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 March 31, 2002
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 Below.
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 10, 2002, 1,015,010 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 10, 2002, 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
Address, including zip
code and telephone number,
Commission File No./ including area code, of
Exact name of registrant as State or other jurisdiction of No. of Shares I.R.S. Employer registrant's principal
specified in its charter incorporation or organization Outstanding Identification No. executive offices
- ------------------------ ----------------------------- ----------- ------------------ -----------------
Building Materials Delaware 10 333-69749-01/ 1361 Alps Road
Manufacturing Corporation 22-3626208 Wayne, NJ 07470
(973) 628-3000
Building Materials Delaware 10 333-69749-02/ 300 Delaware Avenue
Investment Corporation 22-3626206 Suite 303
Wilmington, DE 19801
(302) 427-5960
2
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended
------------------------
April 1, March 31,
2001 2002
-------- --------
(Thousands)
Net sales ............................. $264,961 $319,253
-------- --------
Costs and expenses:
Cost of products sold ............... 198,951 229,932
Selling, general and administrative.. 55,982 68,728
Goodwill amortization ............... 494 -
-------- --------
Total costs and expenses........... 255,427 298,660
-------- --------
Operating income ...................... 9,534 20,593
Interest expense ...................... (15,203) (13,746)
Other expense, net..................... (1,483) (2,284)
-------- --------
Income (loss) before income taxes ..... (7,152) 4,563
Income tax (provision) benefit......... 2,646 (1,643)
-------- --------
Net income (loss)...................... $ (4,506) $ 2,920
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
March 31,
December 31, 2002
2001 (Unaudited)
------------ ---------
ASSETS (Thousands)
Current Assets:
Cash and cash equivalents......................... $ 46,387 $ 15,499
Accounts receivable, trade, net................... 23,490 26,378
Accounts receivable, other........................ 39,769 84,889
Inventories....................................... 102,245 111,540
Other current assets.............................. 3,890 4,971
--------- ---------
Total Current Assets............................ 215,781 243,277
Property, plant and equipment, net.................. 352,067 348,231
Excess of cost over net assets of businesses
acquired, net .................................... 63,294 63,294
Deferred income tax benefits........................ 32,924 31,544
Tax receivable from parent corporations............. 9,000 9,000
Other noncurrent assets............................. 33,259 31,164
--------- ---------
Total Assets........................................ $ 706,325 $ 726,510
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt.............. $ 5,556 $ 5,662
Accounts payable.................................. 58,235 66,894
Payable to related parties........................ 8,910 17,315
Accrued liabilities............................... 43,548 46,398
Reserve for product warranty claims............... 14,900 14,900
-------- ---------
Total Current Liabilities....................... 131,149 151,169
-------- ---------
Long-term debt less current maturities.............. 599,896 598,646
-------- ---------
Reserve for product warranty claims................. 22,741 21,744
-------- ---------
Other liabilities................................... 14,178 13,698
-------- ---------
Stockholders' Equity (Deficit):
Series A Cumulative Redeemable Convertible
Preferred Stock, $.01 par value per share;
400,000 shares authorized; no shares issued..... - -
Class A Common Stock, $.001 par value per share;
1,300,000 shares authorized; 1,015,010 shares
issued and outstanding.......................... 1 1
Class B Common Stock, $.001 par value per share;
100,000 shares authorized; 15,000 shares
issued and outstanding ......................... - -
Loan receivable from parent corporation........... (2,536) (2,564)
Accumulated deficit............................... (59,104) (56,184)
-------- ---------
Total Stockholders' Equity (Deficit)............ (61,639) (58,747)
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit)................................. $ 706,325 $ 726,510
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Quarter Ended
-------------------
April 1, March 31,
2001 2002
-------- --------
(Thousands)
Cash and cash equivalents, beginning of period........... $ 82,747 $ 46,387
-------- --------
