<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For Quarter Ended July 3, 1999 Commission file number 0-7469
TJ INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 82-0250992
- --------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 E. Mallard Drive
BOISE, IDAHO 83706
- ---------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (208) 364-3300
--------------
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 and Exchange Act of 1934 during the preceding 12
months (or for each 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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. August
10, 1999, 15,460,349 shares of $1 par value common stock,
excluding 2,837,558 shares held as treasury stock.
EXHIBIT INDEX ON PAGE 17
<PAGE>
TJ INTERNATIONAL, INC.
PART I. Financial Information
The condensed consolidated financial statements included herein
have been prepared by management, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission,
under the Securities Exchange Act of 1934, as amended. In the
opinion of management, all adjustments necessary to present fairly
the results for the periods presented have been included. The
adjustments made were of a normal, recurring nature. Certain
information and footnote disclosure normally included in financial
statements have been condensed or omitted in accordance with such
rules and regulations, although management believes that the
disclosures are adequate to make the information presented not
misleading. It is recommended that these condensed financial
statements be read in conjunction with the audited financial
statements and the notes thereto included in our latest annual
report on Form 10-K.
The results of operations for the periods presented are not
necessarily indicative of the results that might be expected for
the fiscal year ending January 1, 2000.
2
<PAGE>
<TABLE>
<CAPTION>
TJ INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
July 3, January 2, July 4,
1999 1999 1998
ASSETS
Current assets
Cash and cash equivalents $ 103,321 $ 140,060 $ 139,980
Marketable securities --- 9,091 ---
Receivables, less allowances
of $335, $374 and $394 112,967 69,990 88,495
Inventories 73,502 78,827 77,548
Other 14,874 14,441 14,468
---------- ---------- ----------
304,664 312,409 320,491
Property
Property and equipment 675,626 642,690 616,603
Less - Accumulated depreciation (282,304) (260,123) (240,310)
---------- ---------- ----------
393,322 382,567 376,293
Goodwill 17,940 18,460 18,980
Other assets 18,799 17,503 17,620
---------- ---------- ----------
$ 734,725 $ 730,939 $ 733,384
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 28,576 $ 19,639 $ 33,926
Accrued liabilities 61,419 50,927 46,290
---------- ---------- ----------
89,995 70,566 80,216
Long-term debt 142,390 142,390 142,390
Other long-term liabilities 28,906 31,919 19,917
Reserve for discontinued operations 13,049 13,687 13,955
Minority interest in Partnership 220,622 239,572 228,268
Stockholders' equity
ESOP Convertible Preferred Stock,
$1.00 par value, authorized
10,000,000 shares, issued
1,105,121, 1,124,848, and
1,136,219 13,038 13,271 13,405
Guaranteed ESOP Benefit (7,273) (7,288) (8,188)
Common stock, $1.00 par value,
authorized 200,000,000
shares, issued 18,280,082,
18,069,077, and 17,947,065 18,280 18,069 17,947
Paid-in capital 165,753 160,863 157,570
Retained earnings 124,348 110,411 98,712
Other (1,985) (1,949) (1,865)
Accumulated other comprehensive
income (loss) (5,180) (6,228) (5,148)
Treasury stock, 2,837,558,
2,321,605, and 1,034,355,
shares, at cost (67,218) (54,344) (23,795)
---------- ---------- ----------
239,763 232,805 248,638
---------- ---------- ----------
$ 734,725 $ 730,939 $ 733,384
========== ========== ==========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(amounts in thousands except per share figures)
<S> <C> <C> <C> <C>
For the fiscal For the two fiscal
quarter ended quarters ended
------------------------- --------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------------------- --------------------------
Sales $ 230,870 $ 193,361 $ 447,912 $ 379,190
---------- ---------- ---------- ----------
Costs and expenses
Cost of sales 173,747 139,064 337,881 274,587
Selling expenses 19,414 19,315 39,074 38,890
Administrative expenses 9,171 9,403 18,825 19,013
---------- ---------- ---------- ----------
