SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 28, 1996
TRIANGLE PACIFIC CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-22138 94-2998971
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
16803 Dallas Parkway, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 887-2000
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
Audited financial statements of Hartco Flooring Company filed as a
part of this report:
- Report of Independent Public Accounts
- Balance Sheet at December 30, 1995
- Statement of Operations for the fiscal year ended December 30,
1995
- Statement of Changes in Shareholder's Investment for the fiscal
year ended December 30, 1995
- Statement of Cash flows for the fiscal year ended December 30,
1995
- Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Statements of Triangle Pacific Corp.
filed as part of this report:
- Unaudited Pro Forma Statement of Operations for the six months
ended June 28, 1996 (including Notes)
- Unaudited Pro Forma Statement of Operations for the six months
ended June 30, 1995 (including Notes)
- Unaudited Pro Forma Statement of Operations for the year ended
December 29, 1995 (including Notes)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Hartco Flooring Company:
We have audited the accompanying balance sheet of Hartco Flooring Company as
of December 30, 1995, and the related statements of operations, shareholder's
investment, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hartco Flooring Company as of
December 30, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1, on June 28, 1996, all of the outstanding common stock
of Hartco Flooring Company was sold to Triangle Pacific Corp.
/s/ Arthur Andersen LLP
Dallas, Texas,
July 26, 1996
HARTCO FLOORING COMPANY
-----------------------
BALANCE SHEET--DECEMBER 30, 1995
--------------------------------
(In Thousands)
ASSETS
------
CURRENT ASSETS:
Trade receivables, net of allowance for
doubtful accounts of $501 $ 5,846
Inventories, net 13,638
Prepaid expenses 279
-------
Total current assets 19,763
-------
PROPERTY, PLANT, AND EQUIPMENT:
Land and land improvements 2,403
Buildings and improvements 10,870
Equipment, furniture, and fixtures 31,479
-------
44,752
Less- Accumulated depreciation 20,080
-------
24,672
DEFERRED INCOME TAXES 306
GOODWILL, net 61,368
OTHER NONCURRENT ASSETS 663
-------
Total assets $106,772
=======
The accompanying notes to financial statements are an integral part of this
balance sheet.
HARTCO FLOORING COMPANY
-----------------------
BALANCE SHEET--DECEMBER 30, 1995
--------------------------------
(In Thousands, except share amounts)
LIABILITIES AND SHAREHOLDER'S INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 264
Accounts payable 957
Accrued liabilities 3,146
Deferred income taxes 818
-------
Total current liabilities 5,185
LONG-TERM DEBT, net of current portion 14,894
PAYABLE TO PARENT 56,477
POSTRETIREMENT HEALTHCARE BENEFIT OBLIGATION 2,848
OTHER NONCURRENT LIABILITIES 3,259
-------
Total liabilities 82,663
-------
SHAREHOLDER'S INVESTMENT:
Common stock - $1 par value, authorized
shares - 200,000, issued and outstanding
shares - 65,700 at December 30, 1995 66
Additional paid-in capital 93,934
Retained deficit (69,891)
-------
Total shareholder's investment 24,109
-------
Total liabilities and shareholder's
investment $106,772
=======
The accompanying notes to financial statements are an integral part of this
balance sheet.
HARTCO FLOORING COMPANY
-----------------------
STATEMENT OF OPERATIONS
-----------------------
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
-------------------------------------------
(In Thousands, except per share amounts)
NET SALES $ 70,789
COSTS AND EXPENSES:
Cost of sales 58,979
Selling, general and administrative 9,763
Amortization of goodwill 1,865
Interest 947
-------
71,554
-------
LOSS BEFORE INCOME TAXES (765)
PROVISION FOR INCOME TAXES 438
-------
Net loss $ (1,203)
=======
PER SHARE DATA:
Net loss $ (18.31)
Weighted average shares outstanding 65,700
The accompanying notes to financial statements are an integral part of this
statement.
