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 26, 2003 |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 333-88212
COLLINS & AIKMAN FLOORCOVERINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
58-2151061 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| 311 Smith Industrial Boulevard, Dalton, Georgia |
30721 | |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number: (706) 259-9711
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The Registrant had 1,000 shares of Common Stock, par value $.01 per share, issued and outstanding as of June 6, 2003.
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
| Page No. | ||||||
| Part I. |
Financial Information |
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| Item 1. |
Financial Statements |
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| Consolidated Statements of Operations—Thirteen Weeks Ended April 26, 2003 and April 27, 2002 |
3 | |||||
| Consolidated Balance Sheets—As of January 25, 2003 and April 26, 2003 |
4 | |||||
| Consolidated Statements of Stockholder’s Equity—Thirteen Weeks Ended April 26, 2003 |
5 | |||||
| Consolidated Statements of Cash Flows—Thirteen Weeks Ended April 26, 2003 and April 27, 2002 |
6 | |||||
| 7 | ||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||||
| Item 3. |
27 | |||||
| Item 4. |
28 | |||||
| Part II. |
Other Information |
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| Item 1. |
28 | |||||
| Item 6. |
28 | |||||
| 29 | ||||||
| 30 | ||||||
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PART 1—FINANCIAL INFORMATION
Item 1. Financial Statements
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and In Thousands)
| Thirteen Weeks Ended |
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| April 27, 2002 |
April 26, 2003 |
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| Net Sales |
$ | 66,417 | $ | 71,569 | ||||
| Cost of Goods Sold |
43,101 | 48,332 | ||||||
| Selling, General & Administrative Expenses |
17,355 | 18,986 | ||||||
| 60,456 | 67,318 | |||||||
| Operating Income |
5,961 | 4,251 | ||||||
| Minority Interest in Income (Loss) of Subsidiary |
16 | (16 | ) | |||||
| Equity in Earnings of Affiliate |
476 | 361 | ||||||
| Net Interest Expense |
8,499 | 5,406 | ||||||
| Loss Before Income Taxes and Cumulative Effect of Change in Accounting Principle |
(2,078 | ) | (778 | ) | ||||
| Income Tax Benefit |
(730 | ) | (681 | ) | ||||
| Loss Before Cumulative Effect of Change in Accounting Principle |
(1,348 | ) | (97 | ) | ||||
| Cumulative Effect of Change in Accounting Principle |
(3,240 | ) | — | |||||
| Net Loss |
$ | (4,588 | ) | $ | (97 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
3
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
(In Thousands)
| January 25, 2003 |
April 26, 2003 |
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| (Unaudited) | ||||||||
| ASSETS |
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| CURRENT ASSETS: |
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| Cash and cash equivalents |
$ | 20,907 | $ | 939 | ||||
| Accounts receivable, net of allowance of $865 and $876 in fiscal 2002 and 2003, respectively |
38,527 | 42,066 | ||||||
| Inventories |
35,721 | 43,882 | ||||||
| Deferred tax assets |
1,863 | 2,059 | ||||||
| Prepaid expenses and other |
1,699 | 2,810 | ||||||
| Total current assets |
98,717 | 91,756 | ||||||
| PROPERTY, PLANT, AND EQUIPMENT, net |
66,258 | 66,038 | ||||||
| DEFERRED TAX ASSETS |
870 | 398 | ||||||
| GOODWILL |
98,378 | 98,378 | ||||||
| OTHER INTANGIBLE ASSETS, net |
43,100 | 41,571 | ||||||
| OTHER ASSETS |
11,090 | 9,101 | ||||||
| TOTAL ASSETS |
$ | 318,413 | $ | 307,242 | ||||
| LIABILITIES AND STOCKHOLDER’S EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 15,919 | $ | 19,888 | ||||
| Accrued expenses |
18,714 | 14,890 | ||||||
| Current portion of long-term debt |
12,105 | 918 | ||||||
| Total current liabilities |
46,738 | 35,696 | ||||||
| OTHER LIABILITIES, including post-retirement benefit obligation |
5,529 | 5,419 | ||||||
| LONG-TERM DEBT, net of current portion |
218,666 | 218,932 | ||||||
| MINORITY INTEREST |
330 | 313 | ||||||
| COMMITMENTS AND CONTINGENCIES |
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| STOCKHOLDER’S EQUITY: |
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| Common stock: $.01 par value per share, 1,000 shares authorized, issued, and outstanding in fiscal 2002 and 2003 |
— | — | ||||||
| Paid-in capital |
72,648 | 72,648 | ||||||
| Retained deficit |
(23,480 | ) | (24,163 | ) | ||||
| Accumulated other comprehensive loss |
(2,018 | ) | (1,603 | ) | ||||
| 47,150 | 46,882 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY |
$ | 318,413 | $ | 307,242 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
4
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
FOR THE THIRTEEN WEEKS ENDED APRIL 26, 2003
(Unaudited and In Thousands, Except Share Amounts)
| Common Stock |
Accumulated Other Comprehensive Income (Loss) |
