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 4, 2004
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 or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1361 ALPS ROAD, WAYNE, NEW JERSEY 07470
(Address of Principal Executive Offices) (Zip Code)
(973) 628-3000
(Registrant's telephone number, including area code)
NONE
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES / / NO /X/
As of May 18, 2004, 1,015,010 shares of Class A Common Stock, $.001 par value of
the registrant were outstanding. There is no trading market for the common stock
of the registrant. As of May 18, 2004, each of the additional registrants had
the number of shares outstanding which is shown on the table below. There is no
trading market for the common stock of the additional registrants. As of May 18,
2004, no shares of the registrant or the additional registrants were held by
non-affiliates.
ADDITIONAL REGISTRANTS
Address, including zip code
and telephone number,
Exact name of State or other No. of including area code, of
registrant as jurisdiction of Shares Commission File No./I.R.S. registrant's principal
specified in its charter incorporation or organization Outstanding Employer 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 INCOME (UNAUDITED)
FIRST QUARTER ENDED
-------------------------
MARCH 30, APRIL 4,
2003 2004
--------- ---------
(THOUSANDS)
Net sales...................................... $338,938 $391,982
--------- ---------
Costs and expenses:
Cost of products sold........................ 245,944 274,036
Selling, general and administrative.......... 72,342 86,060
--------- ---------
Total costs and expenses................... 318,286 360,096
--------- ---------
Operating income............................... 20,652 31,886
Interest expense............................... (13,456) (14,155)
Other expense, net............................. (1,622) (784)
--------- ---------
Income before income taxes..................... 5,574 16,947
Income tax expense............................. (2,007) (6,313)
--------- ---------
Net income..................................... $ 3,567 $ 10,634
========= =========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
3
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, APRIL 4,
ASSETS 2003 2004
---------- ----------
Current Assets:
Cash and cash equivalents........................ $ 2,880 $ 11,732
Accounts receivable, trade, less allowance
of $1,363 and $1,398 in 2003 and
2004,respectively........................... 188,231 272,175
Accounts receivable, other....................... 5,864 5,248
Tax receivable from parent corporations.......... 7,044 2,244
Inventories, net................................. 135,960 168,072
Other current assets............................. 5,002 7,397
---------- ----------
Total Current Assets........................... 344,981 466,868
Property, plant and equipment, net................. 342,216 339,895
Goodwill, net of accumulated amortization
of $16,370 in 2003 and 2004, respectively........ 63,294 63,294
Other noncurrent assets............................ 31,989 30,984
---------- ----------
Total Assets....................................... $ 782,480 $ 901,041
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt............. $ 2,504 $ 2,550
Accounts payable................................. 92,849 90,228
Payable to related parties....................... 9,074 13,474
Loan payable to parent corporation............... 52,840 52,840
Accrued liabilities.............................. 63,096 65,385
Reserve for product warranty claims.............. 14,900 14,900
---------- ----------
Total Current Liabilities........................ 235,263 239,377
---------- ----------
Long-term debt less current maturities............. 545,693 653,137
---------- ----------
Reserve for product warranty claims................ 17,072 17,222
---------- ----------
Deferred income tax liabilities.................... 3,308 4,571
---------- ----------
Other liabilities.................................. 23,212 23,192
---------- ----------
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; no shares issued.... - -
Loans receivable from parent corporation......... (55,587) (55,611)
Retained earnings................................ 18,696 24,330
Accumulated other comprehensive loss............. (5,178) (5,178)
---------- ----------
Total Stockholders' Equity (Deficit) .......... (42,068) (36,458)
---------- ----------
Total Liabilities and Stockholders'
Equity (Deficit)................................ $ 782,480 $ 901,041
========== ==========
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)
FIRST QUARTER ENDED
---------------------------
MARCH 30, APRIL 4,
2003 2004
---------- ----------
(THOUSANDS)
Cash and cash equivalents, beginning of period......... $ 96,173 $ 2,880
---------- ----------
Cash provided by (used in) operating activities:
Net income........................................... 3,567 10,634
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation..................................... 9,462 10,019
Amortization..................................... 506 576
Deferred income taxes............................ 1,825 6,063
Noncash interest charges, net.................... 1,299 1,388
Increase in working capital items.................... (75,749) (118,167)
Increase (decrease) in reserve for product
warranty claims..................................... (103) 150
Proceeds from sale of accounts receivable............ 9,569 -
Increase in other assets............................. (569) (786)
Increase (decrease) in other liabilities............. 1,292 (10)
Change in net receivable from/payable to related
parties/parent corporations........................ 4,253 4,400
Other, net........................................... 188 84
---------- ----------
Net cash used in operating activities.................. (44,460) (85,649)
---------- ----------
Cash provided by (used in) investing activities:
Capital expenditures................................. (7,056) (7,782)
---------- ----------
Net cash used in investing activities.................. (7,056) (7,782)
---------- ----------
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt............. - 173,000
Repayments of long-term debt......................... (944) (65,651)
Distributions to parent corporations................. (15) -
Dividend to parent corporation....................... - (5,000)
Loan to parent corporation........................... (25) (24)
Financing fees and expenses.......................... (150) (42)
---------- ----------
Net cash provided by (used in) financing activities.... (1,134) 102,283
---------- ----------
Net change in cash and cash equivalents................ (52,650) 8,852
---------- ----------
Cash and cash equivalents, end of period............... $ 43,523 $ 11,732
========== ==========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized of $129
and $217 in 2003 and 2004, respectively)........... $ 12,289 $ 12,026
Income taxes (including taxes paid pursuant
to the Tax Sharing Agreement)..................... 79 402
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 (UNAUDITED)
Building Materials Corporation of America ("BMCA" or 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 April 4, 2004, and the results of operations and cash flows
for the first quarter ended March 30, 2003 and April 4, 2004, respectively, each
period beginning on January 1st. 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, 2003 (the "2003 Form 10-K").
NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board ("FASB")
issued a revision to Statement of Financial Accounting Standards ("SFAS")No.
132, "Employer's Disclosures About Pensions and Other Postretirement Benefits,"
("SFAS No. 132") which revises employers' disclosures about pension plans and
other postretirement benefit plans. The revised SFAS No. 132 requires
disclosures in addition to those in the original SFAS No. 132 related to the
assets, obligations, cash flows and net periodic benefit cost of defined pension
plans and other defined benefit postretirement plans, including interim
disclosures regarding components of net periodic benefit costs recognized during
interim periods. At April 4, 2004, the Company has adopted the interim
disclosure provisions of SFAS No. 132. See Note 4.
In December 2003, the FASB issued FASB Interpretation No. 46 (revised
December 2003), "Consolidation of Variable Interest Entities," ("FIN 46R"),
which addresses how a business enterprise should evaluate whether it has a
controlling financial interest in an entity through means other than voting
rights and accordingly should consolidate the entity. FIN 46R replaces FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities," ("FIN
46"), which was issued in January 2003. The Company is required to apply FIN 46R
to variable interests in variable interest entities created after December 31,
2003. At April 4, 2004, the Company does not have an interest in a variable
interest entity, therefore, FIN 46R does not have an impact on its financial
condition or results of operations.
6
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 2. INVENTORIES
Inventories consist of the following:
DECEMBER 31, APRIL 4,
2003 2004
--------- ---------
(THOUSANDS)
Finished goods............................ $ 89,684 $ 119,930
Work-in process........................... 12,499 14,855
Raw materials and supplies................ 39,208 38,918
--------- ---------
Total..................................... 141,391 173,703
Less LIFO reserve......................... (5,431) (5,631)
--------- ----------
Inventories............................... $ 135,960 $ 168,072
========= ==========
NOTE 3. WARRANTY CLAIMS
The Company provides certain limited warranties covering most of its
residential roofing products for periods generally ranging from 20 to 40 years,
with lifetime limited warranties on certain specialty shingle products. The
Company also offers certain limited warranties of varying duration covering most
of its commercial roofing products. Most of the Company's specialty building
products and accessories provide limited warranties for periods generally
ranging from 5 to 10 years, with lifetime limited warranties on certain
products.
The reserve for product warranty claims consists of the following for
the first quarter ended March 30, 2003 and April 4, 2004, respectively:
MARCH 30, APRIL 4,
2003 2004
--------- ---------
(THOUSANDS)
Beginning balance................... $ 33,287 $ 31,972
Charged to cost of products sold.... 4,336 5,211
Payments/deductions................. (4,439) (5,061)
--------- ---------
Ending balance...................... $ 33,184 $ 32,122
========= =========
7
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED)
NOTE 4. BENEFIT PLANS
Defined Benefit Plans
The Company provides non-contributory defined benefit retirement
plans for certain hourly and salaried employees (the "Retirement Plans").
Benefits under these plans are based on stated amounts for each year of service.
The Company's funding policy is consistent with the minimum funding requirements
of the Employee Retirement Income Security Act of 1974.
The Company's net periodic pension cost for the Retirement Plans
included the following components for the first quarter ended March 30, 2003 and
April 4, 2004, respectively:
MARCH 30, APRIL 4,
2003 2004
--------- ---------
(THOUSANDS)
Service cost.............................. $ 300 $ 349
Interest cost............................. 452 484
Expected return on plan assets............ (638) (672)
Amortization of unrecognized prior
service cost.............................. 9 9
Amortization of net losses from
earlier periods........................... 48 73
------ -------
Net periodic pension cost................. $ 171 $ 243
====== =======
At April 4, 2004 the Company does not expect to make any pension
contribution to the Retirement Plans in 2004, which is consistent with its
expectations at December 31, 2003.
Postretirement Medical and Life Insurance
The Company generally does not provide postretirement medical and
life insurance benefits, although it subsidizes such benefits for certain
employees and certain retirees. Such subsidies were reduced or ended as of
January 1, 1997.
