notes at
100% of the principal amount plus accrued interest with the net
cash proceeds of certain sales or other dispositions of assets.
The Indenture contains covenants which restrict, among other
things, the incurrence of additional indebtedness by the Company
and its subsidiaries, the payment of dividends and other
distributions in respect of the capital stock of the Company, the
creation of liens on the assets of the Company and its
subsidiaries, the creation of certain restrictions on the payment
of dividends and other distributions by the Company's
subsidiaries, the issuance of preferred stock by the Company's
subsidiaries, and certain mergers, sales of assets and
transactions with affiliates.
The Indenture specifies a number of events of default
including, among others, the failure to make timely principal,
premium and interest payments or to perform the covenants
contained therein. The Indenture contains a cross-default to
other indebtedness of the Company aggregating more than
$5,000,000 and certain customary bankruptcy and insolvency
defaults. Upon the occurrence of an event of default under the
Indenture, the Trustee or the holders of not less than 25% in
principal amount of the outstanding Senior Notes may declare all
amounts thereunder immediately due and payable, except that such
amounts automatically become immediately due and payable in the
event of a bankruptcy or insolvency default.
New Credit Facility
The Company has entered into the New Credit Facility, which
provides for up to $90 million of revolving loans for working
capital and general corporate purposes and for letters of credit.
Availability of borrowings under the New Credit Facility is based
upon a formula related to inventory and accounts receivable. The
Company had $50.0 million of unused borrowing capacity under this
facility at April 1, 1994. Borrowings under the New Credit
Facility bear interest at the agent's prime rate plus 1% (7.25%
at April 1, 1994) or, at the Company's option, at certain
alternate floating rates and is secured by a pledge of the
Company's inventory and accounts receivable. The unpaid balance
is due on August 4, 1996.
The New Credit Facility contains covenants which restrict,
among other things, the incurrence of additional indebtedness and
rental obligations by the Company and its subsidiaries, the
payment of dividends and other distributions in respect of the
capital stock of the Company, the creation of liens on the assets
of the Company and its subsidiaries, the creation of certain
restrictions on the payment of dividends and other distributions
by the Company's subsidiaries, the making of investments and
capital expenditures by the Company and its subsidiaries, the
creation of new subsidiaries by the Company, and certain mergers,
sales of assets and transactions with affiliates. The New Credit
Facility also contains certain financial covenants relating to
the consolidated financial condition of the Company and its
subsidiaries, including covenants relating to their net worth,
the ratio of their earnings to their fixed charges, the ratio of
their earnings to their interest expense, the ratio of their
current assets to their current liabilities, and the ratio of
their indebtedness to their total capitalization. At December
31, 1993, the Company was in compliance with all financial
covenants.
The New Credit Facility specifies a number of events of
default including, among others, the failure to make timely
payments of principal, fees, and interest, the failure to perform
the covenants contained therein, the failure of representations
and warranties to be true, the occurrence of a "change of
control" (as defined in the New Credit Facility, to include,
among other things, the ownership by any person or group of more
than 25% or, (in the case of The TCW Group, Inc. and its
affiliates, 40%) of the total voting securities of the Company),
and certain impairments of the security for the New Credit
Facility. The New Credit Facility also contains a cross-default
to other indebtedness of the Company aggregating more than
$2,000,000 and certain customary bankruptcy, insolvency and
similar defaults. Upon the occurrence of an event of default
under the New Credit Facility, at least three of the lenders
holding at least 60% in amount of the principal indebtedness
outstanding under the New Credit Facility may declare all amounts
thereunder immediately due and payable, except that such amounts
automatically become immediately due and payable in the event of
certain bankruptcy, insolvency or similar defaults.
The New Credit Facility generally prohibits the Company from
prepaying the Senior Notes whether the prepayment would result
from the redemption of the Senior Notes, an offer by the Company
to purchase the Senior Notes following a change of control or a
sale or other disposition of assets, or the acceleration of the
due date for payment of the Senior Notes.
Mortgages payable represent various Industrial Revenue Bond
(IRB) notes. The IRB notes vary in interest rate, with several
notes dependent upon the prime rate. At April 1, 1994 and
December 31, 1993 the interest rates ranged up to 9.0%.
These notes are payable through 2000 and are collateralized
by the related underlying assets.
