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 September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-20095
ATRIUM COMPANIES, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-2642488
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1341 W. MOCKINGBIRD LANE, SUITE 1200W, DALLAS, TEXAS 75247, (214) 630-5757
----------------------------------------------------------------------------
(Address of principal executive offices, including zip code
and telephone number, including area code)
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
--- ---
ATRIUM COMPANIES, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2000
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999......................3
Consolidated Statements of Operations for the Three Months Ended
September 30, 2000 and 1999.....................................................................4
Consolidated Statements of Operations for the Nine Months Ended
September 30, 2000 and 1999 ....................................................................5
Consolidated Statement of Stockholder's Equity for the Nine Months
Ended September 30, 2000........................................................................6
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999.....................................................................7
Notes to Consolidated Financial Statements...................................................8-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................14-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................21
Items 2, 3, 4 and 5 are not applicable
Item 6. Exhibits and Reports on Form 8-K...............................................................21
Signatures..............................................................................................21
Exhibit Index...........................................................................................22
2
ATRIUM COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents................................... $ 3,391 $1,294
Restricted cash............................................. 23,930 869
Equity securities - available for sale...................... - 111
Assets held for sale........................................ 460 -
Accounts receivable, net.................................... 57,037 59,213
Inventories................................................. 41,934 61,277
Prepaid expenses and other current assets................... 4,180 12,441
Deferred tax asset.......................................... 3,118 2,359
-------- --------
Total current assets..................................... 134,050 137,564
PROPERTY, PLANT AND EQUIPMENT, net............................... 32,816 35,165
GOODWILL, net.................................................... 261,986 287,873
DEFERRED FINANCING COSTS, net.................................... 16,338 17,607
DEFERRED TAX ASSET............................................... 12,460 -
OTHER ASSETS..................................................... 6,561 5,927
-------- --------
Total assets............................................. $464,211 $484,136
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of notes payable............................ $2,296 $2,297
Accounts payable............................................ 31,216 26,737
Accrued liabilities......................................... 30,694 25,055
-------- --------
Total current liabilities................................ 64,206 54,089
LONG-TERM LIABILITIES:
Notes payable............................................... 329,072 314,414
Deferred tax liability...................................... - 2,557
Other long-term liabilities................................. 2,748 3,056
-------- --------
Total long-term liabilities........................... 331,820 320,027
-------- --------
Total liabilities..................................... 396,026 374,116
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock $.01 par value, 3,000 shares authorized,
100 shares issued and outstanding........................ - -
Paid-in capital............................................. 114,951 109,624
Retained earnings (accumulated deficit)..................... (46,766) 398
Accumulated other comprehensive income (loss)............... - (2)
-------- --------
Total stockholder's equity............................ 68,185 110,020
-------- --------
Total liabilities and stockholder's equity...... $464,211 $484,136
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
3
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
-------- --------
NET SALES....................................................... $113,321 $133,812
COST OF GOODS SOLD.............................................. 91,784 91,268
-------- --------
Gross profit................................................ 21,537 42,544
-------- --------
OPERATING EXPENSES:
Selling, delivery, general and administrative expenses...... 32,240 29,763
Amortization expense........................................ 2,077 2,376
Special charges............................................. 125 18
-------- --------
34,442 32,157
-------- --------
Income (loss) from operations.......................... (12,905) 10,387
INTEREST EXPENSE................................................ 9,216 9,091
OTHER INCOME, net............................................... 607 719
-------- --------
Income (loss) before income taxes.......................... (21,514) 2,015
PROVISION (BENEFIT) FOR INCOME TAXES............................ (6,845) 1,349
-------- --------
NET INCOME (LOSS) .............................................. $(14,669) $666
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
4
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
-------- --------
NET SALES......................................................... $383,395 $366,184
COST OF GOODS SOLD................................................ 291,961 252,834
-------- --------
Gross profit.................................................. 91,434 113,350
-------- --------
OPERATING EXPENSES:
Selling, delivery, general and administrative expenses........ 96,025 78,199
Amortization expense.......................................... 6,687 6,324
Special charges............................................... 25,708 1,849
-------- --------
128,420 86,372
-------- --------
Income (loss) from operations............................ (36,986) 26,978
INTEREST EXPENSE.................................................. 26,945 19,790
OTHER INCOME, net................................................. 1,441 865
-------- --------
Income (loss) before income taxes and extraordinary charge... (62,490) 8,053
PROVISION (BENEFIT) FOR INCOME TAXES.............................. (15,326) 4,532
-------- --------
Income (loss) before extraordinary charge.................... (47,164) 3,521
EXTRAORDINARY CHARGE ON EARLY RETIREMENT
OF DEBT (net of income tax benefit of $1,170)..................... - 1,908
-------- --------
NET INCOME (LOSS) ................................................ $(47,164) $1,613
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
5
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENT OF
STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
RETAINED ACCUMULATED
COMMON STOCK EARNINGS OTHER TOTAL
----------------- PAID-IN (ACCUMULATED COMPREHENSIVE STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) INCOME (LOSS) EQUITY
------ ------ ------- ------------ ------------- -------------
Balance, December 31, 1999................... 100 $ - $109,624 $ 398 $ (2) $ 110,020
Other comprehensive income................. - - - - 2 2
Net contribution from Atrium Corporation... - - 5,327 - - 5,327
Net loss................................... - - - (47,164) - (47,164)
------ ------ -------- --------- -------- ---------
Balance, September 30, 2000.................. 100 $ - $114,951 $ (46,766) $ - $ 68,185
====== ====== ======== ========= ======== =========
The accompanying notes are an integral part of the consolidated
financial statements.