202,332 167,782 395,780 332,490
---------- ---------- ---------- ----------
Income from operations 28,538 25,579 52,132 46,700
Investment income, net 1,197 1,798 2,431 3,757
Interest expense (2,322) (2,223) (4,541) (4,539)
Minority interest in
Partnership (13,521) (12,220) (24,641) (22,067)
---------- ---------- ---------- ----------
Income before income
taxes 13,892 12,934 25,381 23,851
Income taxes 5,070 4,850 9,264 8,944
---------- ---------- ---------- ----------
Net income $ 8,822 $ 8,084 $ 16,117 $ 14,907
========== ========== ========== ==========
Net income per
common share
Basic $ 0.55 $ 0.46 $ 1.00 $ 0.85
========== ========== ========== ==========
Diluted $ 0.51 $ 0.43 $ 0.93 $ 0.79
========== ========== ========== ==========
Dividends declared per
common share $ 0.055 $ 0.055 $ 0.1100 $ 0.1100
========== ========== ========== ==========
Weighted average number of
common shares outstanding
during the periods
Basic 15,536 16,981
========== ==========
Diluted 17,001 18,554
========== ==========
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TJ INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL QUARTER ENDED
JULY 3, 1999, AND JULY 4, 1998
(Unaudited)
(amounts in thousands)
July 3, July 4,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
- ------------------------------------
Net income $ 16,117 $ 14,907
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 23,168 22,214
Minority interest in partnerships 24,641 22,067
Other, net 2,509 2,040
Change in working capital items:
Receivables (42,977) (33,126)
Inventories 5,325 (8,594)
Other current assets (359) (3,545)
Accounts payable and accrued liabilities 19,429 4,022
Other, net (3,939) (3,678)
----------- -----------
Net cash provided by operating activities $ 43,914 $ 16,307
=========== ===========
Cash flows from investing activities
- ------------------------------------
Capital expenditures $ (32,384) $ (18,006)
Sales of marketable securities 9,091 40,751
Other, net (587) (966)
----------- -----------
Net cash provided by (used in) investing
activities $ (23,880) $ 21,779
=========== ===========
Cash flows from financing activities
- -------------------------------------
Cash dividends paid on common stock $ (1,719) $ (1,873)
Minority partners tax distributions (8,107) (8,020)
Minority partners capital distributions (34,300) ---
Purchase of treasury stock (12,874) (7,536)
Other, net 227 236
----------- -----------
Net cash used in financing activities $ (56,773) $ (17,193)
=========== ===========
Net change in cash and cash equivalents
- ---------------------------------------
Net increase (decrease) in cash and cash $ (36,739) $ 20,893
equivalents
Cash and cash equivalents at beginning
of year 140,060 119,087
----------- -----------
Cash and cash equivalents at end of period $ 103,321 $ 139,980
=========== ===========
Supplemental disclosures of cash flow information
- -------------------------------------------------
Cash paid during the period for:
Interest, net of amounts capitalized $ 5,136 $ 5,198
Income taxes $ 7,788 $ 6,597
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
TJ INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Inventories
- -----------
Inventories consisted of the following:
(amounts in thousands)
<S> <C> <C> <C>
July 3, Jan. 2, July 4,
1999 1999 1998
---------- ---------- ----------
Finished goods $ 60,904 $ 59,740 $ 57,769
Raw materials and
work-in-progress 12,598 19,087 19,779
---------- ---------- ----------
$ 73,502 $ 78,827 $ 77,548
========== ========== ==========
Inventories are priced at the lower of cost or market, with cost determined on
a first-in, first-out basis and market based on the lower of replacement cost or
estimated realizable value.
</TABLE>
6
<PAGE>
Net Income Per Common Share:
- ----------------------------
Basic net income per common share is based on net income adjusted
for preferred stock dividends and related tax benefits divided by
the weighted average number of common shares outstanding. Diluted
net income per common share assumes conversion of the Employee
Stock Ownership Plan (ESOP) convertible preferred stock (ESOP
preferred stock) into common stock at the beginning of the year and
weighted average number of common shares outstanding after giving
effect to stock options under the treasury stock method.
