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 29, 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 March 29, 1996
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 29, 1996
and March 31, 1995 4
Consolidated Balance Sheets
March 29, 1996 and December 29, 1995 5
Consolidated Statements of Cash Flows
for the three months ended March 29, 1996
and March 31, 1995 7
Consolidated Statement of Changes in
Shareholders' Investment for the three months
ended March 29, 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 Three Months ended March 29, 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)
Three Months Ended
----------------------
March 29, March 31,
1996 1995
-------- --------
Net sales $ 110,525 $ 107,192
-------- --------
Costs and expenses:
Cost of sales 84,599 79,260
Selling, general
and administrative 14,588 15,448
Amortization of goodwill 380 380
Interest 4,673 4,563
-------- --------
104,240 99,651
-------- --------
Income before income taxes 6,285 7,541
Provision for income taxes 2,381 3,007
-------- --------
Net income $ 3,904 $ 4,534
======== ========
Net income per share $ 0.26 $ 0.31
======== ========
Weighted average shares outstanding 14,879 14,663
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 29, December 29,
1996 1995
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 27,339 $ 32,581
Receivables (net of allowances
of $2,583 and $2,625, respectively) 51,822 50,406
Inventories 78,432 74,572
Prepaid expenses 4,264 4,735
-------- --------
Total current assets 161,857 162,294
-------- --------
Property, plant and equipment
Land 15,855 15,855
Buildings 50,192 49,808
Equipment, furniture and fixtures 112,851 110,719
-------- --------
178,898 176,382
Less: accumulated depreciation 33,270 30,540
-------- --------
145,628 145,842
Other assets:
Goodwill 54,702 55,090
Trademark 28,933 29,133
Other 1,718 1,468
Deferred financing costs 5,770 5,988
-------- --------
Total assets $ 398,608 $ 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)
March 29, December 29,
1996 1995
--------- ------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 2,924 $ 3,210
Accounts payable 19,313 17,086
Accrued liabilities 20,846 28,601
Income taxes payable 1,447 -
-------- --------
Total current liabilities 44,530 48,897
-------- --------
Long-term debt, net of current portion 182,443 183,044
-------- --------
Deferred income taxes 38,802 38,973
-------- --------
Total liabilities 265,775 270,914
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,668,016 at March 29, 1996 and
14,663,365 at December 29, 1995 147 147
Additional paid-in capital 93,128 93,100
Retained earnings 39,558 35,654
-------- --------
Total shareholders' investment 132,833 128,901
-------- --------
Total liabilities and shareholders' investment $ 398,608 $ 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)
Three Months Ended
--------------------
March 29, March 31,
1996 1995
--------- --------
Cash flows from operating activities:
Net income $ 3,904 $ 4,534
Adjustments:
Depreciation 2,731 2,191
Deferred income taxes (171) (372)
Amortization of goodwill and trademark 580 580
Amortization of deferred financing costs 218 357
Provision for doubtful accounts 111 117
Changes in assets and liabilities:
Receivables (2,266) (1,233)
Inventories (3,860) (2,505)
Prepaid expenses 471 55
Other assets (241) (63)
Accounts payable 2,228 105
Accrued liabilities (3,428) (1,087)
Accrued liabilities - interest (4,327) (4,925)
Income taxes payable 2,186 1,411
-------- --------
Net cash used in operating activities (1,864) (835)
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (2,520) (2,739)
-------- -------
Net cash used in investing activities (2,520) (2,739)
-------- --------
Cash flows from financing activities:
Long-term debt payments (886) (488)
Exercise of stock options 28 -
-------- --------
Net cash used in financing activities (858) (488)
-------- --------
Net (decrease) in cash and cash equivalents $ (5,242) $ (4,062)
Cash and cash equivalents, beginning of period 32,581 24,906
-------- --------
Cash and cash equivalents, end of period $ 27,339 $ 20,844
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,780 $ 8,955
Income taxes 390 1,949
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 - - 3,904 3,904
Exercise of stock
options - 28 - 28
------ ------- ------- -------
Balance,
March 29, 1996 $ 147 $ 93,128 $ 39,558 $132,833
======= ======= ======= =======
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 $22,137,000 at March 29, 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
$2,107,000 at March 29, 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:
March 29, December 29,
1996 1995
-------------------------
(in thousands)
Raw materials $ 42,316 $ 42,088
Work-in-process 4,338 3,625
Finished goods 31,778 28,859
-------- --------
Total $ 78,432 $ 74,572
======== ========
NOTE 2 - LONG-TERM DEBT:
Long-term debt consists of the following:
March 29, December 29,
1996 1995
-------------------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 18,919 19,547
Mortgages payable 6,448 6,707
-------- --------
185,367 186,254
Less: Current portion
of long-term debt (2,924) (3,210)
-------- --------
$ 182,443 $ 183,044
======== ========
Letters of credit outstanding were $10.0 million at March 29, 1996 and
$9.7 million at December 29, 1995, 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 New Credit Facility are secured by
inventory and accounts receivable of the Company and the proceeds thereof, the
Senior Notes are effectively subordinated to such borrowings to the extent of
such security interest.