6
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2000 1999
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................................... $(47,164) $ 1,613
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:...................................................
Depreciation and amortization........................................ 11,416 10,792
Amortization of deferred financing costs............................. 1,754 1,184
Accretion of discount................................................ 123 56
Accretion of gain from interest rate collars......................... (245) -
Gain on sales of assets.............................................. (693) (71)
Special charge....................................................... 25,708 -
Gain on sale of equity securities.................................... (507) -
Deferred tax provision (benefit)..................................... (15,775) 1,467
Changes in assets and liabilities, net of acquisition in 1999: ......
Assets held for sale................................................ 460 -
Accounts receivable, net............................................ 1,733 (5,678)
Inventories......................................................... 18,423 (7,298)
Prepaid expenses and other current assets........................... 8,201 3,100
Accounts payable.................................................... (2,181) 8,561
Accrued liabilities................................................. 3,279 9,640
-------- ---------
Net cash provided by operating activities...................... 4,532 23,366
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.............................. (10,924) (11,368)
Proceeds from sales of assets........................................... 2,801 90
Transfer to restricted cash............................................. (23,930) -
Net proceeds from divestitures of Wing and Atrium Wood fixed assets..... 6,382 -
Payment for acquisition, net of cash acquired........................... - (94,709)
Proceeds from sale of equity securities................................. 620 -
Increase in other assets................................................ (3,441) (4,424)
-------- ---------
Net cash used in investing activities........................ (28,492) (110,411)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior subordinated notes..................... - 172,368
Net borrowings (payments) under revolving credit facility............... 16,230 (1,118)
Payment on senior subordinated notes.................................... - (29,070)
Payment on term loan B.................................................. - (15,000)
Scheduled principal payments on term loans B and C...................... (1,500) (1,500)
Distribution to Atrium Corporation ..................................... (173) (25,312)
Contribution from Atrium Corporation ................................... 5,500 -
Payments of other notes payable......................................... (233) (169)
Payments of other long-term liabilities................................. - (2,003)
Checks drawn in excess of bank balances................................. 6,659 (4,012)
Deferred financing costs................................................ (426) (7,139)
-------- ---------
Net cash provided by financing activities.................... 26,057 87,045
-------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................................... 2,097 -
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................... 1,294 -
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD..................................... $ 3,391 $ -
======== =========
The accompanying notes are an integral part of the consolidated
financial statements.
7
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION:
The unaudited consolidated financial statements of Atrium Companies, Inc.
(the "Company") for the three months and nine months ended September 30, 2000
and 1999, and financial position as of September 30, 2000 and December 31,
1999 have been prepared in accordance with generally accepted accounting
principles for interim financial reporting, the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
These consolidated financial statements and footnotes should be read in
conjunction with the Company's audited financial statements for the fiscal
years ended December 31, 1999, 1998 and 1997 included in the Company's Form
10-K as filed with the Securities and Exchange Commission on March 30, 2000.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the interim
financial information have been included. The results of operations for any
interim period are not necessarily indicative of the results of operations
for a full year.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" amended by
SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FAS No. 133--Amendment of FAS
No. 133" (combined "SFAS 133"). SFAS 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
SFAS 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the statement of
operations, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15, 2000 and
earlier application is permitted as of the beginning of any fiscal quarter
subsequent to June 15, 2000. SFAS 133 cannot be applied retroactively. SFAS
133 must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the Company's
election, before January 1, 1998).
The Company is in the process of quantifying the impact of adopting SFAS 133
on its financial statements and has not determined the timing of or method of
adoption of SFAS 133.
In December 1999, the Securities and Exchange Commission ("Commission")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") which provides guidance on revenue recognition
issues. In June 2000, the Commission issued Staff Accounting Bulletin No.
101B, "Second Amendment: Revenue Recognition in Financial Statements" which
delayed the implementation of SAB 101 until the fourth fiscal quarter of
fiscal years beginning after December 15, 1999. Management does not believe
the implementation of SAB 101 will have a material effect on out financial
position or results of operations.
8
ACQUISITIONS
The statement of operations for 1999 only includes the operations of certain
acquisitions from the date they were acquired by the Company. The operations
of Delta Millwork, Inc. (renamed R.G. Darby Company-South and Total
Trim-South, collectively "Darby-South") are included since the date of
acquisition, January 27, 1999. The operations of Heat, Inc. ("Heat") and
Champagne Industries, Inc. ("Champagne") are included since the date of
acquisition, May 17, 1999.
The following unaudited pro forma information presents consolidated operating
results as though the acquisiton of Darby-South (acquired January 27, 1999)
and Heat and Champagne (acquired May 17, 1999) had occurred at the beginning
of the periods presented. For the three month periods ended September 30,
2000 and 1999, there is no difference between the actual and pro forma
information because the acquisitions have been included in operations for a
full period. The operating results of Wing and Atrium Wood Patio doors are
not excluded since they are not reportable segments. However, see footnote 9
for the summarized combined results pertaining to Wing and Atrium Wood Patio
Doors.
