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 June 28, 1996
--------------------------------------------
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) 887-2000
- ---------------------------------------------------------------------------
(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.
14,668,016 Shares on June 28, 1996
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations
for the six months ended June 28, 1996 and
June 30, 1995 and for the three months ended
June 28, 1996 and June 30, 1995 4
Consolidated Balance Sheets
June 28, 1996 and December 29, 1995 5
Consolidated Statements of Cash Flows
for the six months ended June 28, 1996
and June 30, 1995 7
Consolidated Statement of Changes in
Shareholders' Investment for the six months
ended June 28, 1996 . 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 Six Months ended June 28, 1996
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 presentation of financial
position and results of 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 29, 1995.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
Six Months Ended Three Months Ended
--------------------- ----------------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
--------- --------- -------- --------
Net sales $ 241,996 $ 223,801 $ 131,471 $ 116,609
-------- -------- -------- --------
Costs and expenses:
Cost of sales 181,706 165,062 97,107 85,802
Selling, general
and administrative 31,959 30,861 17,371 15,413
Amortization of goodwill 760 760 380 380
Interest 9,312 9,160 4,639 4,597
-------- -------- -------- --------
223,737 205,843 119,497 106,192
-------- -------- -------- --------
Income before income taxes 18,259 17,958 11,974 10,417
Provision for income taxes 6,922 6,963 4,541 3,956
-------- -------- -------- --------
Net income $ 11,337 $ 10,995 $ 7,433 $ 6,461
======== ======== ======== ========
Net income per share $ 0.76 $ 0.75 $ 0.50 $ 0.44
======== ======== ======== ========
Weighted average shares
outstanding 14,920 14,754 14,955 14,758
The accompanying notes to consolidated financial statements are an integral
part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 28, December 29,
1996 1995
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,006 $ 32,581
Receivables (net of allowances
of $3,017 and $2,588, respectively) 68,985 50,406
Inventories 96,485 74,572
Prepaid expenses 5,604 4,735
-------- --------
Total current assets 175,080 162,294
-------- --------
Property, plant and equipment
Land 15,329 15,855
Buildings 59,265 49,808
Equipment, furniture and fixtures 128,122 110,719
-------- --------
202,716 176,382
Less: accumulated depreciation 35,763 30,540
-------- --------
166,953 145,842
Other assets:
Goodwill 71,850 55,090
Trademark 28,733 29,133
Other 2,609 1,468
Deferred financing costs 5,783 5,988
-------- --------
Total assets $ 451,008 $ 399,815
======== ========
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)
June 28, December 29,
1996 1995
--------- ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 2,872 $ 3,210
Accounts payable 23,730 17,086
Accrued liabilities 37,253 28,601
Income taxes payable 3,041 -
-------- --------
Total current liabilities 66,896 48,897
-------- --------
Long-term debt, net of current portion 201,839 183,044
-------- --------
Other long-term liabilities 2,908 -
Deferred income taxes 39,099 38,973
-------- --------
Total liabilities 310,742 270,914
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,668,016 at June 28, 1996 and
14,663,365 at December 29, 1995 147 147
Additional paid-in capital 93,128 93,100
Retained earnings 46,991 35,654
-------- --------
Total shareholders' investment 140,266 128,901
-------- --------
Total liabilities and shareholders' investment $ 451,008 $ 399,815
======== ========
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)
Six Months Ended
--------------------
June 28, June 30,
1996 1995
--------- --------
Cash flows from operating activities:
Net income $ 11,337 $ 10,995
Adjustments:
Depreciation 5,473 4,456
Deferred income taxes (431) (785)
Amortization of goodwill and trademark 1,160 1,160
Amortization of deferred financing costs 436 714
Provision for doubtful accounts 303 379
Changes in assets and liabilities:
Receivables (11,934) (8,993)
Inventories (7,695) (3,776)
Prepaid expenses (600) (621)
Other assets (458) 168
Accounts payable 4,844 725
Accrued liabilities 1,754 (845)
Accrued liabilities - interest (13) (801)
Income taxes payable 3,782 (66)
-------- --------
