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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 September 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 33-64140
DAL-TILE INTERNATIONAL INC.
---------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3548809
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
7834 HAWN FREEWAY, DALLAS, TEXAS 75217
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(Address of principal executive offices)
(Zip Code)
(214) 398-1411
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(Registrant's telephone number, including area code)
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.
YES X NO
---------- ----------
As of November 9, 2000, the registrant had 55,094,233 outstanding shares of
voting common stock, par value $0.01 per share.
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DAL-TILE INTERNATIONAL INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION PAGE
----
Item 1 - Financial Statements (Unaudited) 3
Notes to Consolidated Condensed Financial Statements (Unaudited) 8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II - OTHER INFORMATION
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 14
</TABLE>
2
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $247,852 $ 219,500 $722,946 $639,495
Cost of goods sold 129,995 112,280 376,883 329,942
------------- ------------- ------------- -------------
Gross profit 117,857 107,220 346,063 309,553
Expenses:
Transportation 17,003 14,500 48,432 43,428
Selling, general and administrative 63,052 57,174 190,743 175,445
Amortization of intangibles 1,378 1,401 4,134 4,203
------------- ------------- ------------- -------------
Total expenses 81,433 73,075 243,309 223,076
------------- ------------- ------------- -------------
Operating income 36,424 34,145 102,754 86,477
Interest expense 7,527 8,886 23,170 28,767
Interest income 29 14 68 85
Other income (expense) 460 (195) (108) 512
------------- ------------- ------------- -------------
Income before income taxes 29,386 25,078 79,544 58,307
Income tax provision 1,701 1,301 4,995 3,901
------------- ------------- ------------- -------------
Net income $ 27,685 $ 23,777 $ 74,549 $ 54,406
============= ============= ============= =============
BASIC EARNINGS PER SHARE
Net income per common share $ 0.50 $ 0.44 $ 1.36 $ 1.01
============= ============= ============= =============
Average shares 54,976 54,346 54,869 53,975
============= ============= ============= =============
DILUTED EARNINGS PER SHARE
Net income per common share $ 0.50 $ 0.43 $ 1.35 $ 1.00
============= ============= ============= =============
Average shares 55,516 54,762 55,108 54,501
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 29, DECEMBER 31,
2000 1999
--------------------- ---------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 778 $ 1,193
Trade accounts receivable 116,137 94,915
Inventories 145,404 140,153
Prepaid expenses 6,315 4,884
Other current assets 15,010 14,819
--------------------- ---------------------
Total current assets 283,644 255,964
Property, plant, and equipment, at cost 332,194 309,729
Less accumulated depreciation 114,542 102,405
--------------------- ---------------------
217,652 207,324
Goodwill, net of amortization 139,455 143,041
Finance costs, net of amortization 4,130 5,226
Tradename and other assets, net of amortization 25,679 27,149
--------------------- ---------------------
Total assets $ 670,560 $ 638,704
===================== =====================
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
4
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 29, DECEMBER 31,
2000 1999
---------------------- ---------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 37,832 $ 36,388
Accrued expenses 77,326 67,375
Current portion of long-term debt 56,422 56,796
Income taxes payable 1,640 1,153
Deferred income taxes 3,240 2,461
---------------------- ---------------------
Total current liabilities 176,460 164,173
Long-term debt 297,397 353,877
Other long-term liabilities 13,929 17,671
Deferred income taxes 4,207 2,039
Stockholders' Equity:
Common stock, $.01 par value:
Authorized shares - 200,000,000; issued and
outstanding shares - 55,077,223 550 547
Additional paid-in capital 450,897 447,738
Accumulated deficit (198,546) (273,095)
Accumulated other comprehensive loss (74,334) (74,246)
---------------------- ---------------------
Total stockholders' equity 178,567 100,944
---------------------- ---------------------
Total liabilities and stockholders' equity $ 670,560 $ 638,704
====================== =====================
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
5
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
September 29, 2000
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN ACCUMULATED COMPREHENSIVE
STOCK CAPITAL DEFICIT LOSS TOTAL
--------- ---------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 547 $ 447,738 $ (273,095) $ (74,246) $ 100,944
Proceeds from issuance of common stock 3 3,159 - - 3,162
Comprehensive Income
Net income - - 74,549 - 74,549
Foreign currency translation adjustments - - - (88) (88)
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Total Comprehensive Income 74,461
------------ ---------------- ------------- ---------------- -------------