Cash provided by (used in) operating activities:
Net income (loss)...................................... (4,506) 2,920
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation....................................... 8,640 9,380
Goodwill and other amortization.................... 843 472
Deferred income taxes.............................. (2,925) 1,380
Noncash interest charges........................... 1,141 1,210
Increase in working capital items...................... (67,979) (62,092)
Decrease in reserve for product warranty claims........ (2,919) (997)
Proceeds from sale of accounts receivable.............. 9,550 15,217
Change in net receivable from/payable to related
parties/parent corporations.......................... 5,546 8,405
Other, net............................................. (640) 360
-------- --------
Net cash used in operating activities.................... (53,249) (23,745)
-------- --------
Cash provided by (used in) investing activities:
Capital expenditures................................... (2,433) (5,549)
-------- --------
Net cash used in investing activities.................... (2,433) (5,549)
-------- --------
Cash provided by (used in) financing activities:
Increase in borrowings under revolving
credit facilities.................................... 7,000 -
Repayments of long-term debt........................... (3,151) (1,353)
Loan to parent corporation............................. - (28)
Financing fees and expenses............................ (830) (213)
-------- --------
Net cash provided by (used in) financing activities...... 3,019 (1,594)
-------- --------
Net change in cash and cash equivalents.................. (52,663) (30,888)
-------- --------
Cash and cash equivalents, end of period................. $ 30,084 $ 15,499
======== ========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized)................. $ 8,302 $ 12,496
Income taxes......................................... 265 -
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
5
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 wholly-owned subsidiary of BMCA Holdings Corporation
("BHC"), which is a wholly-owned subsidiary of G-I Holdings Inc. ("G-I
Holdings"). G-I Holdings is a wholly-owned subsidiary of G Holdings Inc. 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 March 31, 2002, and the results of operations and cash flows
for the periods ended April 1, 2001 and March 31, 2002. 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,
2001 (the "Form 10-K").
Certain reclassifications have been made to conform to current year
presentation.
Note 1. Inventories
Inventories consist of the following:
December 31, March 31,
2001 2002
----------- --------
(Thousands)
Finished goods ..................... $ 66,417 $ 77,800
Work-in-process .................... 8,800 5,806
Raw materials and supplies ......... 29,573 30,979
-------- --------
Total .............................. 104,790 114,585
Less LIFO reserve .................. (2,545) (3,045)
-------- --------
Inventories ........................ $102,245 $111,540
======== ========
Note 2. Contingencies
Asbestos Litigation Against G-I Holdings
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, G-I Holdings. As of March 30, 1997, the Company had paid
all of its assumed asbestos-related liabilities. In January 2001, G-I Holdings
filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code due to its Asbestos Claims. This proceeding remains pending.
Claimants in the G-I Holdings bankruptcy, including judgment creditors,
might seek to satisfy their claims by asking the bankruptcy court to require the
sale of G-I Holdings' assets, including its holdings of BHC's common stock and
its indirect holdings of the Company's common stock. That action could result in
a change of control of the Company. In addition, those claimants may seek to
file Asbestos Claims against the Company (with approximately 1,900 alleged
Asbestos Claims pending against the Company as of March 31, 2002). The Company
believes that it will not sustain any liability in connection with
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Contingencies (Continued)
these or any other asbestos-related claims. Furthermore, on February 2, 2001,
the United States Bankruptcy Court for the District of New Jersey issued a
temporary restraining order enjoining any existing or future claimant from
bringing Asbestos Claims against the Company. On June 22, 2001, following a
hearing, the Bankruptcy Court converted the temporary restraining order into a
preliminary injunction, which is expected to remain in effect pending
confirmation of a Chapter 11 plan of reorganization for the G-I Holdings estate.
