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 July 1, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-81808
BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
Delaware 22-3276290
(State of Incorporation) (I. R. S. Employer
Identification No.)
1361 Alps Road, Wayne, New Jersey 07470
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 628-3000
See table of additional registrants.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
As of August 10, 2001, 1,015,010 shares of Class A Common Stock, $.001 par
value, and 15,000 shares of Class B Common Stock, $.001 par value, of Building
Materials Corporation of America were outstanding. There is no trading market
for the common stock of Building Materials Corporation of America.
As of August 10, 2001, each of the additional registrants had the number of
shares outstanding which is shown on the table below. No shares were held by
non-affiliates.
ADDITIONAL REGISTRANTS
Address, including zip code
Registration No./I.R.S. and telephone number,
Exact name of registrant as State or other jurisdiction No. of Shares Employer Identification including area code, of
specified in its charter of incorporation or Outstanding No. registrant's principal
organization 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
BMCA Insulation Products Inc. Delaware 10 333-58442-10/ 1361 Alps Road
22-3275477 Wayne, NJ 07470
(973) 628-3000
Ductwork Manufacturing Delaware 10 333-58442-08/ 25 Central Industrial Row
Corporation 58-2507312 Purvis, MS 39475
(601) 794-5500
GAF Leatherback Corp. Delaware 10 333-58442-09/ 11 Hillcrest Road
22-3497242 Hollister, CA 95024-5050
(408) 636-5050
GAF Premium Products Inc. Delaware 10 333-58442-04/ 1361 Alps Road
22-3383680 Wayne, NJ 07470
(973) 628-3000
GAF Materials Corporation Delaware 10 333-58442-05/ 1361 Alps Road
(Canada) 22-3563280 Wayne, NJ 07470
(973) 628-3000
GAFTECH Corporation Delaware 10 333-58442-01/ 1361 Alps Road
22-2811609 Wayne, NJ 07470
(973) 628-3000
LL Building Products Inc. Delaware 10 333-58442-06/ 4501 Circle 75 Parkway
58-2394554 Atlanta, GA 30339
(770) 953-6366
Wind Gap Real Property Delaware 10 333-58442-07/ 1361 Alps Road
Acquisition Corp. 22-3383681 Wayne, NJ 07470
(973) 628-3000
2
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Second Quarter Ended Six Months Ended
-------------------- ----------------
July 2, July 1, July 2, July 1,
2000 2001 2000 2001
-------- -------- ------- -------
(Thousands)
Net sales ............................. $325,774 $354,925 $615,590 $619,886
-------- -------- -------- --------
Costs and expenses:
Cost of products sold ............... 230,301 254,185 444,658 453,135
Selling, general and administrative.. 66,319 67,989 126,469 123,971
Goodwill amortization ............... 508 516 1,024 1,010
------- -------- -------- --------
Total costs and expenses........... 297,128 322,690 572,151 578,116
-------- -------- -------- --------
Operating income ...................... 28,646 32,235 43,439 41,770
Interest expense ...................... (12,534) (15,399) (24,979) (30,603)
Other expense, net..................... (2,250) (1,985) (3,414) (3,468)
------- -------- -------- --------
Income before income taxes ............ 13,862 14,851 15,046 7,699
Income taxes......... ................. (5,129) (5,495) (5,567) (2,849)
-------- -------- -------- --------
Net income............................. $ 8,733 $ 9,356 $ 9,479 $ 4,850
======== ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
3
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
July 1,
December 31, 2001
2000 (Unaudited)
------------ ---------
ASSETS (Thousands)
Current Assets:
Cash and cash equivalents......................... $ 82,747 $ 53,934
Accounts receivable, trade, net................... 19,474 29,227
Accounts receivable, other........................ 51,843 85,759
Tax receivable from parent corporations........... 1,500 -
Inventories....................................... 101,702 110,427
Other current assets.............................. 3,925 6,732
--------- ---------
Total Current Assets............................ 261,191 286,079
Property, plant and equipment, net.................. 362,464 352,450
Excess of cost over net assets of businesses
acquired, net .................................... 65,317 64,307
Deferred income tax benefits........................ 42,897 40,603
Tax receivable from parent corporations............. 7,500 9,000
Other assets........................................ 31,800 30,971
--------- ---------
Total Assets........................................ $ 771,169 $ 783,410
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt............ $ 5,908 $ 5,362
Accounts payable.................................. 57,520 66,976
Payable to related parties........................ 10,052 16,465
Accrued liabilities............................... 42,888 44,540
Reserve for product warranty claims............... 14,900 14,900
-------- ---------
Total Current Liabilities....................... 131,268 148,243
--------- ---------
Long-term debt less current maturities.............. 674,698 671,298
--------- ---------
Reserve for product warranty claims................. 28,756 23,625
--------- ---------
Other liabilities................................... 14,312 14,508
--------- ---------
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; 1,015,514 and
1,015,010 shares, issued and outstanding,
respectively ................................... 1 1
Class B Common Stock, $.001 par value per share;
100,000 shares authorized; 15,000 shares
