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 March 30, 1996 Commission file number 0-7469
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TJ INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 82-0250992
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 E. Mallard Drive
BOISE, IDAHO 83706
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (208) 364-3300
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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.
May 3, 1996. 17,154,596 shares of $1 par value common stock.
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EXHIBIT INDEX ON PAGE 13
TJ INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, all
adjustments necessary to present fairly the results for the periods presented
have been included therein. The adjustments made were of a normal, recurring
nature. Certain information and footnote disclosure normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations, although the Company 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 financial
statements and the notes thereto included in the company's latest annual report
on Form 10-K.
The results of operations for the fiscal quarter ended March 30, 1996 are not
necessarily indicative of the results that might be expected for the fiscal year
ending December 28, 1996.
TJ INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(amounts in thousands
except per share figures)
For the fiscal
quarter ended
-------------------------------
March 30, April 1,
1996 1995
--------- --------
Sales $111,157 $109,941
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Costs and expenses
Cost of sales 90,202 87,057
Selling expenses 12,803 11,365
Administrative expenses 6,538 6,814
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109,543 105,236
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Income from operations 1,614 4,705
Investment income, net 58 942
Interest expense (1,481) --
Minority interest in Partnership (220) (3,005)
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Income (loss) from continuing operations before income taxes (29) 2,642
Income taxes (benefits) (12) 827
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Income (loss) from continuing operations (17) 1,815
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Discontinued operations
Loss from discontinued operations 0 (1,301)
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Net income (loss) ($17) $514
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Net income (loss) from continuing operations per common share
Primary ($0.01) $0.09
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--------- ---------
Fully Diluted ($0.01) $0.09
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--------- ---------
Net income (loss) per common share
Primary ($0.01) $0.02
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--------- ---------
Fully Diluted ($0.01) $0.02
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--------- ---------
--------- ---------
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Dividends declared per common share $0.0550 $0.0550
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--------- ---------
Weighted average number of common shares
outstanding during the periods
Primary 17,144 17,397
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Fully Diluted 17,144 18,656
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--------- ---------
TJ INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
March 30, December 30, April 1,
ASSETS 1996 1995 1995
Current assets
Cash and cash equivalents $4,503 $19,715 $25,657
Marketable securities -- -- 20,561
Receivables, less allowances of
$385, $385 and $1,096 33,724 28,754 32,563
Inventories 46,580 38,560 39,513
Other 18,377 17,643 10,378
Net assets from discontinued operations -- -- 54,026
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103,184 104,672 182,698
-------- -------- --------
Property
Property and equipment 558,237 553,879 491,197
Less - Accumulated depreciation (156,788) (149,069) (130,271)
--------- ------------ --------
401,449 404,810 360,926
Goodwill 21,320 21,580 22,360
Unexpended bond funds -- 117 6,784
Other assets 16,342 15,131 15,042
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$542,295 $546,310 $587,810
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-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $3,197 $2,994 $ --
Current portion of long-term debt 340 340 320
Accounts payable 22,646 23,746 33,454
Accrued liabilities 21,765 24,237 20,918
Reserve for discontinued operations 4,232 5,755 --
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52,180 57,072 54,692
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Long-term debt, excluding current portion 89,440 89,440 102,478
Deferred income taxes -- -- 8,091
Other long-term liabilities 10,517 8,597 9,123
Minority interest in Partnership 181,107 181,057 172,960
Stockholders' equity
ESOP Convertible Preferred Stock, $1.00 par 13,918 13,992 14,723
value, authorized 10,000,000 shares,
issued 1,179,659, 1,185,933, and 1,247,837
Guaranteed ESOP Benefit (10,382) (10,382) (11,766)
Common stock, $1.00 par value, authorized
200,000,000 shares, issued 17,154,596,
17,131,758, and 16,930,202 17,155 17,132 16,930
Paid-in capital 140,623 140,384 138,132
Retained earnings 50,614 51,808 85,703
Cumulative translation adjustment (2,877) (2,790) (3,256)
-------- -------- --------
209,051 210,144 240,466
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$542,295 $546,310 $587,810
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-------- -------- --------
TJ INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE FISCAL QUARTERS ENDED
March 30, 1996 and April 1, 1995
(Unaudited)
(amounts in thousands)
March 30, April 1,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (17) $ 514
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 8,994 6,103
Minority interest in partnerships 220 3,005
Other, net 45 179
Change in working capital items:
Receivables (4,970) (6,099)
Inventories (8,020) (8,545)
Other current assets (734) (1,384)
Accounts payable and accrued liabilities (2,038) 6,830
Other, net (1,450) (310)
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Net cash provided from (used by) operating activities $ (7,970) $ 293
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $ (6,435) $(38,315)
Purchases of Marketable securities -- (4,477)
Decrease in unexpended bond funds 117 4,766
Proceeds from note receivable -- 11,998
Other, net 467 1,819
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Net cash used in investing activities $ (5,851) $(24,209)
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CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid on common stock $ (942) $ (930)
Minority partners tax distributions (750) (762)
Net borrowings (repayments) under lines of credit 203 (6,358)
Principal payments of long-term debt -- (250)
Other, net 98 109
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Net cash used by financing
activities $ (1,391) $ (8,191)
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NET CHANGE IN CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash
equivalents $ (15,212) $(32,107)
Cash and cash equivalents at beginning of year 19,715 57,764
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Cash and cash equivalents at end of period $ 4,503 $ 25,657
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest, net of amounts capitalized $ 1,005 $ --
Income taxes $ 603 $ 650
TJ INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
INVENTORIES
Inventories consisted of the following:
(amounts in thousands)
March 30, Dec. 30, April 1,
1996 1995 1995
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Finished goods $33,511 $25,882 $27,587
Raw materials and
work-in-progress 15,264 14,657 16,040
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48,775 40,539 43,627
Reduction to LIFO cost (2,195) (1,979) (4,114)
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$46,580 $38,560 $39,513
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The determination of inventory under the LIFO method can be made only at the end
of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on the
Company's estimates of expected year-end inventory levels and costs. Since
these estimates are subject to many forces beyond the Company's control, interim
results could possibly be affected by the final year-end LIFO inventory
valuation.
