UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended April 2, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-81808
BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
Delaware 22-3276290
(State of Incorporation) (I. R. S. Employer
Identification No.)
1361 Alps Road, Wayne, New Jersey 07470
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 628-3000
See table of additional registrants.
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 / /
As of May 12, 2000, 1,019,754 shares of Class A Common Stock, $.001 par value,
and 15,000 shares of Class B Common Stock, $.001 par value, of Building
Materials Corporation of America were outstanding. There is no trading market
for the common stock of Building Materials Corporation of America.
As of May 12, 2000, each of the additional registrants had the number of shares
outstanding which is shown on the table below. No shares were held by
non-affiliates.
ADDITIONAL REGISTRANTS
Registration Address, including zip
State or other No./I.R.S. code and telephone number,
jurisdiction of No. of Employer including area code, of
Exact name of registrant as incorporation Shares Identification registrant's principal
specified in its charter or organization Outstanding No. executive offices
- --------------------------- --------------- ----------- --------------- ----------------------------
Building Materials
Manufacturing Corporation.... Delaware 10 333-69749-01/ 1361 Alps Road
22-3626208 Wayne, NJ 07470
(973) 628-3000
Building Materials
Investment Corporation....... Delaware 10 333-69749-02/ 300 Delaware Avenue
22-3626206 Suite 303
Wilmington, DE 19801
(302) 427-5960
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Quarter Ended
------------------------
April 4, April 2,
1999 2000
-------- --------
(Thousands)
Net sales ............................. $262,928 $289,815
-------- --------
Costs and expenses:
Cost of products sold ............... 190,187 214,357
Selling, general and administrative.. 56,525 60,150
Goodwill amortization ............... 509 515
-------- --------
Total costs and expenses........... 247,221 275,022
-------- --------
Operating income ...................... 15,707 14,793
Interest expense ...................... (11,903) (12,445)
Other expense, net..................... (510) (1,164)
------- --------
Income before income taxes ............ 3,294 1,184
Income taxes .......................... (1,219) (438)
-------- --------
Net income ............................ $ 2,075 $ 746
======== ========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
1
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
April 2,
December 31, 2000
1999 (Unaudited)
------------ -----------
ASSETS (Thousands)
Current Assets:
Cash and cash equivalents......................... $ 55,952 $ 54,403
Investments in trading securities................. 687 245
Investments in available-for-sale securities...... 29,702 28,787
Other short-term investments...................... 1,590 -
Accounts receivable, trade, net................... 22,938 30,949
Accounts receivable, other........................ 62,892 96,065
Receivable from related parties .................. 59,132 65,828
Inventories....................................... 108,615 127,650
Other current assets.............................. 4,239 4,498
--------- ---------
Total Current Assets............................ 345,747 408,425
Property, plant and equipment, net.................. 410,703 411,919
Excess of cost over net assets of businesses
acquired, net .................................... 70,408 69,328
Deferred income tax benefits........................ 45,561 44,618
Other assets........................................ 22,693 24,066
--------- ---------
Total Assets........................................ $ 895,112 $ 958,356
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.............. $ 6,149 $ 6,919
Accounts payable.................................. 84,334 104,064
Payable to related party.......................... 15,024 15,710
Accrued liabilities............................... 115,828 119,338
Reserve for product warranty claims............... 14,500 14,500
-------- ---------
Total Current Liabilities....................... 235,835 260,531
-------- ---------
Long-term debt less current maturities.............. 600,745 638,937
-------- ---------
Reserve for product warranty claims................. 19,814 18,524
--------- ---------
Other liabilities................................... 17,029 16,484
--------- ---------
Stockholders' Equity:
Series A Cumulative Redeemable Convertible
Preferred Stock, $.01 par value per share;
200,000 and 400,000 shares authorized,
respectively; no shares issued.................. - -
Class A Common Stock, $.001 par value per share;
1,300,000 shares authorized; 1,015,010 and
1,020,985 shares, issued and outstanding,
respectively ................................... 1 1
Class B Common Stock, $.001 par value per share;
100,000 shares authorized; 15,000 shares
issued and outstanding ......................... - -
