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 October 3, 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.
14,720,040 Shares on October 3, 1997
<PAGE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Operations
for the nine months ended October 3, 1997 and
September 27, 1996 and for the three months ended
October 3, 1997 and September 27, 1996 4
Consolidated Balance Sheets
October 3, 1997 and January 3, 1997 5
Consolidated Statements of Cash Flows
for the nine months ended October 3, 1997
and September 27, 1996 7
Consolidated Statement of Changes in
Shareholders' Investment for the nine months
ended October 3, 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 Nine Months ended October 3, 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>
Nine Months Ended Three Months Ended
--------------------- ----------------------
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 486,249 $ 384,937 $ 165,795 $ 142,941
-------- -------- -------- --------
Costs and expenses:
Cost of sales 367,789 289,892 125,310 108,186
Selling, general
and administrative 61,052 50,012 19,991 18,053
Amortization of goodwill 2,047 1,250 780 490
Interest 16,958 14,605 5,972 5,293
-------- -------- -------- --------
447,846 355,759 152,053 132,022
-------- -------- -------- --------
Income before income taxes 38,403 29,178 13,742 10,919
Provision for income taxes 15,071 11,079 5,327 4,157
-------- -------- -------- --------
Net income $ 23,332 $ 18,099 $ 8,415 $ 6,762
======== ======== ======== ========
Net income per share $ 1.52 $ 1.21 $ 0.55 $ 0.45
======== ======== ======== ========
Weighted average shares
outstanding 15,300 14,958 15,424 15,023
</TABLE>
<FOOTNOTE>
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>
October 3, January 3,
1997 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,667 $ 19,638
Receivables (net of allowances
of $3,627 and $3,053, respectively) 76,546 59,236
Inventories 123,476 95,096
Prepaid expenses 4,904 3,713
-------- --------
Total current assets 210,593 177,683
-------- --------
Property, plant and equipment
Land 16,372 15,537
Buildings 63,108 56,274
Equipment, furniture and fixtures 154,415 133,197
-------- --------
233,895 205,008
Less: accumulated depreciation 50,329 40,258
-------- --------
183,566 164,750
Other assets:
Goodwill 107,273 70,986
Trademarks 29,274 28,333
Other 5,257 2,921
Deferred financing costs 4,673 5,290
-------- --------
Total assets $ 540,636 $ 449,963
======== ========
</TABLE>
<FOOTNOTE>
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>
October 3, January 3,
1997 1997
---------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 3,985 $ 2,437
Accounts payable 27,356 18,520
Accrued liabilities 42,148 40,226
Income taxes payable 5,878 1,991
-------- --------
Total current liabilities 79,367 63,174
-------- --------
Long-term debt, net of current portion 239,537 190,604
Other long-term liabilities 3,935 2,331
Deferred income taxes 39,375 39,217
-------- --------
Total liabilities 362,214 295,326
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,720,040 at October 3, 1997 and
14,686,558 at January 3, 1997 147 147
Additional paid-in capital 93,665 93,212
Retained earnings 84,610 61,278
-------- --------
Total shareholders' investment 178,422 154,637
-------- --------
Total liabilities and shareholders' investment $ 540,636 $ 449,963
======== ========
</TABLE>
<FOOTNOTE>
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>
Nine Months Ended
--------------------
Oct. 3, Sept. 27,
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,332 $ 18,099
Adjustments:
Depreciation 10,839 8,644
Deferred income taxes 169 (693)
Amortization of goodwill and trademark 2,660 1,850
Amortization of deferred financing costs 704 667
Provision for doubtful accounts 779 365
Changes in assets and liabilities:
Receivables (11,624) (11,574)
Inventories (15,117) (11,205)
Prepaid expenses (1,148) (709)
Other assets (983) 263
Accounts payable 6,942 4,438
Accrued liabilities 2,702 5,120
Accrued liabilities - interest (3,999) (4,166)
Income taxes payable 3,887 4,321
Long-term liabilities 104 -
-------- --------
Net cash provided by operating activities 19,247 15,420
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (18,801) (9,085)
Proceeds from sale of property, plant & equipment - 3,095
Acquisition of Hartco Flooring - (36,140)
Acquisition of KREDA Bonds - (5,012)
Acquisition of Robbins Hardwood Flooring (55,627) -
Acquisition of Bruce Floor Care Products Trademark (1,550) -
-------- -------
Net cash used in investing activities (75,978) (47,142)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings 45,900 6,400
Long-term debt payments (3,592) (2,337)
Exercise of stock options 66 28
Stock incentive bonus shares issued 386 -
