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 3, 1998
--------------------------------------------
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
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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.
14,752,345 Shares on April 3, 1998
<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 3, 1998 and
April 4, 1997 4
Consolidated Balance Sheets
April 3, 1998 and January 2, 1998 5
Consolidated Statements of Cash Flows
for the three months ended April 3, 1998 and
April 4, 1997 7
Consolidated Statement of Changes in
Shareholders' Investment for the three months
ended April 3, 1998 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 3, 1998
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 2. 1998.
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
<CAPTION>
Three Months Ended
----------------------
April 3, April 4,
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 173,442 $ 145,205
-------- --------
Costs and expenses:
Cost of sales 133,463 108,968
Selling, general
and administrative 22,173 20,944
Amortization of goodwill 718 490
Interest 6,151 4,993
-------- --------
162,505 135,395
-------- --------
Income before income taxes 10,937 9,810
Provision for income taxes 4,103 3,951
-------- --------
Net income $ 6,834 $ 5,859
======== ========
Net income per share
Basic $ 0.46 $ 0.40
Diluted $ 0.44 $ 0.38
Weighted common shares outstanding
Basic 14,745 14,704
Diluted 15,502 15,274
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
April 3, January 2,
1998 1998
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,744 $ 3,790
Receivables (net of allowance
of $3,686 and $3,662, respectively) 77,486 70,399
Inventories 146,613 128,988
Prepaid expenses 4,278 4,561
-------- --------
Total current assets 233,121 207,738
-------- --------
Property, plant and equipment
Land 16,926 16,809
Buildings 68,533 65,050
Equipment, furniture and fixtures 170,165 161,076
-------- --------
255,624 242,935
Less: accumulated depreciation 57,187 53,294
-------- --------
198,437 189,641
Other assets:
Goodwill 97,176 97,375
Trademarks 38,604 38,876
Deferred financing costs 4,228 4,437
Other 4,202 5,154
-------- --------
Total assets $ 575,768 $ 543,221
======== ========
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)
<CAPTION>
April 3, January 2,
1998 1998
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 3,947 $ 3,957
Accounts payable 29,565 28,831
Accrued liabilities 38,160 45,970
Income taxes payable 6,209 1,499
-------- --------
Total current liabilities 77,881 80,257
-------- --------
Long-term debt, net of current portion 261,139 232,241
Other long-term liabilities 3,589 3,565
Deferred income taxes 39,292 40,246
-------- --------
Total liabilities 381,901 356,309
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,752,345 at April 3, 1998 and
14,740,538 at January 2, 1998 148 147
Additional paid-in capital 93,848 93,728
Retained earnings 99,871 93,037
-------- --------
Total shareholders' investment 193,867 186,912
-------- --------
Total liabilities and shareholders' investment $ 575,768 $ 543,221
======== ========
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
<TABLE>
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Three Months Ended
--------------------
April 3, April 4,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,834 $ 5,859
Adjustments:
Depreciation 3,951 3,365
Deferred income taxes (954) (21)
Amortization of goodwill and trademarks 990 690
Amortization of deferred financing costs 237 231
Provision for doubtful accounts 92 130
Changes in assets and liabilities:
Receivables (6,995) (7,880)
Inventories (17,624) (3,147)
Prepaid expenses 283 (24)
Other assets 404 (347)
Accounts payable 733 3,600
Accrued liabilities (3,865) (31)
Accrued liabilities - interest (3,945) (4,014)
Income taxes payable 4,710 3,295
Long-term liabilities 25 35
-------- --------
Net cash (used in) provided by operating activities (15,308) 1,741
-------- --------
Cash flows from investing activities:
Additions to property, plant & equipment (12,747) (4,698)
Acquisition of Robbins Flooring - (55,627)
-------- -------
Net cash (used in) investing activities (12,747) (60,325)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings 29,600 43,100
Long-term debt payments (712) (1,117)
Exercise of stock options 121 2
Stock incentive bonus shares issued - 386
-------- --------