NET INCOME PER COMMON SHARE:
Primary 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 after giving effect to stock options
as common stock equivalents. Fully diluted net income per common share assumes
conversion of the ESOP convertible preferred stock into common stock at the date
of issuance.
Primary net income and fully diluted net income was calculated as follows:
For the fiscal
quarter ended
---------------------------------
March 30, April 1,
1996 1995
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PRIMARY NET INCOME (LOSS)
Net income (loss) from continuing
operations as reported $ (17) $ 1,815
Preferred stock dividends, net
of related tax benefits (240) (236)
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Primary net income from continuing
operations (257) 1,579
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Loss from discontinued operations -- (1,301)
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Primary net income (loss) $ (257) $ 278
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FULLY DILUTED NET INCOME (LOSS)
Net income (loss) from continuing
operations as reported $ (17) $ 1,815
Additional ESOP contribution
payable upon assumed
conversion of ESOP
preferred stock, net of
related tax benefits (181) (183)
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Fully diluted net income (loss)
from continuing operations (198) 1,632
Loss from discontinued operations -- (1,301)
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Fully diluted net income (loss) $ (198) $ 331
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TJ INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE FISCAL QUARTER ENDED MARCH 30, 1996
OPERATING RESULTS
The following comments discuss material variations in the results of operations
for the comparative periods presented in the condensed consolidated statements
of income.
SALES
The Company's sales by quarter during the current year and for the preceding
four years are as follows:
SALES BY QUARTER
(AMOUNTS IN THOUSANDS)
QUARTER 1996 1995 1994 1993 1992
- ------- -------- -------- -------- -------- --------
First $111,157 $109,941 $118,163 $ 93,799 $ 58,570
Second -------- 123,882 128,773 106,529 79,392
Third -------- 137,759 136,266 118,698 80,114
Fourth 113,263 112,858 117,576 70,016
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$484,845 $496,060 $436,602 $288,092
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GENERAL
The Company's 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, interest rates, and weather
patterns. Within the construction markets, engineered lumber sales are
influenced by the market for traditional solid-sawn lumber products, for which
the Company's products serve as a value-added substitute. The Company is also
affected by the seasonality of this industry, which is particularly pronounced
in the colder climates of the Northern, Mid-Western, and Rocky Mountain regions
of the United States and Canada. Consistent with the construction industry as a
whole, the Company's sales have historically tended to be lowest in the first
and fourth quarters and highest in the second and third quarters of each year.
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 laminated strand lumber (LSL) or
Parallam-Registered Trademark- PSL parallel strand lumber (PSL). There are,
however, a number of companies, including several large forest products
companies, that now produce look-alike wood I-joist and laminated veneer lumber
(LVL) products. Several of these companies have announced capacity expansions.
These look-alike products are manufactured using processes similar to the
Company's oldest generation technologies.
The Company believes its network of manufacturing plants and multiple
technologies position it as the low-cost producer of engineered lumber. While
competition helps expand the market for engineered wood products including those
manufactured by the Company, 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 of the Company's products. Commodity lumber prices
historically have been subject to high volatility, and during periods of
significant lumber price movements the Company's prices have trended in the same
direction.
The Company's engineered lumber products continue to gain market acceptance as
high-quality alternatives to traditional solid-sawn lumber products. Through
the Company's 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. The Company
believes that this trend will continue well into the future.
The Company has adopted a plan to divest of its window operations and focus all
of its resources on the engineered lumber business. To accomplish this, the
Company reached an agreement with its partners to exit the Outlook window
partnership in December, 1995. The Company intends to sell its remaining window
investment by the end of 1996. All of the Company's window operations have been
reflected in the accompanying financial statements as Discontinued Operations
for all periods presented.