issued and outstanding ......................... - -
Accumulated deficit............................... (77,866) (74,265)
--------- ---------
Total Stockholders' Equity (Deficit)............ (77,865) (74,264)
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit).................................. $ 771,169 $ 783,410
========= =========
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)
Six Months Ended
-------------------
July 2, July 1,
2000 2001
-------- --------
(Thousands)
Cash and cash equivalents, beginning of period........... $ 55,952 $ 82,747
-------- --------
Cash provided by (used in) operating activities:
Net income ............................................ 9,479 4,850
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation ...................................... 18,527 17,520
Goodwill and other amortization.................... 1,439 1,819
Deferred income taxes.............................. - 2,294
Noncash interest charges........................... 966 2,187
Increase in working capital items...................... (68,560) (94,041)
Decrease in reserve for product warranty claims........ (3,634) (5,131)
Purchases of trading securities........................ (1,019) -
Proceeds from sales of trading securities.............. 1,860 -
Change in net receivable from/payable to related
parties/parent corporations.......................... (11,209) 6,362
Other, net............................................. 4,862 (508)
-------- --------
Net cash used in operating activities.................... (47,289) (64,648)
-------- --------
Cash provided by (used in) investing activities:
Capital expenditures................................... (28,703) (7,277)
Proceeds from sale of assets........................... 4,607 -
Purchases of available-for-sale securities............. (400) -
Proceeds from sales of available-for-sale securities... 3,643 -
Proceeds from sales of other short-term investments.... 1,590 -
-------- --------
Net cash used in investing activities.................... (19,263) (7,277)
-------- --------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable.............. 41,593 49,999
Increase (decrease)in borrowings under revolving
credit facilities.................................... 40,000 (1,000)
Repayments of long-term debt........................... (2,363) (3,339)
Distributions to parent corporations................... - (1,249)
Proceeds from issuance of common stock................. (891) -
Financing fees and expenses............................ (4,072) (1,299)
-------- --------
Net cash provided by financing activities................ 74,267 43,112
-------- --------
Net change in cash and cash equivalents.................. 7,715 (28,813)
-------- --------
Cash and cash equivalents, end of period................. $ 63,667 $ 53,934
======== ========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized)................. $ 25,032 $ 31,345
Income taxes......................................... 6,456 603
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
5
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Building Materials Corporation of America (the "Company" or the "Parent
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"). 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 July 1, 2001, and the
results of operations and cash flows for the periods ended July 2, 2000 and July
1, 2001. 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, 2000 (the "Form 10-K").
Certain reclassifications have been made to conform to current year
presentation.
Note 1. Comprehensive Income
Second Quarter Ended Six Months Ended
-------------------- -----------------
July 2, July 1, July 2, July 1,
2000 2001 2000 2001
------ ------ ------ ------
(Thousands)
Net income............................... $ 8,733 $ 9,356 $ 9,479 $ 4,850
------- ------- ------- -------
Other comprehensive income net of tax:
Change in unrealized gains (losses) on
available-for-sale securities:
Unrealized holding gains
arising during the period, net of
income taxes of $2,546, $0, $3,495
and $0, respectively................. 4,335 - 5,952 -
Less: Reclassification adjustment
for gains included in net
income, net of income taxes
of $(57), $0, $201
and $0, respectively................. (97) - 342 -
------- ------- ------- -------
Total other comprehensive income......... 4,432 - 5,610 -
------- ------- ------- -------
Comprehensive income..................... $13,165 $ 9,356 $15,089 $ 4,850
======= ======= ======= =======
Note 2. Inventories
Inventories consist of the following:
December 31, July 1,
2000 2001
----------- --------
(Thousands)
Finished goods .................. $ 61,606 $ 72,139
Work-in-process ................. 16,938 10,464
Raw materials and supplies ...... 27,743 32,409
-------- --------
Total ........................... 106,287 115,012
Less LIFO reserve ............... (4,585) (4,585)
-------- --------
Inventories ..................... $101,702 $110,427
======== ========
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Contingencies
Asbestos Litigation Against G-I Holdings
In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of liabilities for asbestos-related
bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos
Claims") of its parent, G-I Holdings. As of March 30, 1997, the Company had paid
all of its assumed asbestos-related liabilities. In January 2001, G-I Holdings
filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code due to its Asbestos Claims. This proceeding is in a preliminary
stage.
