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 April 4, 1997
--------------------------------------------
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.
14,712,890 Shares on April 4, 1997
<PAGE>
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 April 4, 1997 and
March 29, 1996 4
Consolidated Balance Sheets
April 4, 1997 and January 3, 1997 5
Consolidated Statements of Cash Flows
for the three months ended April 4, 1997
and March 29, 1996 7
Consolidated Statement of Changes in
Shareholders' Investment for the three months
ended April 4, 1997 . 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 13
SIGNATURES 14
<PAGE>
PART I FINANCIAL INFORMATION
Item I. Financial Statements
Triangle Pacific Corp. and Subsidiaries
Consolidated Financial Statements
for the Three Months ended April 4, 1997
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
January 3, 1997.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
<TABLE>
Three Months Ended
----------------------
April 4, March 29,
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 145,205 $ 110,525
-------- --------
Costs and expenses:
Cost of sales 108,968 84,599
Selling, general
and administrative 20,944 14,588
Amortization of goodwill 490 380
Interest 4,993 4,673
-------- --------
135,395 104,240
-------- --------
Income before income taxes 9,810 6,285
Provision for income taxes 3,951 2,381
-------- --------
Net income $ 5,859 $ 3,904
======== ========
Net income per share $ 0.38 $ 0.26
======== ========
Weighted average shares outstanding 15,274 14,879
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
April 4, January 3,
1997 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,425 $ 19,638
Receivables (net of allowances
of $3,542 and $3,053, respectively) 73,451 59,236
Inventories 111,506 95,096
Prepaid expenses 3,780 3,713
-------- --------
Total current assets 192,162 177,683
-------- --------
Property, plant and equipment
Land 16,375 15,537
Buildings 62,276 56,274
Equipment, furniture and fixtures 141,886 133,197
-------- --------
220,537 205,008
Less: accumulated depreciation 43,221 40,258
-------- --------
177,316 164,750
Other assets:
Goodwill 107,436 70,986
Trademark 28,133 28,333
Other 5,648 2,921
Deferred financing costs 5,147 5,290
-------- --------
Total assets $ 515,842 $ 449,963
======== ========
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)
<TABLE>
April 4, January 3,
1997 1997
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 3,005 $ 2,437
Accounts payable 24,014 18,520
Accrued liabilities 39,400 40,226
Income taxes payable 5,286 1,991
-------- --------
Total current liabilities 71,705 63,174
-------- --------
Long-term debt, net of current portion 240,191 190,604
Other long-term liabilities 3,867 2,331
Deferred income taxes 39,195 39,217
-------- --------
Total liabilities 354,958 295,326
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,712,890 at April 4, 1997 and
14,686,558 at January 3, 1997 147 147
Additional paid-in capital 93,600 93,212
Retained earnings 67,137 61,278
-------- --------
Total shareholders' investment 160,884 154,637
-------- --------
Total liabilities and shareholders' investment $ 515,842 $ 449,963
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
Three Months Ended
--------------------
April 4, March 29,
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,859 $ 3,904
Adjustments:
Depreciation 3,365 2,731
Deferred income taxes (21) (171)
Amortization of goodwill and trademark 690 580
Amortization of deferred financing costs 231 218
Provision for doubtful accounts 130 111
Changes in assets and liabilities:
Receivables (7,880) (2,266)
Inventories (3,147) (3,860)
Prepaid expenses (24) 471
Other assets (347) (241)
Accounts payable 3,600 2,228
Accrued liabilities (31) (3,428)
Accrued liabilities - interest (4,014) (4,327)
Income taxes payable 3,295 2,186
Long-term liabilities 35 -
-------- --------
Net cash provided by (used in) operating activities 1,741 (1,864)
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (4,698) (2,520)
Acquisition of Robbins Flooring (55,627) -
-------- -------
Net cash (used in) investing activities (60,325) (2,520)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings 43,100 -
Long-term debt payments (1,117) (886)
Exercise of stock options 2 28
Stock incentive bonus shares issued 386 -
-------- --------
Net cash provided by (used in) financing activities 42,371 (858)
-------- --------
Net (decrease) in cash and cash equivalents $ (16,213) $ (5,242)
Cash and cash equivalents, beginning of period 19,638 32,581
-------- --------
Cash and cash equivalents, end of period $ 3,425 $ 27,339
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,516 $ 8,780
Income taxes 641 390
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
(in thousands)
<TABLE>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
------- ------- --------- -------
<S> <C> <C> <C> <C>
Balance,
January 3, 1997 $ 147 $ 93,212 $ 61,278 $154,637
Net income - - 5,859 5,859
Exercise of stock
options - 2 - 2
Stock incentive bonus
shares issued - 386 - 386
------ ------- ------- -------
Balance,
April 4, 1997 $ 147 $ 93,600 $ 67,137 $160,884
======= ======= ======= =======
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of this statement.
