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 September 27, 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 September 27, 1996
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations
for the nine months ended September 27, 1996
and September 29, 1995 and for the three months
ended September 27, 1996 and September 29, 1995 4
Consolidated Balance Sheets
September 27, 1996 and December 29, 1995 5
Consolidated Statements of Cash Flows
for the nine months ended September 27, 1996
and September 29, 1995 7
Consolidated Statement of Changes in
Shareholders' Investment for the nine months
ended September 27, 1996 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 12
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 Nine Months ended September 27, 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)
Nine Months Ended Three Months Ended
--------------------- ----------------------
Sept. 27, Sept. 29, Sept. 27, Sept. 29,
1996 1995 1996 1995
--------- --------- -------- --------
Net sales $ 384,937 $ 339,539 $ 142,941 $ 115,738
-------- -------- -------- --------
Costs and expenses:
Cost of sales 289,892 252,859 108,186 87,797
Selling, general
and administrative 50,012 45,213 18,053 14,352
Amortization of goodwill 1,250 1,140 490 380
Interest 14,605 13,656 5,293 4,496
-------- -------- -------- --------
355,759 312,868 132,022 107,025
-------- -------- -------- --------
Income before income taxes 29,178 26,671 10,919 8,713
Provision for income taxes 11,079 10,297 4,157 3,334
-------- -------- -------- --------
Net income $ 18,099 $ 16,374 $ 6,762 $ 5,379
======== ======== ======== ========
Net income per share $ 1.21 $ 1.11 $ 0.45 $ 0.36
======== ======== ======== ========
Weighted average shares
outstanding 14,958 14,774 15,023 14,838
The accompanying notes to consolidated financial statements are an integral
part of these statements.
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 27, December 29,
1996 1995
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,950 $ 32,581
Receivables (net of allowances
of $3,040 and $2,588, respectively) 68,563 50,406
Inventories 99,995 74,572
Prepaid expenses 4,741 4,735
-------- --------
Total current assets 178,249 162,294
-------- --------
Property, plant and equipment
Land 14,730 15,855
Buildings 56,985 49,808
Equipment, furniture and fixtures 130,442 110,719
-------- --------
202,157 176,382
Less: accumulated depreciation 37,503 30,540
-------- --------
164,654 145,842
Other assets:
Goodwill 71,360 55,090
Trademark 28,533 29,133
Other 2,774 1,468
Deferred financing costs 5,552 5,988
-------- --------
Total assets $ 451,122 $ 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)
September 27, December 29,
1996 1995
--------- ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 2,565 $ 3,210
Accounts payable 23,323 17,086
Accrued liabilities 35,707 28,601
Income taxes payable 3,580 -
-------- --------
Total current liabilities 65,175 48,897
-------- --------
Long-term debt, net of current portion 197,751 183,044
-------- --------
Other long-term liabilities 2,331 -
Deferred income taxes 38,837 38,973
-------- --------
Total liabilities 304,094 270,914
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,668,016 at September 27, 1996 and
14,663,365 at December 29, 1995 147 147
Additional paid-in capital 93,128 93,100
Retained earnings 53,753 35,654
-------- --------
Total shareholders' investment 147,028 128,901
-------- --------
Total liabilities and shareholders' investment $ 451,122 $ 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)
Nine Months Ended
--------------------
Sept. 27, Sept. 29,
1996 1995
--------- --------
Cash flows from operating activities:
Net income $ 18,099 $ 16,374
Adjustments:
Depreciation 8,644 6,755
Deferred income taxes (693) (1,045)
Amortization of goodwill and trademark 1,850 1,740
Amortization of deferred financing costs 667 1,071
Provision for doubtful accounts 365 449
Changes in assets and liabilities:
Receivables (11,574) (12,431)
Inventories (11,205) (6,481)
Prepaid expenses (709) (704)
Other assets 263 335
Accounts payable 4,438 (1,091)
Accrued liabilities 5,120 840
Accrued liabilities - interest (4,166) (4,957)
Income taxes payable 4,321 279
-------- --------
Net cash provided by operating activities 15,420 1,134
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (9,085) (7,448)
Proceeds from sale of property, plant & equipment 3,095 5
Acquisition of Hartco - Stock (36,140) -
Acquisition of Hartco - Notes (5,012) -
-------- -------
Net cash used in investing activities (47,142) (7,443)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings 6,400 -
Long-term debt payments (2,337) (3,024)
Exercise of stock options 28 2
Reimbursement of construction deposits - 1,780
-------- --------
Net cash provided by (used in) financing activities 4,091 (1,242)
-------- --------
Net (decrease) in cash and cash equivalents $ (27,631) $ (7,551)
Cash and cash equivalents, beginning of period 32,581 24,906
-------- --------
Cash and cash equivalents, end of period $ 4,950 $ 17,355
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 17,648 $ 18,122