On February 7, 2001, G-I Holdings and the Company filed a defendant class action
in the United States Bankruptcy Court for the District of New Jersey seeking a
declaratory judgment that the Company has no successor liability for Asbestos
Claims against G-I Holdings and that it is not the alter ego of G-I Holdings. No
trial date has been set by the court. As a result, it is not possible to predict
the outcome of this litigation. On May 3, 2002, G-I Holdings and the Company
filed a summary judgment motion seeking entry of judgment against the Named
Defendants in the action declaring that BMCA is not liable to them under any
theory of successor liability or alter ego. The Court has not ruled on the
motion. While the Company cannot predict whether any additional Asbestos Claims
will be asserted against it, or the outcome of any litigation relating to those
claims, the Company believes that it has meritorious defenses to any claim that
it has asbestos-related liability, although there can be no assurances in this
regard.
On February 8, 2001, a creditors committee established in G-I Holdings'
bankruptcy case filed a complaint in the United States Bankruptcy Court for the
District of New Jersey against G-I Holdings and the Company. The complaint
requests substantive consolidation of the Company with G-I Holdings or an order
directing G-I Holdings to cause the Company to file for bankruptcy protection.
The Company and G-I Holdings intend to vigorously defend the lawsuit. The
Company believes that no basis exists for the court to grant the relief
requested. The plaintiffs also filed for interim relief absent the granting of
their requested relief described above. On March 21, 2001, the Bankruptcy Court
refused to grant the requested interim relief.
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, 11 and 16 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 or remedial obligations are imposed, 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.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Contingencies (Continued)
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.
Tax Claim Against G-I Holdings
The Company and certain of its subsidiaries were members of the
consolidated group ("the G-I Holdings Group") for Federal income tax purposes
that included G-I Holdings in certain prior years and, accordingly, would be
severally liable for any tax liability of the G-I Holdings Group in respect of
those prior years.
On September 15, 1997, G-I Holdings received a notice from the Internal
Revenue Service (the "IRS") 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 G-I Holdings held an
interest. G-I Holdings has advised the Company that it believes that it will
prevail in this tax matter, although there can be no assurance in this regard.
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. On September 21, 2001, the Internal Revenue Service filed a proof of
claim with respect to such deficiency against G-I Holdings in the G-I Holdings
bankruptcy. On May 7, 2002, G-I Holdings filed an objection to that proof of
claim. If the IRS's proof of claim is sustained, the Company and/or certain of
the Company's subsidiaries together with G-I Holdings and several current and
former subsidiaries of G-I Holdings would be severally liable for a portion of
those taxes and interest. If the IRS were to prevail for the years in which the
Company and/or certain of its subsidiaries were part of the G-I Holdings Group,
the Company would be severally liable for approximately $40.0 million in taxes
plus interest, although this calculation is subject to uncertainty depending
upon various factors including G-I Holdings' ability to satisfy its tax
liabilities and the application of tax credits and deductions.
Note 3. New Accounting Standards
On June 30, 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No.
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method of accounting and eliminates the pooling
method of accounting. SFAS No. 141 will not have an impact on the Company's
business since the Company has historically accounted for all business
combinations using the purchase method of accounting. With the adoption of SFAS
No. 142, effective January 1, 2002, goodwill is no longer subject to
amortization over its estimated useful life. However, goodwill will be subject
to at least an annual assessment for impairment and more frequently if
circumstances indicate a possible impairment. Companies must perform an initial
fair-value-based goodwill impairment test by the end of the second
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. New Accounting Standards (Continued)
quarter of 2002. On an annualized basis, effective January 1, 2002, the
Company's net income will increase by approximately $1.3 million, unless any
impairment charges are necessary. The Company is currently evaluating its
recorded goodwill for impairment, and expects to complete its analysis by the
end of the second quarter of 2002.
