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 July 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.
14,716,640 Shares on July 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 six months ended July 4, 1997 and
June 28, 1996 and for the three months ended
July 4, 1997 and June 28, 1996 4
Consolidated Balance Sheets
July 4, 1997 and January 3, 1997 5
Consolidated Statements of Cash Flows
for the six months ended July 4, 1997
and June 28, 1996 7
Consolidated Statement of Changes in
Shareholders' Investment for the six months
ended July 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 14
SIGNATURES 15
<PAGE>
PART I FINANCIAL INFORMATION
Item I. Financial Statements
Triangle Pacific Corp. and Subsidiaries
Consolidated Financial Statements
for the Six Months ended July 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>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
<CAPTION>
Six Months Ended Three Months Ended
--------------------- ----------------------
July 4, June 28, July 4, June 28,
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 320,454 $ 241,996 $ 175,249 $ 131,471
-------- -------- -------- --------
Costs and expenses:
Cost of sales 242,479 181,706 133,511 97,107
Selling, general
and administrative 41,061 31,959 20,117 17,371
Amortization of goodwill 1,267 760 777 380
Interest 10,986 9,312 5,993 4,639
-------- -------- -------- --------
295,793 223,737 160,398 119,497
-------- -------- -------- --------
Income before income taxes 24,661 18,259 14,851 11,974
Provision for income taxes 9,744 6,922 5,793 4,541
-------- -------- -------- --------
Net income $ 14,917 $ 11,337 $ 9,058 $ 7,433
======== ======== ======== ========
Net income per share $ 0.97 $ 0.76 $ 0.59 $ 0.50
======== ======== ======== ========
Weighted average shares
outstanding 15,300 14,920 15,308 14,955
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
July 4, January 3,
1997 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,203 $ 19,638
Receivables (net of allowances
of $3,629 and $3,053, respectively) 79,207 59,236
Inventories 115,747 95,096
Prepaid expenses 5,016 3,713
-------- --------
Total current assets 204,173 177,683
-------- --------
Property, plant and equipment
Land 16,246 15,537
Buildings 61,983 56,274
Equipment, furniture and fixtures 147,536 133,197
-------- --------
225,765 205,008
Less: accumulated depreciation 46,849 40,258
-------- --------
178,916 164,750
Other assets:
Goodwill 107,535 70,986
Trademark 29,483 28,333
Other 5,415 2,921
Deferred financing costs 4,910 5,290
-------- --------
Total assets $ 530,432 $ 449,963
======== ========
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)
<CAPTION>
July 4, January 3,
1997 1997
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 4,051 $ 2,437
Accounts payable 26,845 18,520
Accrued liabilities 44,551 40,226
Income taxes payable 4,475 1,991
-------- --------
Total current liabilities 79,922 63,174
-------- --------
Long-term debt, net of current portion 237,508 190,604
Other long-term liabilities 3,904 2,331
Deferred income taxes 39,101 39,217
-------- --------
Total liabilities 360,435 295,326
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,716,640 at July 4, 1997 and
14,686,558 at January 3, 1997 147 147
Additional paid-in capital 93,655 93,212
Retained earnings 76,195 61,278
-------- --------
Total shareholders' investment 169,997 154,637
-------- --------
Total liabilities and shareholders' investment $ 530,432 $ 449,963
======== ========
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Six Months Ended
--------------------
July 4, June 28,
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,917 $ 11,337
Adjustments:
Depreciation 7,084 5,473
Deferred income taxes (115) (431)
Amortization of goodwill and trademark 1,667 1,160
Amortization of deferred financing costs 467 436
Provision for doubtful accounts 271 303
Changes in assets and liabilities:
Receivables (13,777) (11,934)
Inventories (7,388) (7,695)
Prepaid expenses (1,260) (600)
Other assets (619) (458)
Accounts payable 6,432 4,844
Accrued liabilities 645 1,754
Accrued liabilities - interest 461 (13)
Income taxes payable 2,484 3,782
Long-term liabilities 73 -
-------- --------
Net cash provided by operating activities 11,342 7,958
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (10,387) (5,390)
Proceeds from sale of property, plant & equipment - 1,524
Acquisition of Hartco Flooring - (36,140)
Acquisition of KAEDA Bonds - (5,012)
Acquisition of Robbins Flooring (55,627) -
Acquisition of Bruce Floor Care Products Trademark (1,550) -
-------- -------
Net cash used in investing activities (67,564) (45,018)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings 42,100 10,000
Long-term debt payments (1,755) (1,543)
Exercise of stock options 56 28
Stock incentive bonus shares issued 386 -
-------- --------
Net cash provided by financing activities 40,787 8,485
-------- --------
Net (decrease) in cash and cash equivalents $ (15,435) $ (28,575)
Cash and cash equivalents, beginning of period 19,638 32,581
-------- --------
Cash and cash equivalents, end of period $ 4,203 $ 4,006
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 9,699 $ 8,900
Income taxes 7,451 3,587
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' INVESTMENT
(in thousands)
<CAPTION>