The Senior Notes are not redeemable prior to August 1, 1998. Thereafter,
the Senior Notes are redeemable at the option of the Company at redemption
prices specified in the Indenture. The Senior Notes are not subject to any
mandatory sinking fund requirements.
Upon a "change of control" (as defined in the Indenture), the Company is
required to offer to purchase all outstanding Senior Notes at 101% of the
principal amount thereof, plus accrued interest to the date of repurchase. In
addition, the Company may be required to offer to purchase the Senior Notes at
100% of the principal amount plus accrued interest with the net cash proceeds
of certain sales or other dispositions of assets.
The Indenture contains covenants which 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 29, 1996, the amount of
Restricted Payments that the Company could make under the Indenture was
$28,395,000.
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.
New Credit Facility:
In December 1995, the Company entered into a New Credit Facility, which
provides for up to $90 million of revolving loans for working capital and
general corporate purposes and for letters of credit. Availability of
borrowings under the New Credit Facility is based upon a formula related to
inventory and accounts receivable. At March 29, 1996, the Company had no
borrowings under the New Credit Facility and had $77.6 million of borrowing
capacity under this facility. Borrowings under the New Credit Facility bear
interest at the agent's prime rate plus 0.375% (8.625% at March 29, 1996) or,
at the Company's option, at certain alternate floating rates and are secured
by a pledge of the Company's inventory and accounts receivable. The New
Credit Facility expires on December 21, 2000.
The New Credit Facility contains covenants which restrict, among other
things, the incurrence of additional indebtedness and rental obligations by
the Company and its subsidiaries, the payment of dividends and other
distributions with respect to the capital stock of the Company, the creation
of liens on the assets of the Company and its subsidiaries, the creation of
certain restrictions on the payment of dividends and other distributions by
the Company's subsidiaries, the making of investments and capital expenditures
by the Company and its subsidiaries, the creation of new subsidiaries by the
Company, and certain mergers, sales of assets and transactions with
affiliates.
The New Credit Facility also contains certain financial covenants
relating to the consolidated financial condition of the Company and its
subsidiaries, including covenants relating to their net worth, the ratio of
their earnings to their fixed charges, the ratio of their earnings to their
interest expense, the ratio of their current assets to their current
liabilities, and the ratio of their indebtedness to their total
capitalization. At March 29, 1996, the Company was in compliance with all
financial covenants.
The New Credit Facility specifies a number of events of default
including, among others, the failure to make timely payments of principal,
fees, and interest, the failure to perform the covenants contained therein,
the failure of representations and warranties to be true, the occurrence of a
"change of control" (as defined in the New Credit Facility, to include, among
other things, the ownership by any person or group of more than 25% (or, in
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
New Credit Facility. The New Credit Facility also contains a cross-default to
other indebtedness of the Company aggregating more than $2,000,000 and certain
customary bankruptcy, insolvency and similar defaults. Upon the occurrence of
an event of default under the New Credit Facility, at least three of the
lenders holding at least 60% in amount of the principal indebtedness
outstanding under the New Credit Facility may declare all amounts thereunder
immediately due and payable, except that such amounts automatically become
immediately due and payable in the event of certain bankruptcy, insolvency or
similar defaults.
The New Credit Facility generally prohibits the Company from prepaying in
excess of $50.0 million of 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.
Capitalized Lease Obligations:
During the fourth quarter of 1995, the operating lease agreement relating
to the Company's Beverly, West Virginia, plant and related equipment was
amended to allow for a purchase option of $1 until 2018. As a result, the
Company recorded the present value of the remaining future minimum lease
payments of $19.5 million as a capitalized lease asset and related capitalized
lease obligation.
Mortgages Payable:
Mortgages payable represent primarily various Industrial Revenue Bond
(IRB) notes. In June 1994, the Company entered into an industrial revenue
financing agreement in the amount of $7,000,000 with Mississippi Business
Finance Corp., a public corporation in Mississippi, to finance the expansion
of the Bruce Hardwood Floors plant in Port Gibson, Mississippi. The funds
required were provided by a bank term loan which matures on June 28, 2001.
Collateral for the loan is the plant and equipment at Port Gibson,
Mississippi. At March 29, 1996 the interest rates ranged up to 7.72% and at
December 29, 1995, the interest rates ranged up to 7.88%.
