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 March 31, 1995
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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: 0-22138
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Triangle Pacific Corp.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
94-2998971
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(I.R.S. Employer Identification No.)
16803 Dallas Parkway, Dallas, Texas 75248
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(Address of principal executive offices) (Zip Code)
(214) 931-3000
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(Registrant's telephone number, including area code)
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(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.
14,662,609 Shares on March 31, 1995
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations
for the three months ended March 31, 1995
and April 1, 1994 4
Consolidated Balance Sheets
March 31, 1995 and December 30, 1994 5
Consolidated Statements of Cash Flows
for the three months ended March 31, 1995
and April 1, 1994 7
Consolidated Statement of Changes in
Shareholders' Investment for the three months
ended March 31, 1995 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 13
PART II OTHER INFORMATION 14
SIGNATURES 15
PART I FINANCIAL INFORMATION
Item I. Financial Statements
Triangle Pacific Corp. and Subsidiaries
Consolidated Financial Statements
for the Three Months ended March 31, 1995
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 30, 1994.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
Three Months Ended
----------------------
March 31, April 1,
1995 1994
------- --------
Net sales $ 107,192 $ 90,710
-------- --------
Costs and expenses:
Cost of sales 79,260 68,627
Selling, general
and administrative 15,448 13,113
Amortization of goodwill 380 380
Interest 4,563 4,897
-------- --------
99,651 87,017
-------- --------
Income before income taxes 7,541 3,693
Provision for income taxes 3,007 1,551
-------- --------
Net income $ 4,534 $ 2,142
======== ========
Net income per share $ 0.31 $ 0.15
======== ========
Weighted average shares outstanding 14,663 14,653
The accompanying notes to consolidated financial statements are an integral
part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 30,
1995 1994
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 20,844 $ 24,906
Receivables (net of allowances
of $2,625 and $2,491 respectively) 44,419 43,303
Inventories 73,405 70,900
Prepaid expenses 3,879 3,934
-------- --------
Total current assets 142,547 143,043
-------- --------
Property, plant and equipment
Land 12,003 12,003
Buildings 44,399 43,452
Equipment, furniture and fixtures 81,359 79,568
-------- --------
137,761 135,023
Less: accumulated depreciation 23,300 21,110
-------- --------
114,461 113,913
Other assets:
Goodwill 56,237 56,617
Trademark 29,733 29,933
Other 13,301 13,237
Deferred financing costs 6,351 6,708
-------- --------
Total assets $ 362,630 $ 363,451
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)
March 31, December 30,
1995 1994
--------- ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 1,557 $ 1,527
Accounts payable 17,828 17,723
Accrued liabilities 22,101 28,112
Income taxes payable 2,738 1,327
-------- --------
Total current liabilities 44,224 48,689
-------- --------
Long-term debt, net of current portion 167,870 168,388
-------- --------
Deferred income taxes 39,108 39,480
-------- --------
Total liabilities 251,202 256,557
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,662,609 at March 31, 1995 and
December 30, 1994 147 147
Additional paid-in capital 93,098 93,098
Retained earnings 18,183 13,649
-------- --------
Total shareholders' investment 111,428 106,894
-------- --------
Total liabilities and shareholders' investment $ 362,630 $ 363,451
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
--------------------
March 31, April 1,
1995 1994
--------- --------
Cash flows from operating activities:
Net income (loss) $ 4,534 $ 2,142
Adjustments:
Depreciation 2,191 1,973
Deferred income taxes (372) 15
Amortization of goodwill and trademark 580 580
Amortization of deferred financing costs 357 358
Provision for doubtful accounts 117 207
Changes in assets and liabilities:
Receivables (1,233) (1,282)
Inventories (2,505) 1,565
Prepaid expenses 55 300
Other assets (41) (24)
Accounts payable 105 1,280
Accrued liabilities (1,087) 442
Accrued liabilities - interest (4,925) (3,565)
Income taxes payable 1,411 1,551
-------- --------
Net cash provided by (used in) operating activities (813) 5,542
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (2,739) (2,899)
Construction deposits (22) (1,457)
-------- -------
Net cash used in investing activities (2,761) (4,356)
-------- --------
Cash flows from financing activities:
Long-term debt payments (488) (396)
Exercise of stock options - 41
Refinancing costs - (14)
-------- --------
Net cash used in financing activities (488) (369)
-------- --------
Net increase (decrease) in cash $ (4,062) $ 817
Cash and cash equivalents, beginning of period 24,906 785
-------- --------
Cash and cash equivalents, end of period $ 20,844 $ 1,602
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,955 $ 8,049
Income taxes 1,949 10
The accompanying notes to consolidated financial statements are an integral
part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(in thousands)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
------- ------- --------- -------
Balance,
December 30, 1994 $ 147 $ 93,098 $ 13,649 $106,894
Net income - - 4,534 4,534
------- ------- ------- -------
Balance,
March 31, 1995 $ 147 $ 93,098 $ 18,183 $111,428