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 - - 14,917 14,917
Exercise of stock
options - 57 - 57
Stock incentive bonus
shares issued - 386 - 386
------ ------- ------- -------
Balance,
July 4, 1997 $ 147 $ 93,655 $ 76,195 $169,997
======= ======= ======= =======
<FN>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
<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. Sales and
earnings for the residential flooring operations acquired by Robbins Hardwood
Flooring Inc., are included in the reported results for the period since the
acquisition on March 28, 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
=======
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 $46,419,000 at July 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 $6,406,000
at July 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:
July 4, January 3,
1997 1997
-------------------------
(in thousands)
Raw materials $ 52,913 $ 50,873
Work-in-process 10,512 7,259
Finished goods 52,322 36,964
-------- --------
Total $ 115,747 $ 95,096
======== ========
<PAGE>
NOTE 3 - LONG-TERM DEBT:
Long-term debt consists of the following:
July 4, January 3,
1997 1997
-------------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 16,054 16,996
Industrial revenue bonds 23,405 16,045
Revolving note - Bank 42,100 -
-------- --------
241,559 193,041
Less: Current portion
of long-term debt (4,051) (2,437)
-------- --------
$ 237,508 $ 190,604
======== ========
Letters of credit outstanding were $19.5 million at July 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:
July 4, January 3,
1997 1997
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 27,870 $ 27,824
Trademark 10,866 11,022
Other 6,323 7,338
-------- --------
Total $ 45,059 $ 46,184
-------- --------
Deferred Tax Asset:
Other $ 5,958 $ 6,967
-------- --------
Total $ 5,958 $ 6,967
-------- --------
Net Deferred Tax Liability $ 39,101 $ 39,217
======== ========
<PAGE>
The provision for income taxes consists of the following:
Six Months Ended
--------------------
July 4, June 28,
1997 1996
--------------------
(in thousands)
Current:
Federal $ 7,073 $ 6,232
State and local 1,557 1,152
-------- -------
$ 8,630 $ 7,384
======== =======
Deferred:
Federal $ 978 $ (457)
State and local 136 (5)
-------- -------
$ 1,114 $ (462)
======== =======
Total $ 9,744 $ 6,922
======== =======
The tax provision for the periods ending July 4, 1997 and June 28, 1996
was 39.5% and 37.9% of pre-tax income, respectively. The factors causing the
rate to vary from the U.S. Federal statutory rate are as follows:
Six Months Ended
--------------------
July 4, June 28,
1997 1996
--------------------
(in thousands)
Computed (expected) tax provision $ 8,632 $ 6,391
Increase (decrease) from:
State and local taxes 1,083 744
Amortization of goodwill 343 266
Foreign sales (230) (176)
Other book to tax differences, net (84) (303)
------- ------
Total $ 9,744 $ 6,922
======= ======
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the six months ended July 4, 1997, were $320.5 million
compared to $242.0 million for the six months ended June 28, 1996,
representing a 32.4% increase. Results for the first half of 1997 included
Hartco Flooring Company, which was acquired on June 28, 1996, and Robbins
Hardwood Flooring, Inc., which was acquired on March 28, 1997.
Net sales for the three months ended July 4, 1997 were $175.2 million
compared to $131.5 million for the three months ended June 28, 1996. Flooring
Division sales were $126.4 million compared to $76.0 million in the comparable
period in 1996, including the sales of Hartco Flooring Company, which was
acquired on June 28, 1996, and Robbins Hardwood Flooring Inc., which was
acquired on March 28, 1997. Cabinet unit sales declined 21.2% while the
average selling price per unit increased 11.9%. As previously reported, we
have altered our strategy for the Cabinet Division to improve operating income
margins and return on investment. The higher selling prices in the second
quarter are in keeping with this change in strategy.
GROSS PROFIT
Gross profit for the six months ended July 4, 1997 amounted to $78.0
million, or 24.3% of net sales, compared to $60.3 million, or 24.9% of net
sales in the same period in 1996.
Gross profit for the three months ended July 4, 1997 was $41.7 million,
or 23.8% of net sales compared to $34.4 million or 26.1% of net sales in the
same period in 1996. Lumber costs in the second quarter of 1997 increased
6.7%. An unfavorable lumber purchase price variance and a larger LIFO
provision than we had planned during the second quarter of 1997 were the major
factors that lowered gross profit margins in the second quarter of 1997.
Our cost of purchased flooring lumber increased 17.2% by the first six
months of 1997, by 29.6% over the last nine months, and by 31.4% over the last
twelve months. We are anticipating a further lumber cost increase of
approximately 5% during the third quarter of 1997. Continued rainy weather
throughout our lumber acquisition area is the single most important factor
contributing to this abnormal increase in cost. Also, the demand for oak
lumber continues to be high by other users of oak. Improved weather is the
key to what we believe to be a temporary condition. We increased our selling
prices on solid flooring products to partially offset these increased costs.