Net income exclusive of amortization expense for goodwill no longer
being amortized is as follows:
Quarter Ended
April 1, 2001 March 31, 2002
------------- --------------
(Thousands)
Reported net income (loss)............ $(4,506) $ 2,920
Add back: Goodwill amortization...... 494 -
------- -------
Adjusted net income (loss)............ $(4,012) $ 2,920
======== =======
Note 4. Guarantor Financial Information
All of the Company's subsidiaries, other than BMCA Receivables
Corporation, are guarantors under the Company's $100 million secured bank credit
facility, the amended and restated $110 million secured bank credit facility,
the 10 1/2% Senior Notes due 2003, the 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. These guarantees are full, unconditional and joint and
several. In addition, Building Materials Manufacturing Corporation ("BMMC"), a
wholly-owned subsidiary of the Company, is a co-obligor on the 2007 Notes.
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 Building Materials
Investment Corporation, a wholly-owned subsidiary of the Company, for a license
fee stated as a percentage of net sales. The license agreements are for a period
of one year and are subject to automatic renewal unless either party terminates
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
the Company, the guarantor subsidiaries and the non-guarantor subsidiary
prepared on a basis which retroactively reflects the formation of such companies
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 the Company, the guarantor
subsidiaries and the non-guarantor subsidiary is not included herein because
management has determined that such information is not material to investors.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Quarter Ended April 1, 2001
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
Net sales............................. $ 241,395 $ 23,566 $ - $ 264,961
Intercompany net sales................ 24,230 196,540 (220,770) -
--------- --------- --------- ---------
Total net sales....................... 265,625 220,106 (220,770) 264,961
--------- --------- --------- ---------
Costs and expenses:
Cost of products sold............... 220,248 199,473 (220,770) 198,951
Selling, general and administrative. 40,537 15,445 55,982
Goodwill amortization............... 314 180 494
Transition service agreement
(income) expense.................. 25 (25) -
--------- --------- --------- --------
Total costs and expenses.............. 261,124 215,073 (220,770) 255,427
--------- --------- --------- --------
Operating income...................... 4,501 5,033 - 9,534
Equity in earnings of subsidiaries.... 5,227 - (5,227) -
Intercompany licensing income
(expense), net...................... (7,242) 7,242 -
Interest expense...................... (11,223) (3,980) (15,203)
Other income (expense), net........... (1,485) 2 (1,483)
--------- --------- --------- --------
Income (loss) before income taxes..... (10,222) 8,297 (5,227) (7,152)
Income tax (provision) benefit........ 5,716 (3,070) 2,646
-------- --------- --------- --------
Net income (loss)..................... $ (4,506) $ 5,227 $ (5,227) $ (4,506)
========= ========= ========= ========
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Quarter Ended March 31, 2002
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
Net sales............................. $ 294,302 $ 24,951 $ - $319,253
Intercompany net sales................ 16,407 211,153 (227,560) -
--------- --------- -------- --------
Total net sales....................... 310,709 236,104 (227,560) 319,253
--------- --------- -------- --------
Costs and expenses:
Cost of products sold............... 246,219 211,273 (227,560) 229,932
Selling, general and administrative. 51,438 17,290 68,728
Transition service agreement
(income) expense.................. 25 (25) -
--------- --------- -------- --------
Total costs and expenses.............. 297,682 228,538 (227,560) 298,660
--------- --------- -------- --------
Operating income...................... 13,027 7,566 - 20,593
Equity in earnings
of subsidiaries..................... 7,888 - (7,888) -
Intercompany licensing income
(expense), net...................... (8,829) 8,829 -
Interest expense...................... (9,582) (4,164) (13,746)
Other income (expense), net........... (2,378) 94 (2,284)
--------- --------- -------- --------
Income before income taxes............ 126 12,325 (7,888) 4,563
Income tax (provision) benefit........ 2,794 (4,437) (1,643)
--------- --------- -------- --------
Net income............................ $ 2,920 $ 7,888 $ (7,888) $ 2,920
========= ========= ======== ========
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
December 31, 2001
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiary inations Consolidated