Additional paid-in capital........................ 40,632 40,899
Retained earnings ................................ - 746
Accumulated other comprehensive loss ............. (18,944) (17,766)
--------- ---------
Total Stockholders' Equity ..................... 21,689 23,880
--------- ---------
Total Liabilities and Stockholders' Equity ........ $ 895,112 $ 958,356
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
2
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Quarter Ended
-------------------
April 4, April 2,
1999 2000
-------- --------
(Thousands)
Cash and cash equivalents, beginning of period........... $ 24,989 $ 55,952
-------- --------
Cash provided by (used in) operating activities:
Net income............................................. 2,075 746
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ...................................... 7,679 9,147
Goodwill and other amortization.................... 619 722
Deferred income taxes.............................. 1,074 252
Noncash interest charges........................... 1,140 477
Increase in working capital items...................... (66,751) (64,857)
Decrease in product warranty claims.................... (2,531) (1,290)
Purchases of trading securities........................ (82,046) (1,019)
Proceeds from sales of trading securities.............. 125,542 1,860
Change in net receivable from/payable to related
parties.............................................. (29,779) (6,010)
Other, net............................................. (6,140) (579)
-------- --------
Net cash provided by (used in) operating activities...... (49,118) (60,551)
-------- --------
Cash provided by (used in) investing activities:
Capital expenditures................................... (14,484) (14,175)
Proceeds from sale of assets........................... - 4,607
Purchases of available-for-sale securities............. (55,887) (219)
Purchases of held-to-maturity securities............... (1,401) -
Proceeds from sales of available-for-sale securities... 19,419 3,002
Proceeds from held-to-maturity securities.............. 5,629 -
Proceeds from sales of other short-term investments.... 5,000 1,590
-------- --------
Net cash used in investing activities.................. (41,724) (5,195)
-------- --------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable.............. 23,149 26,816
Increase in short-term debt............................ 23,743 -
Increase in borrowings under revolving credit facility 39,500 40,000
Repayments of long-term debt........................... (1,733) (1,113)
Proceeds from issuance of common stock................. - 265
Financing fees and expenses............................ (234) (1,771)
-------- --------
Net cash provided by financing activities................ 84,425 64,197
-------- --------
Net change in cash and cash equivalents.................. (6,417) (1,549)
-------- --------
Cash and cash equivalents, end of period................. $ 18,572 $ 54,403
======== ========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized)............. $ 7,174 $ 7,527
Income taxes..................................... 270 307
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
3
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Building Materials Corporation of America (the "Company") was formed on
January 31, 1994 and is a 99.6% owned subsidiary of BMCA Holdings Corporation
("BHC"), which is a 97% owned subsidiary of GAF Building Materials Corporation
("GAFBMC"), which is a wholly-owned subsidiary of GAF Fiberglass Corporation
("GFC"), which is a wholly-owned subsidiary of G Industries Corp., which is a
wholly-owned subsidiary of G-I Holdings Inc., which is a wholly-owned subsidiary
of GAF Corporation ("GAF"). The consolidated financial statements of the Company
reflect, in the opinion of management, all adjustments necessary to present
fairly the financial position of the Company at April 2, 2000, and the results
of operations and cash flows for the periods ended April 4, 1999 and April 2,
2000. All adjustments are of a normal recurring nature. These financial
statements should be read in conjunction with the annual financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (the "Form 10-K").
Certain reclassifications have been made to conform to current year
presentation.
Note 1. Capital Contribution
Effective August 18, 1999, GFC, in a series of transactions,
contributed certain assets, including the glass fiber manufacturing facility
located in Nashville, Tennessee and certain related liabilities (the "Nashville
facility") to the Company. Accordingly, the Company's historical consolidated
financial statements have been restated to include the results of operations,
cash flows and assets and liabilities of the Nashville facility. For financial
reporting purposes, the contribution of the Nashville facility was recorded by
the Company at the historical cost of $9.3 million. The increase in net income
resulting from the contribution of the Nashville facility for the three-month
period ended April 4, 1999 was $1.0 million.
