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 June 29, 1996 Commission file number 0-7469
------------- ------
TJ INTERNATIONAL, INC.
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 82-0250992
- ------------------------------ -------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 E. Mallard Drive
BOISE, IDAHO 83706
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (208) 364-3300
---------------
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.
August 2, 1996,_17,299,585 shares of $1 par value common stock.
--------------------------------------------------------------
EXHIBIT INDEX ON PAGE 14
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 periods presented 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 FOR THE TWO FISCAL
QUARTER ENDED QUARTERS ENDED
----------------------- ---------------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
--------- -------- --------- --------
Sales $155,050 $123,882 $266,207 $233,823
--------- -------- --------- --------
Costs and expenses
Cost of sales 115,465 93,943 205,667 181,000
Selling expenses 16,483 14,070 29,286 25,435
Administrative expenses 6,859 6,383 13,397 13,197
--------- -------- --------- --------
138,807 114,396 248,350 219,632
--------- -------- --------- --------
Income from operations 16,243 9,486 17,857 14,191
Investment income, net 161 919 219 1,861
Interest expense (1,634) -- (3,114) --
Minority interest in Partnership (7,503) (5,420) (7,723) (8,425)
--------- -------- --------- --------
Income from continuing operations
before income taxes 7,267 4,985 7,239 7,627
Income taxes 2,799 1,938 2,787 2,765
--------- -------- --------- --------
Income from continuing operations 4,468 3,047 4,452 4,862
--------- -------- --------- --------
Discontinued operations
Loss from discontinued operations ----- ( 461) ----- ( 1,762)
--------- -------- --------- --------
Net income $4,468 $2,586 $4,452 $3,100
--------- -------- --------- --------
--------- -------- --------- --------
Net income from continuing operations per common share
Primary $0.24 $0.16 $0.23 $0.25
--------- -------- --------- --------
--------- -------- --------- --------
Fully Diluted $0.23 $0.15 $0.22 $0.24
--------- -------- --------- --------
--------- -------- --------- --------
Net income per common share
Primary $0.24 $0.14 $0.23 $0.15
--------- -------- --------- --------
--------- -------- --------- --------
Fully Diluted $0.23 $0.13 $0.22 $0.15
--------- -------- --------- --------
--------- -------- --------- --------
Dividends declared per common share $0.0550 $0.0550 $0.1100 $0.1100
--------- -------- --------- --------
--------- -------- --------- --------
Weighted average number of common shares
outstanding during the periods
Primary 17,566 17,408
--------- --------
--------- --------
Fully Diluted 18,744 18,654
--------- --------
--------- --------
TJ INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
JUNE 29, DECEMBER 30, JULY 1,
ASSETS 1996 1995 1995
Current assets
Cash and cash equivalents $ 20,957 $ 19,715 $ 21,626
Marketable securities -- -- 18,511
Receivables, less allowances of
$419, $385 and $463 51,689 28,754 37,216
Inventories 43,700 38,560 31,965
Other 18,429 17,643 9,409
Net assets from discontinued operations -- -- 58,205
--------- --------- ---------
134,775 104,672 176,932
Property
Property and equipment 562,063 553,879 529,273
Less - Accumulated depreciation (165,983) (149,069) (136,425)
--------- --------- ---------
396,080 404,810 392,848
Goodwill 21,060 21,580 22,346
Unexpended bond funds -- 117 2,889
Other assets 15,671 15,131 15,134
--------- --------- ---------
$ 567,586 $ 546,310 $ 610,149
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 1,017 $ 2,994 $ 2,063
Current portion of long-term debt 340 340 320
Accounts payable 30,702 23,746 31,471
Accrued liabilities 28,062 24,237 21,766
Reserve for discontinued operations 2,003 5,755 --
--------- --------- ---------
62,124 57,072 55,620
Long-term debt, excluding current portion 95,180 89,440 117,456
Deferred income taxes -- -- 8,091
Other long-term liabilities 10,517 8,597 9,123
Minority interest in Partnership 185,738 181,057 176,456
Stockholders' equity
ESOP Convertible Preferred Stock, $1.00 par
value, authorized 10,000,000 shares,
issued 1,174,500, 1,185,933, and 1,193,122 13,857 13,992 14,076
Guaranteed ESOP Benefit (10,382) (10,382) (11,535)
Common stock, $1.00 par value, authorized
200,000,000 shares, issued 17,276,923,
17,131,758, and 17,081,534 17,277 17,132 17,082
Paid-in capital 142,195 140,384 139,701