NINE MONTHS
ENDED NINE MONTHS
SEPTEMBER 30, ENDED
2000 SEPTEMBER 30, 1999
----------------- -----------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
ACTUAL ACTUAL PRO FORMA
----------------- ----------------- ----------------
Net sales........................... $ 383,395 $ 366,184 $ 394,659
Gross profit........................ 91,434 113,350 123,736
Net income (loss) from continuing
operations......................... (47,164) 3,521 267
2. EQUITY SECURITIES - AVAILABLE FOR SALE:
Investments in equity securities - available for sale are carried at market
based on quoted market prices, with unrealized gains (losses) recorded as
other comprehensive income in stockholder's equity.
3. ASSETS HELD FOR SALE:
During the third quarter of 2000, the Company sold its Wing interior wood
doors and Atrium Wood Patio Door operations to unrelated third parties (see
note 9). At September 30, 2000, the carrying value of the remaining assets of
the divisions was reduced to fair value based on the estimated selling prices
less the costs to sell. The assets pertaining to these sales have been
segregated on the September 30, 2000 consolidated balance sheet. As of
September 30, 2000, the assets held for sale of $460 relate only to the net
realizable value of remaining inventory at Wing.
4. INVENTORIES:
Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) method of accounting. Work-in-process and finished goods
inventories consist of materials, labor and manufacturing overhead.
Inventories consisted of the following:
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
Raw materials................................. $ 27,734 $ 32,481
Work-in-process............................... 812 4,688
Finished goods................................ 14,540 24,071
----------- -----------
43,086 61,240
LIFO reserve.................................. (1,152) 37
----------- -----------
$ 41,934 $ 61,277
=========== ===========
9
5. NOTES PAYABLE:
Notes payable consisted of the following:
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
Revolving credit facility..................... $ 31,500 $ 15,270
Term loan B................................... 58,000 58,750
Term loan C................................... 68,930 69,680
Senior subordinated notes..................... 175,000 175,000
Other......................................... 352 548
----------- -----------
333,782 319,248
Less:
Unamortized debt discount..................... (2,414) (2,537)
Current portion of notes payable.............. (2,296) (2,297)
----------- -----------
Long-term debt $ 329,072 $ 314,414
=========== ===========
The Credit Agreement requires the Company to meet certain financial tests
pertaining to, interest coverage, fixed charge coverage and leverage. On
October 24, 2000, the Company amended and restated its Credit Agreement, in
connection with the Ellison Acquisition (see Note 10). As of this date, the
Company is in compliance with all related covenants.
On November 1, 2000, the Company entered into a $100,000 interest rate swap
agreement to limit the effect of changes in interest rates on long-term
borrowings. Under the agreement, the Company pays interest at a fixed rate of
6.66% on the notional amount and receives interest therein at the three month
LIBOR on a quarterly basis.
6. CONTINGENCIES:
The Company is party to various claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management, all such
matters are without merit or are of such kind, or involve such amounts, that
an unfavorable disposition would not have a material adverse effect on the
consolidated financial position, results of operations or liquidity of the
Company.
During 1993, the Company's Dallas, Texas based factory employees voted to
unionize and become members of the Amalgamated Clothing and Textile Workers
Union. A three-year union contract was executed during 1995 and extended for
three additional years in 1998. In addition, the Company is party to
collective bargaining arrangements related to its Woodville, Texas
operations, which are due to expire in 2001.
The Company is involved in various stages of investigation and cleanup
related to environmental protection matters, some of which relate to waste
disposal sites. The potential costs related to such matters and the possible
impact thereof on future operations are uncertain due in part to: the
uncertainty as to the extent of pollution; the complexity of Government laws
and regulations and their interpretations; the varying costs and
effectiveness of alternative cleanup technologies and methods; the uncertain
level of insurance or other types of recovery; and the questionable level of
the Company's involvement. The Company was named in 1988 as a potentially
responsible party ("PRP") in two superfund sites pursuant to the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended (the Chemical Recycling, Inc. site in Wylie, Texas, and the Diaz
Refinery site in Little Rock, Arkansas). The Company believes that based on
the information currently available, including the substantial number of
other PRP's and relatively small share allocated to it at such sites, its
liability, if any, associated with either of these sites will not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.