Basic net income and diluted net income were calculated as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
<S> <C> <C> <C> <C>
For the fiscal For the two fiscal
quarter ended quarters ended
------------------------- --------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------------------- --------------------------
Basic net income
- ----------------
Net income as reported $ 8,822 $ 8,084 $ 16,117 $ 14,907
Preferred stock dividends,
net of related tax
benefits (254) (250) (511) (503)
---------- ---------- ---------- ----------
Basic net income $ 8,568 $ 7,834 $ 15,606 $ 14,404
========== ========== ========== ==========
Diluted net income
- ------------------
Net income as reported $ 8,822 $ 8,084 $ 16,117 $ 14,907
Additional ESOP
contribution payable upon
assumed conversion of ESOP
preferred stock, net of
related tax benefits (185) (165) (373) (331)
---------- ---------- ---------- ----------
Diluted net income $ 8,637 $ 7,919 $ 15,744 $ 14,576
========== ========== ========== ==========
Weighted average shares
used to determine basic
earnings per common
share 15,536 16,981 15,536 16,981
Conversion of ESOP
preferred stock 1,117 1,142 1,117 1,142
Exercise of stock options
using the Treasury
Stock Method 348 431 348 431
---------- ---------- ---------- ----------
Weighted average shares
used to determine
diluted earnings per
common share 17,001 18,554 17,001 18,554
========== ========== ========== ==========
</TABLE>
7
<PAGE>
Comprehensive Income (Loss)
- ---------------------------
Comprehensive income for the periods include the following:
<TABLE>
<CAPTION>
(amounts in thousands)
<S> <C> <C> <C> <C>
For the fiscal For the two fiscal
quarter ended quarters ended
------------------------------------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------------------------------------------------
Net Income $ 8,822 $ 8,084 $ 16,117 $ 14,907
Other Comprehensive
Income (Loss) 483 (1,290) 1,048 (1,343)
---------- ---------- ---------- ----------
Comprehensive Income $ 9,305 $ 6,794 $ 17,165 $ 13,564
========== ========== ========== ==========
</TABLE>
Accumulated other comprehensive income (loss) for each period ended
was as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
<S> <C> <C> <C>
July 3, January 2, July 4,
1999 1999 1998
---------- ---------- ----------
Balances at beginning of period-
cumulative translation adjustment$ (6,228) $ (3,805) $ (3,805)
Changes within periods-
cumulative translation adjustment 1,048 (2,423) (1,343)
---------- ---------- ----------
Balance at end of period-
cumulative translation adjustment$ (5,180) $ (6,228) $ (5,148)
========== ========== ==========
</TABLE>
8
<PAGE>
TJ INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE FISCAL QUARTER ENDED JULY 3, 1999
FORWARD-LOOKING STATEMENTS
This management's discussion and analysis includes a number of
"forward-looking statements" as defined by the Private Securities
Litigation Act of 1995. Forward-looking statements include,
without limitation, statements regarding the adequacy of our
reserves for discontinued operations and other statements regarding
our beliefs. Investors are cautioned that forward-looking
statements are subject to an inherent risk that actual results may
vary materially from those described, projected, or implied.
Factors that may result in such variance include, among others:
changes in interest rates, commodity prices, and other economic
conditions; actions by competitors; changing weather conditions and
other natural phenomena; actions by government authorities;
technological developments; future decisions by management in
response to changing conditions; and misjudgments in the course of
preparing forward-looking statements. Other factors are discussed
in our filings with the Securities and Exchange Commission.
OPERATING RESULTS
We are the 51 percent owner, and managing partner of Trus Joist
MacMillan, a Limited Partnership (TJM), the world's leading
manufacturer and marketer of engineered lumber products.
Substantially all of our operating assets are held and revenue
generated by TJM. MacMillan Bloedel Limited (MB) owns a 49 percent
interest in TJM.
The following comments discuss material variations in the results
of operations for the comparative periods presented in the
condensed consolidated statements of income.
Sales
- -----
Our sales by quarter during the current year and for the preceding
four years are as follows:
<TABLE>
<CAPTION>
Sales by Quarter
----------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
Quarter 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
First $217,042 $185,829 $161,263 $111,157 $109,941
Second 230,870 193,361 185,730 155,050 123,882
Third 222,423 185,576 179,571 137,759
Fourth 176,450 173,747 131,388 113,263
-------- -------- -------- -------- --------
$447,912 $778,063 $706,316 $577,166 $484,845
======== ======== ======== ======== ========
</TABLE>
9
<PAGE>
SECOND QUARTER 1999 COMPARED TO SECOND QUARTER 1998
We achieved record sales levels in the second quarter of 1999.