Retained earnings 53,902 51,808 87,137
Cumulative translation adjustment (2,822) (2,790) (3,058)
--------- --------- ---------
214,027 210,144 243,403
--------- --------- ---------
$ 567,586 $ 546,310 $ 610,149
--------- --------- ---------
--------- --------- ---------
TJ INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWO FISCAL QUARTERS ENDED
June 29, 1996 and July 1, 1995
(Unaudited)
(amounts in thousands)
JUNE 29, JULY 1,
1996 1995
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,452 $ 3,100
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,728 13,498
Minority interest in partnerships 7,723 8,425
Other, net 495 57
Change in working capital items:
Receivables (22,935) 1,246
Inventories (5,140) (997)
Other current assets (786) (808)
Accounts payable and accrued liabilities 10,230 5,419
Other, net (3,462) (3,464)
--------- --------
Net cash provided from operating activities $ 10,305 $ 26,476
--------- --------
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $(10,484) $(76,475)
Purchases of Marketable securities -- (2,427)
Increase in unexpended bond funds 117 8,661
Proceeds (advances) from notes receivable 706 (1,016)
Other, net (738) 1,687
--------- --------
Net cash used in investing activities $(10,399) $(69,570)
--------- --------
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid on common stock $ (1,885) $ (1,871)
Minority partners tax distributions (835) (1,934)
Net repayments under lines of credit (1,977) (4,295)
Proceeds from the issuance of debt 5,740 15,000
Principal payments of long-term debt -- (250)
Other, net 294 307
--------- --------
Net cash provided by financing
activities $ 1,336 $ 6,957
--------- --------
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash
equivalents $ 1,242 $(36,138)
Cash and cash equivalents at beginning of year 19,715 57,764
--------- --------
Cash and cash equivalents at end of period $ 20,957 $ 21,626
--------- --------
--------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest, net of amounts capitalized $ 3,033 $ --
Income taxes $ 1,323 $ 1,738
TJ INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
INVENTORIES
Inventories consisted of the following:
(amounts in thousands)
June 29, Dec. 30, July 1,
1996 1995 1995
-------- --------- --------
Finished goods $32,436 $25,882 $25,837
Raw materials and
work-in-progress 13,709 14,657 11,825
-------- --------- --------
46,145 40,539 37,662
Reduction to LIFO cost (2,445) (1,979) (5,697)
-------- --------- --------
$43,700 $38,560 $31,965
-------- --------- --------
-------- --------- --------
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 For the two fiscal
quarter ended quarters ended
----------------- ------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
-------- -------- -------- -------
PRIMARY NET INCOME
Net income from continuing
operations as reported $ 4,468 $ 3,047 $ 4,452 $ 4,862
Preferred stock dividends, net
of related tax benefits (237) (207) (477) (443)
-------- -------- -------- -------
Primary net income from continuing
operations 4,231 2,840 3,975 4,419
-------- -------- -------- -------
Loss from discontinued operations - (461) - (1,762)
-------- -------- -------- -------
Primary net income $ 4,231 $ 2,379 $ 3,975 $ 2,657
-------- -------- -------- -------
-------- -------- -------- -------
FULLY DILUTED NET INCOME
Net income from continuing
operations as reported $ 4,468 $ 3,047 $ 4,452 $ 4,862
Additional ESOP contribution
payable upon assumed
conversion of ESOP
preferred stock, net of
related tax benefits (181) (163) (361) (345)
-------- -------- -------- -------
Fully diluted net income
from continuing operations 4,287 2,884 4,091 4,517
Loss from discontinued operations - (461) - (1,762)
-------- -------- -------- -------
Fully diluted net income $ 4,287 $ 2,423 $ 4,091 $2,755
-------- -------- -------- -------
-------- -------- -------- -------
- ------------------------------------------------------------------------
TJ INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE FISCAL QUARTER ENDED JUNE 29, 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 155,050 123,882 128,773 106,529 79,392
Third 137,759 136,266 118,698 80,114
Fourth 113,263 112,858 117,576 70,016
-------- -------- -------- -------- --------
$266,207 $484,845 $496,060 $436,602 $288,092
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
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-R- LSL laminated strand lumber (LSL) or
Parallam-R- 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 recently completed its plan to divest of its window segment.