NOTE 4 - INCOME TAXES:
The components of the deferred tax liability and assets are as
follows (in thousands):
April 1, December 31,
1994 1993
Deferred Tax Liability:
Property, plant and equipment $ 28,294 $ 28,429
Trademark 12,000 12,078
Other 6,006 7,123
$ 46,300 $ 47,630
Deferred Tax Asset:
Tax Carryforwards $ - $ 1,991
Other 2,632 1,986
$ 2,632 $ 3,977
The provision for income taxes consists of the following (in
thousands):
Three Months Ended
April 1, April 2,
1994 1993
Current:
Federal $ 1,381 $ -
State and Local 170 -
$ 1,551 $ -
Deferred:
Federal $ - $ 571
State and Local - 72
$ - $ 643
Total $ 1,551 $ 643
The tax provision for the periods ending April 1, 1994 and April
2, 1993 is 42.0% and 54.7% of pre-tax income, respectively. The
factors causing the rate to vary from the U.S. Federal statutory
rate are as follows (in thousands):
Three Months Ended
April 1, April 2,
1994 1993
Computed (expected) tax provision $ 1,293 $ 345
Increase from:
State and local taxes 159 44
Amortization of goodwill 149 155
Other book to tax differences (net) (50) 99
$ 1,551 $ 643
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended April 1, 1994 were
$90.7 million compared to $78.5 million for the three months
ended April 2, 1993, representing a 15.5% increase. Net sales
for the Bruce Hardwood Floors Division increased 24.3% over the
first three months of the previous year.
The Beltsville and Cabinet Divisions also experienced higher
sales over prior year levels. The first quarter of 1994 was
unusually difficult due to the severe winter weather in much of
the country. Disruptions of operations and delays in shipments
were at times unavoidable.
GROSS PROFIT
Gross profit for the three months ended April 1, 1994
amounted to $22.1 million, or 24.3% of net sales, compared to
$17.9 million, or 22.9% of net sales, in the same period in 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to
$13.1 million for the three months ended April 1, 1994 compared
to $11.6 million for the three months ended April 2, 1993. As a
percent of net sales, selling, general and administrative
expenses were 14.5% for the three months ended April 1, 1994
compared to 14.8% for the same period in fiscal 1993.
OPERATING INCOME
Operating income for the three months ended April 1, 1994
was $8.6 million compared to $5.9 million for the three months
ended April 2, 1993. The increased operating income in the first
quarter of fiscal 1994 compared to the same period in fiscal 1993
was attributable to significantly higher net sales, together with
improved operating efficiencies which generated increased gross profit
margins and lower selling, general and administrative expenses as a
percent of net sales.
INTEREST EXPENSE
Interest expense for both the three months ended April 1,
1994 and the three months ended April 2, 1993 was $4.9 million.
NET INCOME
Net income for the three months ended April 1, 1994,
amounted to $2.1 million, or $0.15 per share, compared to $.4
million, or $0.04 per share, for the three months ended April 2,
1993. The 1994 period benefited from higher net sales and
operating income.
PRO-FORMA NET INCOME
Pro-forma net income for the three months ended April 1,
1994 was $2.1 million, or $.15 per share, versus $.5 million, or
$.03 per share for the same period in fiscal 1993.
Pro-forma figures for 1993 assume that the Company's third
quarter 1993 public offerings of debt and equity securities
occurred on the first day of fiscal 1993. The gross proceeds of
the Company's initial public offerings of debt and equity were
$160 million and $79.4 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
In 1993, the Company completed two public offerings of
7,939,750 shares of the Company's Common Stock and $160 million
aggregate principal amount of 10-1/2% Senior Notes due 2003. The
net proceeds of the offerings, together with borrowings under a
new $90 million bank credit facility were used (i) to repay the
entire unpaid balance under the Company's previously existing
senior debt financing agreements, redeem certain previously
outstanding debentures and pay related accrued interest, for a
total of approximately $227 million, and (ii) for working capital
and general corporate purposes. As a result of this repayment of
debt, the Company incurred an extraordinary loss of $11.3
million, net of tax, as a result of the original issue discount
on certain of the repaid notes as well as the premium required to
redeem the debentures. The New Credit Facility provides for up
to $90 million of revolving credit loans for working capital and
for letters of credit. Availability of borrowings under the New
Credit Facility is based upon a formula related to inventory and
accounts receivable.
For the fiscal quarter ended April 1, 1994, cash increased
by $.8 million. Cash provided from operating activities was $5.5
million. Cash flow of $4.4 million was used for additions to
plant, property and equipment and construction deposits relating
to expansion of the Bruce Hardwood Floors plant in West Virginia.
On April 1, 1994, the Company had working capital of $74.5
million, or 22.5% of total assets, and $50.0 million of unused
bank borrowing capacity.
The Company believes that borrowing availability under the
New Credit Facility and cash generated from operations will be
adequate to fund working capital requirements, debt service
payments and the planned capital expenditures.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits - None
b) No reports on Form 8-K have been filed during the
quarter ended April 1, 1994.
SIGNATURES
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.
TRIANGLE PACIFIC CORP.
Date: May 13, 1994 By: /s/ M. J. McHugh
M. Joseph McHugh
Senior Executive Vice President
and Treasurer
(duly authorized officer and
principal financial officer)
Date: May 13, 1994 By: /s/ Robert J. Symon
Robert J. Symon
Vice President - Controller
(principal accounting officer)