Net cash provided by financing activities 29,009 42,371
-------- --------
Net increase (decrease) in cash and cash equivalents $ 954 $ (16,213)
Cash and cash equivalents, beginning of period 3,790 19,638
-------- --------
Cash and cash equivalents, end of period $ 4,744 $ 3,425
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 9,586 $ 8,516
Income taxes 470 641
</TABLE>
[FN]
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<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 2, 1998 $ 147 $ 93,728 $ 93,037 $186,912
Net income - - 6,834 6,834
Exercise of stock
options 1 120 - 121
------ ------- ------- -------
Balance,
April 3, 1998 $ 148 $ 93,848 $ 99,871 $193,867
======= ======= ======= =======
</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 -INVENTORIES:
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method is used primarily for lumber and certain other
inventories and the first-in, first out (FIFO) method is used for all other
inventories. Inventories valued by the LIFO method were $55,745,0000 at April
3, 1998 and $42,622,000 at January 2, 1998. Had all inventories been valued
by the FIFO method, which approximates current cost, inventories would have
been increased by $11,944,000 at April 3, 1998 and $9,463,000 at January 2,
1998. 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:
April 3, January 2,
1998 1998
-----------------------
(in thousands)
Raw materials $ 71,646 $ 64,808
Work-in-process 15,221 13,747
Finished goods 59,746 50,433
-------- --------
Total $ 146,613 $ 128,988
======== ========
NOTE 2 - LONG-TERM DEBT:
Long-term debt consists of the following:
April 3, January 2,
1998 1998
-----------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Revolving note - bank 69,000 39,400
Capitalized lease obligations 14,593 15,088
Industrial revenue bonds 21,493 21,710
-------- --------
265,086 236,198
Less: Current portion
of long-term debt (3,947) (3,957)
-------- --------
$ 261,139 $ 232,241
======== ========
Letters of credit outstanding were $18.7 million at April 3, 1998 and
$18.6 million at January 2, 1998, under a facility pursuant to which they can
be renewed or replaced.
<PAGE>
NOTE 3 - INCOME TAXES:
The components of the deferred tax liability and asset are as follows:
April 3, January 2,
1998 1998
------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 27,258 $ 26,925
Trademarks 10,021 10,108
Goodwill 1,629 -
Other 7,023 7,856
-------- --------
Total $ 45,931 $ 44,889
-------- --------
Deferred Tax Asset:
Other $ 6,639 $ 4,643
-------- --------
Total $ 6,639 $ 4,643
-------- --------
Net Deferred Tax liability $ 39,292 $ 40,246
======== ========
The provision for income taxes consists of the following:
Three Months Ended
--------------------
April 3, April 4,
1998 1997
---------------------
(in thousands)
Current:
Federal $ 3,801 $ 3,005
State and local 229 618
-------- --------
$ 4,030 $ 3,623
-------- --------
Deferred:
Federal $ 66 $ 290
State and local 7 38
-------- --------
$ 73 $ 328
-------- --------
Total $ 4,103 $ 3,951
======== ========
The tax provision for the periods ending April 3, 1998 and April 4, 1997
was 37.5% and 40.3% of pre-tax income, respectively. The factors causing the
rate to vary from the U.S. Federal statutory rate are as follows:
<PAGE>
Three Months Ended
--------------------
April 3, April 4,
1998 1997
--------------------
(in thousands)
Computed (expected) tax provision $ 3,828 $ 3,434
Increase (decrease) from:
State and local taxes 150 426
Amortization of goodwill 193 171
Foreign sales (62) (98)
Other book to tax differences, net (6) 18
------- ------
Total $ 4,103 $ 3,951
======= ======
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended April 3, 1998 were $173.4 million,
compared to $145.2 million for the three months ended April 4, 1997,
representing a 19.4% increase. The 1998 period includes the results of
Robbins Hardwood Flooring Inc., which acquired the Robbins Residential
Flooring operations on March 28, 1997.
Net flooring sales increased 34.7% to $133.1 million in the first quarter
of 1998 compared to $98.8 million in the same period in 1997. The 1998 period
includes the results of Robbins Hardwood Flooring Inc., which acquired the
Robbins Residential Flooring operations on March 28, 1997.
Net cabinet sales were $40.3 million in the first quarter of 1998
compared to $46.4 million in the same period in 1997. Unit sales were down by
15.2%, while average selling price increased 2.5%.