FIRST QUARTER OF 1996 COMPARED WITH THE FIRST QUARTER OF 1995
Sales for the first quarter of 1996 increased $1.2 million from the prior year
first quarter, to $111.2 million. The sales increase came despite severe
weather in the Northeastern and Northwestern United States, which resulted in
sales declines in these regions. Additionally, market prices for traditional
solid-sawn lumber declined approximately 7% from the comparable period in the
prior year. Despite the relatively soft market, overall volumes increased 6%
from the same period in 1995. Selling prices, however, were reduced by an
average of 5% from the prior year first quarter, in response to the market
declines for solid-sawn lumber.
Gross margins for the first quarter of 1996 were 18.9 percent compared with
20.8 percent in 1995. The decline was primarily due to the start-up losses
of $3.5 million at the Company's Kentucky TimberStrand-Registered Trademark-
LSL and West Virginia combination Parallam-Registered Trademark- PSL and
Microllam -Registered Trademark- LVL plants. This compares with a combined
start-up loss of $1.6 million in the first quarter of 1995. The manufacturing
ramp up and product introduction related to start-up of the plants is behind
original schedule. The Company expects the start-up losses to decrease in
the coming months and that the plants will cross into profitability in 1996.
Selling expenses increased $1.4 million in 1996, compared to the prior year.
This increase reflects the Company's continuing investment in new and innovative
product lines, increased dedication to a national advertising campaign, and
updates to the Company's proprietary TJXpert design software.
Interest expense was recognized in the first quarter of 1996 due to the end of
the construction phase of the two new plants in 1995. In the prior year first
quarter, interest payments of $1.6 million were capitalized in connection with
this construction. Minority interest expense declined $2.8 million from 1995
due to the decline in earnings at TJM.
LIQUIDITY AND CAPITAL RESOURCES
MARCH 30, 1996 COMPARED TO DECEMBER 30, 1995
Working capital, without regard to discontinued operations, increased $1.9
million during the first quarter of 1996, to $55 million. Cash flows from
operations was an outflow of $8 million
reflecting the seasonal investment in inventory and receivables, as the
Company enters the traditional building season. Additionally, inventory
increases at the new Kentucky TimberStrand-Registered Trademark- LSL plant
and the Buckhannon, West Virginia combination Microllam-Registered
Trademark- LVL and Parallam-Registered Trademark- PSL plant required
additional cash flows.
MARCH 30, 1996 COMPARED TO APRIL 1, 1995
Working capital, without regard to Net assets from discontinued operations or
Reserve for discontinued operations was $55 million on March 30, 1996
compared to $74 million at the end of the first quarter in the prior year.
The $19 million decline was largely due to cash expenditures required for the
completion of the two new technology plants.
Cash used in operating activities of $8 million in the first quarter of 1996
is compared to cash provided by operations of $293,000 in the same period
of 1995. The difference is primarily due to higher inventory levels
associated with the Company's new plants and new products. Capital
expenditures were $6 million in the first quarter of 1996 compared to $38
million in 1995.
The Company has completed the construction of its Kentucky
TimberStrand-Registered Trademark- LSL and West Virginia combination
Parallam-Registered Trademark- PSL and Microllam-Registered Trademark- LVL
plants. These plants are currently in the process of ramping up to normal
production. The Company is evaluating potential sites for a third
TimberStrand-Registered Trademark- LSL plant, or an additional combination
Microllam -Registered Trademark- LVL and Parallam-Registered Trademark- PSL
plant, but has not determined whether or when to proceed with construction.
In the third quarter of 1995, the Company issued $22.5 million of industrial
revenue bonds to finance the construction of the Buckhannon, West Virginia
combination Microllam-Registered Trademark- LVL and Parallam-Registered
Trademark- PSL plant. The bonds are due in a single maturity in 2025, with
interest payable semi-annually at 7 percent. Remaining proceeds from these
bonds are recorded as unexpended bond funds.
The Company believes that current cash balances, cash generated from operations,
remaining industrial revenue bond proceeds, and borrowing under a $100 million
Revolving Credit Facility will be sufficient to meet the Company's capital
expansion program approved by the Board of Directors and to fund any remaining
start-up losses at its Hazard and Buckhannon plants. The Company also believes
that additional or expanded lines of credit or appropriate long-term capital can
be obtained to fund other capital requirements as they arise, or to fund an
acquisition.
Substantially all of the Company's operating assets are held, and revenue
generated, by its 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
operations of the Company.
Microllam-Registered Trademark-, Parallam-Registered Trademark-, and
TimberStrand-Registered Trademark- are registered trademarks of Trus Joist
MacMillan a Limited Partnership, Boise, Idaho
TJ INTERNATIONAL, INC.
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Filed as an exhibit to this report is the following:
(27) Financial Data Schedule
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: May 13, 1996
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 MARCH 30, 1996 COMMISSION FILE NUMBER 0-7469
TJ INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibits Page
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(27) Financial Data Schedule Document 2