|||||||||||||||||||||||
| Shares |
Amount |
Paid-in Capital |
Retained Earnings (Deficit) |
Foreign Currency Translation Adjustment |
Minimum Pension Liability |
Total |
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| BALANCE, January 25, 2003 |
1,000 | $ | — | $ | 72,648 | $ | (23,480 | ) | $ | (809 | ) | $ | (1,209 | ) | $ | 47,150 | ||||||||
| Net loss |
— | — | — | (97 | ) | — | — | (97 | ) | |||||||||||||||
| Dividend to Tandus Group, Inc. |
— | — | — | (586 | ) | — | — | (586 | ) | |||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | 415 | — | 415 | |||||||||||||||||
| BALANCE, April 26, 2003 |
1,000 | $ | — | $ | 72,648 | $ | (24,163 | ) | $ | (394 | ) | $ | (1,209 | ) | $ | 46,882 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and In Thousands)
| Thirteen Weeks Ended |
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| April 27, 2002 |
April 26, 2003 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net loss |
$ | (4,588 | ) | $ | (97 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: |
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| Depreciation and leasehold amortization |
1,900 | 2,512 | ||||||
| Amortization of other intangible assets |
971 | 1,528 | ||||||
| Amortization and write-off of deferred financing fees |
1,748 | 315 | ||||||
| Deferred income tax expense (benefit) |
(649 | ) | 276 | |||||
| Equity in earnings of affiliate |
(476 | ) | (361 | ) | ||||
| Minority interest in income (loss) of subsidiary |
16 | (16 | ) | |||||
| Cumulative effect of change in accounting principle |
3,240 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(785 | ) | (3,539 | ) | ||||
| Inventories |
(6,526 | ) | (8,161 | ) | ||||
| Accounts payable |
3,154 | 3,969 | ||||||
| Accrued expenses |
(25 | ) | (3,824 | ) | ||||
| Other, net |
(1,034 | ) | (726 | ) | ||||
| Total adjustments |
1,534 | (8,027 | ) | |||||
| Net cash used by operating activities |
(3,054 | ) | (8,124 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Equity distribution from affiliate |
553 | 1,878 | ||||||
| Additions to property, plant, and equipment |
(1,300 | ) | (2,046 | ) | ||||
| Net cash used in investing activities |
(747 | ) | (168 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Proceeds from issuance of long-term debt |
175,000 | 1,500 | ||||||
| Repayments of long-term debt |
(125,133 | ) | (12,579 | ) | ||||
| Cash dividends to Tandus Group, Inc. |
(1,837 | ) | (586 | ) | ||||
| Financing costs |
(6,398 | ) | (11 | ) | ||||
| Net cash provided by (used in) financing activities |
41,632 | (11,676 | ) | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
37,831 | (19,968 | ) | |||||
| CASH AND CASH EQUIVALENTS, beginning of period |
6,234 | 20,907 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 44,065 | $ | 939 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
6
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 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. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Form 10-K which was filed with the Securities and Exchange Commission on April 25, 2003. The accompanying unaudited consolidated financial statements, in the opinion of management, include all adjustments necessary for fair presentation. All such adjustments are of a normal and recurring nature.
2. Organization
Based on annual sales and product brands, Collins & Aikman Floorcoverings, Inc. (the “Company”), a Delaware corporation, is a leading manufacturer of floorcovering products for the North American specified commercial carpet market. The Company’s floorcovering products include (i) vinyl-backed six-foot roll carpet and modular carpet tile, and (ii) high style tufted and woven broadloom carpet. The Company designs, manufactures and markets its C&A, Monterey and Crossley brands for a wide variety of end markets, including corporate offices, education, healthcare, government facilities and retail stores. Because of the Company’s diversity of its end markets, management believes its business tends to be less cyclical than that of many of its competitors, which rely more heavily on the corporate market. The ability to provide a “package of product offerings” in various forms, coupled with flexible distribution channels, allows the Company to provide a wide array of floorcovering solutions for each of its customers. The Company is headquartered in Georgia, with additional locations in California, Canada, the United Kingdom, and Asia.
The Company is a wholly-owned subsidiary of Tandus Group, Inc. (“Tandus”), formerly known as CAF Holdings, Inc. Subsequent to a recapitalization transaction on January 25, 2001, a majority of Tandus’s outstanding capital stock is controlled by investment funds managed by Oaktree Capital Management, LLC and Banc of America Capital Investors.
3. Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s presentation.
4. Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and investments with an original maturity of three months or less.
7