Claimants in the G-I Holdings bankruptcy, including judgment creditors,
might seek to satisfy their claims by asking the bankruptcy court to require the
sale of G-I Holdings' assets, including its holdings of BHC's common stock and
its indirect holdings of the Company's common stock. Such action could result in
a change of control of the Company. In addition, those claimants may seek to
file Asbestos Claims against the Company (with 1,853 alleged Asbestos Claims
pending against the Company as of July 1, 2001). The Company believes that it
will not sustain any liability in connection with these or any other
asbestos-related claims. Furthermore, on February 2, 2001, the United States
Bankruptcy Court for the District of New Jersey issued a temporary restraining
order enjoining any existing or future claimant from bringing Asbestos Claims
against the Company. On June 22, 2001, following a hearing, the Bankruptcy Court
converted the temporary restraints into a preliminary injunction, which is
expected to remain in effect pending confirmation of a Chapter 11 plan of
reorganization for the G-I Holdings estate. On February 7, 2001, G-I Holdings
filed a defendant class action in the United States Bankruptcy Court for the
District of New Jersey seeking a declaratory judgment that the Company has no
successor liability for Asbestos Claims against G-I Holdings and that it is not
the alter ego of G-I Holdings. This action is in a preliminary 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. While the Company cannot predict whether any
additional Asbestos Claims will be asserted against it, or the outcome of any
litigation relating to those claims, the Company believes that it has
meritorious defenses to any claim that it has asbestos-related liability,
although there can be no assurances in this regard.
On February 8, 2001, a creditors committee established in G-I Holdings'
bankruptcy case filed a complaint in the United States Bankruptcy Court for the
District of New Jersey against G-I Holdings and the Company. The complaint
requests substantive consolidation of the Company with G-I Holdings or an order
directing G-I Holdings to cause the Company to file for bankruptcy protection.
The Company and G-I Holdings intend to vigorously defend the lawsuit. The
Company believes that no basis exists for the court to grant the relief
requested. The plaintiffs also filed for interim relief absent the granting of
their requested relief described above. On March 21, 2001, the Bankruptcy Court
refused to grant the requested interim relief.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Contingencies (continued)
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Item 3,"Legal Proceedings," and
Notes 3, 11 and 16 to Consolidated Financial Statements contained in the
Company's Form 10-K.
Environmental Litigation
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters ("Environmental
Claims"), in which recovery is sought for the cost of cleanup of contaminated
sites, a number of which Environmental Claims are in the early stages or have
been dormant for protracted periods. At most sites, the Company anticipates that
liability will be apportioned among the companies found to be responsible for
the presence of hazardous substances at the site. The Company believes that the
ultimate disposition of such matters will not, individually or in the aggregate,
have a material adverse effect on the liquidity, financial position or results
of operations of the Company.
For further information regarding environmental matters and other
litigation, reference is made to Item 3, "Legal Proceedings" contained in the
Company's Form 10-K.
Tax Claim Against G-I Holdings
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 Surfactuants and Specialties, L.P.
(the"surfactants partnership"), a partnership in which G-I Holdings held an
interest. The claim of the IRS for interest and penalties, after taking into
account the effect on the use of net operating losses and foreign tax credits,
could result in G-I Holdings incurring liabilities significantly in excess of
the deferred tax liability of $131.4 million that it recorded in 1990 in
connection with this matter. G-I Holdings has advised the Company that it
believes that it will prevail in this matter, although there can be no assurance
in this regard. The Company believes that the ultimate disposition of this
matter will not have a material adverse effect on its business, financial
position or results of operations. For the possible consequences to the Company
of the failure of G-I Holdings to satisfy this liability and other information
relating to G-I Holdings, see "Asbestos Litigation Against G-I Holdings" above.
Note 4. New Accounting Standards
On June 30, 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method of accounting and eliminates the
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. New Accounting Standards (continued)
pooling method of accounting. SFAS No. 141 will not have an impact on the
Company's business since the Company has historically accounted for all business
combinations using the purchase method of accounting. With the adoption of SFAS
No. 142, effective January 1, 2002, goodwill will no longer be subject to
amortization over its estimated useful life. However, goodwill will be subject
to at least an annual assessment for impairment and more frequently if
circumstances indicate a possible impairment. Companies must perform a
fair-value-based goodwill impairment test. In addition, under SFAS No. 142, an
acquired intangible asset should be separately recognized if the benefit of the
intangible is obtained through contractual or other legal rights, or if the
intangible asset can be sold, transferred, licensed, rented, or exchanged.