======= ======= ======= =======
The accompanying notes to consolidated financial statements are an integral
part of this statement.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -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 $21,186,000 at March 31, 1995 and $20,870,000
at December 30, 1994. Had all inventories been valued by the FIFO method,
which approximates current cost, inventories would have been increased by
$1,653,000 at March 31, 1995 and $2,069,000 at December 30, 1994. 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:
March 31, December 30,
1995 1994
-------------------------
(in thousands)
Raw materials $ 38,676 $ 39,092
Work-in-process 3,308 3,640
Finished goods 31,421 28,168
-------- --------
Total $ 73,405 $ 70,900
======== ========
NOTE 2 - LONG-TERM DEBT:
Long-term debt consists of the following:
March 31, December 30,
1995 1994
-------------------------
(in thousands)
Mortgages payable $ 9,427 $ 9,915
Senior Notes, 10 1/2% due 8-1-2003 160,000 160,000
-------- --------
169,427 169,915
Less: Current portion of long-term debt (1,557) (1,527)
-------- --------
$ 167,870 $ 168,388
======== ========
Letters of credit outstanding at March 31, 1995 were $8.1 million and
$9.8 million at December 30, 1994 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 amount of $160 million. The Senior Notes mature on August
1, 2003 and bear interest at an annual rate of 10 1/2%, payable in two equal
semi-annual installments of $8,400,000 each, with each semi-annual period
deemed to have 180 days. The Senior Notes were issued under an Indenture (the
"Indenture") between the Company and a predecessor to Texas Commerce Bank
National Association, 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 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 limit, among other things, the
incurrence of additional indebtedness by the Company and its subsidiaries, the
payment of dividends on or the purchase of the capital stock of the Company
("Restricted Payments"), 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.
Based on the Company's operations through March 31, 1995, the amount of
Restricted Payments that the Company could make under the Indenture was
$17,707,000.
The Indenture specifies a number of events of default including, among
others, the failure to make timely principal 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.
Credit Facility:
The Company has entered into the 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
Credit Facility is based upon a formula related to inventory and accounts
receivable. At March 31, 1995, the Company had no borrowings under the Credit
Facility and had $58.9 million of borrowing capacity under this facility.
Borrowings under the Credit Facility bear interest at the agent's prime rate
plus 1% (10.0% at March 31, 1995) 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 Credit Facility expires on August 4, 1996.
The 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 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 March 31, 1995, the
Company was in compliance with all financial covenants.
The 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 Credit Facility, to include, among other things,
the ownership by any person or group of more than 25% or, (in case of The TCW
Group, Inc. and its affiliates, 50%) of the total voting securities of the
Company), and certain impairments of the security for the Credit Facility.
The 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 Credit Facility, at least three of the lenders holding at least 60%
in amount of the principal indebtedness outstanding under the 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 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 primarily various Industrial Revenue Bond
(IRB) notes. The IRB notes vary in interest rate, with several notes dependent
upon the prime rate. At March 31, 1995 and December 30, 1994 the interest
rates ranged up to 9.0%.
These notes are payable through 2001 and are collateralized by the
related underlying assets.
NOTE 3 - INCOME TAXES:
The components of the deferred tax liability and asset are as follows:
March 31, December 30,
1995 1994
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 22,532 $ 22,511
Trademark 11,685 11,764
Other 8,783 8,527
-------- --------
Total $ 43,000 $ 42,802
======== ========
Deferred Tax Asset:
Tax carryforwards $ - $ -
Other 3,891 3,322
-------- --------
Total $ 3,891 $ 3,322
======== ========
The provision for income taxes consists of the following:
Three Months Ended
--------------------
March 31, April 1,
1995 1994
--------------------
(in thousands)
Current:
Federal $ 3,147 $ 1,381
State and local 404 170
-------- -------
$ 3,551 $ 1,551
======== =======
Deferred:
Federal $ (484) $ -
State and local (60) -
-------- -------
$ (544) $ -
======== =======
Total $ 3,007 $ 1,551
======== =======
The tax provision for the periods ending March 31, 1995 and April 1, 1994
is 39.9% and 42.0% of pre-tax income. The factors causing the rate to vary
from the U.S. Federal statutory rate are as follows:
Three Months Ended
--------------------
March 31, April 1,
1995 1994
--------------------
(in thousands)
Computed (expected) tax provision $ 2,639 $ 1,293
Increase from:
State and local taxes 324 159
Amortization of goodwill 149 149
Change due to limitation of net
operating loss carryforwards - -
Other book to tax differences (net) (105) (50)
------- ------
$ 3,007 $ 1,551
======= ======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended March 31, 1995 were $107.2 million
compared to $90.7 million for the three months ended April 1, 1994,
representing a 18.2% increase. Net sales for all divisions increased.