Net cash provided by operating activities 7,958 2,710
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (5,390) (4,547)
Proceeds from sale of property, plant & equipment 1,524 -
Acquisition of Hartco - Stock (36,140) -
Acquisition of Hartco - Notes (5,012) -
-------- -------
Net cash used in investing activities (45,018) (4,547)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings 10,000 -
Long-term debt payments (1,543) (800)
Exercise of stock options 28 2
Reimbursement of construction deposits - 1,780
-------- --------
Net cash provided by financing activities 8,485 982
-------- --------
Net (decrease) in cash and cash equivalents $ (28,575) $ (855)
Cash and cash equivalents, beginning of period 32,581 24,906
-------- --------
Cash and cash equivalents, end of period $ 4,006 $ 24,051
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,900 $ 9,507
Income taxes 3,587 7,798
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
(in thousands)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
------- ------- --------- -------
Balance,
December 29, 1995 $ 147 $ 93,100 $ 35,654 $128,901
Net income - - 11,337 11,337
Exercise of stock
options - 28 - 28
------ ------- ------- -------
Balance,
June 28, 1996 $ 147 $ 93,128 $ 46,991 $140,266
======= ======= ======= =======
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 - ACQUISITION OF HARTCO FLOORING COMPANY
On June 28, 1996, the Company acquired all of the outstanding shares of
Hartco Flooring Company ("Hartco"), formerly a wholly-owned subsidiary of
Premark International, Inc. The total value of the acquisition was $63
million, consisting of $36.1 million in cash and the balance representing the
assumption of liabilities.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair values of
the net assets acquired was $17.5 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 40 years. The
accompanying consolidated statements of operations do not reflect any
operations of Hartco since the acquisition occurred on June 28, 1996. The
operations of Hartco will be reflected by the Company in periods subsequent to
June 28, 1996.
The net purchase price was allocated as follows:
(in thousands)
Net working capital $ 13,589
Net property, plant and equipment 22,717
Other assets 712
Goodwill 17,530
Other non-current liabilities (18,408)
-------
Cash paid for Hartco $ 36,140
=======
The unaudited proforma results below assume the acquisition occurred at
the beginning of the six-month interim periods ended June 28, 1996 and June
30, 1995 (in thousands, except per share data):
June 28, June 30,
1996 1995
-------- --------
Net sales $ 282,415 $ 258,087
Net income 11,671 10,957
Net income per share $ 0.78 $ 0.74
The above proforma results include adjustments to give effect to
amortization of goodwill, interest expense on acquisition debt and certain
other adjustments, together with related income tax effects. The proforma
results above are not necessarily indicative of the operating results that
would have occurred had the acquisition been consummated as of January 1, 1996
and 1995, nor are they necessarily indicative of future operating results.
NOTE 2 -INVENTORIES:
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method is used for certain inventories and the first-in,
first-out (FIFO) method is used for all other inventories. Inventories valued
by the LIFO method were $39,804,000 at June 28, 1996 and $21,154,000 at
December 29, 1995. Had all inventories been valued by the FIFO method, which
approximates current cost, inventories would have been increased by $2,307,000
at June 28, 1996 and $2,071,000 at December 29, 1995. 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:
June 28, December 29,
1996 1995
-------------------------
(in thousands)
Raw materials $ 50,794 $ 42,088
Work-in-process 6,698 3,625
Finished goods 38,993 28,859
-------- --------
Total $ 96,485 $ 74,572
======== ========
NOTE 3 - LONG-TERM DEBT:
Long-term debt consists of the following:
June 28, December 29,
1996 1995
-------------------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 18,272 19,547
Industrial revenue bonds 16,439 6,707
Revolving note - Bank 10,000 -
-------- --------
204,711 186,254
Less: Current portion
of long-term debt (2,872) (3,210)
-------- --------
$ 201,839 $ 183,044
======== ========
Letters of credit outstanding were $20.4 million at June 28, 1996 and
$9.7 million at December 29, 1995, under a facility pursuant to which they can
be renewed or replaced.