Note 2. Comprehensive Income Quarter Ended
-----------------------
April 4, April 2,
1999 2000
-------- --------
(Thousands)
Net income ....................................... $ 2,075 $ 746
------- -------
Other comprehensive income (loss), net of tax:
Change in unrealized gains (losses) on
available-for-sale securities:
Unrealized holding gains arising during the
period, net of income taxes of $806 and $949... 209 1,617
Less:Reclassification adjustment for gains
included in net income, net of income taxes
of $237 and $258............................... 404 439
------- -------
Total other comprehensive income (loss)............ (195) 1,178
------- -------
Comprehensive income............................... $ 1,880 $ 1,924
======= =======
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Comprehensive Income (Continued)
Changes in the components of "Accumulated other comprehensive loss" for the
quarter ended April 2, 2000 are as follows:
Unrealized
Losses on Minimum Accumulated
Available- Pension Other
for-Sale Liability Comprehensive
Securities Adjustment Loss
-------------- ---------- -------------
(Thousands)
Balance, December 31, 1999 ... $(17,593) $ (1,351) $(18,944)
Change for the period ........ 1,178 - 1,178
-------- -------- --------
Balance, April 2, 2000........ $ (16,415) $ (1,351) $(17,766)
======== ======== ========
Note 3. Inventories
Inventories consist of the following:
December 31, April 2,
1999 2000
------------ ---------
(Thousands)
Finished goods .................. $ 68,878 $ 79,689
Work in process ................. 13,974 15,888
Raw materials and supplies ...... 27,462 33,772
-------- --------
Total ........................... 110,314 129,349
Less LIFO reserve ............... (1,699) (1,699)
-------- --------
Inventories ..................... $108,615 $127,650
======== ========
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Contingencies
Asbestos Litigation Against GAF
In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of liabilities for asbestos-related
bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos
Claims") of its parent, GAFBMC. As of March 30, 1997, the Company had paid all
of its assumed asbestos-related liabilities. G-I Holdings and GAFBMC have
jointly and severally agreed to indemnify the Company against any other existing
or future claims related to asbestos-related liabilities if asserted against the
Company.
GAF has advised the Company that, as of April 2, 2000, it is defending
approximately 124,200 pending alleged Asbestos Claims, having received notice of
approximately 12,500 new Asbestos Claims during the first three months of 2000.
GAF has advised that the Center for Claims Resolution ("CCR"), a non-profit
organization set up to administer and handle asbestos-related personal injury
claims against the participating companies and in which GAF was a member,
terminated GAF's membership, effective January 17, 2000. GAF has advised the CCR
that such termination was unauthorized and that it intends to take appropriate
measures to protect its rights to pursue claims against the CCR and its member
companies for reimbursement of amounts that GAF believes it has been overcharged
since 1995 in respect of asbestos-related liability payments made to the CCR,
for damages arising out of this improper termination and for other improper
actions. Currently, the disputes between GAF and the CCR are the subject of
pending Alternative Dispute Proceedings. GAF has advised that in judicial
proceedings in connection with pending underlying asbestos-related claims, other
than the pending claims referred to above, it is disputing its liability in
respect of settlements entered into by the CCR, including, among other things,
the propriety of the allocation by the CCR of GAF's liability payment shares in
respect of such settlements.
GAF has confirmed that it has experienced a significant increase in the
rate of new Asbestos Claims, principally involving claimants without any
asbestos-related impairment, and amounts demanded to settle these claims. GAF
anticipates that these trends could well continue for the foreseeable future,
and that the percentage of Asbestos Claims filed by individuals with no physical
impairment will remain high. GAF has advised that it expects an increasingly
adverse litigation environment in particular jurisdictions. GAF believes that
these trends and the CCR's termination of GAF's membership resulted from, or was
induced by, in no small part, retaliatory actions taken by asbestos lawyers
against GAF in connection with GAF's active support of proposed legislation
currently pending in Congress to address the national asbestos litigation
crisis.
GAF has stated that it is committed to effecting a comprehensive
resolution of Asbestos Claims and that it is exploring options to accomplish
such resolution, including the support of the proposed Congressional
legislation, but there can be no assurance that these efforts will be
successful.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company believes that it will not sustain any additional liability
in connection with asbestos-related claims. While the Company cannot predict
whether any asbestos-related claims will be asserted against it or its assets or
the outcome of any litigation relating to those claims, the Company believes
that it has meritorious defenses to any claim that could be so asserted. In
addition, G-I Holdings and GAFBMC have jointly and severally indemnified the
Company with respect to asbestos-related claims, and G-I Holdings has advised
the Company that it believes it has and will have sufficient resources to enable
it to satisfy any indemnification obligations. However, GAF has advised the
Company that depending upon whether the trends described above continue, whether
other retaliatory actions are taken, the ultimate resolution of the disputes
between GAF and the CCR, and whether the proposed legislation currently pending
in Congress is enacted into law, its financial condition could be materially
adversely affected by one or more of these factors. Should GAF or GAFBMC be
unable to satisfy judgments against it in asbestos-related lawsuits, its
judgment creditors might seek to enforce their judgments against the assets of
GAF, including its holdings of G-I Holdings common stock, or GAFBMC, including
its holdings of the Company's common stock. This enforcement could result in a
change of control with respect to the Company.