Balance at September 29, 2000 $ 550 $ 450,897 $ (198,546) $ (74,334) $ 178,567
============= =============== ================ ================== =============
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
6
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------
SEPTEMBER 29, OCTOBER 1,
2000 1999
OPERATING ACTIVITIES ------------- ------------
<S> <C> <C>
Net income $ 74,549 $ 54,406
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,833 19,981
Other, net 2,836 (278)
Changes in operating assets and liabilities:
Trade accounts receivable (21,217) (13,365)
Inventories (5,230) 3,259
Other assets (779) 2,211
Trade accounts payable and accrued expenses 10,840 9,559
Accrued interest payable 804 517
Other liabilities (4,252) (8,227)
--------- --------
Net cash provided by operating activities 77,384 68,063
INVESTING ACTIVITIES
Expenditures for property, plant and equipment, net (24,936) (14,659)
FINANCING ACTIVITIES
Borrowings under long-term debt 188,250 197,550
Repayments of long-term debt (245,104) (260,505)
Proceeds from issue of common stock 4,009 8,745
-------- --------
Net cash used in financing activities (52,845) (54,210)
Effect of exchange rate changes on cash (18) 116
-------- --------
Net decrease in cash (415) (690)
Cash at beginning of period 1,193 1,546
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Cash at end of period $ 778 $ 856
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
7
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DAL-TILE INTERNATIONAL INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The operating results of Dal-Tile International Inc. for the nine months
ended September 29, 2000 reflect the results of operations of Dal-Tile
International Inc. and its consolidated subsidiaries (the "Company") on
the basis of a 52/53 week accounting cycle.
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments,
consisting of normal recurring adjustments considered necessary for a
fair presentation of the financial position, results of operations and
cash flow have been included. The results of operations for the nine
months ended September 29, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 29, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the December 31, 1999 annual report on Form
10-K of the Company.
2. EARNINGS PER SHARE
Basic earnings per share are based on the average number of shares
outstanding during each period presented. Diluted earnings per share are
based on the average number of shares outstanding including any dilutive
effects of options, warrants and convertible securities.
3. COMPREHENSIVE INCOME
Total comprehensive income includes net income and foreign currency
translation adjustments. For the nine months ended September 29, 2000 and
October 1, 1999, total comprehensive income was $74,461 and $54,530,
respectively.
4. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
September 29, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
Raw materials $ 9,602 $ 9,966
Work-in-process 4,221 4,316
Finished goods 131,581 125,871
----------- -----------
$ 145,404 $ 140,153
=========== ===========
</TABLE>
8
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5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 29, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
Term A Loan $ 127,500 $ 165,000
Term B Loan 122,250 123,000
Revolving Credit Loan 92,950 108,800
Other 11,119 13,873
----------- -----------
353,819 410,673
Less current portion 56,422 56,796
----------- -----------
$ 297,397 $ 353,877
=========== ===========
</TABLE>
6. INCOME TAXES
The income tax provision for the third quarter of 2000 reflects an
effective tax rate of approximately 5.8 percent compared to 5.2 percent
for the third quarter of 1999. For the nine months ended September 29,
2000, the effective rate was approximately 6.3 percent compared to 6.7
percent for the same period in 1999. These rates reflect estimated Mexico
tax liabilities and U.S. state and possession taxes based on estimated
taxable income in those jurisdictions. The decrease in the effective rate
for the nine months ended September 29, 2000 versus the comparable period
in 1999 was due to increased levels of pretax income, which primarily
effect the federal tax jurisdiction. No U.S. federal income tax expense
was recorded for 2000 or 1999 due to an offset by a valuation allowance
against U.S. federal deferred tax assets.
The pro-forma effective tax rate, assuming no benefits from the Company's
net operating losses, would have been 38.5 percent.
7. DERIVATIVE FINANCIAL INSTRUMENTS
Effective September 30, 2000 (fourth quarter), the Company adopted
Statement of Financial Accounting Standards No. 133 - "Accounting for
Derivative Instruments and Hedging Activities," ("SFAS 133") and its
amendments Statements 137 and 138, in June 1999 and June 2000 ("SFAS
137") and ("SFAS 138"). SFAS 138 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through earnings. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives are either offset against the change in fair value
of assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change
in fair value is immediately recognized in earnings. The adoption of FASB
133 is not expected to have a material effect on the Company's future
results.