Sales for the quarter grew to $231 million, a 19% increase from the
$193 million reported in the second quarter of 1998. The increase
in sales resulted from growing acceptance of engineered lumber in
construction due to the higher quality and better value that
engineered lumber products provide over competing solid sawn lumber
products.
We had a very good market environment in the first half of 1999,
strong North American housing starts as well as increasing lumber
prices. Our past experience has been that as lumber prices
increase, builders accelerate their switch to engineered lumber.
Demand for our products during the first quarter was so strong that
we instituted a managed demand system for our customers. This
system is designed primarily to keep any particular customer or
group of customers from placing orders in excess of existing
capacity and extending lead times to unreasonable levels. During
the second quarter we had additional capacity available from our
newly constructed Evergreen, Alabama TJI-Registered Trademark-
joist and Microllam-Registered Trademark- LVL facility, as well as
additional shifts at our TJI-Registered Trademark- joist facility
at the East Kentucky TimberStrand-Registered Trademark- LSL plant.
These capacity additions were a significant step toward meeting the
increased demand we experienced for our products. By the end of
the second quarter most of our products were no longer under the
managed demand system.
Virtually all of our growth in 1999 has been from increased
volumes. On a price/mix basis, year-to-date, results were
essentially flat. Earlier in the year we raised prices on most of
our products, and we began to see the benefit of these increased
prices in the second quarter. Offsetting some of the price
increase is a shift in our product mix toward lower-priced
products. These products would include our TimberStrand-Registered
Trademark- flanged I-joists and TimberStrand-Registered Trademark-
headers, which have both lower prices and lower performance than
our traditional Microllam-Registered Trademark- LVL, I-joist and
header products. These products are designed to fill less
demanding applications where strength or span requirements are not
as great. These products give us a broader range of price and
performance options to meet the various applications in a house or
commercial building design.
Gross margins for the second quarter were 24.7% compared with 28.1%
in the second quarter of 1998. The margin decline in the second
quarter was primarily the result of significant increases in the
commodity price we pay for some of our raw materials. Prices
during the second quarter for veneer, which is a significant raw
material component for Microllam-Registered Trademark- LVL and our
TJI-Registered Trademark- joists, were at the highest levels in the
last 5 years. Prices were also at historic highs for Oriented
Strand Board (OSB). We use a proprietary OSB as a purchased raw
material component for our TJI-Registered Trademark- joists. We
negotiated price collars around a significant portion of our
planned OSB purchases to protect us from the price fluctuations,
however, the prices within the collars are higher than we paid last
year in the second quarter. Offsetting these cost increases were
productivity improvements and increased throughput at several of
our manufacturing facilities. In addition, an increasing amount of
our product line's cost structure is tied to logs, which do not
experience the same price volatility as commodity veneer and OSB.
Selling expenses were essentially flat from the second quarter of
1998 compared to the second quarter of 1999, which resulted in a
reduction of selling expenses as a percent of sales. We continue
to execute our strategy of providing value-added services to the
market. In addition, our selling expenses include the costs to
develop our international markets.
10
<PAGE>
General and administrative expenses in the second quarter were down
from the prior year. However, as a percentage of sales, general
and administrative expenses declined in the second quarter of 1999
to 4.0% compared to 4.9% for 1998. Control of spending has helped
mitigate the gross margin declines and operating margins in this
quarter were 12.4% compared to 13.2% in the second quarter of 1998.
Interest income has declined from the second quarter of last year
due to lower invested cash balances and a shift to lower yielding
tax-exempt investments from taxable investments. The effective
tax rate is 36.5% for 1999 as compared to 37.5% in 1998. The
tax-exempt interest income as well as other initiatives we are
implementing are driving this rate reduction.
Minority interest expense increased $1.3 million from 1998 due to
an increase in earnings of the Trus Joist MacMillan (TJM)
Partnership.