Income taxes 7,467 12,529
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 - - 18,099 18,099
Exercise of stock
options - 28 - 28
------ ------- ------- -------
Balance,
September 27, 1996 $ 147 $ 93,128 $ 53,753 $147,028
======= ======= ======= =======
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 include the operations of
Hartco, since the acquisition, which occurred on 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):
Six Months Ended
---------------------
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 $37,012,000 at September 27, 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 $2,445,000
at September 27, 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:
. Sept. 27, Dec. 29,
1996 1995
---------------------
(in thousands)
Raw materials $ 55,154 $ 42,088
Work-in-process 6,146 3,625
Finished goods 38,695 28,859
-------- --------
Total $ 99,995 $ 74,572
======== ========
NOTE 3 - LONG-TERM DEBT:
Long-term debt consists of the following:
Sept. 27, Dec. 29,
1996 1995
----------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 17,612 19,547
Industrial revenue bonds 16,304 6,707
Revolving note - Bank 6,400 -
-------- --------
200,316 186,254
Less: Current portion
of long-term debt (2,565) (3,210)
-------- --------
$ 197,751 $ 183,044
======== ========
Letters of credit outstanding were $16.9 million at September 27, 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:
Sept. 27, Dec. 29,
1996 1995
---------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 28,076 $ 24,229
Trademark 11,099 11,449
Other 6,800 7,250
-------- --------
Total $ 45,975 $ 42,928
======== ========
Deferred Tax Asset:
Other $ 7,138 $ 3,955
-------- --------
Total $ 7,138 $ 3,955
======== ========
The provision for income taxes consists of the following:
Nine Months Ended
---------------------
Sept. 27, Sept. 29,
1996 1995
--------------------
(in thousands)
Current:
Federal $ 9,530 $ 9,775
State and local 1,848 1,273
-------- -------
$ 11,378 $ 11,048
======== =======
Deferred:
Federal $ (324) $ (669)
State and local 25 (82)
-------- -------
$ (299) $ (751)
======== =======
Total $ 11,079 $ 10,297
======== =======
The tax provision for the periods ending September 27, 1996 and September
29, 1995 is 38.0% and 38.6% of pre-tax income, respectively. The factors
causing the rate to vary from the U.S. Federal statutory rate are as follows:
Nine Months Ended
----------------------
Sept. 27, Sept. 29,
1996 1995
--------------------
(in thousands)
Computed (expected) tax provision $ 10,213 $ 9,335
Increase (decrease) from:
State and local taxes 1,226 1,147
Amortization of goodwill 437 448
Foreign sales (270) (209)
Other book to tax differences, net (527) (424)
------- -------
$ 11,079 $ 10,297
======= =======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the nine months ended September 27, 1996 were $384.9
million compared to $339.5 million for the nine months ended September 29,
1995, representing a 13.4% increase. The nine months and third quarter ended
September 27, 1996 includes the results for Hartco Flooring Company, since
June 28, 1996, the acquisition date. (See Note 1 of Notes to Consolidated
Financial Statements)
Net sales for the three months ended September 27, 1996 were $142.9
million compared to $115.7 million for the three months ended September 29,
1995, representing a 23.5% increase. Flooring Division sales were up 46.4%
over the comparable period in 1995. Cabinet Division sales in the third
quarter of 1996, without the impact of the decline in sales from the
discontinued Beltsville Building Products unit, were equal to those of the
same period in 1995.
GROSS PROFIT
Gross profit for the nine months ended September 27, 1996 amounted to
$95.0 million, or 24.7% of net sales, compared to $86.7 million, or 25.5% of
net sales, in the same period in 1995. The lower gross profit in the 1996
nine month period was caused primarily by three factors: the effects of
competitive market conditions in the flooring business, primarily in the first
quarter; the impact during the first half of 1996 related to the closing of
the Building Materials Division; and the impact on third quarter operations of
somewhat lower gross margins in the newly-acquired Hartco Flooring unit.
Gross profit for the three months ended September 27, 1996 was $34.8
million, or 24.3% of net sales, compared to $27.9 million, or 24.1% of net
sales, in the same period in 1995. As discussed, Hartco Flooring gross margins
for the quarter were slightly lower than in the remaining flooring operations.
The Flooring Division has had the benefit of stable lumber costs and higher
unit sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $50.0 million,
or 13.0% of net sales, for the nine months ended September 27, 1996 compared
to $45.2 million, or 13.3% of net sales, for the nine months ended September
29, 1995. The total spending increase of $4.8 million is primarily selling
expense required to support the higher sales and is also due to the selling
and administrative expenses for Hartco Flooring in the third quarter of 1996.