--------- ------------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents............... $ 133 $ 46,254 $ - $ - $ 46,387
Accounts receivable, trade, net......... 10,726 12,764 - 23,490
Accounts receivable, other.............. 5,005 1,827 32,937 39,769
Inventories............................. 63,077 39,168 - 102,245
Other current assets.................... 1,487 2,403 - 3,890
--------- --------- -------- --------- --------
Total Current Assets.................. 80,428 102,416 32,937 - 215,781
Investment in subsidiaries................ 379,589 - - (379,589) -
Intercompany loans including accrued
interest................................ 81,781 (81,781) - -
Due from(to)subsidiaries, net............. (204,934) 200,863 4,071 -
Property, plant and equipment, net........ 36,466 315,601 - 352,067
Excess of cost over net assets of
businesses acquired, net................ 40,080 23,214 - 63,294
Deferred income tax benefits.............. 32,924 - - 32,924
Tax receivable from parent corporations... 9,000 - - 9,000
Other noncurrent assets................... 16,654 16,605 - 33,259
--------- --------- -------- --------- --------
Total Assets.............................. $ 471,988 $ 576,918 $ 37,008 $(379,589) $706,325
========= ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt.... $ - $ 5,556 $ - $ - $ 5,556
Accounts payable........................ 19,393 38,842 - 58,235
Payable to related parties.............. 1,296 7,614 - 8,910
Accrued liabilities..................... 23,333 20,215 - 43,548
Reserve for product warranty claims..... 14,900 - - 14,900
--------- --------- -------- --------- --------
Total Current Liabilities............. 58,922 72,227 - - 131,149
Long-term debt less current maturities.... 438,374 161,522 - 599,896
Reserve for product warranty claims....... 22,358 383 - 22,741
Other liabilities......................... 13,973 205 - 14,178
--------- --------- -------- --------- --------
Total Liabilities......................... 533,627 234,337 - - 767,964
Total Stockholders' Equity (Deficit)...... (61,639) 342,581 37,008 (379,589) (61,639)
--------- --------- -------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit) ..................... $ 471,988 $ 576,918 $ 37,008 $(379,589) $706,325
========= ========= ======== ========= ========
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
March 31, 2002
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiary inations Consolidated
--------- ------------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents............... $ 14 $ 15,485 $ - $ - $ 15,499
Accounts receivable, trade, net......... 9,574 16,804 - 26,378
Accounts receivable, other.............. 1,858 1,765 81,266 84,889
Inventories............................. 74,362 37,178 - 111,540
Other current assets.................... 417 4,554 - 4,971
--------- -------- -------- --------- --------
Total Current Assets.................. 86,225 75,786 81,266 - 243,277
Investment in subsidiaries................ 434,280 - - (434,280) -
Intercompany loans including accrued
interest................................ 82,657 (82,657) - -
Due from(to)subsidiaries, net............. (255,508) 252,962 2,546 -
Property, plant and equipment, net........ 36,354 311,877 - 348,231
Excess of cost over net assets of
businesses acquired, net................ 40,080 23,214 - 63,294
Deferred income tax benefits.............. 31,544 - - 31,544
Tax receivable from parent corporations... 9,000 - - 9,000
Other noncurrent assets................... 14,640 16,524 - 31,164
--------- --------- -------- --------- --------
Total Assets.............................. $ 479,272 $ 597,706 $ 83,812 $(434,280) $726,510
========= ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt.... $ - $ 5,662 $ - $ - $ 5,662
Accounts payable........................ 27,263 39,631 - 66,894
Payable to related parties.............. 2,277 15,038 - 17,315
Accrued liabilities..................... 19,998 26,400 - 46,398
Reserve for product warranty claims..... 14,900 - - 14,900
--------- --------- -------- --------- --------
Total Current Liabilities............. 64,438 86,731 - - 151,169
Long-term debt less current maturities.... 438,503 160,143 - 598,646
Reserve for product warranty claims....... 21,577 167 - 21,744
Other liabilities......................... 13,501 197 - 13,698
--------- --------- -------- --------- --------
Total Liabilities......................... 538,019 247,238 - - 785,257
Total Stockholders' Equity (Deficit)...... (58,747) 350,468 83,812 (434,280) (58,747)
--------- --------- -------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit) ..................... $ 479,272 $ 597,706 $ 83,812 $(434,280) $726,510
========= ========= ======== ========= ========
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Quarter Ended April 1, 2001
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