FIRST TWO QUARTERS OF 1999 COMPARED WITH THE FIRST TWO QUARTERS OF
1998
Sales for the first half of 1999 increased by $68.7 million or 18%
from the comparable period last year. Unit volume sales growth
accounted for virtually all of the increase due to increased
acceptance of the Company's engineered lumber products.
Gross margins decreased from 27.6% to 24.6% between the two
periods. Record high levels for commodity raw materials were the
dominant driver of the margin decline. Offsetting this margin
pressure somewhat were productivity and throughput improvements at
several of our manufacturing facilities.
Selling, general and administrative expenses were essentially flat
with the prior year, even in light of an 18% increase in sales.
Our cost control efforts have resulted in the level spending
despite our continuing commitment to value added marketing strategy
and investments in international markets, as well as infrastructure
system improvements.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the second quarter was $215 million
as compared to $240 million at the end of the second quarter of
1998. The reduction in working capital was primarily due to the
use of cash for the stock repurchase program and the cash
distribution to MacMillan Bloedel of America in the first quarter
of 1999.
In December 1998, the Board of Directors approved a cash
distribution from Trus Joist MacMillan, a limited partnership, to
its partners, MacMillan Bloedel of America and TJ International,
Inc. The distribution of $34.3 million was made in January 1999 to
MacMillan Bloedel of America and has been recorded as a reduction
of Minority Interest in Partnership.
In 1997, TJM began construction of a Microllam-Registered
Trademark- LVL and TJI-Registered Trademark- joist plant located in
Evergreen, Alabama and completed the facility in 1998. Production
began late in the fourth quarter of 1998. This new facility will
produce traditional Microllam-Registered Trademark- LVL and TJI-
Registered Trademark- joist products. The plant construction
required a capital investment of approximately $45 million.
In April 1999, the Ontario Provincial Government selected Trus
Joist MacMillan to use the Aspen resource in the Kenora, Ontario
area for a state-of-the-art engineered lumber manufacturing
facility. Our plan is to build a TimberStrand-Registered
Trademark- LSL plant in this area. We're currently in the planning
phase, developing and refining a business plan for the facility,
evaluating the quality and quantity of wood fiber available and
completing preliminary engineering work and site selection. We
plan to go to our Board of Directors in the fourth quarter of this
year with a proposal for this capital expenditure and expect to
proceed with construction some time next year.
11
<PAGE>
We believe that current cash balances, cash generated from
operations, and borrowing under our $150 million Revolving Credit
Facility will be sufficient to meet our on-going operating and
capital expansion needs. We also believe additional or expanded
lines of credit or appropriate long-term capital can be obtained to
fund other major capital requirements as they arise or to fund any
acquisition that is available.
In December 1998, the Board of Directors authorized a $25 million
share repurchase program. At the end of the second quarter of
1999, approximately $13 million of the Company's capital stock has
been repurchased under this program and was held as Treasury
shares.
In the first quarter of 1998, the Board of Directors authorized us
to purchase $3.1 million of treasury stock. In addition, at the
Board of Directors meeting held on May 27, 1998, the Board
authorized us to purchase $35 million of treasury stock. We
purchased $4.4 million in the second quarter of 1998 and $30.6
million in the third quarter 1998 completing this stock purchase
program.
In the third quarter of 1998, we issued $6.7 million of tax-exempt
industrial revenue variable rate demand bonds related to the East
Kentucky plant. In 1998, the weighted average interest rate on
these bonds was 3.82%. These bonds are unsecured, with the
principal due in a single maturity in 2028. We used the proceeds
from these bonds to prepay, without penalty, $6.7 million of the
taxable industrial revenue bonds described below.
In the fourth quarter of 1998, we extended for five years the due
date of our $10 million tax-exempt industrial revenue variable rate
demand bonds, which otherwise would have matured in the year 2000.
These bonds had a weighted average interest rate of 3.82% in 1998.
We completed the sale of our window operations in 1996; however, we
retained certain liabilities related to these operations. We
believe that existing reserves are adequate to meet all liabilities
that may arise related to the discontinued operations.