-------- --------
Net cash provided by financing activities 42,760 4,091
-------- --------
Net (decrease) in cash and cash equivalents $ (13,971) $ (27,631)
Cash and cash equivalents, beginning of period 19,638 32,581
-------- --------
Cash and cash equivalents, end of period $ 5,667 $ 4,950
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 19,367 $ 17,648
Income taxes 11,081 7,467
</TABLE>
<FOOTNOTE>
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 - - 23,332 23,332
Exercise of stock
options - 67 - 67
Stock incentive bonus
shares issued - 386 - 386
------ ------- ------- -------
Balance,
October 3, 1997 $ 147 $ 93,665 $ 84,610 $178,422
======= ======= ======= =======
</TABLE>
<FOOTNOTE>
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. 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 $57,884,000 at October 3, 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 $7,706,000
at October 3, 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:
October 3, January 3,
1997 1997
-------------------------
(in thousands)
Raw materials $ 61,428 $ 50,873
Work-in-process 10,314 7,259
Finished goods 51,734 36,964
-------- --------
Total $ 123,476 $ 95,096
======== ========
<PAGE>
NOTE 3 - LONG-TERM DEBT:
Long-term debt consists of the following:
October 3, January 3,
1997 1997
-------------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 15,575 16,996
Industrial revenue bonds 22,047 16,045
Revolving note - Bank 45,900 -
-------- --------
243,522 193,041
Less: Current portion
of long-term debt (3,985) (2,437)
-------- --------
$ 239,537 $ 190,604
======== ========
Letters of credit outstanding were $17.8 million at October 3, 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:
October 3, January 3,
1997 1997
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 28,153 $ 27,824
Trademark 10,788 11,022
Other 6,186 7,338
-------- --------
Total $ 45,127 $ 46,184
-------- --------
Deferred Tax Asset:
Other $ 5,752 $ 6,967
-------- --------
Total $ 5,752 $ 6,967
-------- --------
Net Deferred Tax Liability $ 39,375 $ 39,217
======== ========
<PAGE>
The provision for income taxes consists of the following:
Nine Months Ended
--------------------------
October 3, September 27,
1997 1996
--------------------------
(in thousands)
Current:
Federal $ 10,837 $ 9,530
State and local 2,450 1,848
-------- -------
$ 13,287 $ 11,378
======== =======
Deferred:
Federal $ 1,573 $ (324)
State and local 211 25
-------- -------
$ 1,784 $ (299)
======== =======
Total $ 15,071 $ 11,079
======== =======
The tax provision for the periods ending October 3, 1997 and September
27, 1996 was 39.2% and 38.0% of pre-tax income, respectively. The factors
causing the rate to vary from the U.S. Federal statutory rate are as follows:
Nine Months Ended
---------------------------
October 3, September 27,
1997 1996
---------------------------
(in thousands)
Computed (expected) tax provision $ 13,441 $ 10,213
Increase (decrease) from:
State and local taxes 1,717 1,226
Amortization of goodwill 514 437
Foreign sales (323) (270)
Other book to tax differences, net (278) (527)
------- -------
Total $ 15,071 $ 11,079
======= =======
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the nine months ended October 3, 1997 were $486.2 million
compared to $384.9 million for the nine months ended September 27, 1996,
representing a 26.3% increase. Results for the first nine months of 1997
included Hartco Flooring Company, which was acquired on June 28, 1996, and
Robbins Hardwood Flooring Inc., which acquired the Robbins Residential
Flooring Operations on March 28, 1997.
Net sales for the three months ended October 3, 1997 were $165.8 million
compared to $142.9 million for the three months ended September 27, 1996.
Flooring Division sales for the third quarter of 1997 were $120.6 million
compared to $95.0 in the third quarter of 1996, an increase of 27.0%. The
Flooring Division unit sales for the third quarter of 1997 increased by 19.6%
over the third quarter of 1996. The third quarter of 1997 includes the
results of Robbins Hardwood Flooring, Inc., which acquired the Robbins
Residential Flooring operations on March 28, 1997.
Cabinet Division sales for the quarter ended October 3, 1997 were $45.2
million compared to $48.0 million in the third quarter of 1996. Unit sales
declined 13.0%, while the average unit selling price increased 8.3%. The
higher unit selling price is confirmation that we continue to be more
selective in accepting orders. Operating margins increased over prior year
levels.
GROSS PROFIT
Gross profit for the nine months ended October 3, 1997 amounted to $118.5
million or 24.4% of net sales, compared to $95.0 million, or 24.7% of net
sales in the same period in 1996.