HARTCO FLOORING COMPANY
-----------------------
STATEMENT OF CHANGES IN SHAREHOLDER'S INVESTMENT
------------------------------------------------
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
-------------------------------------------
(In Thousands)
Additional
Common Paid-In Retained
Stock Capital (Deficit) Total
------ --------- --------- -------
BALANCE, December 31, 1994 $ 66 $ 93,934 $ (68,688) $ 25,312
Net loss - - (1,203) (1,203)
----- -------- -------- -------
BALANCE, December 30, 1995 $ 66 $ 93,934 $ (69,891) $ 24,109
===== ======== ======== =======
The accompanying notes to financial statements are an integral part of this
statement.
HARTCO FLOORING COMPANY
-----------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
-------------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,203)
Adjustments-
Depreciation 3,526
Deferred income taxes (524)
Amortization of goodwill 1,865
Change In Assets And Liabilities-
Trade receivables (495)
Inventories (473)
Accounts payable (162)
Accrued liabilities 18
Other (387)
---------
Net cash provided by operating activities 2,165
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant, and equipment 42
Additions to property, plant, and equipment (3,142)
---------
Net cash used in investing activities (3,100)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from parent 1,194
Payments of long-term debt (259)
---------
Net cash provided by financing activities 935
---------
NET INCREASE IN CASH -
CASH AND CASH EQUIVALENTS, beginning of period -
---------
CASH AND CASH EQUIVALENTS, end of period $ -
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 947
Income taxes 386
The accompanying notes to financial statements are an integral part of this
statement.
HARTCO FLOORING COMPANY
-----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995
NOTE 1. SALE OF THE COMPANY:
Prior to June 28, 1996, Hartco Flooring Company (the "Company") was a wholly
owned subsidiary of Premark International ("Premark"). On June 28, 1996,
Premark sold all of the outstanding common stock of the Company to Triangle
Pacific Corp. ("Tripac"). The total value of the acquisition was $63 million,
consisting of $36.1 million in cash and the balance representing the
assumption of liabilities.
As of December 30, 1995, it was Premark's intent to continue to operate the
Company as a wholly owned subsidiary. As such, the carrying value and
classification of assets and liabilities in the accompanying balance sheet
were evaluated on the basis that the Company would continue to be operated as
a wholly owned subsidiary of Premark.
NOTE 2. NATURE OF OPERATIONS:
The Company conducts its operations through a single business segment which
consists of the manufacture and distribution of hardwood flooring. The
Company's products are used primarily in residential new construction and
remodeling and are sold throughout the U.S.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Inventories
Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) cost method. Had inventories been valued by the first-in,
first-out method, which approximates current cost, inventories would have been
increased by $3,619,000 at December 30, 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 at December 30, 1995, are as follows (in thousands):
Raw materials $ 6,194
Work-in-process 3,180
Finished goods 7,883
-------
Total 17,257
Less- LIFO reserve (3,619)
-------
Inventory, net $ 13,638
=======
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Expenditures for
maintenance, repairs, renewals and improvements which do not extend the useful
lives of assets are charged to appropriate expense accounts in the year
incurred. Upon disposition of an asset, cost and accumulated depreciation are
removed from the accounts, and any gain or loss is included in the results of
operations. Depreciation is computed on a straight-line basis using the
following estimated useful lives:
Buildings and improvements 10 to 31 years
Equipment, furniture, and fixtures 3 to 12 years
If the carrying value of an asset, including associated intangibles, exceeds
the sum of estimated undiscounted future cash flows, then an impairment loss
is recognized for the difference between estimated fair value and carrying
value. Based upon the Company's analysis of estimated undiscounted future
cash flows, no such impairment loss has been recorded in the accompanying
financial statements.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of
the net assets when Premark acquired the Company in 1988. The goodwill is
being amortized over 40 years. Accumulated amortization of goodwill is
approximately $13,431,000 as of December 30, 1995.
Fair Value of Financial Instruments
The Company's long-term debt is recorded at cost, which approximates fair
market value at December 30, 1995.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using the rates
expected to apply to taxable income in the years in which the temporary
differences are expected to reverse and the credits are expected to be used.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. In
determining the amount of any valuation allowance required to offset deferred
tax assets an assessment is made, which includes anticipating future income in
determining the likelihood of realizing deferred tax assets.
Loss Per Share
Loss per share is based upon the weighted average number of common shares
outstanding during the year. The Company has no common stock equivalents.