Substantially all of the operating assets are held, and revenue
generated, by Trus Joist MacMillan a Limited Partnership. The
Partnership regularly distributes cash to the partners to fund the
tax liabilities generated by the Partnership at the corporate
level. All other distributions of cash by the Partnership are
dependent on the affirmative votes of the representatives of the
minority partner. Accordingly, there can be no assurance that such
distributions will be approved and thereby be available for the
payment of dividends or to fund other cash expenses.
WEYERHAEUSER ACQUISITION OF MACMILLAN BLOEDEL
On June 21, 1999, Weyerhaeuser Company announced it had entered
into an agreement to acquire MacMillan Bloedel, Ltd. Under the
terms of the 1991 Partnership Agreement between TJ International
and MacMillan Bloedel, TJ International has certain rights upon a
change of control of the MacMillan Bloedel entity that is TJ
International's partner. We believe that consummation of the
pending transaction between Weyerhaeuser and MacMillan Bloedel
triggers these rights. If these rights are triggered, TJ
International would have the right to purchase MacMillan Bloedel's
49% minority interest without a takeover premium, or the right to
sell TJ International's 51% interest to Weyerhaeuser as the
acquirer of MacMillan Bloedel with a takeover premium. TJ
International also could allow Weyerhaeuser to assume MacMillan
Bloedel's rights and obligations under the Partnership contract. We
are evaluating our options under the Partnership contract, and
otherwise, in order to determine the most advantageous option for
our shareholders, Associates, customers and suppliers.
12
<PAGE>
INDUSTRY, COMPETITION, AND CYCLICALITY
Our engineered lumber products continue to gain market acceptance
as high-quality alternatives to traditional solid sawn lumber
products. Through intensive marketing efforts, builders and other
wood users are increasingly recognizing the consistent quality,
superior strength, lighter weight, and ease of installation of
engineered lumber products. We believe that this trend will
continue well into the future.
No other company possesses the range of engineered lumber products,
the levels of service and technical support, or the
second-generation technologies of TimberStrand-Registered
Trademark- LSL or Parallam-Registered Trademark- PSL. There are,
however, a number of companies, including several large forest
products companies, which now produce look-alike wood I-joist and
laminated veneer lumber products. Several of these companies have
announced capacity expansions. These look-alike products are
manufactured using processes similar to our oldest-generation
technologies.
We believe our network of manufacturing plants and multiple
technologies position us as the low-cost producer of engineered
lumber. While competition helps expand the market for engineered
wood products, including those manufactured by us, it may also make
the existing markets more price competitive. Traditional
wide-dimension lumber, however, remains the predominant structural
framing material used in residential construction and is the
primary competitor for our products. Commodity lumber prices
historically have been subject to high volatility, and during
prolonged periods of significant lumber price movements, our prices
have trended in the same direction.
Our operations are strongly influenced by the cyclicality and
seasonality of residential housing construction. This industry
experiences fluctuations resulting from a number of factors,
including the state of the economy, consumer confidence, credit
availability, interests rates, and weather patterns. Consistent
with the seasonal pattern of the construction industry as a whole,
our sales have historically tended to be lowest in the first and
fourth quarters and highest in the second and third quarters of
each year.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. The Statement
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. As of July 3, 1999, we had no material
derivative financial instruments outstanding. We plan to adopt
this statement in the first quarter of 2000.
YEAR 2000 ISSUE
We are working to resolve the effects of the Year 2000 problem on
our information systems, including the financial and transaction
systems, production and process control systems, and compliance
status of suppliers' systems. The Year 2000 problem, which is
common to most businesses, concerns the inability of such systems
to properly recognize the process dates and date-sensitive
information on and beyond January 1, 2000.
In 1997, we formally began a series of assessments, company-wide
tracking, and awareness programs. These programs ensured
company-wide awareness of the Year 2000 issues, standardized the
inventory and assessment methods, and tracked the results of the
assessments.
13
<PAGE>
We have successfully educated key personnel on the issues,
completed our inventory and assessments of the Year 2000 risks for
financial and transaction systems and production and process
control systems. A number of applications in the financial and
transaction processing systems are compliant due to recent
implementations and upgrades. We have been configuring and
installing Year 2000 compliant systems as part of our program to
provide significantly improved functionality in our business
support software. This program is intended to provide the
infrastructure for future growth. Our core financial and reporting
systems are not yet fully compliant but are scheduled to be
complete by late fall 1999. To date, no significant issues have
been identified in connection with our assessment of our primary
production and process control systems. We expect to complete
replacement of the identified non-compliant equipment or software
by the third quarter of 1999.
