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 July 31, 2004
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number 000-22791
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 has 1,000 shares of Common Stock, par value $.01 per share, issued and outstanding as of September 10, 2004.
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
INDEX
| Page No. | ||||||
| Part I. |
||||||
| Item 1. | ||||||
| Consolidated Balance Sheets – As of January 31, 2004 and July 31, 2004 |
3 | |||||
| 4 | ||||||
| Consolidated Statements of Stockholder’s Equity – Twenty-Six Weeks Ended July 31, 2004 |
5 | |||||
| Consolidated Statements of Cash Flows – Twenty-Six Weeks Ended July 26, 2003 and July 31, 2004 |
6 | |||||
| 7 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 | ||||
| Item 3. | 33 | |||||
| Item 4. | 33 | |||||
| Part II. |
||||||
| Item 1. | 33 | |||||
| Item 6. | 34 | |||||
| 35 | ||||||
2
PART 1 – FINANCIAL INFORMATION
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
| January 31, 2004 |
July 31, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 11,041 | $ | 10,024 | ||||
| Accounts receivable, net of allowances of $918 and $856 in fiscal 2003 and 2004, respectively |
36,019 | 51,269 | ||||||
| Inventories |
35,463 | 43,916 | ||||||
| Deferred tax assets |
4,013 | 4,850 | ||||||
| Prepaid expenses and other |
4,961 | 2,449 | ||||||
| Total current assets |
91,497 | 112,508 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, net |
66,062 | 64,243 | ||||||
| GOODWILL |
98,378 | 98,378 | ||||||
| OTHER INTANGIBLE ASSETS, net |
34,255 | 32,722 | ||||||
| OTHER ASSETS |
8,956 | 8,562 | ||||||
| TOTAL ASSETS |
$ | 299,148 | $ | 316,413 | ||||
| LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 17,722 | $ | 19,464 | ||||
| Accrued expenses |
20,298 | 29,177 | ||||||
| Current portion of long-term debt |
1,791 | 1,553 | ||||||
| Total current liabilities |
39,811 | 50,194 | ||||||
| OTHER LIABILITIES, including post-retirement benefit obligation |
4,768 | 4,306 | ||||||
| DEFERRED TAX LIABILITIES |
19 | 1,615 | ||||||
| LONG-TERM DEBT, net of current portion |
207,516 | 206,121 | ||||||
| MINORITY INTEREST |
342 | 320 | ||||||
| COMMITMENTS AND CONTINGENCIES |
||||||||
| 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 | ) | (17,313 | ) | ||||
| Accumulated other comprehensive loss: |
||||||||
| Foreign currency translation adjustment |
(493 | ) | (524 | ) | ||||
| Minimum pension liability adjustment, net of tax |
(954 | ) | (954 | ) | ||||
| Total stockholder’s equity |
46,692 | 53,857 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY |
$ | 299,148 | $ | 316,413 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and In Thousands)
| Thirteen Weeks Ended |
Twenty-Six Weeks Ended |
||||||||||||
| July 26, 2003 |
July 31, 2004 |
July 26, 2003 |
July 31, 2004 |
||||||||||
| NET SALES |
$ | 93,931 | $ | 99,602 | $ | 165,500 | $ | 177,287 | |||||
| COST OF GOODS SOLD |
59,169 | 60,567 | 107,501 | 111,983 | |||||||||
| SELLING, GENERAL & ADMINISTRATIVE EXPENSES |
19,452 | 20,130 | 36,910 | 41,134 | |||||||||
| AMORTIZATION |
1,528 | 765 | 3,056 | 1,531 | |||||||||
| OPERATING EXPENSES |
80,149 | 81,462 | 147,467 | 154,648 | |||||||||
| OPERATING INCOME |
13,782 | 18,140 | 18,033 | 22,639 | |||||||||
| MINORITY INTEREST IN INCOME (LOSS) OF SUBSIDIARY |
32 | 14 | 16 | (22 | ) | ||||||||
| EQUITY IN EARNINGS OF AFFILIATE |
326 | 365 | 687 | 776 | |||||||||
| NET INTEREST EXPENSE |
5,199 | 5,150 | 10,605 | 10,273 | |||||||||
| INCOME BEFORE INCOME TAXES |
8,877 | 13,341 | 8,099 | 13,164 | |||||||||
| INCOME TAX EXPENSE |
3,799 | 5,390 | 3,118 | 5,968 | |||||||||
| NET INCOME |
$ | 5,078 | $ | 7,951 | $ | 4,981 | $ | 7,196 | |||||
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 TWENTY-SIX WEEKS ENDED JULY 31, 2004
(Unaudited and In Thousands, Except Share Amounts)
| Common Stock |
Paid - in Capital |
Retained (Deficit) |
Accumulated Other Comprehensive Income (Loss) |
Total |
||||||||||||||||||||
| Shares |
Amount |
Foreign Currency Translation |
Minimum Pension Liability |
|||||||||||||||||||||
| BALANCE, January 31, 2004 |
1,000 | $ | — | $ | 72,648 | $ | (24,509 | ) | $ | (493 | ) | $ | (954 | ) | $ | 46,692 | ||||||||
| Net income |
— | — | — | 7,196 | — | — | 7,196 | |||||||||||||||||
| Foreign currency translation Adjustment |
— | — | — | — | (31 | ) | — | (31 | ) | |||||||||||||||
| Total Comprehensive Income (Loss) |
— | — | — | 7,196 | (31 | ) | — | 7,165 | ||||||||||||||||
| BALANCE, July 31, 2004 |
1,000 | $ | — | $ | 72,648 | $ | (17,313 | ) | $ | (524 | ) | $ | (954 | ) | $ | 53,857 | ||||||||
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)
| Twenty-Six Weeks Ended |
||||||||
| July 26, 2003 |
July 31, 2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 4,981 | $ | 7,196 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and leasehold amortization |
5,024 | 5,119 | ||||||
| Amortization of other intangible assets |
3,056 | 1,531 | ||||||
| Amortization and write-off of deferred financing fees |
630 | 840 | ||||||
| Change in deferred income tax |
(616 | ) | 759 | |||||
| Equity in earnings of affiliate |
(687 | ) | (776 | ) | ||||
| Minority interest in income (loss) of subsidiary |
16 | (22 | ) | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(13,726 | ) | (15,250 | ) | ||||
| Inventories |
(8,830 | ) | (8,453 | ) | ||||
| Accounts payable |
6,193 | 1,742 | ||||||
| Accrued expenses |
7,010 | 8,879 | ||||||
| Other, net |
(683 | ) | 1,695 | |||||
| Total adjustments |
(2,613 | ) | (3,936 | ) | ||||
| Net cash provided by operating activities |
2,368 | 3,260 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Equity distribution from affiliate |
2,282 | 922 | ||||||
| Additions to property, plant, and equipment |
(4,130 | ) | (3,411 | ) | ||||
| Net cash used in investing activities |
(1,848 | ) | (2,489 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from revolving credit facility |
3,500 | 15,280 | ||||||
| Repayments of revolving credit facility |
(3,500 | ) | (15,280 | ) | ||||
| Repayments of long-term debt |
(11,130 | ) | (1,573 | ) | ||||
| Cash dividends to Tandus Group, Inc. |
(2,263 | ) | — | |||||
| Financing costs |
(18 | ) | (237 | ) | ||||
| Net cash used in financing activities |
(13,411 | ) | (1,810 | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
318 | 22 | ||||||