10
7. INTEGRATION ACTIVITIES:
In connection with the acquisition of Atrium in 1998, certain integration
activities were undertaken in the acquired business. These activities
included the elimination of certain product lines and the associated
inventory, severance paid to employees terminated through the elimination of
redundant positions, costs associated with plant closings and rent expenses
related to the idle facilities. In connection with these integration
activities the Company recorded accrued provisions using the purchase method
of accounting. The activity impacted by these provisions is summarized as
follows:
BALANCE AT BALANCE AT
DECEMBER 31, EXPENDITURES SEPTEMBER 30,
1999 IN 2000 2000
------------ ------------ -------------
Product line rationalization.... $ 198 $ (198) $ 0
Idle facility expenses.......... 748 (508) 240
------- ------- -------
$ 946 $ (706) $ 240
======= ======= =======
8. SUBSIDIARY GUARANTORS:
In connection with the issuance of the Notes, the Company's payment
obligations under the Notes are fully and unconditionally guaranteed, jointly
and severally (collectively, the Subsidiary Guarantees) on a senior
subordinated basis by its wholly-owned subsidiaries: ADW-Northeast, ADW-West
Coast, ADW-Arizona, Wing, Darby, Darby-South, Heat and Champagne
(collectively, the Subsidiary Guarantors). The Company has no non-guarantor
direct or indirect subsidiaries. The operations related to the assets of
Wing, ADW-Northeast, ADW-West Coast, ADW-Arizona and Darby are included for
all periods. The operations of Darby-South are included since their date of
acquisition, January 27, 1999, and the operations of Heat and Champagne are
included since their date of acquisition, May 17, 1999. The balance sheet
information includes all subsidiaries and divisions as of September 30, 2000
and December 31, 1999. In the opinion of management, separate financial
statements of the respective Subsidiary Guarantors would not provide
additional material information, which would be useful in assessing the
financial composition of the Subsidiary Guarantors. No single Subsidiary
Guarantor has any significant legal restrictions on the ability of investors
or creditors to obtain access to its assets in event of default on the
Subsidiary Guarantee other than its subordination to senior indebtedness.
Following is summarized combined financial information pertaining to these
Subsidiary Guarantors:
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
Current assets............................................. $ 18,587 $ 59,658
Noncurrent assets.......................................... 160,005 206,938
Current liabilities........................................ 22,418 26,118
Noncurrent liabilities..................................... 179,730 200,620
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2000 1999
------------- ------------
(UNAUDITED) (UNAUDITED)
Net sales.................................................. $ 235,008 $ 202,091
Gross profit............................................... 45,015 55,506
Net loss from continuing operations........................ (39,099) (3,802)
11
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2000 1999
------------- ------------
(UNAUDITED) (UNAUDITED)
Net sales.................................................. $ 61,221 $ 80,866
Gross profit............................................... 712 24,562
Net loss from continuing operations........................ (12,809) (1,866)
The Notes and the Subsidiary Guarantees are subordinated to all existing and
future Senior Indebtedness of the Company. The Indenture governing the Notes
contains limitations on the amount of additional indebtedness (including
Senior Indebtedness) which the Company may incur.
9. SPECIAL CHARGES AND DIVESTITURES (COLLECTIVELY THE "WOOD
DIVESTITURES"):
WING DIVESTITURE:
On August 25, 2000, the Company completed the sale of substantially all of
the assets of Wing Industries, Inc., its wood interior door subsidiary
("Wing") to Premdor Corporation, a subsidiary of Premdor Inc. (NYSE:PI )
(Toronto: PDI). In connection with the sale, the Company received
approximately $20,570 in proceeds. As such, the Company has recorded a
special charge related to this divestiture as follows:
WING SPECIAL CHARGE:
Write-off of goodwill....................................... $ 21,087
Write-off of capitalized software costs..................... 1,662
Expense associated with operating leases of idle facilities. 1,529
Expense associated with operating leases of idle equipment.. 462
Net gain on sale of fixed assets............................ (267)
---------
Total special charge - Wing divestiture..................... $ 24,473
=========
ATRIUM WOOD PATIO DOOR DIVESTITURE:
On August 30, 2000, the Company completed the sale of substantially all of
its Atrium Wood Patio Door division assets to Woodgrain Millwork, Inc. In
connection with the sale, the Company received approximately $3,785 in
proceeds. As such, the Company has recorded a special charge related to this
divestiture as follows:
ATRIUM WOOD PATIO DOOR SPECIAL CHARGE:
Net loss on sale of fixed assets.............................. $ 928
Expense associated with operating leases of idle facilities... 307
--------
Total special charge - Atrium Wood Patio Door divestiture..... $ 1,235
========
In addition to the above charges, the Company recorded writedowns related to
inventory of $5,338 and $1,868, respectively, related to the Wing and Atrium
Wood Patio Door divestitures, that is included in cost of goods sold. In
addition, the Company's gross margins were also adversely affected as a
result of liquidating Wood Divestitures inventory below normal selling
prices, although in excess of cost. As a result, the Company's gross margins
were negatively impacted an additional $12,609 and $1,277, from Wing and
Atrium Wood Patio Door, respectively, as a result of such price concessions.
12
Following is the summarized combined results of operations pertaining to
these Wood Divestitures including the writedowns as described above:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
Net sales.................................................. $ 92,090 $ 126,729
Gross profit (loss)........................................ (7,792) 25,052
Net loss from continuing operations........................ (64,118) (3,309)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
Net sales.................................................. $ 9,479 $ 38,246
Gross profit (loss)........................................ (13,020) 7,368
Net loss from continuing operations........................ (23,306) (4,201)
10. SUBSEQUENT EVENT:
ELLISON ACQUISITION:
On October 24, 2000, the Company completed the acquisition of the stock of
Ellison Extrusion Systems, Inc. and substantially all of the operating assets
of The Ellison Company, Inc.'s Windows and Doors Division (hereinafter
collectively referred to as "Ellison"). The transaction is valued at $125,466.