Intangible assets will be amortized over their useful lives. Early adoption of
SFAS No. 142 is not permitted. On an annualized basis, effective January 1,
2002, the Company's net income will increase by approximately $1.3 million,
unless any impairment charges are necessary.
Note 5. Guarantor Financial Information
All of the Company's subsidiaries, other than BMCA Receivables
Corporation, are guarantors under the Company's $100 million secured bank credit
facility, the amended and restated $110 million secured bank credit facility,
the 10 1/2% Senior Notes due 2003, the 7 3/4% Senior Notes due 2005, the 8 5/8%
Senior Notes due 2006, the 8% Senior Notes due 2007 (the "2007 Notes"), and the
8% Senior Notes due 2008. These guarantees are full, unconditional and joint and
several. In addition, Building Materials Manufacturing Corporation ("BMMC") a
wholly-owned subsidiary of the Company, is a co-obligor on the 2007 Notes.
The Company and BMMC entered into license agreements, effective January
1, 1999, for the right to use intellectual property, including patents,
trademarks, know-how, and franchise rights owned by Building Materials
Investment Corporation, a wholly-owned subsidiary of the Company, for a license
fee stated as a percentage of net sales. These 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.
In January 2001, certain subsidiaries of the Company were merged into
BMMC, and accordingly, certain reclassifications were made to the guarantor
financial statements to conform with current period presentations.
Presented below is condensed consolidating financial information for
the Company, the guarantor subsidiaries and the non-guarantor subsidiary
prepared on a basis which retroactively reflects the formation of such companies
for all periods presented. This financial information should be read in
conjunction with the Consolidated Financial Statements and other notes related
thereto. Separate financial information for the Company's guarantor subsidiaries
and non-guarantor subsidiary is not included herein because management has
determined that such information is not material to investors.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Second Quarter Ended July 2, 2000
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
Net sales............................. $ 283,800 $ 41,974 $ - $325,774
Intercompany net sales................ 29,064 202,174 (231,238) -
--------- --------- -------- --------
Total net sales....................... 312,864 244,148 (231,238) 325,774
--------- --------- -------- --------
Costs and expenses:
Cost of products sold............... 215,154 246,385 (231,238) 230,301
Selling, general and administrative. 42,808 23,511 66,319
Goodwill amortization............... 326 182 508
--------- --------- -------- --------
Total costs and expenses.............. 258,288 270,078 (231,238) 297,128
--------- --------- -------- --------
Operating income (loss)............... 54,576 (25,930) - 28,646
Equity in earnings (losses)
of subsidiaries..................... (13,303) 13,303 -
Intercompany licensing income
(expense), net...................... (7,886) 7,886 -
Interest expense, net................. (8,208) (4,326) (12,534)
Other income (expense), net........... (2,511) 261 (2,250)
--------- --------- -------- --------
Income (loss) before income taxes..... 22,668 (22,109) 13,303 13,862
Income tax (provision) benefit........ (13,935) 8,806 (5,129)
--------- --------- -------- --------
Net income (loss)..................... $ 8,733 $ (13,303) $ 13,303 $ 8,733
========= ========= ======== ========
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Second Quarter Ended July 1, 2001
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
Net sales............................. $ 323,947 $ 30,978 $ - $ 354,925
Intercompany net sales................ 29,067 234,932 (263,999) -
--------- --------- --------- ---------
Total net sales....................... 353,014 265,910 (263,999) 354,925
--------- --------- --------- ---------
Costs and expenses:
Cost of products sold............... 266,242 251,942 (263,999) 254,185
Selling, general and administrative. 49,744 18,245 67,989
Goodwill amortization............... 337 179 516
--------- --------- --------- -------
Total costs and expenses.............. 316,323 270,366 (263,999) 322,690
--------- --------- --------- -------
Operating income (loss)............... 36,691 (4,456) - 32,235
Equity in earnings of subsidiaries.... 818 (818) -
Intercompany licensing income
(expense), net...................... (9,718) 9,718 -
Interest expense, net................. (11,177) (4,222) (15,399)
Other income (expense), net........... (2,243) 258 (1,985)
--------- --------- --------- --------
Income (loss) before income taxes..... 14,371 1,298 (818) 14,851
Income taxes ......................... (5,015) (480) (5,495)
--------- --------- --------- --------
Net income (loss)..................... $ 9,356 $ 818 $ (818) $ 9,356
======== ========= ========== ========
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Six Months Ended July 2, 2000
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