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Item 3. "Legal Proceedings" and
Notes 3, 10 and 15 to Consolidated Financial Statements contained in the
Company's Form 10-K.
Environmental Litigation
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters ("Environmental
Claims"), in which recovery is sought for the cost of cleanup of contaminated
sites, a number of which Environmental Claims are in the early stages or have
been dormant for protracted periods. At most sites, the Company anticipates that
liability will be apportioned among the companies found to be responsible for
the presence of hazardous substances at the site. The Company believes that the
ultimate disposition of such matters will not, individually or in the aggregate,
have a material adverse effect on the liquidity, financial position or results
of operations of the Company.
For further information regarding environmental matters and other
litigation, reference is made to "Item 3. Legal Proceedings" contained in the
Company's Form 10-K.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tax Claim Against GAF
On September 15, 1997, GAF received a notice from the Internal Revenue
Service (the "Service") of a deficiency in the amount of $84.4 million (after
taking into account the use of net operating losses and foreign tax credits
otherwise available for use in later years) in connection with the formation in
1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the "surfactants
partnership"), a partnership in which a subsidiary of GAF, GFC, held an
interest. The claim of the Service for interest and penalties, after taking into
account the effect on the use of net operating losses and foreign tax credits,
could result in GAF incurring liabilities significantly in excess of the
deferred tax liability of $131.4 million that it recorded in 1990 in connection
with this matter. GAF has advised the Company that it believes that it will
prevail in this matter, although there can be no assurance in this regard.
However, if GAF is unsuccessful in challenging its tax deficiency notice, the
ability of GAF to satisfy its tax obligation would be dependent on the cash
flows of the Company and GFC. The Company believes that the ultimate disposition
of this matter will not have a material adverse effect on its business,
financial position or results of operations. GAF, G-I Holdings and certain
subsidiaries of GAF have agreed to jointly and severally indemnify the Company
against any tax liability associated with the surfactants partnership, which the
Company would be severally liable for, together with GAF and several current and
former subsidiaries of GAF, should GAF be unable to satisfy such liability. For
the possible consequences to the Company of the failure of GAF to satisfy this
liability and other information relating to GAF, see the penultimate paragraph
of " - Asbestos Litigation Against GAF" above.
Note 5. New Accounting Standard
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000, but may be adopted earlier. The Company has not
yet determined the effect of adoption of SFAS No. 133 and has not determined the
timing or method of adoption of the statement.
Note 6. Guarantor Financial Information
Effective January 1, 1999, Building Materials Corporation of America ("the
Company" or "Parent Company") transferred all of its investment assets and
intellectual property assets to Building Materials Investment Corporation
("BMIC"), a newly-formed, wholly-owned subsidiary. In connection with this
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
transfer, BMIC agreed to guarantee all of the Company's obligations under the
Company's then existing bank credit facility, the Company's 7 3/4% Senior Notes
due 2005, the 8 5/8% Senior Notes due 2006, the 8% Senior Notes due 2007 (the
"2007 Notes") and the 8% Senior Notes due 2008 (collectively, the "Senior
Notes"). The Company also transferred all of its manufacturing assets, other
than those located in Texas, to Building Materials Manufacturing Corporation
("BMMC"), another newly-formed, wholly-owned subsidiary. In connection with this
transfer, BMMC agreed to become a co-obligor on the 2007 Notes and to guarantee
the Company's obligations under the then existing credit facility, and the
Senior Notes. In addition, in August 1999, BMIC and BMMC guaranteed the
Company's obligations under its three-year bank credit facility entered into in
August 1999 and the Company's Term Loan due 2004. The guarantees of BMIC and
BMMC are full, unconditional and joint and several.
In addition, in connection with the above transactions, the Company and
BMMC entered into license agreements, effective January 1, 1999, for the right
to use intellectual property, including patents, trademarks, know-how, and
franchise rights owned by BMIC for a license fee charged as a percentage of net
sales. The license agreements are subject to annual renewal, unless terminated
by either party to the agreements with 60 days written notice. Also, effective
January 1, 1999, BMMC sells all finished goods to the Company at a manufacturing
profit.