8
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 4. BENEFIT PLANS - (CONTINUED)
Net periodic postretirement benefit cost included the following
components for the first quarter ended March 30, 2003 and April 4, 2004,
respectively:
MARCH 30, APRIL 4,
2003 2004
-------- --------
(THOUSANDS)
Service cost.............................. $ 31 $ 35
Interest cost............................. 77 76
Amortization of unrecognized prior
service cost.............................. (24) (24)
Amortization of net gains from
earlier periods........................... (65) (58)
----- ------
Net periodic postretirement benefit cost.. $ 19 $ 29
===== ======
At April 4, 2004 the Company expects to contribute approximately $0.3
million to the postretirement medical and life insurance plan in 2004, which is
consistent with its expectations at December 31, 2003.
NOTE 5. LONG-TERM INCENTIVE PLAN
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" ("SFAS No. 148"), an
amendment of FASB Statement No. 123 "Accounting for Stock-Based Compensation"
("SFAS No. 123"). SFAS No. 148 provides alternative methods of transition for
any entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation. It also amends the disclosure provisions
of SFAS No. 123 to require prominent disclosures about the effects on reported
net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. SFAS No. 148 also amends Accounting
Principles Board Opinion No. 28 "Interim Financial Reporting" ("APB No. 28"), to
require disclosures about those effects in interim financial information
beginning with the Company's first quarter ended March 30, 2003. As of March 30,
2003, the Company has adopted the additional interim disclosure provisions of
SFAS 148 as it relates to its 2001 Long-Term Incentive Plan. Compensation
expense for the Company's incentive units was $0.7 and $1.3 million for the
first quarter ended March 30, 2003 and April 4, 2004, respectively. The
Company's pro forma net income under SFAS No. 123 would have been the same as
actual net income.
9
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 6. 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 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 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 BMCA
Holdings Corporation's common stock and its indirect holdings of the Company's
common stock. Such action could result in a change of control of the Company. In
addition, those creditors may seek to file Asbestos Claims against the Company
(with approximately 1,900 alleged Asbestos Claims having been filed against the
Company as of April 4, 2004). The Company believes that it will not sustain any
liability in connection with these or any other asbestos-related claims. 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 or prosecuting an Asbestos Claim against the Company. By
oral opinion, on June 22, 2001, and written order entered February 22, 2002, the
court converted the temporary restraints into a preliminary injunction,
prohibiting the bringing or prosecution of any such Asbestos Claim against the
Company. On February 7, 2001, G-I Holdings filed an action in the United States
Bankruptcy Court for the District of New Jersey seeking a declaratory judgment
that BMCA has no successor liability for Asbestos Claims against G-I Holdings
and that it is not the alter ego of G-I Holdings (the "BMCA Action"). On May 13,
2003 the United States District Court for the District of New Jersey overseeing
the G-I Holdings' Bankruptcy Court withdrew the reference of the BMCA Action
from the Bankruptcy Court, and this matter will be heard by the District Court
directly. The BMCA Action is in a pretrail discovery stage and no trial date has
been set by the court. As a result, it is not possible to predict the outcome of
this litigation although the Company believes its claims are meritorious. While
the Company cannot predict whether any additional Asbestos 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 it has asbestos-related liability, although there can be no assurances in
this regard.
10
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 6. CONTINGENCIES - (CONTINUED)
On or about February 8, 2001, a creditors' committee established in
G-I Holdings' bankruptcy case filed a complaint in the United States Bankruptcy
Court, 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 plaintiffs also filed for interim relief absent the granting of
their requested relief described above. On March 21, 2001, the bankruptcy court
denied plaintiffs' application for interim relief. In November 2002, the
creditors' committee, joined in by the legal representative of future demand
holders, filed a motion for appointment of a trustee in the G-I Holdings'
bankruptcy. In December 2002, the bankruptcy court denied the motion. The
creditors' committee, appealed the ruling to the United States District Court,
which denied the appeal on June 27, 2003. The creditors' committee has appealed
the denial to the Third Circuit Court of Appeals, which matter remains pending.
On February 27, 2004, the creditors' committee, joined in by the
legal representative, filed a motion to modify the preliminary injunction and to
seek authority by the bankruptcy court to avoid, on various grounds, certain
liens granted in connection with the financing obtained by the Company in
December, 2000. G-I Holdings and the Company opposed this motion, a hearing on
the motion was held by the bankruptcy court on March 29, 2004 and the parties
await a decision by the court.
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Notes 5, 12, 17 and 18 to
consolidated financial statements contained in the Company's 2003 Form 10-K.
Environmental Litigation
The Company, together with other companies, is a party to a variety
of proceedings and lawsuits involving environmental matters under the
Comprehensive Environmental Response Compensation and Liability Act, and similar
state laws, in which recovery is sought for the cost of cleanup of contaminated
sites or remedial obligations are imposed, a number of which are in the early
stages or have been dormant for protracted periods. The Company refers to these
proceedings and lawsuits as "Environmental Claims." 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.