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACQUISITION OF RESIDENTIAL FLOORING DIVISION OF ROBBINS, INC.
AND SEARCY FLOORING, INC.
On March 28, 1997, Robbins Hardwood Flooring Inc., a newly formed wholly-
owned subsidiary of Triangle Pacific Corp., acquired from Robbins Inc. and
it's affiliate Searcy Flooring, Inc., substantially all the assets and assumed
certain liabilities (primarily IRB financing and trade payables) associated
with their residential flooring operations. The purchase price was $64.2
million consisting of $55.7 in cash and the balance in assumed 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 $36.9 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 40 years. The balance
sheet at April 4, 1997, reflects the acquisition of Robbins Hardwood Flooring
Inc., on March 28, 1997. Sales and earnings for the residential flooring
operations acquired by Robbins Hardwood Flooring Inc., are not included in the
reported results for the quarter ended April 4, 1997.
The net purchase price was allocated as follows:
(in thousands)
Net working capital $ 14,661
Net property, plant and equipment 11,295
Other assets 2,923
Goodwill 36,941
Other non-current liabilities (10,193)
-------
Cash paid for Robbins Hardwood Flooring $ 55,627
=======
On a proforma basis, assuming the acquisition would have occured on
January 5, 1997, management believes the Company's results of operations would
not have been significantly different than as reported.
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 $45,500,0000 at April 4, 1997 and $35,311,000 at
January 3, 1997. Had all inventories been valued by the FIFO method, which
approximates current cost, inventories would have been increased by $4,301,000
at April 4, 1997 and $2,851,000 at January 3, 1997. 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:
<PAGE>
April 4, January 3,
1997 1997
-------------------------
(in thousands)
Raw materials $ 52,749 $ 50,873
Work-in-process 10,100 7,259
Finished goods 48,657 36,964
-------- --------
Total $ 111,506 $ 95,096
======== ========
NOTE 3 - LONG-TERM DEBT:
Long-term debt consists of the following:
April 4, January 3,
1997 1997
-----------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 16,533 16,996
Industrial revenue bonds 23,563 16,045
Revolving note - Bank 43,100 -
-------- --------
243,196 193,041
Less: Current portion
of long-term debt (3,005) (2,437)
-------- --------
$ 240,191 $ 190,604
======== ========
Letters of credit outstanding were $18.6 million at April 4, 1997 and
$15.0 million at January 3, 1997, under a facility pursuant to which they can
be renewed or replaced.
NOTE 4 - INCOME TAXES:
The components of the deferred tax liability and asset are as follows:
April 4, March 29,
1997 1996
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 27,762 $ 27,824
Trademark 10,944 11,022
Other 6,889 7,338
-------- --------
Total $ 45,595 $ 46,184
======== ========
Deferred Tax Asset:
Other $ 6,400 $ 6,967
-------- --------
Total $ 6,400 $ 6,967
======== ========
<PAGE>
The provision for income taxes consists of the following:
Three Months Ended
--------------------
April 4, March 29,
1997 1996
---------------------
(in thousands)
Current:
Federal $ 3,005 $ 2,035
State and local 618 399
-------- --------
$ 3,623 $ 2,434
-------- --------
Deferred:
Federal $ 290 $ (48)
State and local 38 (5)
-------- --------
$ 328 $ (53)
-------- --------
Total $ 3,951 $ 2,381
======== ========
The tax provision for the periods ending April 4, 1997 and March 29, 1996
was 40.3% and 37.9% of pre-tax income, respectively. The factors causing the
rate to vary from the U.S. Federal statutory rate were as follows:
Three Months Ended
--------------------
April 4, March 29,
1997 1996
--------------------
(in thousands)
Computed (expected) tax provision $ 3,434 $ 2,200
Increase (decrease) from:
State and local taxes 426 254
Amortization of goodwill 171 133
Foreign sales (98) (79)
Other book to tax differences, net 18 (127)
------- ------
Total $ 3,951 $ 2,381
======= ======
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended April 4, 1997 were $145.2 million,
compared to $110.5 million for the three months ended March 29, 1996,
representing a 31.4% increase. The 1997 period includes the results of Hartco
Flooring Company acquired in June, 1996.
Flooring Division sales for the first quarter of 1997 increased 55.1%
over the first quarter of 1996. Flooring Division unit sales increased by
45.9% over the same period in 1996. The first quarter does not include any
sales of the residential flooring operations of Robbins, Inc. and Searcy
Flooring Inc., which were acquired on March 28, 1997.