Presented below is condensed consolidating financial information for BMIC
and BMMC, prepared on a basis which retroactively reflects the formation of such
companies, as discussed above, for all periods presented. This financial
information should be read in conjunction with the Consolidated Financial
Statements and other notes related thereto. Separate financial information for
BMIC and BMMC is not included herein because management has determined that such
information is not material to investors.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Quarter Ended April 4, 1999
(Thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ -----------
Net sales............................. $ 210,955 $ - $ 51,973 $ - $ 262,928
Intercompany net sales................ 1,001 144,623 16,044 (161,668) -
--------- --------- --------- --------- ---------
Total net sales....................... 211,956 144,623 68,017 (161,668) 262,928
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of products sold............... 162,566 130,395 58,894 (161,668) 190,187
Selling, general and administrative. 36,300 9,718 10,507 56,525
Transition service agreement
(income) expense.................. (250) 250 -
Goodwill amortization............... 160 349 509
--------- --------- --------- --------- --------
Total costs and expenses.............. 198,776 140,363 69,750 (161,668) 247,221
--------- --------- --------- --------- --------
Operating income (loss)............... 13,180 4,260 (1,733) - 15,707
Equity in earnings of subsidiaries.... 3,526 (3,526) -
Intercompany licensing income
(expense), net...................... (6,329) 6,329 -
Interest expense, net................. (7,290) (1,996) (2,617) (11,903)
Other income (expense), net........... (1,866) 1,356 (510)
--------- --------- ---------- --------- ---------
Income (loss) before income taxes..... 1,221 9,949 (4,350) (3,526) 3,294
Income tax (provision) benefit........ 854 (3,683) 1,610 (1,219)
--------- --------- --------- ---------- --------
Net income (loss)..................... $ 2,075 $ 6,266 $ (2,740) $ (3,526) $ 2,075
======== ======== ========= ========== ========
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Quarter Ended April 2, 2000
(Thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ ------------
Net sales............................. $ 236,776 $ - $ 53,039 $ - $289,815
Intercompany net sales................ 2,221 172,727 25,551 (200,499) -
--------- --------- --------- --------- --------
Total net sales....................... 238,997 172,727 78,590 (200,499) 289,815
--------- --------- --------- --------- --------
Costs and expenses:
Cost of products sold............... 190,561 156,841 67,454 (200,499) 214,357
Selling, general and administrative. 38,646 10,855 10,649 60,150
Goodwill amortization............... 160 355 515
--------- --------- --------- --------- --------
Total costs and expenses.............. 229,367 167,696 78,458 (200,499) 275,022
--------- --------- --------- --------- --------
Operating income...................... 9,630 5,031 132 - 14,793
Equity in earnings of subsidiaries.... 5,374 (5,374) -
Intercompany licensing income
(expense), net...................... (8,792) 8,792 -
Interest expense, net................. (6,183) (2,710) (3,552) (12,445)
Other income (expense), net........... (2,001) 837 - (1,164)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary loss............. (1,972) 11,950 (3,420) (5,374) 1,184
Income tax (provision) benefit........ 2,718 (4,422) 1,266 (438)
--------- --------- --------- --------- --------
Net income (loss)..................... $ 746 $ 7,528 $ (2,154) $ (5,374) $ 746
========= ========= ========= ========= ========
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Quarter Ended April 4, 1999
(Thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Consolidated
------- ------------ ------------- ------------
Cash and cash equivalents, beginning of period....... $ 3 $ 21,748 $ 3,238 $ 24,989
--------- --------- --------- --------
Cash provided by (used in) operating activities:
Net income(loss)..................................... (213) 5,028 (2,740) 2,075
Adjustments to reconcile net income(loss)to net
cash provided by(used in)operating activities:
Depreciation..................................... 629 4,455 2,595 7,679
Goodwill and other amortization.................. 279 349 619
Deferred income taxes............................ 1,074 1,074
Noncash interest charges......................... 1,140 1,140
Increase in working capital items.................... (43,385) (8,491) (14,875) (66,751)
Decrease in product warranty claims.................. (2,428) (103) (2,531)
Purchases of trading securities...................... (82,046) (82,046)
Proceeds from sales of trading securities............ 125,542 125,542
Change in net receivable from/payable to
related parties.................................... (24,844) (26,540) 21,605 (29,779)
Other, net........................................... 381 (6,275) (246) (6,140)
------- -------- -------- --------