Other Litigation
On or about February 17, 2004, litigation was commenced against the
Company in the United States District Court for the Eastern district of
Pennsylvania by CertainTeed Corporation alleging patent infringement in
11
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 6. CONTINGENCIES - (CONTINUED)
connection with certain of its products representing less than 5% of its net
sales. The Company intends to defend itself vigorously in this matter, has
denied CertainTeed's claims and has filed counterclaims against CertainTeed for
patent infringement, violations of the antitrust laws and for trade libel.
Although this matter is in its preliminary stages and there can be no assurances
made, the Company believes that CertainTeed's claims are without merit and will
not have a material adverse effect on the Company.
For a further discussion with respect to the history of environmental
matters and other litigation, reference is made to Notes 2 and 18 to
consolidated financial statements contained in the Company's 2003 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 arising out of the surfactants partnership, 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 IRS filed a proof of claim with respect to such deficiency against G-I
Holdings in the G-I Holdings' bankruptcy. If such 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. G-I Holdings has
filed an objection to the proof of claim. 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.
12
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 7. RELATED PARTY TRANSACTIONS
The Company makes loans to and borrows from its parent corporations
from time to time at prevailing market rates. At April 4, 2004 BMCA Holdings
Corporation owed the Company $55.6 million, including interest of $0.3 million,
and the Company owed BMCA Holdings Corporation $52.8 million. Interest income on
the Company's loans to BMCA Holdings Corporation amounted to $0.7 million during
the first quarter ended April 4, 2004. Interest expense on the Company's loans
from BMCA Holdings Corporation amounted to $0.7 million during the first quarter
ended April 4, 2004.
NOTE 8. SUBSEQUENT EVENT
On May 7, 2004, the Company acquired certain assets of a
manufacturing facility located in Quakertown, Pennsylvania from Atlas Roofing
Corporation at a purchase price of $23.2 million. The Quakertown manufacturing
facility provides the Company with immediate production capacity to keep pace
with the growing demand for its products in the North American markets, plus the
potential for additional capacity expansion, as well as saturated felt products.
With the acquisition of this manufacturing facility, the Company has decided it
will not construct the new shingle manufacturing facility in the Northeast, the
anticipated construction of which had been announced on February 9, 2004.
NOTE 9. GUARANTOR FINANCIAL INFORMATION
At April 4, 2004, all of the Company's subsidiaries are guarantors
under the Company's $350.0 million Senior Secured Credit Facility, 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. This
financial information should be read in conjunction with the consolidated
financial statements and other notes related thereto. Separate financial
statements for the Company, the guarantor subsidiaries and the non-guarantor
subsidiary are not included herein, because management has determined that these
financial statements are not material to investors.
13
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 9. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FIRST QUARTER ENDED MARCH 30, 2003
(THOUSANDS)
(UNAUDITED)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------
Net Sales................................. $ 313,036 $ 25,902 $ - $ 338,938
Intercompany net sales.................... 18,173 239,876 (258,049) -
---------- ---------- ---------- ----------
Total net sales....................... 331,209 265,778 (258,049) 338,938
---------- ---------- ---------- ----------
Costs and expenses, net:
Cost of products sold................... 268,819 235,174 (258,049) 245,944
Selling, general and administrative..... 54,907 17,435 - 72,342
Transition service agreement
(income) expense...................... 25 (25) - -
---------- ---------- ---------- ----------
Total costs and expenses, net......... 323,751 252,584 (258,049) 318,286
---------- ---------- ---------- ----------
Operating income.......................... 7,458 13,194 - 20,652
Equity in earnings of subsidiaries........ 14,711 - (14,711) -
Intercompany licensing income
(expense), net.......................... (13,248) 13,248 - -
Interest expense.......................... (9,860) (3,596) - (13,456)
Other income (expense), net............... (1,762) 140 - (1,622)
---------- ---------- ---------- ----------
Income (loss) before income taxes......... (2,701) 22,986 (14,711) 5,574
Income tax (expense) benefit.............. 6,268 (8,275) - (2,007)
---------- ---------- ---------- ----------
Net income................................ $ 3,567 $ 14,711 $ (14,711) $ 3,567
========== ========== ========== ==========
14
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
NOTE 9. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FIRST QUARTER ENDED APRIL 4, 2004
(THOUSANDS)
(UNAUDITED)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------
Net Sales................................ $ 366,653 $ 25,329 $ - $ 391,982
Intercompany net sales................... 19,798 269,604 (289,402) -
---------- ---------- ---------- ----------
Total net sales...................... 386,451 294,933 (289,402) 391,982
---------- ---------- ---------- ----------
Costs and expenses, net:
Cost of products sold.................. 302,656 260,782 (289,402) 274,036