-------- ------------ ----------- ------------
Cash and cash equivalents, beginning of period....... $ 9,741 $ 73,006 $ - $ 82,747
-------- --------- --------- --------
Cash provided by (used in) operating activities:
Net income (loss).................................... (9,733) 5,227 (4,506)
Adjustments to reconcile net income(loss) to net
cash provided by (used in) operating activities:
Depreciation..................................... 677 7,963 8,640
Goodwill and other amortization.................. 663 180 843
Deferred income taxes............................ (2,925) - (2,925)
Noncash interest charges......................... 891 250 1,141
Increase in working capital items.................... (3,299) (15,423) (49,257) (67,979)
Decrease in product warranty claims.................. (2,026) (893) (2,919)
Proceeds from sales of accounts receivable........... 9,550 - 9,550
Change in net receivable from/payable to
related parties/parent corporations................ (10,060) (33,651) 49,257 5,546
Other, net........................................... 57 (697) (640)
-------- --------- --------- --------
Net cash provided by (used in) operating activities.. (16,205) (37,044) - (53,249)
-------- --------- --------- --------
Cash provided by (used in) investing activities:
Capital expenditures............................... (29) (2,404) (2,433)
-------- --------- --------- --------
Net cash used in investing activities................ (29) (2,404) - (2,433)
-------- --------- --------- --------
Cash provided by (used in) financing activities:
Increase in borrowings under revolving
credit facility.................................. 7,000 - 7,000
Repayments of long-term debt....................... (55) (3,096) (3,151)
Financing fees and expenses........................ (438) (392) (830)
-------- --------- --------- ---------
Net cash provided by (used in) financing activities.. 6,507 (3,488) - 3,019
-------- --------- --------- ---------
Net change in cash and cash equivalents.............. (9,727) (42,936) - (52,663)
-------- --------- --------- ---------
Cash and cash equivalents, end of period............. $ 14 $ 30,070 $ - $ 30,084
======== ========= ========= =========
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Quarter Ended March 31, 2002
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
--------- ------------ ---------- ------------
Cash and cash equivalents, beginning of period....... $ 133 $ 46,254 $ - $ 46,387
--------- --------- --------- --------
Cash provided by (used in) operating activities:
Net income(loss)..................................... (4,968) 7,888 2,920
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation..................................... 593 8,787 9,380
Goodwill and other amortization.................. 472 - 472
Deferred income taxes............................ 1,380 - 1,380
Noncash interest charges......................... 879 331 1,210
(Increase) decrease in working capital items......... (16,598) 2,835 (48,329) (62,092)
Decrease in product warranty claims.................. (781) (216) (997)
Proceeds from sale of accounts receivable............ 15,217 - 15,217
Change in net receivable from/payable to
related parties/parent corporations................ 3,876 (43,800) 48,329 8,405
Other, net........................................... 525 (165) 360
--------- --------- --------- --------
Net cash provided by (used in) operating activities.. 595 (24,340) - (23,745)
--------- --------- --------- --------
Cash provided by (used in) investing activities:
Capital expenditures............................... (473) (5,076) (5,549)
--------- --------- --------- --------
Net cash used in investing activities................ (473) (5,076) - (5,549)
--------- --------- --------- --------
Cash provided by (used in) financing activities:
Repayments of long-term debt....................... - (1,353) (1,353)
Financing fees and expenses........................ (213) - (213)
Loan to parent corporation......................... (28) - (28)
--------- --------- --------- --------
Net cash used in financing activities................ (241) (1,353) - (1,594)
--------- --------- --------- --------
Net change in cash and cash equivalents.............. (119) (30,769) - (30,888)
--------- --------- --------- --------
Cash and cash equivalents, end of period............. $ 14 $ 15,485 $ - $ 15,499
========= ========= ========= ========
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - First Quarter 2002 Compared With
First Quarter 2001
We recorded net income in the first quarter of 2002 of $2.9 million
compared with a net loss of $4.5 million in the first quarter of 2001. The
improved results in the first quarter of 2002 were primarily due to higher net
sales and lower manufacturing and raw material costs together with lower
interest expense.