Net cash provided by(used in)operating activities.... (67,376) 11,673 6,585 (49,118)
-------- --------- --------- --------
Cash provided by(used in)investing activities:
Capital expenditures............................... 251 (9,755) (4,980) (14,484)
Purchases of available-for-sale securities......... (55,887) (55,887)
Purchases of held-to-maturity securities .......... (1,401) (1,401)
Proceeds from sales of available-for-sale
securities........................................ 19,419 19,419
Proceeds from held-to-maturity securities.......... 5,629 5,629
Proceeds from sales of other short-term
investments....................................... 5,000 5,000
--------- --------- --------- -------
Net cash provided by(used in)investing activities.... 251 (36,995) (4,980) (41,724)
--------- --------- --------- -------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable.......... 23,149 23,149
Increase in short-term debt........................ 5,000 18,743 23,743
Increase in borrowings under revolving
credit facility.................................. 39,500 39,500
Repayments of long-term debt....................... (290) (1,420) (23) (1,733)
Financing fees and expenses........................ (234) (234)
--------- --------- ---------- --------
Net cash provided by (used in) financing activities.. 67,125 17,323 (23) 84,425
--------- --------- --------- -------
Net change in cash and cash equivalents.............. - (7,999) 1,582 (6,417)
--------- --------- --------- -------
Cash and cash equivalents, end of period............. $ 3 $ 13,749 $ 4,820 $ 18,572
========= ========= ========= ========
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
December 31, 1999
(Thousands)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiaries inations Consolidated
--------- ------------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents............... $ 81 $ 53,184 $ 2,687 $ - $ 55,952
Investments in trading securities....... 687 687
Investments in available-for-sale
securities............................ 29,702 29,702
Other short-term investments............ 1,590 1,590
Accounts receivable, trade.............. 1,590 21,348 22,938
Accounts receivable, other.............. 57,200 348 5,344 62,892
Receivable from related parties......... 59,132 59,132
Inventories............................. 52,903 23,210 32,502 108,615
Other current assets.................... 1,208 2,199 832 4,239
------- --------- --------- --------- --------
Total Current Assets.................. 172,114 110,920 62,713 - 345,747
Investment in subsidiaries................ 273,195 (273,195) -
Intercompany loans including accrued
interest................................ 166,762 (166,762) -
Due from(to)subsidiaries, net............. (146,942) 161,660 (14,718) -
Property, plant and equipment, net........ 32,821 256,542 121,340 410,703
Excess of cost over net assets of
businesses acquired, net................ 18,739 51,669 70,408
Deferred income tax benefits.............. 45,561 45,561
Other assets.............................. 15,454 6,901 338 22,693
--------- --------- --------- --------- ---------
Total Assets.............................. $ 577,704 $ 536,023 $ 54,580 $(273,195) $ 895,112
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.... $ 2,333 $ 3,729 $ 87 $ - $ 6,149
Accounts payable........................ 41,799 28,146 14,389 84,334
Payable to related party................ 12,382 2,583 59 15,024
Accrued liabilities..................... 19,695 87,228 8,905 115,828
Reserve for product warranty claims..... 13,400 1,100 14,500
--------- --------- --------- --------- --------
Total Current Liabilities............. 89,609 121,686 24,540 - 235,835
Long-term debt less current maturities.... 435,398 165,194 153 600,745
Reserve for product warranty claims....... 16,127 3,687 19,814
Other liabilities......................... 14,881 2,148 17,029
--------- --------- --------- --------- --------
Total Liabilities......................... 556,015 286,880 30,528 - 873,423
Total Stockholders' Equity, net........... 21,689 249,143 24,052 (273,195) 21,689
--------- --------- --------- --------- --------
Total Liabilities and Stockholders' Equity $ 577,704 $ 536,023 $ 54,580 $(273,195) $ 895,112
========= ========= ========= ========== =========
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
April 2, 2000
(Thousands)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiaries inations Consolidated
--------- ------------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents............... $ 7 $ 52,811 $ 1,585 $ - $ 54,403
Investments in trading securities....... 245 245
Investments in available-for-sale
securities............................ 28,787 28,787
Accounts receivable, trade.............. 30,949 30,949
Accounts receivable, other.............. 84,897 2,837 8,331 96,065
Receivable from related parties......... 65,828 - - 65,828
Inventories............................. 62,086 27,861 37,703 127,650
Other current assets.................... 1,257 1,960 1,281 4,498
------- --------- --------- --------- --------
Total Current Assets.................. 214,075 114,501 79,849 - 408,425