Selling, general and administrative.... 66,259 19,801 - 86,060
Transition service agreement
(income) expense..................... 25 (25) - -
---------- ---------- ---------- ----------
Total costs and expenses, net........ 368,940 280,558 (289,402) 360,096
---------- ---------- ---------- ----------
Operating income......................... 17,511 14,375 - 31,886
Equity in earnings of subsidiaries....... 16,885 - (16,885) -
Intercompany licensing income
(expense), net......................... (15,459) 15,459 - -
Interest expense......................... (11,191) (2,964) - (14,155)
Other income (expense), net.............. (823) 39 - (784)
---------- ---------- ---------- ----------
Income before income taxes............... 6,923 26,909 (16,885) 16,947
Income tax (expense) benefit............. 3,711 (10,024) - (6,313)
---------- ---------- ---------- ----------
Net income............................... $ 10,634 $ 16,885 $ (16,885) $ 10,634
========== ========== ========== ==========
15
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED)
NOTE 9. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2003
(THOUSANDS)
(UNAUDITED)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents............... $ 8 $ 2,872 $ - $ 2,880
Accounts receivable, trade, net ........ 173,945 14,286 - 188,231
Accounts receivable, other ............. 5,115 749 - 5,864
Tax receivable from parent corporations. 7,044 - - 7,044
Inventories, net........................ 87,399 48,561 - 135,960
Other current assets.................... 2,434 2,568 - 5,002
---------- ---------- ---------- ----------
Total Current Assets.................. 275,945 69,036 - 344,981
Investment in subsidiaries................ 476,695 - (476,695) -
Intercompany loans including accrued
interest................................ 30,582 (30,582) - -
Due from (to) subsidiaries, net........... (335,690) 335,690 - -
Property, plant and equipment, net........ 40,769 301,447 - 342,216
Goodwill, net............................. 40,080 23,214 - 63,294
Other noncurrent assets................... 13,126 18,863 - 31,989
---------- ---------- ---------- ----------
Total Assets.............................. $541,507 $ 717,668 $(476,695) $ 782,480
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt.... $ - $ 2,504 $ - $ 2,504
Accounts payable........................ 43,331 49,518 - 92,849
Payable to related parties.............. 1,969 7,105 - 9,074
Loan payable to parent corporation...... 52,840 - - 52,840
Accrued liabilities..................... 23,511 39,585 - 63,096
Reserve for product warranty claims..... 14,900 - - 14,900
---------- ---------- ---------- ----------
Total Current Liabilities............. 136,551 98,712 - 235,263
Long-term debt less current maturities.... 404,297 141,396 - 545,693
Reserve for product warranty claims....... 16,407 665 - 17,072
Deferred income tax liabilities........... 3,308 - - 3,308
Other liabilities......................... 23,012 200 - 23,212
---------- ---------- ---------- ----------
Total Liabilities......................... 583,575 240,973 - 824,548
Total Stockholders' Equity (Deficit)...... (42,068) 476,695 (476,695) (42,068)
---------- ---------- ---------- ----------
Total Liabilities and Stockholders'
Equity (Deficit) .................... $ 541,507 $ 717,668 $(476,695) $ 782,480
========== ========== ========== ==========
16
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED)
NOTE 9. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
APRIL 4, 2004
(THOUSANDS)
(UNAUDITED)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents................ $ 3 $ 11,729 $ - $ 11,732
Accounts receivable, trade, net ......... 255,317 16,858 - 272,175
Accounts receivable, other .............. 4,596 652 - 5,248
Tax receivable from parent corporations.. 2,244 - - 2,244
Inventories, net......................... 116,858 51,214 - 168,072
Other current assets..................... 4,005 3,392 - 7,397
---------- ---------- ---------- ----------
Total Current Assets................... 383,023 83,845 - 466,868
Investment in subsidiaries................. 493,580 - (493,580) -
Intercompany loans including accrued
interest................................. 28,070 (28,070) - -
Due from (to) subsidiaries, net............ (344,140) 344,140 - -
Property, plant and equipment, net......... 41,128 298,767 - 339,895
Goodwill, net.............................. 40,080 23,214 - 63,294
Other noncurrent assets.................... 12,176 18,808 - 30,984
---------- ---------- ---------- ----------
Total Assets............................... $ 653,917 $ 740,704 $(493,580) $ 901,041
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt..... $ - $ 2,550 $ - $ 2,550
Accounts payable......................... 38,974 51,254 - 90,228
Payable to related parties............... 2,315 11,159 - 13,474
Loan payable to parent corporation....... 52,840 - - 52,840
Accrued liabilities...................... 25,122 40,263 - 65,385
Reserve for product warranty claims...... 14,900 - - 14,900
---------- ---------- ---------- ----------
Total Current Liabilities.............. 134,151 105,226 - 239,377
Long-term debt less current maturities..... 512,353 140,784 - 653,137
Reserve for product warranty claims........ 16,305 917 - 17,222
Deferred income tax liabilties............. 4,571 - - 4,571
Other liabilities.......................... 22,995 197 - 23,192
---------- ---------- ---------- ----------
Total Liabilities.......................... 690,375 247,124 - 937,499
Total Stockholders' Equity (Deficit)....... (36,458) 493,580 (493,580) (36,458)
---------- ---------- ---------- ----------
Total Liabilities and Stockholders'