NOTE 4. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
Industrial revenue bond $ 10,000
Capital lease obligation 4,989
Other 169
-------
15,158
Less- current portion of long-term debt 264
$ 14,894
=======
Industrial Revenue Bond
On August 1, 1989, the Company entered into an industrial revenue financing
agreement in the amount of $10,000,000 with the City of Somerset, Kentucky, to
partially finance the construction of a manufacturing plant in Somerset,
Kentucky. The principal is due on or before August 1, 2009. The interest
rate varies, and for the year ended December 30, 1995, the interest rate
ranged up to 4.55%.
Capital Lease Obligation
The Company has an agreement with the Kentucky Rural Economic Development
Authority (KREDA) to lease land and a building for its Somerset, Kentucky
manufacturing plant. Financing for the land and building was obtained by
KREDA through the issuance of revenue bonds. The lease is accounted for as a
capital lease and extends through November 9, 2014. The Company has a bargain
purchase option of $1 at the expiration of the lease or following payment in
full of the revenue bonds. The Company's present value (10% interest rate) of
the remaining future minimum lease payments as of December 30, 1995, is
$4,989,000 and is recorded as a capital lease obligation. Related capital
lease assets of $5,545,000 at December 30, 1995, are net of accumulated
depreciation of $1,608,000. The amortization charge for capital lease assets
is included with depreciation expense.
Maturities for all long-term debt are as follows (in thousands):
Capital Lease
Industrial Obligation
Revenue Bond and Other Total
------------ ----------- -------
1996 $ - $ 264 $ 264
1997 - 105 105
1998 - 115 115
1999 - 127 127
2000 - 140 140
Thereafter 10,000 4,407 14,407
------- ------- -------
Total $ 10,000 $ 5,158 $ 15,158
======= ======= =======
Through a cash management program, the Company periodically borrows funds from
Premark to meet its daily operating requirements. Cumulative net borrowings
from Premark are noninterest bearing and were approximately $56,477,000 at
December 30, 1995.
NOTE 5. INCOME TAXES
The components of the deferred tax liability and asset are as follows (in
thousands):
Current Deferred Tax Liability-
Inventory $ 1,533
Current Deferred Tax Asset-
Various accruals 715
-------
Net Current Deferred Tax Liability $ 818
=======
Noncurrent Deferred Tax Liability-
Property, plant, and equipment $ 1,935
Interest 143
Other 127
-------
Total 2,205
-------
Noncurrent Deferred Tax Asset-
Environmental and OSHA Reserve 1,069
Postemployment benefits 1,137
Other 305
-------
Total 2,511
-------
Net Noncurrent Deferred Tax Asset $ 306
=======
The provision for income taxes consists of the following (in thousands):
Current-
Federal $ 863
State and local 99
-------
962
-------
Deferred-
Federal (470)
State and local (54)
-------
(524)
-------
Total $ 438
=======
The statutory federal tax rate is 35%. The Company's effective tax rate
differs from the statutory federal tax rate due to the following factors (in
thousands) :
Computed/expected tax benefit $ (268)
Decrease from-
State and local taxes 43
Amortization of goodwill 653
Other book to tax differences, net 10
-------
Total $ 438
=======
NOTE 6. OPERATING LEASE COMMITMENTS:
The Company rents certain real estate and buildings under leases expiring at
various dates to 2015. These leases include options for renewal and contain
clauses for payment of real estate taxes and insurance. In most cases,
management expects that in the normal course of business, leases will be
renewed or replaced by other leases.
The following is a summary of minimum future lease payments required under
operating leases that have initial noncancelable lease terms in excess of one
year (in thousands):
1996 $ 81
1997 73
1998 73
1999 75
2000 75
-----
Total $ 377
=====
Rental expense for operating leases amounted to $122,000 for the fiscal year
ended December 30, 1995.
NOTE 7. ACCRUED LIABILITIES:
Amounts included in accrued liabilities are as follows (in thousands):
Payroll $ 333
Worker's compensation 900
Medical benefit plan 820
Taxes 150
Insurance 290
Interest 141
Warranty 202
Other 310
------
Total $ 3,146
======
NOTE 8. POSTRETIREMENT HEALTHCARE BENEFIT OBLIGATION:
The Company provides certain postretirement healthcare and life insurance
benefits for employees. Employees may become eligible for these benefits if
they reach normal retirement age while working for the Company and satisfy
certain years of service requirements. The medical plan is contributory, with
retiree contributions adjusted annually, and contain other cost-sharing
features such as deductibles and coinsurance.