Investment in subsidiaries................ 280,436 (280,436) -
Intercompany loans including accrued
interest................................ 176,746 (176,746) -
Due from(to)subsidiaries, net............. (159,111) 175,070 (15,959) -
Property, plant and equipment, net........ 32,184 261,702 118,033 411,919
Excess of cost over net assets of
businesses acquired, net................ 18,579 50,749 69,328
Deferred income tax benefits.............. 44,618 44,618
Other assets.............................. 14,916 8,815 335 24,066
--------- --------- --------- --------- ---------
Total Assets.............................. $ 622,443 $ 560,088 $ 56,261 $(280,436) $ 958,356
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.... $ 2,072 $ 4,760 $ 87 $ - $ 6,919
Accounts payable........................ 45,681 41,135 17,248 104,064
Payable to related party................ 10,342 5,200 168 15,710
Accrued liabilities..................... 22,186 87,071 10,081 119,338
Reserve for product warranty claims..... 13,400 1,100 14,500
--------- --------- --------- --------- --------
Total Current Liabilities............. 93,681 138,166 28,684 - 260,531
Long-term debt less current maturities.... 475,413 163,383 141 638,937
Reserve for product warranty claims....... 14,855 3,669 18,524
Other liabilities......................... 14,614 1,870 16,484
--------- --------- --------- --------- --------
Total Liabilities......................... 598,563 301,549 34,364 - 934,476
Total Stockholders' Equity, net........... 23,880 258,539 21,897 (280,436) 23,880
--------- --------- --------- --------- --------
Total Liabilities and Stockholders' Equity $ 622,443 $ 560,088 $ 56,261 $(280,436) $ 958,356
========= ========== ========== ========== =========
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Quarter Ended April 2, 2000
(Thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Consolidated
--------- ------------ ------------- ---------
Cash and cash equivalents, beginning of period....... $ 81 $ 53,184 $ 2,687 $ 55,952
--------- --------- --------- --------
Cash provided by(used in)operating activities:
Net income(loss)..................................... (4,626) 7,528 (2,156) 746
Adjustments to reconcile net income(loss)to net
cash provided by(used in)operating activities:
Depreciation..................................... 708 5,915 2,524 9,147
Goodwill and other amortization.................. 367 355 722
Deferred income taxes............................ 252 252
Noncash interest charges......................... 477 477
(Increase) decrease in working capital items......... (55,782) 5,931 (15,006) (64,857)
Decrease in product warranty claims.................. (1,272) (18) (1,290)
Purchases of trading securities...................... (1,019) (1,019)
Proceeds from sales of trading securities............ 1,860 1,860
Change in net receivable from/payable to
related parties.................................... (6,551) (10,793) 11,334 (6,010)
Other, net........................................... (297) (361) 79 (579)
--------- --------- --------- --------
Net cash provided by(used in)operating activities.... (66,724) 9,061 (2,888) (60,551)
--------- --------- --------- --------
Cash provided by(used in)investing activities:
Capital expenditures............................... (29) (11,337) (2,809) (14,175)
Proceeds from sale of assets....................... 4,607 4,607
Purchases of available-for-sale securities......... (219) (219)
Proceeds from sales of available-for-sale
securities....................................... 3,002 3,002
Proceeds from sales of other short-term
investments...................................... 1,590 1,590
--------- --------- --------- --------
Net cash provided by(used in)investing activities.... (29) (6,964) 1,798 (5,195)
--------- --------- --------- --------
Cash provided by(used in)financing activities:
Proceeds from sale of accounts receivable.......... 26,816 26,816
Increase in borrowings under revolving
credit facility.................................. 40,000 40,000
Repayments of long-term debt....................... (321) (780) (12) (1,113)
Financing fees and expenses........................ (81) (1,690) (1,771)
Stock Issuance..................................... 265 265
---------- --------- --------- --------
Net cash provided by (used in) financing activities.. 66,679 (2,470) (12) 64,197
--------- --------- --------- --------
Net change in cash and cash equivalents.............. (74) (373) (1,102) (1,549)
--------- --------- --------- --------
Cash and cash equivalents, end of period............. $ 7 $ 52,811 $ 1,585 $ 54,403
========= ========= ========= ========
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - First Quarter 2000 Compared With
First Quarter 1999
The Company recorded first quarter 2000 net income of $0.7 million
compared with $2.1 million in the first quarter of 1999. The decline in net
earnings was primarily the result of lower operating income, higher other
expenses attributable to lower investment income and higher interest expense.