Our plants continue to do a good job with managing their cost efficiency
programs in helping to offset the major lumber cost increase.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $41.1 million,
or 12.8% of net sales, for the six months ended July 4, 1997 compared to $32.0
million, or 13.2% of net sales, for the six months ended June 28, 1996.
Selling, general and administrative expenses amounted to $20.1 million,
or 11.5% of net sales, for the three months ended July 4, 1997 compared to
$17.4 million, or 13.2% of net sales, for the three months ended June 28,
1996. The higher spending in both the second quarter and the six months ended
July 4, 1997 compared to the comparable periods in 1996 was primarily for
advertising, marketing and other selling expenses and also due to the
inclusion of such costs for the Hartco and Robbins operations.
<PAGE>
OPERATING INCOME
Operating income for the six months ended July 4, 1997 was $35.6 million
compared to $27.6 million for the six months ended June 28, 1996, an increase
of 29.3%.
Operating income for the three months ended July 4, 1997 was $20.8
million compared to $16.6 million for the three months ended June 28, 1996, an
increase of 25.5%.
INTEREST EXPENSE
Interest expense for the six months ended July 4, 1997 was $11.0 million
compared to $9.3 million for the six months ended June 28, 1996.
Interest expense for the three months ended July 4, 1997 was $6.0 million
compared to $4.6 million for the three months ended June 28, 1996.
NET INCOME
Net income for the six months ended July 4, 1997 was $14.9 million or
$0.97 per share, an increase of 31.6% over the net income of $11.3 million or
$0.76 per share for the six months ended June 28, 1996.
Net income for the three months ended July 4, 1997 increased 21.9% to
$9.1 million or $0.59 per share, compared to $7.4 million or $0.50 per share
for the three months ended June 28, 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended July 4, 1997, cash decreased by $15.4 million.
Cash used for the acquisition of Robbins Hardwood Flooring Inc. was $55.6
million, cash used for additions to property, plant and equipment was $10.4
million, cash used for the acquisition of a Bruce Floor Care Products
Trademark was $1.6 million, and long-term debt payments were $1.8 million.
Bank borrowings of $42.1 million and cash provided by operating activities of
$11.3 million were used to offset these expenditures.
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.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit No.
11 - Statement re-computation of per share
earnings
27 - Financial Data Schedule for the six month
interim period ended July 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 July 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: August 15, 1997 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: August 15, 1997 By: /s/ Robert J. Symon
----------------- -----------------------------------
Robert J. Symon
Executive Vice President,
Treasurer and Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT 11
<TABLE>
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
---------------------- ----------------------
JULY 4, JUNE 28, July 4, JUNE 28,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $14,917,000 $11,337,000 $ 9,058,000 $ 7,433,000
========== ========== ========== ==========
Shares outstanding
beginning of period 14,686,558 14,663,365 14,712,890 14,668,016
Weighted average number
of shares issued from
exercise of stock options 1,163 3,284 1,250 -
Weighted average number
of shares issued from
stock bonuses 21,271 - - -
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding 14,708,992 14,666,649 14,714,140 14,668,016
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 590,842 253,156 593,917 287,158
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 15,299,834 14,919,805 15,308,057 14,955,174
========== ========== ========== ==========
Primary income per common
and common equivalent
share $ 0.97 $ 0.76 $ 0.59 $ 0.50
========== ========== ========== ==========
Assuming full dilution:
Weighted average number
of shares outstanding 14,708,992 14,666,649 14,714,140 14,668,016
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 653,920 318,677 653,920 318,677
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 15,362,912 14,985,326 15,368,060 14,986,693
========== ========== ========== ==========
Fully diluted income per
common and common
equivalent share $ 0.97 $ 0.76 $ 0.59 $ 0.50
========== ========== ========== ==========
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-END> JUL-04-1997
<CASH> 4,203,000
<SECURITIES> 0
<RECEIVABLES> 82,836,000
<ALLOWANCES> 3,629,000
<INVENTORY> 115,747,000
<CURRENT-ASSETS> 204,173,000
<PP&E> 225,765,000
<DEPRECIATION> 46,849,000
<TOTAL-ASSETS> 530,432,000
<CURRENT-LIABILITIES> 79,922,000
<BONDS> 0
0
0
<COMMON> 147,000
<OTHER-SE> 169,850,000
<TOTAL-LIABILITY-AND-EQUITY> 530,432,000
<SALES> 175,249,000
<TOTAL-REVENUES> 175,249,000
<CGS> 133,511,000
<TOTAL-COSTS> 133,511,000
<OTHER-EXPENSES> 20,753,000
<LOSS-PROVISION> 141,000
<INTEREST-EXPENSE> 5,993,000
<INCOME-PRETAX> 14,851,000
<INCOME-TAX> 5,793,000
<INCOME-CONTINUING> 9,058,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,058,000
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