The transaction was comprised of $98,187 of cash and $27,279 of stock in the
Company's parent. The cash portion of the purchase price and fees and
expenses of $9,553 were funded through a combination of debt and new equity,
including $26,000 of new equity from the Company's current ultimate equity
sponsors, $36,500 of Senior PIK Notes issued by the Company's parent and
contributed to the Company as equity, $24,033 from the divestiture of
Atrium's Wing Industries, Inc. and Atrium Wood Patio Door assets and $21,208
of senior debt borrowed from the Company's current senior facility.
The acquisition will be accounted for as a purchase in accordance with APB
16. The aggregate purchase price will be allocated to the underlying assets
and liabilities based upon their respective estimated fair market values at
the date of acquisition. Based on preliminary estimates which will be
finalized at a later date, the excess of purchase price over the fair value
of the net assets acquired ("goodwill") will be approximately $95,000. The
results of operations for the acquired business will be included in the
Company's operations subsequent to the date of acquisition.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN FORWARD-LOOKING STATEMENTS
This 10-Q contains certain forward looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) that involve
substantial risks and uncertainties relating to the Company that are based on
the beliefs of management. When used in this 10-Q, the words "anticipate",
"believe", "estimate", "expect", "intend", and similar expressions, as they
relate to the Company or the Company's management, identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to the risks and uncertainties regarding the operations and the
results of operations of the Company as well as its customers and suppliers,
including as a result of the availability of consumer credit, interest rates,
employment trends, changes in levels of consumer confidence, changes in
consumer preferences, national and regional trends in new housing starts, raw
material costs, pricing pressures, shifts in market demand and general
economic conditions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions or estimates prove incorrect,
actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended.
RESULTS OF OPERATIONS
The operations of the Company are cyclical in nature and generally result in
increases during the peak building season which coincides with the second and
third quarters of the year. Accordingly, results of operations for the third
quarter ended and nine months ended September 30, 2000 are not necessarily
indicative of results expected for the full year.
The operations of Darby-South are included since their date of acquisition,
January 27, 1999, and the operations of Heat and Champagne are included since
their date of acquisition, May 17, 1999. The balance sheet information
includes all subsidiaries and divisions as of September 30, 2000 and December
31, 1999.
NET SALES. Net sales decreased by $20,491 from $133,812 during the third
quarter of 1999 to $113,321 during the third quarter of 2000 and increased
$17,211 from $366,184 during the first nine months of 1999 to $383,395 during
the first nine months of 2000. The decrease during the third quarter was the
result of the divestiture of Wing and the Atrium Wood Patio Door operations
during the quarter. Wing's net sales decreased by $27,431 from $34,897 during
the third quarter of 1999 to $7,466 during the third quarter of 2000 and the
Atrium Wood Patio Door operations net sales decreased by $1,360 from $3,211
during the third quarter of 1999 to $1,851 during the third quarter of 2000.
The increase for the first nine months of 2000 was primarily due to a
combined increase in net sales of $34,953 from the acquisitions of Heat and
Champagne, which were acquired during the second quarter of 1999. The
decrease for the third quarter was partially offset by increases that
included approximately $9,020 from its aluminum window operations, or a 18.8%
growth rate, for the third quarter of 2000, and $16,910, or a 11.6% growth
rate, for the first nine months of 2000 and the vinyl window operations
included approximately $905, or a 2.3% growth rate, for the third quarter of
2000, and $9,031, or a 9.1% growth rate, for the first nine months of 2000.
These year-to-date increases were partially offset by declines at Wing,
Atrium Wood and Darby of $27,751 (or 24.9%), $6,913 (or 46.5%) and $2,032 (or
8.8%), respectively, during the first nine months of 2000. The decline at
Darby is the result of eliminating single-family installations and focusing
exclusively on multi-family installations. During the second and third
quarter of 2000, the net sales from the Wing
14
operations declined prior to their divestiture as their largest customer, The
Home Depot, began shifting their business to other interior door
manufacturers. The decline at the Atrium Wood Patio Door operations prior to
their divestiture were due to the Company's efforts to eliminate
less-profitable sales territories.
COST OF GOODS SOLD. Cost of goods sold increased from 68.2% of net sales
during the third quarter of 1999 to 81.0% of net sales during the third
quarter of 2000 and 69.0% of net sales during the first nine months of 1999
to 76.2% of net sales during the first nine months of 2000. The increase as a
percentage of net sales was due largely to the Wing and Atrium Wood Patio
Door operations. Wing experienced increases in material costs, up from 58.8%
of net sales during the first nine months of 1999 (57.3 % of net sales during
the third quarter of 1999) to 80.7% of net sales during the first nine months
of 2000 (196.0% during the third quarter of 2000), primarily the result of a
$5,338 write-down of inventory that was recorded during the second and third
quarters of 2000 relating to its divestiture and $12,609 of price concessions
made to move remaining inventories. The Atrium Wood Patio Door operations
increased from 52.6% of net sales during the third quarter of 1999 to 57.0%
of net sales during the third quarter of 2000 and 52.7% of net sales during
the first nine months of 1999 to 89.7% of net sales during the first nine
months of 2000. The increase at the wood patio door division was primarily
due to material costs relating to the $1,868 write-down of inventory which
was recorded during the second and third quarters of 2000 relating to its
divestiture and $1,277 of price concessions made to move remaining
inventories. The aluminum divisions had costs of goods sold of 74.5% of net
sales during the third quarter of 2000 (73.0% of net sales for nine month
period ended 2000) compared to 71.5% of net sales during the third quarter of
1999 (71.2% of net sales for nine month period ended 1999). The increase at
the aluminum divisions were the result of higher insurance and lease costs at
new facilities. These increases were partially offset by the vinyl window
divisions which had favorable costs of goods sold of 65.3% of net sales
during the third quarter of 2000 (65.2% of net sales for nine month period
ended 2000) compared to 65.9% of net sales during the third quarter of 1999
(66.9% of net sales for nine month period ended 1999). The LIFO reserve
expense during the first nine months of 2000 was $1,189 ($597 during the
third quarter of 2000) and the LIFO reserve benefit was $770 through the
third quarter and first nine months of 1999. Overall, changes in the cost of
goods sold as a percentage of net sales for one period as compared to another
period may reflect a number of factors, including changes in the relative mix
of products sold and, the effects of changes in sales prices, material costs
and changes in productivity levels.
SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, delivery,
general and administrative expenses increased $2,447 from $29,763 (22.2% of
net sales during the third quarter of 1999) to $32,240 (28.5% of net sales
during the third quarter of 2000) and increased $17,826 from $78,199 (21.4%
of net sales during the first nine months of 1999) to $96,025 (25.0% of net
sales during the first nine months of 2000). Wing's selling, delivery,
general and administrative expenses were up from 21.4% of net sales during
the first nine months of 1999 (24.0% during the third quarter of 1999) to
32.9% of net sales during the first nine months of 2000 (91.7% during the
third quarter of 2000), due to increased labor, freight expense and shut down
expenses surrounding the divestiture during the third quarter. The remaining
increase is also largely due to the inclusion of selling, delivery, general
and administrative expenses at Heat and Champagne for the full year, which
have higher selling expenses as a percentage of net sales. The combined Heat
and Champagne selling, delivery, general and administrative expenses were
$8,249 (28.1% of net sales) during the third quarter of 2000, an increase of
$575 over the third quarter of 1999 (26.5% of net sales) and $23,293 (29.7%
of net sales) during the first nine months of 2000, an increase of $11,951
over the first nine months of 1999 (26.3% of net sales). If the acquisitions
had been included for the entire first nine months of 1999, selling, delivery
general and administrative expenses would have been 22.3% in 1999. Excluding
the acquisitions during 1999, the aluminum windows operations improved from
17.4% of net sales during the first nine months of 1999 (17.8% of net sales
during the third quarter of 1999) to 16.9% of net sales during the first nine
months of 2000 (17.5% of net sales during the third quarter of 2000) and the
vinyl window operations improved from 24.0% of net sales during the first
nine months of 1999 (23.3% of net sales during the third quarter of 1999) to
23.4% of net sales during the first nine
15
months of 2000 (22.7% of net sales during the third quarter of 2000).
Additionally, delivery and selling expenses increased due to increased fuel
costs and the increase in sales.
AMORTIZATION EXPENSE. Amortization expense decreased $299 from $2,376 during
the third quarter of 1999 to $2,077 during the third quarter of 2000 due to
the write-off of the goodwill related to Wing and increased $363 from $6,324
during the first nine months of 1999 to $6,687 during the nine months of
2000. The year to date increase was largely due to the amortization of
goodwill recorded in connection with the acquisitions of Heat and Champagne
in 1999.
SPECIAL CHARGES. During the second and third quarters of 2000, the Company
recorded a one-time charge of $25,708, of which $24,473 related to the
write-off of certain intangible assets and the write-down of certain assets
related to the sale of Wing and $1,235 related to the writedown of certain
assets and charges for idle facilities at the Atrium Wood Patio Door
operations. During the first quarter of 1999, the Company recorded a one-time
charge of $1,762 for severance benefits incurred in connection with the
separation agreement entered into by the Company and the former President and
Chief Executive Officer.
INTEREST EXPENSE. Interest expense increased $125 from $9,091 during the
third quarter of 1999 to $9,216 during the third quarter of 2000 and $7,155
from $19,790 during the first nine months of 1999 to $26,945 during the first
nine months of 2000. The increase in interest expense was due primarily to
the $175,000 senior subordinated notes the Company issued on May 17, 1999.
The notes were issued in connection with the acquisitions of Heat and
Champagne and are due May 1, 2009. In addition, the increase in interest
expense includes the amortization of deferred financing costs and accretion
of the discount recorded in connection with the issuance of $175,000 of
senior subordinated notes. The interest expense was partially offset from
gains of $245 for the nine months ended September 30, 2000 from interest rate
collars.
INCOME TAXES. The Company's effective tax rate was 31.8% during the third
quarter of 2000 and 24.5% during the first nine months of 2000 due largely to
non-deductible goodwill amortization expense of approximately $1,379 and
$4,316, respectively and the write-off of non-deductible goodwill of $13,060
in the nine month period, related to the sale of Wing. Excluding the effects
of non-deductible expenses, the Company's effective tax rate would have been
approximately 34.0% during the third quarter of 2000 and the first nine
months of 2000.
RECENT DEVELOPMENTS
ELLISON ACQUISITION:
On October 24, 2000, the Company completed the acquisition of the stock of
Ellison Extrusion Systems, Inc. and substantially all of the operating assets
of The Ellison Company, Inc.'s Windows and Doors Division (hereinafter
collectively referred to as "Ellison"). The transaction is valued at $125,466.