The Company's net sales for the first quarter of 2000 were $289.8
million, a 10.2% increase over first quarter 1999 net sales of $262.9 million,
with the increase due to net sales gains in residential and commercial roofing
products and the specialty building products sold by the Company's LL Building
Products Inc. subsidiary. The increase in residential roofing products reflected
higher unit volumes and selling prices while the increase in net sales of
commercial roofing products resulted from higher unit volumes, partially offset
by lower selling prices.
Operating income for the first quarter of 2000 was $14.8 million
compared with $15.7 million in 1999. The lower operating results were primarily
attributable to higher sales reported in the quarter being offset by the higher
cost of raw material purchases, principally the cost of asphalt due to rising
oil prices, partially offset by a reduction in manufacturing costs. Selling,
general and administrative expenses, as a percentage of net sales, declined to
20.9% in 2000 as compared to 21.7% in 1999.
Interest expense for the first quarter of 2000 increased to $12.4
million from $11.9 million recorded in the same period in 1999, while other
expense, net was $1.2 million for the first quarter of 2000 compared to $0.5
million in the first quarter of 1999, with the increase primarily due to lower
investment income.
Liquidity and Financial Condition
Net cash outflow during the first quarter of 2000 was $65.7 million
before financing activities, and included the use of $60.6 million of cash for
operations, the reinvestment of $14.2 million for capital programs, the
generation of $4.4 million from net sales of available-for-sale and
held-to-maturity securities and other short-term investments, and the sale of
$4.6 million of assets of the LL Building Products Inc. subsidiary.
Cash invested in additional working capital totaled $64.9 million
during the first quarter of 2000, primarily reflecting seasonal increases in
inventories of $20.0 million and $68.0 million in receivables, including a
16
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
$54.2 million increase in the receivable from the trust which purchases certain
of the Company's trade accounts receivable, partially offset by a $23.2 million
increase in accounts payable and accrued liabilities. The net cash used for
operating activities also included a $6.0 million cash outflow for net advances
to the Company's parent companies.
Net cash provided by financing activities totaled $64.2 million during
the first quarter of 2000, mainly reflecting $40.0 million in borrowings under
the Company's bank revolving credit facility and $26.8 million in proceeds from
the sale of the Company's trade receivables.
As a result of the foregoing factors, cash and cash equivalents
decreased by $1.5 million during the first quarter of 2000 to $54.4 million,
excluding $29.0 million of trading and available-for-sale securities.
See Note 5 to Consolidated Financial Statements for information
regarding contingencies.
* * *
Forward-looking Statements
This Quarterly Report on Form 10-Q contains both historical and
forward-looking statements. All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements within the meaning
of section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are only predictions and
generally can be identified by use of statements that include phrases such as
"believe," "expect," "anticipate," "intend," "plan," "foresee" or other words or
phrases of similar import. Similarly, statements that describe the Company's
objectives, plans or goals also are forward-looking statements. The Company's
operations are subject to certain risks and uncertainties that could cause
actual results to differ materially from those contemplated by the relevant
forward-looking statement. The forward-looking statements included herein are
made only as of the date of this Quarterly Report on Form 10-Q and the Company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances. No assurances can be given that
projected results or events will be achieved.
17
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Form 10-K for a discussion of
"Market-Sensitive Instruments and Risk Management." As of December 31, 1999,
equity-related financial instruments employed by the Company to reduce market
risk included long contracts valued at $0.9 million. At April 2, 2000, the
Company had long contracts valued at $1.8 million and short contracts valued at
$1.1 million. Since the Company marks-to-market such instruments each month,
there was no economic cost to the Company to terminate these instruments.
18
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule for the three months ended April 2, 2000,
which is submitted electronically to the Securities and Exchange
Commission for information only.
(b) The registrants filed a report on Form 8-K, dated January 7, 2000,
reporting events under Item 5 thereof.
19
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants listed below have duly caused this report
to be signed on their behalf by the undersigned, thereunto duly authorized.
BUILDING MATERIALS CORPORATION OF AMERICA
BUILDING MATERIALS MANUFACTURING CORPORATION
BUILDING MATERIALS INVESTMENT CORPORATION
DATE: May 15, 2000 BY: /s/William C. Lang
------------ ----------------------
William C. Lang
Executive Vice President,
Chief Administrative Officer
and Chief Financial Officer
(Principal Financial Officer)
DATE: May 15, 2000 BY: /s/James T. Esposito
------------ ------------------------
James T. Esposito
Vice President and Controller
(Principal Accounting Officer)
20