Net sales............................. $ 543,586 $ 72,004 $ - $615,590
Intercompany net sales................ 31,285 374,901 (406,186) -
--------- --------- -------- --------
Total net sales....................... 574,871 446,905 (406,186) 615,590
--------- --------- -------- --------
Costs and expenses:
Cost of products sold............... 423,277 427,567 (406,186) 444,658
Selling, general and administrative. 86,521 39,948 126,469
Goodwill amortization............... 652 372 1,024
--------- --------- -------- --------
Total costs and expenses.............. 510,450 467,887 (406,186) 572,151
--------- --------- -------- --------
Operating income (loss)............... 64,421 (20,982) - 43,439
Equity in earnings (losses)
of subsidiaries..................... (10,936) 10,936 -
Intercompany licensing income
(expense), net...................... (14,988) 14,988 -
Interest expense, net................. (12,517) (12,462) (24,979)
Other income (expense), net........... (4,512) 1,098 (3,414)
--------- --------- -------- --------
Income (loss) before income taxes..... 21,468 (17,358) 10,936 15,046
Income tax (provision) benefit........ (11,989) 6,422 (5,567)
--------- --------- -------- --------
Net income (loss)..................... $ 9,479 $ (10,936) $ 10,936 $ 9,479
========= ========= ======== ========
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Six Months Ended July 1, 2001
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
Net sales............................. $ 565,342 $ 54,544 $ - $ 619,886
Intercompany net sales................ 53,297 423,307 (476,604) -
--------- --------- --------- ---------
Total net sales....................... 618,639 477,851 (476,604) 619,886
--------- --------- --------- ---------
Costs and expenses:
Cost of products sold............... 478,324 451,415 (476,604) 453,135
Selling, general and administrative. 90,281 33,690 123,971
Goodwill amortization............... 651 359 1,010
--------- --------- --------- --------
Total costs and expenses.............. 569,256 485,464 (476,604) 578,116
--------- --------- --------- --------
Operating income (loss)............... 49,383 (7,613) - 41,770
Equity in earnings of subsidiaries.... 1,031 (1,031) -
Intercompany licensing income
(expense), net...................... (16,960) 16,960 -
Interest expense, net................. (22,002) (8,601) (30,603)
Other income (expense), net........... (4,358) 890 (3,468)
--------- --------- --------- --------
Income (loss) before income taxes..... 7,094 1,636 (1,031) 7,699
Income taxes.......................... (2,244) (605) (2,849)
--------- --------- --------- --------
Net income (loss)..................... $ 4,850 $ 1,031 $ (1,031) $ 4,850
======== ========= ========== ========
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
December 31, 2000
(Thousands)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiary inations Consolidated
--------- ------------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents............... $ 9,741 $ 73,006 $ - $ - $ 82,747
Accounts receivable, trade, net......... 19,474 19,474
Accounts receivable, other.............. 5,027 2,947 43,869 51,843
Tax receivable from parent corporations. 1,500 1,500
Inventories............................. 55,891 45,811 101,702
Other current assets.................... 1,105 2,820 3,925
------- --------- --------- --------- --------
Total Current Assets.................. 73,264 144,058 43,869 - 261,191
Investment in subsidiaries................ 356,726 (356,726) -
Intercompany loans including accrued
interest................................ 188,945 (184,531) (4,414) -
Due from(to)subsidiaries, net............. (233,236) 229,273 3,963 -
Property, plant and equipment, net........ 46,928 315,536 362,464
Excess of cost over net assets of
businesses acquired, net................ 41,562 23,755 65,317
Deferred income tax benefits.............. 42,897 42,897
Tax receivable from parent corporations... 7,500 7,500
Other assets.............................. 16,026 15,774 31,800
--------- --------- --------- --------- ---------
Total Assets.............................. $ 540,612 $ 543,865 $ 43,418 $(356,726) $ 771,169
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt.... $ 153 $ 5,755 $ - $ - $ 5,908
Accounts payable........................ 19,871 37,649 57,520
Payable to related parties.............. 7,522 2,530 10,052
Accrued liabilities..................... 18,865 24,023 42,888
Reserve for product warranty claims..... 14,900 14,900
--------- --------- --------- --------- --------
Total Current Liabilities............. 61,311 69,957 - - 131,268
Long-term debt less current maturities.... 514,880 159,818 674,698
Reserve for product warranty claims....... 28,187 569 28,756
Other liabilities......................... 14,099 213 14,312
--------- --------- --------- --------- --------
Total Liabilities......................... 618,477 230,557 - - 849,034
Total Stockholders' Equity (Deficit), net. (77,865) 313,308 43,418 (356,726) (77,865)
Total Liabilities and --------- --------- --------- --------- --------
Stockholders' Equity (Deficit) ......... $ 540,612 $ 543,865 $ 43,418 $(356,726) $ 771,169