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 29, December 29,
1996 1995
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 24,640 $ 24,229
Trademark 11,255 11,449
Other 7,212 7,250
-------- --------
Total $ 43,107 $ 42,928
======== ========
Deferred Tax Asset:
Other $ 4,305 $ 3,955
-------- --------
Total $ 4,305 $ 3,955
======== ========
The provision for income taxes consists of the following:
Three Months Ended
--------------------
March 29, March 31,
1996 1995
--------------------
(in thousands)
Current:
Federal $ 2,035 $ 3,147
State and local 399 404
-------- -------
$ 2,434 $ 3,551
======== =======
Deferred:
Federal $ (48) $ (484)
State and local (5) (60)
-------- -------
$ (53) $ (544)
======== =======
Total $ 2,381 $ 3,007
======== =======
The tax provision for the periods ending March 29, 1996 and March 31,
1995 is 37.9% and 39.9% of pre-tax income respectively. The factors causing
the rate to vary from the U.S. Federal statutory rate are as follows:
Three Months Ended
--------------------
March 29, March 31,
1996 1995
--------------------
(in thousands)
Computed (expected) tax provision $ 2,200 $ 2,639
Increase (decrease) from:
State and local taxes 254 324
Amortization of goodwill 133 149
Foreign sales (79) -
Other book to tax differences, net (127) (105)
------- ------
$ 2,381 $ 3,007
======= ======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended March 29, 1996 were $110.5 million
compared to $107.2 million for the three months ended March 31, 1995,
representing a 3.1% increase. This year's first quarter, historically the
weakest quarter of our fiscal year, was adversely impacted by unusually poor
weather conditions.
Cabinet Division sales were up 12.3% over those of the same period in
1995. The Cabinet Division's operations, starting in 1996, include the impact
of the building products operations. As reported in our 1995 annual report,
we have elected to discontinue the sale of lumber and related building
materials at our Beltsville, Maryland location and to concentrate on sales of
cabinets, counter tops and cabinet installation.
Hardwood Floors Division sales increased 1.9% over the first quarter of
1995.
GROSS PROFIT
Gross profit for the three months ended March 29, 1996 amounted to $25.9
million, or 23.5% of net sales, compared to $27.9 million, or 26.1% of net
sales in the same period in fiscal 1995.
This decrease in gross profit resulted primarily from competitive market
conditions in the flooring business and, to a lesser extent, to the mix of
business in the Cabinet Division.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $14.6 million
for the three months ended March 29, 1996 compared to $15.4 million for the
three months ended March 31, 1995. As a percent of net sales, selling,
general and administrative expenses were 13.2% for the three months ended
March 29, 1996 compared to 14.4% for the same period in fiscal 1995. Certain
marketing costs, professional fees and incentive compensation expenses were
lower in the first quarter of 1996 vs. the first quarter of 1995.
OPERATING INCOME
Operating income for the three months ended March 29, 1996 was $11.0
million compared to $12.1 million for the three months ended March 31, 1995.
The decrease in operating income in the first quarter of 1996 compared to the
same period in 1995 was attributable primarily to lower average selling prices
in the Hardwood Floors Division, offset by lower selling, general and
administrative expenses.
INTEREST EXPENSE
Interest expense for the three months ended March 29, 1996 was $4.7
million compared to $4.6 million for the three months ended March 29, 1995.
NET INCOME
Net income for the three months ended March 29, 1996 amounted to $3.9
million, or $0.26 per share, compared to $4.5 million, or $0.31 per share, for
the three months ended March 29, 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the fiscal quarter ended March 29, 1996, cash decreased by $5.2
million. Cash used in operating activities was $1.8 million. Cash of $2.5
million was used for additions to property, plant and equipment and $.9
million for long-term debt payments.
At March 29, 1996, the Company had working capital of $117.3 million, or
29.4% of total assets, and $77.6 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 29, 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 March 29, 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: May 10, 1996 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: May 10, 1996 By: /s/ Robert J. Symon
----------------- -----------------------------------
Robert J. Symon
Executive Vice President,
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
15
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> MAR-29-1996
<CASH> 27,339,000
<SECURITIES> 0
<RECEIVABLES> 54,405,000
<ALLOWANCES> 2,583,000
<INVENTORY> 78,432,000
<CURRENT-ASSETS> 161,857,000
<PP&E> 178,898,000
<DEPRECIATION> 33,270,000
<TOTAL-ASSETS> 398,608,000
<CURRENT-LIABILITIES> 44,530,000
<BONDS> 0
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0
<COMMON> 147,000
<OTHER-SE> 132,686,000
<TOTAL-LIABILITY-AND-EQUITY> 398,608,000
<SALES> 110,525,000
<TOTAL-REVENUES> 110,525,000
<CGS> 84,599,000
<TOTAL-COSTS> 84,599,000
<OTHER-EXPENSES> 14,857,000
<LOSS-PROVISION> 111,000
<INTEREST-EXPENSE> 4,673,000
<INCOME-PRETAX> 6,285,000
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