Effective, July 1, 1996, all of the remaining window operation assets owned by
the Company's Norco Windows subsidiary were sold to JELD-WEN, Inc. Proceeds
from the sale are approximately $30 million. The Company retained all of the
operating and contingent liabilities of the window segment, and management
believes that existing reserves are adequate to satisfy all of the remaining
liabilities. This divestiture will allow the Company to devote all of its
resources towards its Engineered Lumber segment. All of the Company's window
operations have been reflected in the accompanying financial statements as
Discontinued Operations for all periods presented.
SECOND QUARTER OF 1996 COMPARED WITH THE SECOND QUARTER OF 1995
Sales for the second quarter of 1996 increased $31 million from the prior
year second quarter, to $155 million. The sales increase is primarily the
result of the growing acceptance of the Company's engineered lumber products
as a substitute for commodity solid-sawn lumber. The Company had a 35%
increase in volume sales, compared to the prior year second quarter. Volume
gains were strong in the Company's new technology TimberStrand LSL and
Parallam PSL products.
The Company's sales were also aided by increased housing starts compared to
the prior year. Housing starts increased 14% over the prior year second
quarter. Starts in the quarter were impacted by the mild weather, following a
relatively severe winter and spring in certain locations of North America.
Additionally, the climate of relatively low interest rates continues to have
a favorable impact on the affordability of housing.
Prices for the Company's products were down 10% from the prior year second
quarter. The decrease was primarily due to a shift in sales mix towards the
Company's more efficient, lower priced residential construction products.
Additionally, market price reductions that were implemented in the first
quarter continued in effect through much of the second quarter. Prices for
competing wide-dimension lumber rose during the quarter and hit a two-year
high in June. The rising prices of competing solid-sawn lumber also aided in
the continuing conversion of builders to engineered lumber from traditional
commodity lumber products.
Gross margins for the second quarter of 1996 were 25.5 percent compared with
24.2 percent in 1995. The lower sales prices were largely offset by lower
production costs from the shift in sales mix towards lower cost products as
well as a general decline in certain key raw materials such as oriented
strand board and veneer. The margin gains were primarily the result of the
improved operating performance at the Company's two new plants. The new
plants earned $900,000 of positive gross margins in the second quarter. This
compares with a combined start-up loss of $2.2 million in the second quarter
of 1995.
Selling expenses increased $2.4 million in the second quarter of 1996, compared
to the prior year. This increase is largely due to variable selling expenses
and commissions. Additionally, the Company continues to invest in new and
innovative product lines and to expand its national advertising campaign.
Interest expense was recognized in the second quarter of 1996 due to the end of
the construction phase of the two new plants in 1995. In the prior year second
quarter, interest payments of $1.9 million were capitalized in connection with
this construction. Investment income declined from the prior year due to the
investment of available cash and securities into new construction. Minority
interest expense increased $2.1 million from 1995 due to the increase in
earnings at the Trus Joist MacMillan (TJM) Partnership.
FIRST TWO QUARTERS OF 1996 COMPARED WITH THE FIRST TWO QUARTERS OF 1995
Sales for the first half of 1996 increased by $32 million or 14% from the
comparable period last year. The sales growth reflects volume increases in
excess of 21%. The volume growth came from the increased acceptance of the
Company's engineered lumber products. The Company also saw the continued
impact of price reductions made in the first quarter of the year, combined
with a shift in product mix towards more efficient, lower priced residential
products.