The net postretirement benefit costs were (in thousands):
Service cost $ 213
Interest on accumulated postretirement
benefit obligation 246
Net amortization 16
--------
Net postretirement benefit cost $ 475
========
The projected liabilities, which are not funded, are reconciled to the amounts
recognized in the Company's balance sheet as follows (in thousands):
Accumulated postretirement benefit obligation-
Retirees $ 273
Active eligible participants 192
Active, not eligible 685
-------
1,150
-------
Unrecognized prior service benefit 965
Unrecognized net gain 800
-------
Total accrued postretirement benefit cost $ 2,915
=======
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 30, 1995. The
accumulated postretirement benefit obligation is not affected by future
healthcare cost inflation due to the fixed rate contributions by the Company.
Triangle Pacific Corp.
Unaudited Pro Forma Information
On June 28, 1996, Triangle Pacific Corp. (the "Company") acquired all of the
outstanding shares of Hartco Flooring Company ("Hartco"), formerly a wholly-
owned subsidiary of Premark International, Inc.
The following unaudited pro forma consolidated statements of operations for
the six months ended June 28, 1996, the six months ended June 30, 1995, and
the twelve months ended December 29, 1995, were prepared to illustrate the
estimated effects of the acquisition of Hartco. The unaudited pro forma
consolidated statements of operations present the results of operations of the
Company as if the acquisition had occurred as of the beginning of each period
presented. An unaudited pro forma balance sheet as of June 28, 1996, is not
presented as Hartco is included in the unaudited consolidated balance sheet of
the Company as of June 28, 1996, which is included in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 28, 1996, filed with the
Securities and Exchange Commission on August 12, 1996.
The unaudited pro forma financial information is intended to provide
information about the continuing impact of the acquisition by showing how it
might have affected historical financial statements if it had been consummated
at an earlier date. This information is not necessarily indicative of future
operations or the actual results that would have occurred had the acquisition
been consummated at the beginning of each period presented.
The unaudited pro forma consolidated statements of operations should be read
in conjunction with the audited consolidated financial statements of Triangle
Pacific Corp. filed with the Securities and Exchange Commission in its Annual
Report on Form 10-K for the fiscal year ended December 29, 1995 and the
unaudited consolidated financial statements of Triangle Pacific Corp. filed
with the Securities and Exchange Commission in its Quarterly Report on Form
10-Q for the quarters ended June 28, 1996, and June 30, 1995, and the notes
thereto.
Triangle Pacific Corp.
Unaudited Pro Forma Statement of Operations
For the six months ended June 28, 1996
(in thousands, except earnings per share data)
Historical Pro Forma
--------------------- ---------------------
Triangle Hartco
Pacific Flooring
Corp. Company Adjustments Results
-------- -------- ----------- ---------
Net Sales $241,996 $40,419 $ - $282,415
------- ------ ----- -------
Costs and Expenses:
Cost of Sales 181,706 32,982 (214)(1) 214,474
Selling, general
and administrative 31,959 5,523 (216)(2) 37,266
Amortization of Goodwill 760 932 (713)(3) 979
Interest 9,312 450 994 (4) 10,756
------- ------ ----- -------
223,737 39,887 (149) 263,475
------- ------ ----- -------
Income before income taxes 18,259 532 149 18,940
Provision for income taxes (6,922) (205) (142)(5) (7,269)
------- ------ ----- -------
Net income $ 11,337 $ 327 $ 7 $ 11,671
======= ======= ===== =======
Earnings Per Share Data:
Net income per share $ 0.76 $ 0.78
======= =======
Weighted average shares
outstanding 14,920 14,920
======= =======
Notes to Pro Forma Statement of Operations:
-------------------------------------------
(1) Represents the adjustment to depreciation expense as a result of the
purchase price allocation.
(2) Represents the elimination of corporate allocations from Premark and the
addition of Triangle Pacific's estimated corporate allocation.
(3) Net adjustment to goodwill comprised of the elimination of Hartco
goodwill amortization of $932,000 and the addition of Triangle Pacific
goodwill amortization of $219,000 based upon its purchase of Hartco.