Cabinet Division sales in the first quarter of 1997 were $46.4 million
compared to $46.8 million in the same period in 1996. Unit sales were down by
8.1%, while the average selling price increased by 7.8%
GROSS PROFIT
Gross profit for the three months ended April 4, 1997 amounted to $36.2
million, or 25.0% of net sales, compared to $25.9 million, or 23.5% of net
sales, in the same period in 1996. Lumber prices have increased more than
20.0% since October 1, 1996 and 9.9% in the first quarter of 1997. We expect
that lumber prices will cointinue to rise throughout the second quarter before
peaking by the end of June, 1997. It is possible that our 1997 lumber costs
could increase by as much as 15.0% in 1997. We believe we will be able to
maintain current profitability levels through improved operating efficiency,
improved lumber and material yields and by selected price increases.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $20.9 million,
or 14.4% of net sales, for the three months ended April 4, 1997 compared to
$14.6 million, or 13.2% of net sales, for the three months ended March 29,
1996. The higher spending levels were primarily for advertising, marketing
and field sales expense and increased provisions for incentive compensation
programs.
OPERATING INCOME
Operating income for the three months ended April 4, 1997 was $14.8
million compared to $11.0 million for the three months ended March 29, 1996.
INTEREST EXPENSE
Interest expense for the three months ended April 4, 1997 was $5.0
million compared to $4.7 million for the three months ended March 29, 1996.
NET INCOME
Net income for the three months ended April 4, 1997 was $5.9 million or
$0.38 per share, compared to $3.9 million or $0.26 per share, for the three
months ended March 29, 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the fiscal quarter ended April 4, 1997, cash decreased by $16.2
million. Cash used for the acquisition of the residential flooring operations
of Robbins Inc. and Searcy Flooring, Inc. on March 28, 1997 was $55.7 million.
In addition, cash used for additions to property, plant and equipment was $4.7
million. Bank borrowings of $43.1 million were used to offset these
expenditures.
At April 4, 1997, the Company had working capital of $120.5 million, or
23.4% of total assets, and $28.3 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.
Except for the statements of historical fact, this Form 10-Q, including,
without limitation, this "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" contains "forward-looking statements"
that involve risks and uncertainties that are detailed from time to time in
documents filed by the Company with the SEC. The Company 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 three month
interim period ended April 4, 1997.
(Submitted only in EDGAR filing to Securities
and Exchange Commission)
b) No reports on Form 8-K have been filed during the quarter
ended April 4, 1997.
<PAGE>
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 19, 1997 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: May 19, 1997 By: /s/ Robert J. Symon
----------------- -----------------------------------
Robert J. Symon
Executive Vice President,
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
Exhibit II
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
Three Months Ended
--------------------------
April 4, March 29,
1997 1996
---------- ----------
Net Income $ 5,859,000 $ 3,904,000
========== ==========
Shares outstanding beginning of period 14,686,558 14,663,365
Weighted average number of shares issued
from exercise of stock options 269 1,917
Weighted average number of shares issued
from stock bonuses 17,017 -
========== ==========
Weighted average number of shares outstanding 14,703,844 14,665,282
Shares issuable from assumed exercise of
stock options and stock warrants,
reduced by the number of shares
which could have been purchased with
the proceeds from exercise of such
options and warrants 569,971 214,140
---------- ----------
Weighted average number of shares
outstanding as adjusted 15,273,815 14,879,422
========== ==========
Primary income per common and common
equivalent share $ 0.38 $ 0.26
========== ==========
Assuming full dilution:
Weighted average number of shares outstanding 14,703,844 14,665,282
Shares issuable from assumed exercise of
stock options and stock warrants
reduced by the number of shares which
could have been purchased with the
proceeds from exercise of stock options
and warrants 569,971 214,956
---------- ----------
Weighted average number of shares outstanding
as adjusted 15,273,815 14,880,238
========== ==========
Fully diluted income per common and
common equivalent share $ 0.38 $ 0.26
========== ==========
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-04-1998
<PERIOD-END> APR-04-1997
<CASH> 3,425,000
<SECURITIES> 0
<RECEIVABLES> 76,933,000
<ALLOWANCES> 3,542,000
<INVENTORY> 111,506,000
<CURRENT-ASSETS> 192,162,000
<PP&E> 220,537,000
<DEPRECIATION> 43,221,000
<TOTAL-ASSETS> 515,842,000
<CURRENT-LIABILITIES> 71,705,000
<BONDS> 0
0
0
<COMMON> 147,000
<OTHER-SE> 160,737,000
<TOTAL-LIABILITY-AND-EQUITY> 515,842,000
<SALES> 145,205,000
<TOTAL-REVENUES> 145,205,000
<CGS> 108,968,000
<TOTAL-COSTS> 108,968,000
<OTHER-EXPENSES> 21,304,000
<LOSS-PROVISION> 130,000
<INTEREST-EXPENSE> 4,993,000
<INCOME-PRETAX> 9,810,000
<INCOME-TAX> 3,951,000
<INCOME-CONTINUING> 5,859,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,859,000
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