Gross profit for the three months ended October 3, 1997 was $40.5 million
or 24.4% of net sales compared to $34.8 million or 24.3% of net sales in the
same period in 1996. Lumber costs in the third quarter of 1997 increased
7.8%, bringing the total increase for the nine months of 1997 to 31.1%. An
unfavorable lumber purchase price variance and a larger LIFO provision during
the third quarter of 1997 were major factors which impacted gross profit
margins in the third quarter of 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $61.1 million,
or 12.6% of net sales for the nine months ended October 3, 1997 compared to
$50.0 million, or 13.0% of net sales for the nine months ended September 27,
1996.
Selling, general and administrative expenses amounted to $20.0 million,
or 12.1% of net sales, for the three months ended October 3, 1997 compared to
$18.1 million, or 12.6% of net sales for the three months ended September 27,
1996. In absolute terms, this expense increased $1.9 million. The higher
spending was primarily for advertising, marketing and selling expenses which
now include the Robbins operation. Administrative expenses have remained
relatively constant for the quarter and declined as a percentage of sales.
<PAGE>
OPERATING INCOME
Operating income for the nine months ended October 3, 1997 was $55.4
million compared to $43.8 million for the nine months ended September 27,
1996, an increase of 26.4%.
Operating income for the three months ended September 27, 1996 was $19.7
million compared to $16.2 million for the three months ended September 27,
1996, and increase of 21.6%.
INTEREST EXPENSE
Interest expense for the nine months ended October 3, 1997 was $17.0
million compared to $14.6 million for the nine months ended September 27,
1997.
Interest expense for the three months ended October 3, 1997 was $6.0
million compared to $5.3 million for the three months ended September 27,
1996.
NET INCOME
Net income for the nine months ended October 3, 1997 was $23.3 million or
$1.52 per share, an increase of 28.9% over net income of $18.1 million or
$1.21 per share for the nine months ended September 27, 1996.
Net income for the three months ended October 3, 1997, increased 24.4% to
$8.4 million or $0.55 per share, compared to $6.7 million or $0.45 per share
for the three months ended September 27, 1996.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended October 3, 1997, cash decreased by $14.0
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
$18.8 million, cash used for the acquisition of the Bruce Floor Care Products
Trademark was $1.6 million, and long-term debt payments were $3.6 million.
Bank borrowings of $45.9 million and cash provided by operating activities of
$19.2 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"
which involve risks and uncertainties which are detailed from time to time in
documents filed by the Company with the SEC. The Company can give no
assurance that such statements 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 nine month
interim period ended October 3, 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 October 3, 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: November 17, 1997 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: November 17, 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
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
NINE MONTHS ENDED THREE MONTHS ENDED
---------------------- ----------------------
OCT. 3, SEPT. 27, OCT. 3, SEPT. 27,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $23,332,000 $18,099,000 $ 8,415,000 $ 6,762,000
========== ========== ========== ==========
Shares outstanding
beginning of period 14,686,558 14,663,365 14,716,640 14,668,016
Weighted average number
of shares issued from
exercise of stock options 2,672 3,740 1,133 -
Weighted average number
of shares issued from
stock bonuses 22,689 - - -
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding 14,711,919 14,667,105 14,717,773 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 588,539 290,636 706,688 354,725
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 15,300,458 14,957,741 15,424,461 15,022,741
========== ========== ========== ==========
Primary income per common
and common equivalent
share $ 1.52 $ 1.21 $ 0.55 $ 0.45
========== ========== ========== ==========
Assuming full dilution:
Weighted average number
of shares outstanding 14,711,919 14,667,105 14,717,773 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 776,273 373,545 776,273 373,545
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding as
adjusted 15,488,192 15,040,650 15,494,046 15,041,561
========== ========== ========== ==========
Fully diluted income per
common and common
equivalent share $ 1.51 $ 1.20 $ 0.54 $ 0.45
========== ========== ========== ==========
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-END> OCT-03-1997
<CASH> 5,667,000
<SECURITIES> 0
<RECEIVABLES> 80,173,000
<ALLOWANCES> 3,627,000
<INVENTORY> 123,476,000
<CURRENT-ASSETS> 210,593,000
<PP&E> 233,895,000
<DEPRECIATION> 50,329,000
<TOTAL-ASSETS> 540,636,000
<CURRENT-LIABILITIES> 79,367,000
<BONDS> 0
0
0
<COMMON> 147,000
<OTHER-SE> 178,275,000
<TOTAL-LIABILITY-AND-EQUITY> 540,636,000
<SALES> 165,795,000
<TOTAL-REVENUES> 165,795,000
<CGS> 125,310,000
<TOTAL-COSTS> 125,310,000
<OTHER-EXPENSES> 20,263,000
<LOSS-PROVISION> 508,000
<INTEREST-EXPENSE> 5,972,000
<INCOME-PRETAX> 13,742,000
<INCOME-TAX> 5,327,000
<INCOME-CONTINUING> 8,415,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,415,000
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