We are also in the process of surveying vendors, principal
customers and business partners regarding their Year 2000
compliance. Contingency plans have been identified or are
currently being developed in the event either our systems or key
third-party systems are not compliant.
While we currently believe that we will be able to modify or
replace our affected systems in time to reduce any detrimental
effects on our operations, failure to do so, or the failure of our
major customers and suppliers to modify or replace their affected
systems, could have a material adverse impact on our results of
operations, liquidity, or consolidated financial position in the
future. The most reasonably likely, worst-case scenario of our
failure or our customers or suppliers, to resolve the Year 2000
problem would be a temporary slowdown or cessation of manufacturing
operations at one or more of our facilities and a temporary
inability on our part to process orders and billings on a timely
basis and to timely deliver finished products to customers. We are
currently identifying and considering various contingency
operations, including identification of alternate suppliers,
vendors and service providers, and manual alternatives to systems
operations, which will allow us to minimize the risk of any
unresolved Year 2000 problems in our operations and to minimize the
effect of any unforeseen Year 2000 failures.
We currently estimate the cost to complete compliance should not
exceed $3,000,000. These costs will be expensed as incurred, unless
new software, equipment, or hardware is purchased that should be
capitalized in accordance with GAAP.
Microllam-Registered Trademark-, Parallam-Registered Trademark-,
TJI-Registered Trademark- joist, and TimberStrand-Registered
Trademark- are registered trademarks of Trus Joist MacMillan a
Limited Partnership, Boise, Idaho.
14
<PAGE>
TJ INTERNATIONAL, INC.
PART II
Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
At the Company's May 26, 1999 annual meeting of
stockholders, the following matters were voted upon and
approved by the stockholders as indicated:
Votes Cast
------------------------------------
Against or
Description For Withheld Abstentions
- ------------------- --------- ---------- -----------
1. To elect as director
the following individual
For terms expiring at the
-------------------------
2002 annual meeting
-------------------
Richard L. King 12,285,660 36,129 ---
2. Ratification of Appointment
of Arthur Andersen LLP as
Independent Accountants for
the Company 12,204,347 74,054 43,388
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) Filed as an exhibit to this report is the following:
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the
quarter.
15
<PAGE>
TJ INTERNATIONAL INC.
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.
TJ INTERNATIONAL, INC.
/s/ Valerie A. Heusinkveld
-----------------------------------
Valerie A. Heusinkveld
Vice President, Finance & Chief
Financial Officer
Date: August 16, 1999
16
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS TO FORM 10-Q
Quarterly Report Under section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the fiscal quarter ended July 3, 1999
Commission File Number 0-7469
TJ INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibits Page
- -------- -----
(27) Financial Data Schedule Document 2
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DATA SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM
THE TJ INTERNATIONAL, INC. BALANCE SHEET AT JULY 3, 1999, AND
FROM ITS STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JULY 3,
1999. THE INFORMATION PRESENTED IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 103,321
<SECURITIES> 0
<RECEIVABLES> 113,302
<ALLOWANCES> 335
<INVENTORY> 73,502
<CURRENT-ASSETS> 304,664
<PP&E> 675,626
<DEPRECIATION> 282,304
<TOTAL-ASSETS> 734,725
<CURRENT-LIABILITIES> 89,995
<BONDS> 142,390
0
13,038
<COMMON> 18,280
<OTHER-SE> 208,445
<TOTAL-LIABILITY-AND-EQUITY> 734,725
<SALES> 447,912
<TOTAL-REVENUES> 447,912
<CGS> 337,881
<TOTAL-COSTS> 337,881
<OTHER-EXPENSES> 57,899
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,541
<INCOME-PRETAX> 25,381
<INCOME-TAX> 9,264
<INCOME-CONTINUING> 16,117
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,117
<EPS-BASIC> 1.00
<EPS-DILUTED> .93
</TABLE>