(4) Represents the cost of funds to Triangle Pacific if the purchase of
Hartco occurred as of the beginning of the period.
(5) Represents the adjustment to the consolidated provision for income taxes
had Hartco been consolidated with Triangle Pacific as of the beginning of
the period.
Triangle Pacific Corp.
Unaudited Pro Forma Statement of Operations
For the six months ended June 30, 1995
(in thousands, except earnings per share data)
Historical Pro Forma
--------------------- ---------------------
Triangle Hartco
Pacific Flooring
Corp. Company Adjustments Results
-------- -------- ----------- ---------
Net Sales $223,801 $ 34,286 $ - $258,087
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 165,062 27,766 (214)(1) 192,614
Selling, general
and administrative 30,861 5,177 (204)(2) 35,834
Amortization of Goodwill 760 932 (713)(3) 979
Interest 9,160 473 994 (4) 10,627
------- ------- ------- -------
205,843 34,348 (137) 240,054
------- ------- ------- -------
Income before income taxes 17,958 (62) 137 18,033
Provision for income taxes (6,963) (343) 230 (5) (7,076)
------- ------- ------- -------
Net income $ 10,995 $ (405) $ 367 $ 10,957
======= ======= ======= =======
Earnings Per Share Data:
Net income per share $ 0.75 $ 0.74
======= =======
Weighted average shares
outstanding 14,754 14,754
======= =======
Notes to Pro Forma Statement of Operations:
-------------------------------------------
(1) Represents the adjustment to depreciation expense as a result of the
purchase price allocation.
(2) Represents the elimination of corporate allocations from Premark and the
addition of Triangle Pacific's estimated corporate allocation.
(3) Net adjustment to goodwill comprised of the elimination of Hartco
goodwill amortization of $932,000 and the addition of Triangle Pacific
goodwill amortization of $219,000 based upon its purchase of Hartco.
(4) Represents the cost of funds to Triangle Pacific if the purchase of
Hartco occurred as of the beginning of the period.
(5) Represents the adjustment to the consolidated provision for income taxes
had Hartco been consolidated with Triangle Pacific as of the beginning of
the period.
Triangle Pacific Corp.
Unaudited Pro Forma Statement of Operations
For the year ended December 29, 1995
(in thousands, except earnings per share data)
Historical Pro Forma
--------------------- ---------------------
Triangle Hartco
Pacific Flooring
Corp. Company Adjustments Results
-------- -------- ----------- ---------
Net Sales $458,868 $ 70,789 $ - $529,657
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 342,348 58,979 (428)(1) 400,899
Selling, general
and administrative 60,841 9,763 (380)(2) 70,224
Amortization of Goodwill 1,520 1,865 (1,427)(3) 1,958
Interest 18,380 947 1,988 (4) 21,315
------- ------- ------- -------
423,089 71,554 (247) 494,396
------- ------- ------- -------
Income before income taxes 35,779 (765) 247 35,261
Provision for income taxes (13,774) (438) 297 (5) (13,915)
------- ------- ------- -------
Net income $ 22,005 $ (1,203) $ 544 $ 21,346
======= ======= ======= =======
Earnings Per Share Data:
Net income per share $ 1.49 $ 1.44
======= =======
Weighted average shares
outstanding 14,815 14,815
======= =======
Notes to Pro Forma Statement of Operations:
-------------------------------------------
(1) Represents the adjustment to depreciation expense as a result of the
purchase price allocation.
(2) Represents the elimination of corporate allocations from Premark and the
addition of Triangle Pacific's estimated corporate allocation.
(3) Net adjustment to goodwill comprised of the elimination of Hartco
goodwill amortization of $1,865,000 and the addition of Triangle Pacific
goodwill amortization of $438,000 based upon its purchase of Hartco.
(4) Represents the cost of funds to Triangle Pacific if the purchase of
Hartco occurred as of the beginning of the period.
(5) Represents the adjustment to the consolidated provision for income taxes
had Hartco been consolidated with Triangle Pacific as of the beginning of
the period.
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 hereunto duly authorized.
Date: September 13, 1996 TRIANGLE PACIFIC CORP.
By: /s/ Robert J. Symon
-----------------------------------
Robert J. Symon
Executive Vice President, Treasurer
and Chief Financial Officer