========= ========= ========= ========== =========
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
July 1, 2001
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiary inations Consolidated
--------- ------------- ------------ ----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents...............$ 13 $ 53,921 $ - $ - $ 53,934
Accounts receivable, trade, net......... 29,227 29,227
Accounts receivable, other.............. 2,251 1,387 82,121 85,759
Inventories............................. 70,149 40,278 110,427
Other current assets.................... 2,979 3,753 6,732
--------- -------- --------- --------- ---------
Total Current Assets.................. 75,392 128,566 82,121 - 286,079
Investment in subsidiaries................ 404,435 (404,435) -
Intercompany loans including accrued
interest................................ 77,737 (73,323) (4,414) -
Due from(to)subsidiaries, net............. (159,760) 147,370 12,390 -
Property, plant and equipment, net........ 45,735 306,715 352,450
Excess of cost over net assets of
businesses acquired, net................ 40,731 23,576 64,307
Deferred income tax benefits.............. 40,603 - 40,603
Tax receivable from parent corporations... 9,000 9,000
Other assets.............................. 15,110 15,861 30,971
--------- --------- --------- --------- ---------
Total Assets.............................. $ 548,983 $ 548,765 $ 90,097 $(404,435) $ 783,410
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt.... $ 69 $ 5,293 $ - $ - $ 5,362
Accounts payable........................ 24,149 42,827 66,976
Payable to related parties.............. 2,441 14,024 16,465
Accrued liabilities..................... 29,098 15,442 44,540
Reserve for product warranty claims..... 14,900 - 14,900
--------- --------- --------- --------- ---------
Total Current Liabilities............. 70,657 77,586 - - 148,243
Long-term debt less current maturities.... 514,126 157,172 671,298
Reserve for product warranty claims....... 24,161 (536) 23,625
Other liabilities......................... 14,303 205 14,508
--------- --------- --------- --------- ---------
Total Liabilities......................... 623,247 234,427 - - 857,674
Total Stockholders' Equity (Deficit), net. (74,264) 314,338 90,097 (404,435) (74,264)
--------- --------- --------- --------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) ..................... $ 548,983 $ 548,765 $ 90,097 $(404,435) $ 783,410
========= ========= ======== ========= =========
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Six Months Ended July 2, 2000
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
--------- ------------ ---------- ------------
Cash and cash equivalents, beginning of period....... $ 203 $ 55,749 $ - $ 55,952
--------- --------- --------- --------
Cash provided by(used in)operating activities:
Net income(loss)..................................... 20,415 (10,936) 9,479
Adjustments to reconcile net income(loss)to net
cash provided by(used in)operating activities:
Depreciation..................................... 1,868 16,659 18,527
Goodwill and other amortization.................. 735 704 1,439
Deferred income taxes............................ -
Noncash interest charges......................... 966 966
(Increase) decrease in working capital items......... (46,933) (6,902) (14,725) (68,560)
Decrease in product warranty claims.................. (11,788) 8,154 (3,634)
Purchases of trading securities...................... (1,019) (1,019)
Proceeds from sales of trading securities............ 1,860 1,860
Change in net receivable from/payable to
related parties/parent corporations................ (49,110) 23,176 14,725 (11,209)
Other, net........................................... 6,704 (1,842) 4,862
--------- --------- --------- --------
Net cash provided by(used in)operating activities.... (77,143) 29,854 - (47,289)
--------- --------- --------- --------
Cash provided by(used in)investing activities:
Capital expenditures............................... (271) (28,432) (28,703)
Proceeds from sale of assets....................... 4,607 4,607
Purchases of available-for-sale securities......... (400) (400)
Proceeds from sales of available-for-sale
securities....................................... 3,643 3,643
Proceeds from sales of other short-term
investments...................................... 1,590 1,590
--------- --------- --------- --------
Net cash used in investing activities................ (271) (18,992) - (19,263)
--------- --------- --------- --------
Cash provided by(used in)financing activities:
Proceeds from sale of accounts receivable.......... 41,593 41,593
Increase in borrowings under revolving
credit facility.................................. 40,000 40,000
Repayments of long-term debt....................... (552) (1,811) (2,363)
Financing fees and expenses........................ (2,926) (1,146) (4,072)
Stock Issuance..................................... (891) (891)
---------- --------- --------- --------
Net cash provided by (used in) financing activities.. 77,224 (2,957) - 74,267
--------- --------- --------- --------
Net change in cash and cash equivalents.............. (190) 7,905 - 7,715