GROSS PROFIT
Gross profit for the three months ended April 3, 1998 amounted to $40.0
million, or 23.1% of net sales, compared to $36.2 million, or 25.0% of net
sales in the same period in 1997. Lumber prices rose 5.1% in the first
quarter and were 33.6% higher than last year's first quarter. Lumber prices
stabilized in the first quarter and did not rise for the last eight weeks of
the quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to $22.2 million,
or 12.8% of net sales, for the three months ended April 3, 1998 compared to
$20.9 million, or 14.4% of net sales, for the three months ended April 4,
1997. The total spending increase of $1.3 million was primarily for
advertising, marketing and field sales expenses.
OPERATING INCOME
Operating income for the three months ended April 3,1998 was $17.1
million compared to $14.8 million for the three months ended April 4, 1997.
INTEREST EXPENSE
Interest expense for the three months ended April 3, 1998 was $6.2
million compared to $5.0 for the three months ended April 4, 1997.
NET INCOME
Net income for the three months ended April 3, 1998 was $6.8 million, or
$0.44 per share, compared to $5.9 million, or $0.38 per share, for the three
months ended April 4, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the fiscal quarter ended April 3, 1998, cash increased by $1.0
million. Cash used in operating activities was $15.3 million and cash used
for additions to property, plant and equipment was $12.7 million. Bank
borrowings of $29.0 million were used to offset this use of cash.
At April 3, 1998, the Company had working capital of $155.2 million, or
27.0% of total assets, and $2.3 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.
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties that are detailed from time to time in documents filed by the
Company with the SEC. All statements other than statements of historical
fact, including, without limitation, statements contained in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations' regarding the Company's financial position, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it 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 3, 1998.
(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 3, 1998
<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 , 1998 By: /s/ M. Joseph McHugh
----------------- -----------------------------------
M. Joseph McHugh
President and Chief Operating Officer
(duly authorized officer)
Date: May , 1998 By: /s/ E. Dwain Plaster
----------------- -----------------------------------
E. Dwain Plaster
Vice President, Treasurer and
Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
Exhibit II
<TABLE>
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
Three Months Ended
--------------------------
April 3, April 4,
1998 1997
---------- ----------
<S> <C> <C>
BASIC
- -----
Net Income $ 6,834,000 $ 5,859,000
========== ==========
Shares outstanding beginning of period 14,740,538 14,686,558
Weighted average number of shares issued
from incentive bonus shares - 17,017
Weighted average number of shares issued
from exercise of stock options 4,355 269
========== ==========
Basic weighted common shares outstanding 14,744,893 14,703,844
========== ==========
Basic net income per share $ 0.46 $ 0.40
========== ==========
DILUTED
- -------
Weighted average number of shares outstanding 14,744,893 14,703,844
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 757,533 569,971
---------- ----------
Weighted average common shares outstanding 15,502,426 15,273,815
========== ==========
Diluted net income per share $ 0.44 $ 0.38
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1999
<PERIOD-END> APR-03-1998
<CASH> 4,744,000
<SECURITIES> 0
<RECEIVABLES> 81,172,000
<ALLOWANCES> 3,686,000
<INVENTORY> 146,613,000
<CURRENT-ASSETS> 233,121,000
<PP&E> 255,624,000
<DEPRECIATION> 57,187,000
<TOTAL-ASSETS> 575,768,000
<CURRENT-LIABILITIES> 77,881,000
<BONDS> 0
0
0
<COMMON> 148,000
<OTHER-SE> 193,719,000
<TOTAL-LIABILITY-AND-EQUITY> 575,768,000
<SALES> 173,442,000
<TOTAL-REVENUES> 173,442,000
<CGS> 133,463,000
<TOTAL-COSTS> 133,463,000
<OTHER-EXPENSES> 22,799,000
<LOSS-PROVISION> 92,000
<INTEREST-EXPENSE> 6,151,000
<INCOME-PRETAX> 10,937,000
<INCOME-TAX> 4,103,000
<INCOME-CONTINUING> 6,834,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,834,000
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.44
</TABLE>