FOREIGN CURRENCY EXCHANGE RISK MANAGEMENT
The Company uses foreign currency forward contracts to hedge against
currency risk associated with the Mexican peso and accounts for these
contracts as cash flow hedges. Such financial instruments are
marked-to-market with the offset to other comprehensive income and then
subsequently recognized as a component of cost of goods sold when the
underlying transaction is recognized as revenue. The Company did not have
any forward contracts outstanding as of September 29, 2000.
9
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INTEREST RATE RISK MANAGEMENT
The Company uses interest rate swap contracts to adjust the proportion of
total debt that is subject to variable and fixed interest rates. Under an
interest rate swap contract, the Company agrees to pay an amount equal to
a fixed-rate of interest times a notional principal amount, and to
receive in return an amount equal to a specified variable-rate of
interest times the same notional principal amount. The notional amounts
of the contracts are not exchanged and no other cash payments are paid.
As of September 29, 2000, the Company had an interest rate swap agreement
outstanding for $200,000,000, which will be in effect until January 16,
2001. Under the terms of the swap agreement, the Company pays a fixed
interest rate of 5.7 percent. As of September 29, 2000, the fair value of
this agreement was not reflected on the balance sheet. The adoption of
FASB 133 is not expected to have a material effect on the Company's
future results.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to federal, state, local and foreign laws and
regulations relating to the environment and to work places. Laws that
affect or could affect the Company's United States operations include,
among others, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act and the Occupational Safety and Health Act.
The Company believes that it is currently in substantial compliance with
such laws and the regulations promulgated thereunder.
The Company is involved in various proceedings relating to environmental
matters. The Company, in the past, has disposed of, or arranged for the
disposal of, substances which are now characterized as hazardous and
currently is engaged in the investigation and cleanup of hazardous
substances at certain sites. It is the Company's policy to accrue
liabilities for remedial investigations and cleanup activities when it is
probable that such liabilities have been incurred and when they can be
reasonably estimated. The Company has provided reserves, which management
believes are adequate to cover probable and estimable liabilities of the
Company with respect to such remedial investigations and cleanup
activities, taking into account currently available information and the
Company's contractual rights of indemnification. However, estimates of
future response costs are necessarily imprecise due to, among other
things, the possible identification of presently unknown sites, the scope
of contamination of such sites, the allocation of costs among other
potentially responsible parties with respect to any such sites and the
ability of such parties to satisfy their share of liability. Accordingly,
there can be no assurance that the Company will not become involved in
future litigation or other proceedings or, if the Company were found to
be responsible or liable in any litigation or proceeding, that such costs
would not be material to the Company.
The Company is also a defendant in various lawsuits arising from normal
business activities. In the opinion of management, the ultimate liability
likely to result from the contingencies described above is not expected
to have a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
10
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the third quarter of 2000, the Company achieved new records in quarterly
sales and profits. The improvement was driven by the strong performance of
Company-operated sales centers supported by new product introductions and
improved customer service. Growth was achieved across all product teams through
higher commercial sales and an increased presence in the residential market.
Profits improved due to higher sales volume and productivity enhancements at
various manufacturing facilities; however, gross margins were reduced by higher
energy costs and the strength of the peso. The increase in profits and improved
utilization of working capital provided for strong cash flows allowing for
reductions in debt and increased spending for capacity expansion and
modernization. The Company plans to continue its efforts to modernize and expand
its manufacturing facilities during the last quarter of 2000.
The Company announced in September that it had entered into a joint venture with
EmilCeramica S.p.A., a leading Italian tile manufacturer. The joint venture will
sell, distribute and manufacture porcelain tile products for the North American
market.
The following is a discussion of the results of operations for the three and
nine months ended September 29, 2000 compared with the three and nine months
ended October 1, 1999 for Dal-Tile International Inc. and its consolidated
subsidiaries (the "Company"). Due to the Company's 52/53 week accounting cycle,
the third quarter of 2000 ended on September 29, 2000.
NET SALES
Net sales for the third quarter of 2000 increased $28.4 million, or 12.9
percent, to $247.9 million from $219.5 million in 1999. For the nine months
ended September 29, 2000, net sales increased $83.4 million, or 13.0 percent, to
$722.9 million from $639.5 million for the same period in 1999. These increases
for the three and nine months ended September 29, 2000 were due primarily to
increased sales volume through the Company-operated sales centers, which
increased 17.5 percent for both the three and nine months ended September 29,
2000 compared to the same periods in 1999. Commercial sales grew steadily and
increased acceptance of new products supported growth in the residential market.