--------- --------- --------- --------
Cash and cash equivalents, end of period............. $ 13 $ 63,654 $ - $ 63,667
========= ========= ========= ========
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Six Months Ended July 1, 2001
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
------- ------------ ----------- ------------
Cash and cash equivalents, beginning of period....... $ 9,741 $ 73,006 $ - $ 82,747
-------- --------- --------- --------
Cash provided by (used in) operating activities:
Net income........................................... 3,820 1,030 4,850
Adjustments to reconcile net income(loss)to net
cash provided by(used in)operating activities:
Depreciation..................................... 1,367 16,153 17,520
Goodwill and other amortization.................. 1,460 359 1,819
Deferred income taxes............................ 2,294 2,294
Noncash interest charges......................... 1,578 609 2,187
Increase in working capital items.................... (48,793) (6,996) (38,252) (94,041)
Decrease in product warranty claims.................. (4,026) (1,105) (5,131)
Change in net receivable from/payable to
related parties/parent corporations................ (14,079) (17,811) 38,252 6,362
Other, net........................................... (4) (504) (508)
-------- -------- --------- --------
Net cash used in operating activities................ (56,383) (8,265) - (64,648)
-------- -------- --------- --------
Cash provided by(used in)investing activities:
Capital expenditures............................... (173) (7,104) (7,277)
-------- -------- --------- --------
Net cash used in investing activities................ (173) (7,104) - (7,277)
-------- -------- --------- --------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable.......... 49,999 49,999
Increase in borrowings under revolving
credit facility.................................. (1,000) (1,000)
Repayments of long-term debt....................... (97) (3,242) (3,339)
Distributions to parent corporations............... (1,249) (1,249)
Financing fees and expenses........................ (825) (474) (1,299)
-------- --------- --------- ---------
Net cash provided by (used in) financing activities.. 46,828 (3,716) - 43,112
-------- --------- --------- ---------
Net change in cash and cash equivalents.............. (9,728) (19,085) - (28,813)
-------- --------- --------- ---------
Cash and cash equivalents, end of period............. $ 13 $ 53,921 $ - $ 53,934
======== ========= ========= =========
17
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Second Quarter 2001 Compared With
Second Quarter 2000
The Company recorded second quarter net income of $9.4 million compared
with net income of $8.7 million in the second quarter of 2000. The increase in
net earnings was primarily the result of higher operating income and lower other
expenses, partially offset by higher interest expense.
The Company's net sales for the second quarter of 2001 were $354.9
million, an 8.9 % increase from last year's second quarter net sales of $325.8
million, with the increase primarily due to net sales gains in steep slope
roofing products, partially offset by the sale of the security products business
of LL Building Products Inc. which was sold in September 2000. Excluding the net
sales of the security products business in the second quarter of 2000, net sales
were higher by 12.6% for the second quarter of 2001. The increase in net sales
of steep slope roofing products reflected higher unit volumes, partially offset
by slightly lower average selling prices.
Operating income in the second quarter of 2001 was $32.2 million
compared with $28.6 million in the second quarter of 2000, an increase of 12.6%.
Higher operating results were primarily attributable to an increase in steep
slope roofing products sales volumes, partially offset by slightly lower average
selling prices for both steep slope and low slope roofing products and the sale
of the security products business of LL Building Products Inc. Selling, general
and administrative expenses for the second quarter of 2001 improved to 19.3% of
net sales compared to 20.5% of net sales in the second quarter of 2000,
primarily a result of cost reduction programs instituted in the third and fourth
quarters of 2000.
Interest expense for the quarter increased to $15.4 million from $12.5
million recorded in the same period of 2000, primarily due to higher average
borrowings and lower capitalized interest in 2001. The lower capitalized
interest in 2001 is the result of the completion of construction of three new
manufacturing facilities in the second half of 2000. Other expense, net was $2.0
million for the second quarter of 2001 compared with $2.3 million in 2000.
Results of Operations - Six Months 2001 Compared With
Six Months 2000
For the first six months of 2001, the Company recorded net income of
$4.9 million compared with $9.5 million in 2000. The decrease in net earnings
was primarily the result of higher interest expense and, to a lesser extent,
lower operating income due to lower first quarter of 2001 operating results.