Administrative expenses, including Hartco Flooring, in absolute amounts were
flat compared to the 1995 nine month period.
Selling, general and administrative expenses amounted to $18.1 million,
or 12.6% of net sales, for the three months ended September 27, 1996 compared
to $14.4 million, or 12.4% of net sales, for the three months ended September
29, 1995. The higher spending levels were primarily selling expenses such as
advertising, marketing and field sales expenses. In the current quarter, the
administrative expenses, after excluding Hartco Flooring, were flat compared
to the same quarter in 1995.
OPERATING INCOME
Operating income for the nine months ended September 27, 1996 was $43.8
million compared to $40.3 million for the nine months ended September 29,
1995.
Operating income for the three months ended September 27, 1996 was $16.2
million compared to $13.2 million in the same period in 1995.
INTEREST EXPENSE
Interest expense for the nine months ended September 27, 1996 was $14.6
million compared to $13.7 million for the nine months ended September 29,
1995. Interest expense for the three months ended September 27, 1996 was $5.3
million compared to $4.5 million for the three months period ended September
29, 1995. In both the nine month and the three month periods in 1996, the
higher cost is due to the financing of the acquisition of Hartco Flooring
Company and the assumption of debt relating to the acquisition of Hartco
Flooring Company.
NET INCOME
Net income for the nine months ended September 27, 1996 was $18.1 million
or $1.21 per share, compared to $16.4 million, or $1.11 per share, for the
nine months ended September 29, 1995.
Net income for the three months ended September 27, 1996 was $6.8
million, or $0.45 per share, compared to $5.4 million, or $0.36 per share, for
the three months ended September 29, 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 27, 1996, cash decreased by $27.6
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 September 27, 1996, the Company had working capital of $113.1 million,
or 25.1% of total assets, and $66.7 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 nine month
interim period ended September 27, 1996.
(Submitted only in EDGAR filing to Securities
and Exchange Commission)
b) During the quarter ended September 27, 1996, a Current
Report on Form 8-K dated June 28, 1996 was filed to report
the Company's acquisition of Hartco Flooring Company, and a
Form 8-K/A Amendment No. 1 thereto was subsequently filed
within the time period permitted by Form 8-K to include the
financial statements of Hartco Flooring Company and the pro-
forma financial information required by Form 8-K.
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: November 11, 1996 By: /s/ M. Joseph McHugh
------------------ -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: November 11, 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
NINE MONTHS ENDED THREE MONTHS ENDED
---------------------- ----------------------
SEPT. 27, SEPT. 29, SEPT. 27, SEPT. 29,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net Income $18,099,000 $16,374,000 $ 6,762,000 $ 5,379,000
========== ========== ========== ==========
Shares outstanding
beginning of
period 14,663,365 14,662,609 14,668,016 14,663,365
Weighted average number
of shares issued from
exercise of stock options 3,740 504 - -
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding 14,667,105 14,663,113 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 290,636 110,898 354,725 174,910
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 14,957,741 14,774,011 15,022,741 14,838,275
========== ========== ========== ==========
Primary income per common
and common equivalent
share $ 1.21 $ 1.11 $ 0.45 $ 0.36
========== ========== ========== ==========
Assuming full dilution:
Weighted average number
of shares outstanding 14,667,105 14,663,113 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 373,545 173,057 373,545 174,910
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 15,040,650 14,836,170 15,041,561 14,838,275
========== ========== ========== ==========
Fully diluted income per
common and common
equivalent share $ 1.20 $ 1.10 $ 0.45 $ 0.36
========== ========== ========== ==========
16
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> SEP-27-1996
<CASH> 4,950,000
<SECURITIES> 0
<RECEIVABLES> 71,603,000
<ALLOWANCES> 3,040,000
<INVENTORY> 99,995,000
<CURRENT-ASSETS> 178,249,000
<PP&E> 202,157,000
<DEPRECIATION> 37,503,000
<TOTAL-ASSETS> 451,122,000
<CURRENT-LIABILITIES> 65,175,000
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0
0
<COMMON> 147,000
<OTHER-SE> 146,881,000
<TOTAL-LIABILITY-AND-EQUITY> 451,122,000
<SALES> 384,937,000
<TOTAL-REVENUES> 384,937,000
<CGS> 289,892,000
<TOTAL-COSTS> 289,892,000
<OTHER-EXPENSES> 50,897,000
<LOSS-PROVISION> 365,000
<INTEREST-EXPENSE> 14,605,000
<INCOME-PRETAX> 29,178,000
<INCOME-TAX> 11,079,000
<INCOME-CONTINUING> 18,099,000
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