Sales to independent distributors were flat for the quarter and increased 1.4
percent for the nine month period, while home center sales remained flat for
both the third quarter and nine months ended September 29, 2000.
GROSS PROFIT
Gross profit for the third quarter of 2000 increased $10.7 million, or 10.0
percent, to $117.9 million from $107.2 million in 1999. Gross profit for the
nine months ended September 29, 2000 increased $36.5 million, or 11.8 percent,
to $346.1 million from $309.6 million for the same period in 1999. These
increases in gross profit were principally a result of increased sales volume.
Gross margin was 47.6 percent for the third quarter of 2000 and 47.9 percent for
the nine months ended September 29, 2000 versus 48.8 percent for the third
quarter of 1999 and 48.4 percent for the nine months ended October 1, 1999.
Increased sales volume and productivity enhancements were offset by higher
energy costs and the relative strength of the peso.
11
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OPERATING EXPENSES
Operating expenses in the third quarter of 2000 increased $8.3 million, or 11.4
percent, to $81.4 million from $73.1 million in the third quarter of 1999. For
the nine months ended September 29, 2000, operating expenses increased $20.2
million, or 9.1 percent, to $243.3 million from $223.1 million for the same
period in 1999. These increases were due primarily to additional spending
related to new product introductions and higher costs associated with the growth
in sales. Operating expenses as a percent of sales in the third quarter of 2000
improved to 32.8 percent from 33.3 percent in 1999. Year to date, operating
expenses as a percent of sales decreased to 33.7 percent compared to 34.9
percent for the same period in 1999. These decreases for the three and nine
months ended September 29, 2000 were due primarily to higher sales and lower
corporate spending. Transportation costs, as a percent of sales, increased to
6.9 percent of sales for the quarter versus 6.6 percent in 1999 due to higher
fuel prices and increased service requirements of the expanding residential
market. For the nine months ended September 29, 2000, transportation costs as a
percent of sales were 6.7 percent compared to 6.8 percent for the same period in
1999.
OPERATING INCOME
Operating income in the third quarter of 2000 increased $2.3 million, or 6.7
percent, to $36.4 million from $34.1 million in the third quarter of 1999. For
the nine months ended September 29, 2000, operating income increased $16.3
million, or 18.8 percent, to $102.8 million from $86.5 million for the same
period in 1999. Operating margin decreased to 14.7 percent in the third quarter
of 2000 from 15.5 percent in 1999 as a result of higher energy costs and a
strong peso; however, year-to-date operating margin increased to 14.2 percent
from 13.5 percent in 1999.
INTEREST EXPENSE (NET)
Interest expense (net) in the third quarter of 2000 decreased $1.4 million, or
15.7 percent, to $7.5 million from $8.9 million in the third quarter of 1999.
For the nine months ended September 29, 2000, interest expense (net) decreased
$5.6 million, or 19.5 percent, to $23.1 million from $28.7 million in the same
period of 1999. During the nine months ended September 29, 2000, borrowing
requirements on the Company's credit facility (the "Fourth Amended Credit
Facility") decreased due to improved financial performance, and borrowing
spreads decreased from 2.0 percent to 0.875 percent on the revolver and Term A
loan borrowings and from 2.5 percent to 1.75 percent on the Term B loan
borrowings.
INCOME TAXES
The income tax provision for the third quarter of 2000 reflects an effective tax
rate of approximately 5.8 percent compared to 5.2 percent for the third quarter
of 1999. For the nine months ended September 29, 2000, the effective rate was
approximately 6.3 percent compared to 6.7 percent for the same period in 1999.
These rates reflect expected Mexico tax liabilities and U.S. state and
possession taxes based on estimated taxable income in those jurisdictions. The
decrease in the effective rate for the nine months ended September 29, 2000
versus the comparable period in 1999 was due to increased levels of pretax
income, which primarily effect the federal tax jurisdiction. No U.S. federal
income tax expense was recorded for 2000 or 1999 due to an offset by a valuation
allowance against U.S. federal deferred tax assets.
The pro-forma effective tax rate, assuming no benefits from the Company's net
operating losses, would
12
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have been 38.5 percent.