Cabinet Division sales were up 32.1% over those of the same period in
1994 due, in large measure, to increased sales to the multi-family housing
sector which continues to experience strong growth.
Hardwood Floors sales remained strong, but were tempered by weakening
consumer confidence relative to large dollar purchases. Our average unit
selling price declined slightly as some builders shifted to lower-priced
products with heavy emphasis on unfinished strip versus prefinished products.
GROSS PROFIT
Gross profit for the three months ended March 31, 1995 amounted to $27.9
million, or 26.1% of net sales, compared to $22.1 million, or 24.3% of net
sales in the same period in fiscal 1994.
The improvement in gross profit resulted primarily from higher unit sales
and to a lesser extent from increased prices. While lumber costs were
slightly higher in the first quarter, the Company continues to benefit from
improved plant efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $15.4 million
for the three months ended March 31, 1995 compared to $13.1 million for the
three months ended April 1, 1994. As a percent of net sales, selling, general
and administrative expenses were 14.4% for the three months ended March 31,
1995 compared to 14.5% for the same period in fiscal 1994.
OPERATING INCOME
Operating income for the three months ended March 31, 1995 was $12.1
million compared to $8.6 million for the three months ended April 1, 1994.
The increased operating income in the first quarter of 1995 compared to the
same period in fiscal 1994 was attributable to significantly higher net sales
and improved operating profit margins, offset in part by higher selling,
general and administrative expenses.
INTEREST EXPENSE
Interest expense for the three months ended March 31, 1995 was $4.6
million compared to $4.9 million for the three months ended April 1, 1994.
NET INCOME
Net income for the three months ended March 31, 1995 amounted to $4.5
million, or $0.31 per share, compared to $2.1 million, or $0.15 per share, for
the three months ended April 1, 1994. The 1995 period benefited from higher
net sales and operating income.
LIQUIDITY AND CAPITAL RESOURCES
For the fiscal quarter ended March 31, 1995, cash decreased by $4.1
million. Cash used in operating activities was $.8 million. Cash of $2.7
million was used for additions to property, plant and equipment and $.5
million for long-term debt payments.
On March 31, 1995, the Company had working capital of $98.3 million, or
27.1% of total assets, and $58.9 million of unused bank borrowing capacity.
The Company believes that borrowing availability under the Credit
Facility and cash generated from operations will be adequate to fund working
capital requirements, debt service payments and the planned capital
expenditures for the foreseeable future.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit No.
27 - Financial Data Schedule for the three month
interim period ended March 31, 1995.
(Submitted only in EDGAR filing to Securities
and Exchange Commission)
b) No reports on Form 8-K have been filed during the quarter
ended March 31, 1995.
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 15, 1995 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: May 15, 1995 By: /s/ Robert J. Symon
----------------- -----------------------------------
Robert J. Symon
Executive Vice President,
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> MAR-31-1995
<CASH> 20,844,000
<SECURITIES> 0
<RECEIVABLES> 47,044,000
<ALLOWANCES> 2,625,000
<INVENTORY> 73,405,000
<CURRENT-ASSETS> 142,547,000
<PP&E> 137,761,000
<DEPRECIATION> 23,300,000
<TOTAL-ASSETS> 362,630,000
<CURRENT-LIABILITIES> 44,224,000
<BONDS> 0
<COMMON> 147,000
0
0
<OTHER-SE> 111,281,000
<TOTAL-LIABILITY-AND-EQUITY> 362,630,000
<SALES> 107,192,000
<TOTAL-REVENUES> 107,192,000
<CGS> 79,260,000
<TOTAL-COSTS> 79,260,000
<OTHER-EXPENSES> 15,711,000
<LOSS-PROVISION> 117,000
<INTEREST-EXPENSE> 4,563,000
<INCOME-PRETAX> 7,541,000
<INCOME-TAX> 3,007,000
<INCOME-CONTINUING> 4,534,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,534,000
<EPS-PRIMARY> .31
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