Net sales for the first quarter of 2002 were $319.3 million, a 20.5%
increase over last year's net sales of $265.0 million, with the increase
primarily due to net sales gains in residential roofing products, partially
offset by decreased net sales in commercial roofing products. The increase in
net sales of residential roofing products reflected higher unit volumes and
higher average selling prices, while the decline in net sales of commercial
roofing products was attributable to lower unit volumes and lower average
selling prices.
Operating income in the first quarter of 2002 was $20.6 million
compared with $9.5 million in the first quarter of 2001. The increase in
operating income was primarily attributable to higher net sales of residential
roofing products and lower manufacturing and raw material costs, partially
offset by higher selling, general and administrative expenses and lower net
sales of commercial roofing products. As a result of the initial adoption of
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets", goodwill amortization, which amounted to $0.5 million
in the first quarter of 2001, is no longer being recorded in the first quarter
of 2002.
Interest expense for the first quarter of 2002 decreased to $13.7
million from $15.2 million for the same period in 2001, primarily due to lower
average borrowings and a lower average interest rate. Other expense net, was
$2.3 million for the first quarter of 2002 compared with $1.4 million for the
same period in 2001.
Liquidity and Financial Condition
Net cash outflow during the first quarter of 2002 was $29.3 million,
before financing activities, and included the use of $23.7 million of cash for
operations and the reinvestment of $5.5 million for capital programs.
Cash invested in additional working capital totaled $62.1 million
during the first quarter of 2002, primarily reflecting seasonal increases in
accounts receivable of $63.2 million, including a $63.5 million increase in the
receivable from the third party which purchases certain of our trade accounts
receivable, and $9.3 million in inventories, partially offset by a $11.5 million
increase in accounts payable and accrued liabilities. The net cash used for
operating activities also included $15.2 million of net proceeds from the sale
of accounts receivable to a third party in connection with our Accounts
Receivable Securitization Agreement and a $8.4 million net increase in the
payable to related parties/parent corporations.
16
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Net cash used in financing activities totaled $1.6 million during the
first quarter of 2002, reflecting $1.4 million in repayments of long-term debt
and $0.2 million in financing fees and expenses.
As a result of the foregoing factors, cash and cash equivalents
decreased by $30.9 million during the first quarter of 2002 to $15.5 million.
See Note 2 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. 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 forward-looking statements to reflect subsequent events or
circumstances. No assurances can be given that projected results or events will
be achieved.
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." There were no material
changes in such information as of March 31, 2002 and there was no hedging
activity in the quarter ended March 31, 2002.
17
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As of March 31, 2002, 1,900 alleged asbestos-related bodily injury
claims relating to the inhalation of asbestos fiber are pending against Building
Materials Corporation of America. See Note 2 to Consolidated Financial
Statements above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) No Reports on Form 8-K were filed during the quarter ended
March 31, 2002.
18
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
BUILDING MATERIALS CORPORATION OF AMERICA
BUILDING MATERIALS MANUFACTURING CORPORATION
DATE: May 13, 2002 BY: /s/John F. Rebele
----------------- ---------------------------------------
John F. Rebele
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
DATE: May 13, 2002 BY: /s/James T. Esposito
----------------- ---------------------------------------
James T. Esposito
Vice President and Controller
(Principal Accounting Officer)
19
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant listed below has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
BUILDING MATERIALS INVESTMENT CORPORATION
DATE: May 13, 2002 BY: /s/John F. Rebele
----------------- ---------------------------------------
John F. Rebele
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
20