The transaction was comprised of $98,187 of cash and $27,279 of stock in the
Company's parent. The cash portion of the purchase price and fees and
expenses of $9,553 were funded through a combination of debt and new equity,
including $26,000 of new equity from the Company's current ultimate equity
sponsors, $36,500 of Senior PIK Notes issued by the Company's parent and
contributed to the Company as equity, $24,033 from the divestiture of
Atrium's Wing Industries, Inc. and Atrium Wood Patio Door assets and $21,208
of senior debt borrowed from the Company's current senior facility.
The acquisition will be accounted for as a purchase in accordance with APB
16. The aggregate purchase price will be allocated to the underlying assets
and liabilities based upon their respective estimated fair market values at
the date of acquisition. Based on preliminary estimates which will be
finalized at a later date, the excess of purchase price over the fair value
of the net assets acquired ("goodwill") will be
16
approximately $95,000. The results of operations for the acquired business
will be included in the Company's operations subsequent to the date of
acquisition.
Had the Company completed the acquisition of Ellison as of January 1, 1999,
the pro forma consolidated balance sheet as of September 30, 2000 and the pro
forma consolidated statement of operations (including the acquisitions of
Darby-South, Heat and Champagne and the divestiture of the Wing Industries,
Inc. and Atrium Wood patio door) for the nine month period ending September
30, 2000 and 1999 would have been as follows:
SEPTEMBER 30,
2000
-------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents................................... $ 2,923
Assets held for sale........................................ 460
Accounts receivable, net.................................... 70,356
Inventories................................................. 48,244
Prepaid expenses and other current assets................... 4,175
Deferred tax asset.......................................... 3,118
---------
Total current assets................................... 129,276
PROPERTY, PLANT AND EQUIPMENT, net............................... 50,049
GOODWILL, net.................................................... 361,009
DEFERRED FINANCING COSTS, net.................................... 20,728
DEFERRED TAX ASSET............................................... 11,840
OTHER ASSETS..................................................... 7,730
---------
Total assets........................................... $ 580,632
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of notes payable............................ $ 2,297
Accounts payable............................................ 36,317
Accrued liabilities......................................... 34,485
---------
Total current liabilities.............................. 73,099
---------
LONG-TERM LIABILITIES:
Notes payable............................................... 351,822
Other long-term liabilities................................. 2,748
---------
Total long-term liabilities............................ 354,570
---------
Total liabilities...................................... 427,669
---------
STOCKHOLDER'S EQUITY 152,963
---------
Total liabilities and stockholder's equity....................... $ 580,632
=========
17
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
----------- -----------
(UNAUDITED) (UNAUDITED)
NET SALES................................................. $ 373,702 $ 334,553
COST OF GOODS SOLD........................................ 248,260 213,478
---------- ----------
Gross profit............................................ 125,442 121,075
OPERATING EXPENSES:
Selling, delivery, general and administrative expenses.... 81,160 74,322
Amortization expense...................................... 10,137 10,568
Stock option compensation................................. - 3,406
Special charges........................................... - 1,849
---------- ----------
91,297 90,145
---------- ----------
Income from operations.................................. 34,145 30,930
INTEREST EXPENSE.......................................... 28,520 26,490
OTHER INCOME, net......................................... 1,278 823
Income before income taxes................................ 6,903 5,263
PROVISION FOR INCOME TAXES................................ 5,272 4,616
---------- ----------
Net income from continuing operations.................... $ 1,631 $ 647
========== ==========
Other Information:
Depreciation expense..................................... $ 5,858 $ 5,215
========== ==========
EBITDA (1)................................................ $ 51,418 $ 52,791
========== ==========
LIFO reserve expense (benefit)............................ $ 1,881 $ (652)
========== ==========
EBITDA excluding LIFO reserve expense (benefit) (1)....... $ 53,299 $ 52,139
========== ==========
(1) EBITDA represents income before interest, income taxes, depreciation and
amortization, special charges and stock option compensation expense. While
EBITDA is not intended to represent cash flow from operations as defined by
GAAP and should not be considered as an indicator of operating performance
or an alternative to cash flow or operating income (as measured by GAAP) or
as a measure of liquidity, it is included herein to provide additional
information with respect to the ability of Atrium to meet its future debt
service, capital expenditures and working capital requirements. Atrium
believes EBITDA provides investors and analysts in the building materials
industry the necessary information to analyze and compare historical
results of Atrium on a comparable basis with other companies on the basis
of operating performance, leverage and liquidity. However, as EBITDA is not
defined by GAAP, it may not be calculated or comparable to other similarly
titled measures within the building materials industry. LIFO reserve is
included due to the non-cash nature of the expense (benefit), since the
Company uses consumer price indices to determine the adjustment, as opposed
to actual prices paid.