Gross margins remained constant between the two periods at 23 percent. The
price decreases made in the early part of the year were offset by the improved
performance at the Company's two new plants. These two plants incurred losses
of $2.6 million in the first half of 1996, compared to losses of $3.8 million in
the prior year.
Selling expenses increased $3.9 million or 15%, however, as a percent of sales,
they were constant between the two six month periods. This reflects the
increased absorption of fixed selling costs offset by an increased investment in
new product introduction and national advertising.
LIQUIDITY AND CAPITAL RESOURCES
JUNE 29, 1996 COMPARED TO DECEMBER 30, 1995
Working capital, without regard to discontinued operations, increased $21
million during the first half of 1996, to $75 million. The increase reflects
the Company's seasonal investment in inventory and receivables as the
traditional building season gains full momentum. Cash flows from operations
were $10 million. These inflows were largely invested in capital expenditures
associated with the new plants.
JUNE 29, 1996 COMPARED TO JULY 1, 1995
Working capital, without regard to Net assets from discontinued operations or
Reserve for discontinued operations was $75 million on June 29, 1996 compared to
$63 million at the end of the second quarter in the prior year. The $12 million
increase is primarily due to the inventories at the two new plants which have
built up as they progress towards full capacity.
Cash provided by operating activities of $10 million in the first half of 1996
is compared to cash provided by operations of $26 million in the same period of
1995. The difference is primarily due to higher inventory levels associated with
the Company's new production facilities. Capital expenditures were $10 million
in the first half of 1996 compared to $76 million in 1995, reflecting the
completion of the new plants.
In the second quarter of 1996, the Company issued $5.7 million of industrial
revenue bonds to finance the construction of the Hazard, Kentucky
TimberStrand-R- LSL plant. The bonds are due in a single maturity in 2026,
with interest payable semi-annually at 6.8 percent.
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-R- LVL and Parallam-R- PSL plant. The bonds are due in
a single maturity in 2025, with interest payable semi-annually at 7 percent.
The Company is evaluating potential sites for an additional combination
Microllan-R- LVL and Parallam-R- PSL plant or a -third TimberStrand-R- LSL
plant but has not determined whether or when to proceed with construction.
The Company believes that current cash balances, cash generated from
operations, and borrowing under a $100 million Revolving Credit Facility will
be sufficient to meet the on-going operating and capital expansion needs of
the Company. The Company also believes that additional or expanded lines of
credit or appropriate long-term capital can be obtained to fund other major
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 TJM 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-R-, Parallam-R-, and TimberStrand-R- are registered trademarks of
Trus Joist MacMillan a Limited Partnership, Boise, Idaho
TJ INTERNATIONAL, INC.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's May 22, 1996 annual meeting of stockholders, the
following matters were voted upon and approved by the stockholders as
indicated:
VOTES CAST
------------------------------------
AGAINST OR
DESCRIPTION FOR WITHHELD ABSTENTIONS
-------------- ---------- ----------- ------------
1. To elect as directors the
following individuals
FOR TERMS EXPIRING AT THE 1999
ANNUAL MEETING
Robert B. Findlay 15,876,251 8,041 183,100
Jerre L. Stead 15,841,057 24,964 200,931
2. To ratify the appointment of
Arthur Andersen LLP as the
Company's independent
accountants for the year
ended December 28, 1996 15,903,788 51,020 112,944
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Filed as an exhibit to this report is the following:
(27) Financial Data Schedule
(b) One report, dated July 15, 1996, on Form 8-K has been filed,
pursuant to Item 2 of that form, disclosing the sale of the
Company's window segment assets. No financial statements were
filed as part of that report.
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: August 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 JUNE 29, 1996 COMMISSION FILE NUMBER 0-7469
TJ INTERNATIONAL, INC.
EXHIBIT INDEX
EXHIBITS PAGE
- --------- ----------
(27) Financial Data Schedule Document 2