On June 28, 1996, in connection with the acquisition of Hartco Flooring
Company, the Company acquired $10,000,000, floating interest rate, City of
Somerset, Kentucky, Industrial Revenue Bonds, due in full on August 1, 2009.
These bonds were used to finance the Somerset, Kentucky hardwood flooring
plant and are collateralized by a $10,000,000 letter of credit.
NOTE 4 - INCOME TAXES:
The components of the deferred tax liability and asset are as follows:
June 28, December 29,
1996 1995
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 26,075 $ 24,229
Trademark 11,177 11,449
Other 9,471 7,250
-------- --------
Total $ 46,723 $ 42,928
======== ========
Deferred Tax Asset:
Other $ 7,624 $ 3,955
-------- --------
Total $ 7,624 $ 3,955
======== ========
The provision for income taxes consists of the following:
Six Months Ended
--------------------
June 28, June 30,
1996 1995
--------------------
(in thousands)
Current:
Federal $ 6,232 $ 6,831
State and local 1,152 856
-------- -------
$ 7,384 $ 7,687
======== =======
Deferred:
Federal $ (457) $ (645)
State and local (5) (79)
-------- -------
$ (462) $ (724)
======== =======
Total $ 6,922 $ 6,963
======== =======
The tax provision for the periods ending June 28, 1996 and June 30, 1995
is 37.9% and 38.8% of pre-tax income respectively. The factors causing the
rate to vary from the U.S. Federal statutory rate are as follows:
Six Months Ended
--------------------
June 28, June 30,
1996 1995
--------------------
(in thousands)
Computed (expected) tax provision $ 6,391 $ 6,285
Increase (decrease) from:
State and local taxes 744 772
Amortization of goodwill 266 299
Foreign sales (176) -
Other book to tax differences, net (303) (393)
------- ------
$ 6,922 $ 6,963
======= ======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the six months ended June 28, 1996 were $242.0 million
compared to $223.8 million for the six months ended June 30, 1995,
representing a 8.1% increase.
Net sales for the three months ended June 28, 1996 were $131.5 million
compared to $116.6 million for the three months ended June 30, 1995,
representing a 12.7% increase. Flooring Division sales were up 19% over the
comparable period in 1995. Cabinet Division sales in the second quarter of
1996, without the impact of the decline in sales from the discontinued
Beltsville Building Products unit were up 11.8% over those of the same period
in 1995.
GROSS PROFIT
Gross profit for the six months ended June 28, 1996 amounted to $60.3
million, or 24.9% of net sales, compared to $58.7 million, or 26.3% of net
sales in the same period in 1995.
Gross profit for the three months ended June 28, 1996 was $34.4 million
or 26.1% of net sales compared to $30.8 million or 26.4% of net sales in the
same period in 1995. However, gross profit margins improved over the first
quarter of 1996. The major improvement was generated by the Flooring
Division, which benefited from higher unit prices and improved overhead
absorption resulting from higher unit sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $32.0 million or
13.2% of net sales for the six months ended June 28, 1996 compared to $30.9
million or 13.8% of net sales for the six months ended June 30, 1995.
Selling, general and administrative expenses amounted to $17.4 million or
13.2% of net sales for the three months ended June 28, 1996 compared to $15.4
million or 13.2% of net sales for the three months ended June 30, 1995.
OPERATING INCOME
Operating income for the six months ended June 28, 1996 was $27.6 million
compared to $27.1 million for the six months ended June 30, 1995.
Operating income for the three months ended June 28, 1996 was $16.6
million compared to $15.0 million in the same period in 1995.
INTEREST EXPENSE
Interest expense for the six months ended June 28, 1996 was $9.3 million
compared to $9.2 million for the six months ended June 30, 1995.