18
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operations and availability under the Company's Revolving
Credit Facility are the Company's principal sources of liquidity. During the
first nine months of 2000, cash was primarily used for increases in working
capital, capital expenditures and debt payments. Net cash provided by
operating activities was $4,532 during first nine months of 2000 ($13,760
during the third quarter of 2000) compared to $23,366 during the first nine
months of 1999 ($21,989 during the third quarter of 1999). The decrease in
cash provided by operating activities is largely due to changes in deferred
taxes. Net cash used in investing activities during the first nine months of
2000 was $28,492 ($24,112 during the third quarter of 2000) compared to
$110,411 during the first nine months of 1999 ($8,234 during the third
quarter of 1999). The decrease in cash used in investing activities was due
primarily the acquisition of Heat and Champagne during the second quarter of
1999 and Delta Millwork, Inc. during the first quarter of 1999. Cash provided
by financing activities during the first nine months of 2000 was $26,057
($10,480 during the third quarter of 2000) compared to $87,045 during the
first nine months of 1999 ($13,755 used in during the second quarter of
1999). The decrease from prior year was due to the $175,000 senior
subordinated notes the Company issued on May 17, 1999 (due May 1, 2009) in
connection with the acquisitions of Heat and Champagne.
OTHER CAPITAL RESOURCES
The Revolving Credit Facility, which was increased to $40,000 in June of
1999, has a maturity date of September 30, 2004. At September 30, 2000, the
Company had $4,190 of availability under the Revolving Credit Facility, net
of borrowings of $31,500 and outstanding letters of credit totaling $4,310,
relating to workers' compensation benefits and utility deposits. On October
24, 2000, at the close of the Ellison acquisition, the Company amended and
restated its Credit Agreement. As part of the amendment, the Revolving Credit
Facility was increased to $47,000. In connection with the divestitures of
Wing and Atrium Wood and the acquisition of Ellison, the Company paid down
$14,500 of its Revolving Credit Facility. As of November 10, 2000, the
Company had cash of $2,180 and $13,190 of availability under the Revolving
Credit Facility, net of borrowings of $29,500 and outstanding letters of
credit totaling $4,310.
CAPITAL EXPENDITURES
The Company had cash capital expenditures of $10,924 during the first nine
months of 2000 ($6,606 during the third quarter of 2000) compared to $11,368
during the first nine months of 1999 ($5,253 during the third quarter of
1999). Capital expenditures during the first nine months were largely a
result of the Company's continued efforts to increase efficiency through
automation at its various divisions as well as to increase plant capacity at
the Company's Extruders division. The Company expects capital expenditures,
including capitalization of software implementation costs (exclusive of
acquisitions) in 2000 to be
19
approximately $15,000, however, actual capital requirements may change,
particularly as a result of acquisitions the Company may make.
The ability of the Company to meet its debt service and working capital
obligations and capital expenditure requirements is dependant, however, upon
the future performance of the Company and its subsidiaries which, in turn,
will be subject to general economic conditions and to financial, business and
other factors, including factors beyond the Company's control.
MARKET RISK
The Company is exposed to market risk from changes in interest rates and
commodity pricing. The Company uses derivative financial instruments on a
limited basis to hedge economic exposures including interest rate protection
agreements and forward commodity delivery agreements. The Company does not
enter into derivative financial instruments or other financial instruments
for speculative trading purposes.
On November 1, 2000, the Company entered into a $100,000 interest rate swap
agreement to limit the effect of changes in interest rates on long-term
borrowings. Under the agreement, the Company pays interest at a fixed rate of
6.66% on the notional amount and receives interest therein at the three month
LIBOR on a quarterly basis.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" amended by
SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FAS No. 133--Amendment of FAS
No. 133" (combined "SFAS 133"). SFAS 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
SFAS 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15, 2000 and
earlier application is permitted as of the beginning of any fiscal quarter
subsequent to June 15, 2000. SFAS 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the Company's election, before January 1, 1998).
The Company is in the process of quantifying the impact of adopting SFAS 133
on its financial statements and has not determined the timing of or method of
adoption of SFAS 133.
In December 1999, the Securities and Exchange Commission ("Commission")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") which provides guidance on revenue recognition
issues. In June 2000, the Commission issued Staff Accounting Bulletin No.
101B, "Second Amendment: Revenue Recognition in Financial Statements" which
delayed the implementation of SAB 101 until the fourth fiscal quarter of
fiscal years beginning after December 15, 1999. Management does not believe
the implementation of SAB 101 will have a material effect on out financial
position or results of operations.
20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various claims, legal actions, and complaints arising
in the ordinary course of business. In the opinion of management, all such
matters are without merit or are of such kind, or involve such amounts, that
an unfavorable disposition would not have a material adverse effect on the
financial position, results of operations or liquidity of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The Exhibits listed on the accompanying Exhibit Index are
filed as part of this report.
(b) Reports on Form 8-K
On July 11, 2000, in accordance with Items 5 and 7 of Form
8-K, the Company filed a Report on Form 8-K announcing the
signing of a definitive agreement to sell substantially all
the assets of Wing Industries, Inc., its wood interior door
subsidiary to Premdor Corporation, a subsidiary of Premdor
Inc.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATRIUM COMPANIES, INC.
(Registrant)
Date: November 13, 2000 By: /s/ Jeff L. Hull
----------------- -------------------------------------
Jeff L. Hull
President,
Chief Financial Officer, Treasurer
and Director
Date: November 13, 2000 By: /s/ Eric W. Long
----------------- -------------------------------------
Eric W. Long
Vice President, Corporate Controller
and Secretary
21
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
22