The Company's net sales for the first half of 2001 were $619.9 million
compared to $615.6 million in the same period of 2000. Excluding the net sales
of the security products business of LL Building Products Inc. in the first six
months of 2000, net sales were higher by 3.5% for the first six months of 2001.
Net sales gains in steep slope roofing products were partially offset by lower
net sales in low slope roofing products and the sale of the security products
18
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
business of LL Building Products Inc. The increase in net sales of steep slope
roofing products primarily resulted from higher unit volumes, while the decline
in net sales of low slope roofing products primarily resulted from lower unit
volumes.
Operating income for the first six months of 2001 was $41.8 million
compared with $43.4 million reported in the same period of 2000. Lower operating
results were primarily attributable to higher manufacturing costs, principally
the cost of energy together with a decrease in low slope roofing products sales
volumes, and the sale of the security products business of LL Building Products
Inc., partially offset by an increase in steep slope roofing products sales
volumes. Selling, general and administrative expenses were 20.2% of net sales
for the first six months of 2001 compared to 20.7% of net sales in the same
period of 2000, primarily a result of the cost reduction programs instituted in
the third and fourth quarters of 2000.
Interest expense for the first six months increased to $30.6 million
from $25.0 million recorded in the same period of 2000, primarily due to higher
average borrowings and lower capitalized interest in 2001. Other expense, net
was $3.5 million for the first six months of 2001 compared to $3.4 million for
the same period in 2000.
Liquidity and Financial Condition
Net cash outflow during the first six months of 2001 was $73.2 million,
before financing activities, and included the use of $64.6 million of cash for
operations and the reinvestment of $7.3 million for capital programs.
Cash invested in additional working capital totaled $94.0 million
during the first six months of 2001, primarily reflecting seasonal increases in
inventories of $8.7 million and $93.7 million in accounts receivable, including
a $88.2 million increase in the receivable from the trust which purchases
certain of the Company's trade accounts receivable, partially offset by a $11.1
million increase in accounts payable and accrued liabilities. The net cash used
for operating activities also included a $6.4 million net increase in the
payable to related parties/parent corporations.
Net cash provided by financing activities totaled $43.1 million during
the first six months of 2001, mainly reflecting $50.0 million in proceeds from
the sale of the Company's trade receivables, partially offset by $4.3 million in
repayments of long-term debt and borrowings under the Company's bank revolving
credit facilities.
As a result of the foregoing factors, cash and cash equivalents
decreased by $28.8 million during the first six months of 2001 to $53.9 million.
See Note 3 to Consolidated Financial Statements for information
regarding contingencies.
* * *
19
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Forward-looking Statements
This Quarterly Report on Form 10-Q contains both historical and
forward-looking statements. All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements within the meaning
of section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are only predictions and
generally can be identified by use of statements that include phrases such as
"believe," "expect," "anticipate," "intend," "plan," "foresee" or other words or
phrases. Similarly, statements that describe the Company's objectives, plans or
goals also are forward-looking statements. The Company's operations are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement.
The forward-looking statements included herein are made only as of the date of
this Quarterly Report on Form 10-Q and the Company undertakes no obligation to
publicly update forward-looking statements to reflect subsequent events or
circumstances. No assurances can be given that projected results or events will
be achieved.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Form 10-K for a discussion of
"Market-Sensitive Instruments and Risk Management." There were no material
changes in such information as of July 1, 2001.
20
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As of July 1, 2001, 1,853 alleged asbestos-related bodily injury claims
relating to the inhalation of asbestos fiber are pending against Building
Materials Corporation of America. See Note 3 to Consolidated Financial
Statements above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) No Reports on Form 8-K were filed during the quarter ended July 1, 2001.
21
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
GAF LEATHERBACK CORP.
WIND GAP REAL PROPERTY ACQUISITION CORP.
GAF MATERIALS CORPORATION (CANADA)
DATE: August 15, 2001 BY: /s/John F. Rebele
----------------- ----------------------
John F. Rebele
Vice President
and Chief Financial Officer
(Principal Financial Officer)
DATE: August 15, 2001 BY: /s/James T. Esposito
----------------- --------------------
James T. Esposito
Vice President and Controller
(Principal Accounting Officer)
22
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 INVESTMENT CORPORATION
BMCA INSULATION PRODUCTS INC.
DUCTWORK MANUFACTURING CORPORATION
GAF PREMIUM PRODUCTS INC.
GAFTECH CORPORATION
LL BUILDING PRODUCTS INC.
DATE: August 15, 2001 BY: /s/John F. Rebele
----------------- ----------------------
John F. Rebele
Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
23