NET INCOME
Net income in the third quarter of 2000 increased to $27.7 million from $23.8
million in the third quarter of 1999. Year to date, net income increased to
$74.5 million from $54.4 million for the same period in 1999. Net income for the
three and nine months ended September 29, 2000 increased due to higher operating
income and reduced interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations and funds available under the Company's bank credit
agreement continue to provide the Company with liquidity and capital resources
for working capital requirements, capital expenditures and debt service. For the
nine months ended September 29, 2000, cash provided by operating activities was
$77.4 million compared to $68.1 million for the same period in 1999. The
increase in cash flow from operations was due primarily to increased
profitability and improvements in working capital utilization through increased
inventory turns and reduced days sales outstanding.
Net expenditures for property, plant and equipment were $24.9 million for the
nine months ended September 29, 2000 compared to $14.7 million for the same
period in 1999. Expenditures included costs for multiple projects to expand and
modernize various manufacturing facilities, improvements at the Company's
distribution facilities and costs for leasehold improvements at various sales
centers. During the remainder of 2000, the Company expects to incur an
additional $10.0 to $15.0 million for routine capital improvements and the
expansion and modernization of its manufacturing facilities.
Cash used in financing activities was $52.8 million for the nine months ended
September 29, 2000. Cash outflows for term debt of $38.2 million, other debt of
$2.8 million, and the Company's revolving credit facility of $15.8 million were
offset by cash inflows of $4.0 million related to employee stock purchases and
the exercise of options of common stock. Total availability under the Fourth
Amended Credit Facility as of September 29, 2000 was $143.7 million.
The Company believes cash flow from operating activities, together with
borrowings available under the Fourth Amended Credit Facility, will be
sufficient to fund working capital needs, capital expenditures and debt service
requirements.
The Company is involved in various proceedings relating to environmental matters
and is currently engaged in environmental investigation and remediation programs
at certain sites. The Company has provided reserves for remedial investigation
and cleanup activities that the Company has determined to be both probable and
reasonably estimable. The Company is entitled to indemnification with respect to
certain expenditures incurred in connection with such environmental matters and
does not expect that the ultimate liability with respect to such investigation
and remediation activities will have a material adverse effect on the Company's
liquidity and financial condition.
The United States is a party to the General Agreement on Tariffs and Trade
("GATT"). Under GATT, the United States currently imposes import duties on
ceramic tile from non-North American countries at no more than 14 percent, to be
reduced ratably to 8 1/2 percent by 2004. Accordingly, GATT may stimulate
competition from non-North American manufacturers who now export, or who may
seek to export, ceramic tile to the United States. The Company cannot predict
with certainty the effect that GATT may have on the Company's operations.
13
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In 1993, Mexico, the United States and Canada approved the North American Free
Trade Agreement ("NAFTA"). NAFTA has, among other things, removed and will
continue to remove, over a transition period, most normal customs duties imposed
on goods traded among the three countries. In addition, NAFTA will remove or
limit many investment restrictions, liberalize trade in services, provide a
specialized means for settlement of, and remedies for, trade disputes arising
thereunder, and will result in new laws and regulations to further these goals.
Although NAFTA lowers the tariffs imposed on the Company's ceramic tile
manufactured in Mexico and sold in the United States, it also may stimulate
competition in the United States and Canada from manufacturers located in
Mexico. The United States currently imposes import duties on glazed ceramic tile
from Mexico of approximately 11 percent, although these duties on imports from
Mexico are being phased out ratably under NAFTA by 2008. It is uncertain what
ultimate effect NAFTA will have on the Company's results of operations.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Cautionary Statement for purposes of "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995.
Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward looking statements. Potential risks and uncertainties include,
but are not limited to, the impact of competitive pressures and
changing economic conditions on the Company's business and its
dependence on residential and commercial construction activity, the
fact that the Company is highly leveraged, currency fluctuations and
other factors relating to the Company's foreign manufacturing
operations, the impact of pending reductions in tariffs and custom
duties, system integration issues and environmental laws and other
regulations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27.1 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
September 29, 2000.
14
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SIGNATURE
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.
DAL-TILE INTERNATIONAL INC.
------------------------------------
(Registrant)
Date:
November 13, 2000 /s/ W. Christopher Wellborn
----------------- ------------------------------------
Executive Vice President and
Chief Financial Officer
15