Interest expense for the three months ended June 28, 1996 was $4.6
million, the same as the three month period ended June 30, 1995.
NET INCOME
Net income for the six months ended June 28, 1996 was $11.3 million or
$0.76 per share compared to $11.0 million or $0.75 per share for the six
months ended June 30, 1995.
Net income for the three months ended June 28, 1996 was $7.4 million or
$0.50 per share compared to $6.5 million or $0.44 per share for the three
months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 28, 1996, cash decreased by $28.6 million
due principally to the cash used to purchase the stock of Hartco Flooring
Company (See Note 1 of Notes to Consolidated Financial Statements).
At June 28, 1996, the Company had working capital of $108.2 million, or
24.0% of total assets, and $59.6 million of unused bank borrowing capacity.
The Company believes that borrowing availability under its 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.
This report on Form 10-Q includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements other
than statements of historical fact included in this Form 10-Q, including,
without limitation, statements contained in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to have been correct.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit No.
11 - Statement re-computation of per share
earnings
27 - Financial Data Schedule for the six month
interim period ended June 28, 1996.
(Submitted only in EDGAR filing to Securities
and Exchange Commission)
b) No reports on Form 8-K have been filed during the quarter
ended June 28, 1996.
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: August 12, 1996 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: August 12, 1996 By: /s/ Robert J. Symon
----------------- -----------------------------------
Robert J. Symon
Executive Vice President,
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
EXHIBIT 11
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
SIX MONTHS ENDED THREE MONTHS ENDED
---------------------- ----------------------
JUNE 28, JUNE 30, JUNE 28, JUNE 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net Income $11,337,000 $10,995,000 $ 7,433,000 $ 6,461,000
========== ========== ========== ==========
Shares outstanding
beginning of
period 14,663,365 14,662,609 14,668,016 14,662,609
Weighted average number
of shares issued from
exercise of stock options 3,284 756 - 756
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding 14,666,649 14,663,365 14,668,016 14,663,365
Shares issuable from assumed
exercise of stock options,
reduced by the number of
shares which could have
been purchased with the
proceeds from exercise of
such options 253,156 90,526 287,158 94,571
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 14,919,805 14,753,891 14,955,174 14,757,936
========== ========== ========== ==========
Primary income per common
and common equivalent
share $ 0.76 $ 0.75 $ 0.50 $ 0.44
========== ========== ========== ==========
Assuming full dilution:
Weighted average number
of shares outstanding 14,666,649 14,663,176 14,668,016 14,663,365
Shares issuable from
assumed exercise of
stock options reduced
by the number of shares
which could have been
purchased with the
proceeds from exercise
of such options 318,677 97,417 318,677 97,417
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 14,985,326 14,760,593 14,986,693 14,760,782
========== ========== ========== ==========
Fully diluted income per
common and common
equalivalent share $ 0.76 $ 0.75 $ 0.50 $ 0.44
========== ========== ========== ==========
13
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> JUN-28-1996
<CASH> 4,006,000
<SECURITIES> 0
<RECEIVABLES> 72,002,000
<ALLOWANCES> 3,017,000
<INVENTORY> 96,485,000
<CURRENT-ASSETS> 175,080,000
<PP&E> 202,716,000
<DEPRECIATION> 35,763,000
<TOTAL-ASSETS> 451,008,000
<CURRENT-LIABILITIES> 66,896,000
<BONDS> 0
0
0
<COMMON> 147,000
<OTHER-SE> 140,119,000
<TOTAL-LIABILITY-AND-EQUITY> 451,008,000
<SALES> 241,996,000
<TOTAL-REVENUES> 241,996,000
<CGS> 181,706,000
<TOTAL-COSTS> 181,706,000
<OTHER-EXPENSES> 32,416,000
<LOSS-PROVISION> 303,000
<INTEREST-EXPENSE> 9,312,000
<INCOME-PRETAX> 18,259,000
<INCOME-TAX> 6,922,000
<INCOME-CONTINUING> 11,337,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,337,000
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
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