Equity (Deficit) ..................... $ 653,917 $ 740,704 $(493,580) $ 901,041
========== ========== ========== ==========
17
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED)
NOTE 9. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FIRST QUARTER ENDED MARCH 30, 2003
(THOUSANDS)
(UNAUDITED)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
---------- ------------- ----------- -------------
Cash and cash equivalents, beginning of period...... $ 60 $ 96,113 $ - $ 96,173
---------- ---------- ---------- ----------
Cash provided by (used in) operating activities:
Net income (loss) ................................ (11,144) 14,711 - 3,567
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation.................................... 660 8,802 - 9,462
Amortization.................................... - 506 - 506
Deferred income taxes........................... 1,825 - - 1,825
Noncash interest charges, net................... 941 358 - 1,299
(Increase) decrease in working capital items...... (34,472) 4,776 (46,053) (75,749)
Increase (decrease) in reserve for product
warranty claims................................. (248) 145 - (103)
Proceeds from sale of accounts receivable......... 9,569 - - 9,569
(Increase)decrease in other assets................ (604) 35 - (569)
Increase (decrease) in other liabilities.......... 1,295 (3) - 1,292
Change in net receivable from/payable to
related parties/parent corporations............. 33,241 (75,041) 46,053 4,253
Other, net........................................ 12 176 - 188
---------- ---------- ---------- ----------
Net cash provided by (used in) operating
activities....................................... 1,075 (45,535) - (44,460)
---------- ---------- ---------- ----------
Cash provided by (used in) investing activities:
Capital expenditures.............................. (910) (6,146) - (7,056)
---------- ---------- ---------- ----------
Net cash used in investing activities............... (910) (6,146) - (7,056)
---------- ---------- ---------- ----------
Cash provided by (used in) financing activities:
Repayments of long-term debt...................... - (944) - (944)
Distributions to parent corporations.............. (15) - - (15)
Loan to parent corporation........................ (25) - - (25)
Financing fees and expenses....................... (150) - - (150)
---------- ---------- ---------- ----------
Net cash used in financing activities............... (190) (944) - (1,134)
---------- ---------- ---------- ----------
Net change in cash and cash equivalents............. (25) (52,625) - (52,650)
---------- ---------- ---------- ----------
Cash and cash equivalents, end of period............ $ 35 $ 43,488 $ - $ 43,523
========== ========== ========== ==========
18
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED)
NOTE 9. GUARANTOR FINANCIAL INFORMATION - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FIRST QUARTER ENDED APRIL 4, 2004
(THOUSANDS)
(UNAUDITED)
Parent Guarantor
Company Subsidiaries Consolidated
--------- ------------ ------------
Cash and cash equivalents, beginning of period...... $ 8 $ 2,872 $ 2,880
--------- --------- ---------
Cash provided by (used in) operating activities:
Net income (loss)................................. (6,251) 16,885 10,634
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation.................................... 745 9,274 10,019
Amortization.................................... - 576 576
Deferred income taxes........................... 6,063 - 6,063
Noncash interest charges, net................... 1,027 361 1,388
Increase in working capital items................. (114,629) (3,538) (118,167)
Increase (decrease) in reserve for product
warranty claims................................. (102) 252 150
(Increase) decrease in other assets............... 11 (797) (786)
Decrease in other liabilities..................... (7) (3) (10)
Change in net receivable from/payable to
related parties/parent corporations............. 11,308 (6,908) 4,400
Other, net........................................ (27) 111 84
--------- --------- ---------
Net cash provided by (used in) operating
activities ....................................... (101,862) 16,213 (85,649)
--------- --------- ---------
Cash provided by (used in) investing activities:
Capital expenditures.............................. (1,077) (6,705) (7,782)
--------- --------- ---------
Net cash used in investing activities............... (1,077) (6,705) (7,782)
--------- --------- ---------
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt.......... 173,000 - 173,000
Repayments of long-term debt...................... (65,000) (651) (65,651)
Dividend to parent corporation.................... (5,000) - (5,000)
Loan to parent corporation........................ (24) - (24)
Financing fees and expenses....................... (42) - (42)
--------- --------- ---------
Net cash provided by (used in) financing activities. 102,934 (651) 102,283
--------- --------- ---------
Net change in cash and cash equivalents............. (5) 8,857 8,852
--------- --------- ---------
Cash and cash equivalents, end of period............ $ 3 $ 11,729 $ 11,732
========= ========= =========
19
BUILDING MATERIALS CORPORATION OF AMERICA
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
There have been no significant changes to our Critical Accounting
Policies during the first quarter ended April 4, 2004. For a further discussion
on our Critical Accounting Policies, reference is made to Management's
Discussion and Analysis of Financial Condition and Results of Operations,
"Critical Accounting Policies" in our annual report on Form 10-K for the fiscal
year ended December 31, 2003, which we refer to as the 2003 Form 10-K.
