COLLINS & AIKMAN FLOOR COVERINGS INC - 10-Q Quarterly Report

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 October 30, 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 December 10, 2004.

COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

INDEX


		Page No.
Part I.	Financial Information

	Item 1. Financial Statements

	Consolidated Balance Sheets – As of January 31, 2004 and October 30, 2004	3

	Consolidated Statements of Income – Thirteen Weeks and Thirty-Nine Weeks Ended October 25, 2003 and October 30, 2004	4

	Consolidated Statements of Stockholder’s Equity – Thirty-Nine Weeks Ended October 30, 2004	5

	Consolidated Statements of Cash Flows – Thirty-Nine Weeks Ended October 25, 2003 and October 30, 2004	6

	Notes to Consolidated Financial Statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	34

	Item 4. Controls and Procedures	34

Part II.	Other Information

	Item 1. Legal Proceedings	35

	Item 6. Exhibits	35

Signature		36

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands)


	January 31, 2004			October 30, 2004
				(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,041		$	17,558
Accounts receivable, net of allowances of $918 and $843 in fiscal 2003 and 2004, respectively		36,019			40,464
Inventories		35,463			45,322
Deferred tax assets		4,013			3,976
Prepaid expenses and other		4,961			2,201

Total current assets		91,497			109,521

PROPERTY, PLANT AND EQUIPMENT, net		66,062			65,418

GOODWILL		98,378			98,378

OTHER INTANGIBLE ASSETS, net		34,255			31,956

OTHER ASSETS		8,956			8,334

TOTAL ASSETS	$	299,148		$	313,607

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	17,722		$	15,979
Accrued expenses		20,298			23,425
Current portion of long-term debt		1,791			477

Total current liabilities		39,811			39,881

OTHER LIABILITIES, including post-retirement benefit obligation		4,768			4,310

DEFERRED TAX LIABILITIES		19			5,607

LONG-TERM DEBT, net of current portion		207,516			207,280

MINORITY INTEREST		342			323

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	)		(15,486	)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(493	)		(2	)
Minimum pension liability adjustment, net of tax		(954	)		(954	)

Total stockholder’s equity		46,692			56,206

TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	299,148		$	313,607

The accompanying notes are an integral part of these consolidated financial statements.

COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited and In Thousands)


	Thirteen Weeks Ended					Thirty-Nine Weeks Ended
	October 25, 2003			October 30, 2004		October 25, 2003		October 30, 2004
NET SALES	$	74,139		$	82,501	$	239,639	$	259,788

COST OF GOODS SOLD		51,851			55,014		159,352		166,997
SELLING, GENERAL & ADMINISTRATIVE EXPENSES		17,066			17,548		53,976		58,682
AMORTIZATION		1,528			768		4,584		2,299

OPERATING EXPENSES		70,445			73,330		217,912		227,978

OPERATING INCOME		3,694			9,171		21,727		31,810

NET INTEREST EXPENSE		5,381			4,876		15,986		15,149
MINORITY INTEREST IN INCOME (LOSS) OF SUBSIDIARY		10			2		26		(20	)
EQUITY IN EARNINGS OF AFFILIATE		387			117		1,074		893
OTHER EXPENSE		—			133		—		133

INCOME (LOSS) BEFORE INCOME TAXES		(1,310	)		4,277		6,789		17,441

INCOME TAX EXPENSE (BENEFIT)		(1,345	)		2,450		1,773		8,418

NET INCOME	$	35		$	1,827	$	5,016	$	9,023

The accompanying notes are an integral part of these consolidated financial statements.

COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 30, 2004

(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
BALANCE, January 31, 2004	1,000	$	—	$	72,648	$	(24,509	)	$	(493	)	$	(954	)	$	46,692

Net Income	—		—		—		9,023			—			—			9,023
Foreign Currency Translation Adjustment	—		—		—		—			491			—			491

Total Comprehensive Income	—		—		—		9,023			491			—			9,514

BALANCE, October 30, 2004	1,000	$	—	$	72,648	$	(15,486	)	$	(2	)	$	(954	)	$	56,206

The accompanying notes are an integral part of these consolidated financial statements.

COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and In Thousands)


	Thirty-Nine Weeks Ended
	October 25, 2003			October 30, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,016		$	9,023

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and leasehold amortization		7,689			7,688
Amortization of other intangible assets		4,584			2,299
Amortization and write-off of deferred financing fees		1,381			1,259
Change in deferred income tax		310			5,625
Equity in earnings of affiliate		(1,074	)		(893	)
Minority interest in income (loss) of subsidiary		26			(20	)
Changes in operating assets and liabilities:
Accounts receivable		1,728			(4,445	)
Inventories		(4,527	)		(9,859	)
Accounts payable		(3,219	)		(1,743	)
Accrued expenses		(2,691	)		3,127
Other, net		(426	)		2,016

Total adjustments		3,781			5,054

Net cash provided by operating activities		8,797			14,077

CASH FLOWS FROM INVESTING ACTIVITIES:
Equity distribution from affiliate		3,023			922
Additions to property, plant, and equipment		(7,220	)		(6,647	)

Net cash used in investing activities		(4,197	)		(5,725	)

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		(21,912	)		(1,618	)
Cash dividends to Tandus Group, Inc.		(2,263	)		—
Financing costs		(18	)		(380	)

Net cash used in financing activities		(24,193	)		(1,998	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		36			163

NET CHANGE IN CASH AND CASH EQUIVALENTS		(19,557	)

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