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 May 1, 2004
| ¨ | 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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 14, 2004.
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
2
PART 1 – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
(In Thousands)
| January 31, 2004 |
May 1, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 11,041 | $ | 4,044 | ||||
| Accounts receivable, net of allowance of $918 and $918 in fiscal 2003 and 2004, respectively |
36,019 | 41,199 | ||||||
| Inventories |
35,463 | 44,953 | ||||||
| Deferred tax assets |
4,013 | 4,275 | ||||||
| Prepaid expenses and other |
4,961 | 5,440 | ||||||
| Total current assets |
91,497 | 99,911 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, net |
66,062 | 64,283 | ||||||
| GOODWILL |
98,378 | 98,378 | ||||||
| OTHER INTANGIBLE ASSETS, net |
34,255 | 33,489 | ||||||
| OTHER ASSETS |
8,956 | 8,532 | ||||||
| TOTAL ASSETS |
$ | 299,148 | $ | 304,593 | ||||
| LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 17,722 | $ | 21,277 | ||||
| Accrued expenses |
20,298 | 17,708 | ||||||
| Current portion of long-term debt |
1,791 | 1,519 | ||||||
| Total current liabilities |
39,811 | 40,504 | ||||||
| OTHER LIABILITIES, including post-retirement benefit obligation |
4,768 | 4,757 | ||||||
| DEFERRED TAX LIABILITIES |
19 | 1,370 | ||||||
| LONG-TERM DEBT, net of current portion |
207,516 | 211,771 | ||||||
| MINORITY INTEREST |
342 | 306 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 15) |
||||||||
| STOCKHOLDER’S EQUITY: |
||||||||
| Common stock: $.01 par value per share, 1,000 shares authorized, issued, and outstanding in fiscal 2003 and 2004 |
— | — | ||||||
| Paid-in capital |
72,648 | 72,648 | ||||||
| Retained deficit |
(24,509 | ) | (25,264 | ) | ||||
| Accumulated other comprehensive loss : |
||||||||
| Foreign currency translation adjustment |
(493 | ) | (545 | ) | ||||
| Minimum pension liability adjustment, net of tax |
(954 | ) | (954 | ) | ||||
| 46,692 | 45,885 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY |
$ | 299,148 | $ | 304,593 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and In Thousands)
| Thirteen Weeks Ended |
||||||||
| April 26, 2003 |
May 1, 2004 |
|||||||
| Net Sales |
$ | 71,569 | $ | 77,685 | ||||
| Cost of Goods Sold |
48,332 | 51,416 | ||||||
| Selling, General & Administrative Expenses |
17,458 | 21,004 | ||||||
| Amortization |
1,528 | 766 | ||||||
| Operating Expenses |
67,318 | 73,186 | ||||||
| Operating Income |
4,251 | 4,499 | ||||||
| Minority Interest in Loss of Subsidiary |
(16 | ) | (36 | ) | ||||
| Equity in Earnings of Affiliate |
361 | 411 | ||||||
| Net Interest Expense |
5,406 | 5,123 | ||||||
| Loss Before Income Taxes |
(778 | ) | (177 | ) | ||||
| Income Tax Expense (Benefit) |
(681 | ) | 578 | |||||
| Net Loss |
$ | (97 | ) | $ | (755 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
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COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
FOR THE THIRTEEN WEEKS ENDED MAY 1, 2004
(Unaudited and In Thousands, Except Share Amounts)
| Common Stock |
||||||||||||||||||||||||
| Shares |
Amount |
Paid - in Capital |
Retained Earnings (Deficit) |
Foreign Currency Translation Adjustment |
Minimum Pension Liability |
Total |
||||||||||||||||||
| BALANCE, January 31, 2004 |
1,000 | $ | — | $ | 72,648 | $ | (24,509 | ) | $ | (493 | ) | $ | (954 | ) | $ | 46,692 | ||||||||
| Net Loss |
— | — | — | (755 | ) | — | — | (755 | ) | |||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | (52 | ) | — | (52 | ) | |||||||||||||||
| Total Comprehensive Loss |
— | — | — | (755 | ) | (52 | ) | — | (807 | ) | ||||||||||||||
| BALANCE, May 1, 2004 |
1,000 | $ | — | $ | 72,648 | $ | (25,264 | ) | $ | (545 | ) | $ | (954 | ) | $ | 45,885 | ||||||||
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 |
||||||||
| April 26, 2003 |
May 1, 2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (97 | ) | $ | (755 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: |
||||||||
| Depreciation and leasehold amortization |
2,512 | 2,586 | ||||||
| Amortization of other intangible assets |
1,528 | 766 | ||||||
| Amortization and write-off of deferred financing fees |
315 | 420 | ||||||
| Deferred income tax expense |
276 | 1,089 | ||||||
| Equity in earnings of affiliate |
(361 | ) | (411 | ) | ||||
| Minority interest in loss of subsidiary |
(16 | ) | (36 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(3,539 | ) | (5,180 | ) | ||||
| Inventories |
(8,161 | ) | (9,490 | ) | ||||
| Accounts payable |
3,969 | 3,555 | ||||||
| Accrued expenses |
(3,824 | ) | (2,590 | ) | ||||
| Other, net |
(1,035 | ) | (337 | ) | ||||
| Total adjustments |
(8,336 | ) | (9,628 | ) | ||||
| Net cash used by operating activities |
(8,433 | ) | (10,383 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Equity distribution from affiliate |
1,878 | 278 | ||||||
| Additions to property, plant, and equipment |
(2,046 | ) | (1,214 | ) | ||||
| Net cash used in investing activities |
(168 | ) | (936 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from revolving credit facility |
1,500 | 10,104 | ||||||
| Repayments of revolving credit facility |
(1,500 | ) | (4,500 | ) | ||||
| Repayments of long-term debt |
(11,079 | ) | (1,567 | ) | ||||
| Cash dividends to Tandus Group, Inc. |
(586 | ) | — | |||||
| Financing costs |
(11 | ) | (17 | ) | ||||
| Net cash provided by (used in) financing activities |
(11,676 | ) | 4,020 | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
309 | 302 | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
(19,968 | ) | (6,997 | ) | ||||
| CASH AND CASH EQUIVALENTS, beginning of period |
20,907 | 11,041 | ||||||
| CASH AND CASH EQUIVALENTS, end of period |
$ | 939 | $ | 4,044 | ||||
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 accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States 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. 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. 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, Singapore and China.
The Company is a wholly-owned subsidiary of Tandus Group, Inc. (“Tandus Group”). Subsequent to a recapitalization transaction on January 25, 2001, investment funds managed by Oaktree Capital Management, LLC (“Oaktree”) and Banc of America Capital Investors (“BACI”) control a majority of the outstanding capital stock of Tandus Group.
| 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.
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| 5. | Inventories |
Net inventory balances are summarized below (in thousands):
| January 31, 2004 |
May 1, 2004 | |||||