RESULTS OF OPERATIONS
First Quarter 2004 Compared With
First Quarter 2003
We recorded net income in the first quarter of 2004 of $10.6 million
compared with net income of $3.6 million in the first quarter of 2003. The
increase in first quarter of 2004 net income was primarily attributable to
higher operating income, together with lower other expenses, partially offset by
higher interest expense.
Net sales for the first quarter of 2004 were $392.0 million, a 15.7%
increase over first quarter of 2003 net sales of $338.9 million, with the
increase primarily due to higher unit volumes and higher average selling prices
of premium residential and commercial roofing products.
Operating income in the first quarter of 2004 was $31.9 million
compared with $20.7 million in the first quarter of 2003, representing an
increase of 54.1%. Operating results were positively affected by higher net
sales of premium residential and commercial roofing products, partially offset
by higher selling, general and administrative expenses due to higher volume
related expenses and transportation costs.
Interest expense for the first quarter of 2004 increased to $14.2
million from $13.5 million for the same period in 2003, primarily due to higher
average borrowings partially offset by a lower average interest rate. Other
expense, net was $0.8 million for the first quarter of 2004 compared with $1.6
million for the same period in 2003, primarily due to a decline in financing
costs in connection with the termination of the Accounts Receivable
Securitization Agreement in July 2003.
LIQUIDITY AND FINANCIAL CONDITION
Cash Flows and Cash Position
Net cash outflow during the first quarter of 2004 from operating and
investing activities was $93.4 million, including the use of $85.6 million of
cash from operations and the reinvestment of $7.8 million for capital programs.
20
BUILDING MATERIALS CORPORATION OF AMERICA
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
Cash invested in additional working capital totaled $118.2 million
during the first quarter of 2004, reflecting an increase in total accounts
receivable of $83.3 million, due to increased operating performance and the
seasonality of our business, a $32.1 million increase in inventories to meet our
seasonal operating demands, a $2.4 million increase in other current assets, and
a $0.4 million decrease in accounts payable and accrued liabilities. The net
cash used for operating activities also included a $4.4 million net increase in
the payable to related parties/parent corporations.
Net cash provided by financing activities totaled $102.3 million
during the first quarter of 2004, including $173.0 million of proceeds from the
issuance of long-term debt related to 2004 year to date cumulative borrowings
under our $350.0 million Senior Secured Credit Facility. Financing activities
also included $65.7 million in repayments of long-term debt, of which $65.0
million related to 2004 year to date cumulative repayments under our $350.0
million Senior Secured Credit Facility. In addition, repayments of long-term
debt also included $0.6 million related to our Chester, South Carolina lease
obligation and $0.1 million related to our 10 1/2% Michigan City Note. In
addition, financing activities included a $5.0 million dividend to our parent
corporation.
Intercompany Transactions
We make loans to and borrow from, our parent corporations from time
to time at prevailing market rates. At April 4, 2004 BMCA Holdings Corporation
owed us $55.6 million, including interest of $0.3 million, and we owed BMCA
Holdings Corporation $52.8 million. Interest income on our loans to BMCA
Holdings Corporation amounted to $0.7 million during the first quarter ended
April 4, 2004. Interest expense on our loans from BMCA Holdings Corporation
amounted to $0.7 million during the first quarter ended April 4, 2004.
On February 25, 2004, we declared and paid a $5.0 million dividend to
our parent corporation.
As a result of the foregoing factors, cash and cash equivalents
increased by $8.9 million during the first quarter of 2004 to $11.7 million.
Contingencies
See Note 6 to Consolidated Financial Statements for information
regarding contingencies.
Economic Outlook
We do not believe that inflation has had an effect on our results of
operations during the first quarter of 2004. However, we cannot assure you that
our business will not be affected by inflation in the future, or by increases in
the cost of energy and asphalt purchases used in our manufacturing process
principally due to fluctuating oil prices.
21
BUILDING MATERIALS CORPORATION OF AMERICA
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
During the first quarter of 2004, the cost of asphalt continued to be
high relative to historical levels. Due to the strength of the Company's
manufacturing operations which allows us to use many types of asphalt together
with our ability to secure alternative sources of supply, we do not anticipate
that any future disruption in the supply of asphalt will have a material impact
on future net sales, although no assurances can be provided in that regard.
To mitigate these and other petroleum-based cost increases, we
announced and implemented multiple price increases during the first quarter of
2004. We will attempt to pass on future additional unexpected cost increases
from suppliers as needed; however, no assurances can be provided that these
price increases will be accepted in the marketplace.
Contractual Obligations
We have contracts with two different asphalt terminal suppliers where
asphalt imported from Venezuela or other suppliers is stored prior to its use at
our plants. These asphalt terminals are located at the Ports of Tampa, Florida
and Savannah, Georgia and are used to service our plants at those sites. We are
obligated to pay these suppliers for use of these terminals under these
contracts through 2008 and 2005, respectively. Monthly pricing is fixed and
includes capital improvements made at each asphalt terminal by its owner. No
changes have been made to these contracts during the first quarter ended April
4, 2004.
Other Matters
On May 7, 2004, we acquired certain assets of a manufacturing
facility located in Quakertown, Pennsylvania from Atlas Roofing Corporation at a
purchase price of $23.2 million. The Quakertown manufacturing facility provides
us with immediate production capacity to keep pace with the growing demand for
our products in the North American markets, plus the potential for additional
capacity expansion, as well as saturated felt products. With the acquisition of
this manufacturing facility, we have decided we will not construct the new
shingle manufacturing facility in the Northeast, the anticipated construction of
which had been announced on February 9, 2004.
New Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board, which we
refer to as FASB, issued a revision to Statement of Financial Accounting
Standards No. 132, "Employer's Disclosures About Pensions and Other
Postretirement Benefits," which we refer to as SFAS No. 132, which revises
employers' disclosures about pension plans and other postretirement benefit
plans. The revised SFAS No. 132 requires disclosures in addition to those in the
original SFAS No. 132 related to the assets, obligations, cash flows and net
periodic benefit cost of defined pension plans and other defined benefit
postretirement plans, including interim disclosures regarding components of net
periodic benefit costs recognized during interim periods. At April 4, 2004, we
have adopted the interim disclosure provisions of SFAS No. 132. See Note 4 to
Consolidated Financial Statements.
22
BUILDING MATERIALS CORPORATION OF AMERICA
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
In December 2003, the FASB issued FASB Interpretation No. 46 (revised
December 2003), "Consolidation of Variable Interest Entities," which we refer to
as FIN 46R, which addresses how a business enterprise should evaluate whether it
has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. FIN 46R replaces
FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," which
we refer to as FIN 46, which was issued in January 2003. We are required to
apply FIN 46R to variable interests in variable interest entities created after
December 31, 2003. At April 4, 2004, we do not have an interest in a variable
interest entity, therefore, FIN 46R does not have an impact on our financial
condition or results of operations.
* * *
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 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 similar words or
phrases. Similarly, statements that describe the Company's objectives, plans or
goals also are forward-looking statements. Our operations are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the relevant forward-looking statements. The
forward-looking statements included herein are made only as of the date of this
quarterly report on Form 10-Q and we undertake no obligation to publicly update
any forward-looking statements to reflect subsequent events or circumstances. We
cannot assure you 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 2003 Form 10-K for a
discussion of "Market-Sensitive Instruments and Risk Management." There were no
material changes in such information as of April 4, 2004 and there was no
hedging activity in the first quarter ended April 4, 2004.
23
BUILDING MATERIALS CORPORATION OF AMERICA
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: Our management, with the
participation of the Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of such period, our disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by us in the reports filed, furnished or submitted
under the Exchange Act.
Internal Control Over Financial Reporting: There were no significant
changes in our internal control over financial reporting identified in
management's evaluation during the first quarter of fiscal year 2004 that have
materially affected or are reasonably likely to materially affect our internal
control over financial reporting.
24
BUILDING MATERIALS CORPORATION OF AMERICA
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of April 4, 2004, approximately 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 6 to consolidated financial
statements above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 6 to the Amended and Restated Management Agreement,
dated as of January 1, 2004, by and among G-I Holdings Inc., Merick
Inc., International Specialty Products Inc., International Specialty
Holdings Inc., ISP Synthetic Elastomers LP, ISP Investco LLC, GAF
Broadcasting Company, Inc., Building Materials Corporation of America
and ISP Management Company, Inc. as assignee of ISP Chemco, Inc.
31.1 Rule 13a-14(a)/Rule 15d-14(a) Certification of the Chief Executive
Officer.
31.2 Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial
Officer.
32.1 Section 1350 Certification of Chief Executive Officer and Chief
Financial Officer
(b) The registrants filed a news release on Form 8-K dated February 26, 2004
regarding the results of operations for the quarterly period and year ended
December 31, 2003. The information set forth in Item 12 of this Form 8-K
was furnished to the Securities and Exchange Commission and not "filed"
pursuant to Section 18 of the Securities Exchange Act of 1934, as amended.
25
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 18, 2004 BY: /s/ John F. Rebele
----------------- ------------------------------
John F. Rebele
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
DATE: May 18, 2004 BY: /s/ James T. Esposito
----------------- ------------------------------
James T. Esposito
Vice President and Controller
(Principal Accounting Officer)
26
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 18, 2004 BY: /s/ John F. Rebele
----------------- ----------------------------
John F. Rebele
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
27