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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
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 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 07470
WAYNE, NEW JERSEY (Zip Code)
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 628-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of March 20, 2002, 1,015,010 shares of Class A Common Stock, $.001 par
value, and 15,000 shares of Class B Common Stock, $.001 par value, of Building
Materials Corporation of America were outstanding. There is no trading market
for the common stock of Building Materials Corporation of America.
As of March 20, 2002, each of the additional registrants had the number of
shares outstanding which is shown on the table below. No shares were held by
non-affiliates.
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ADDITIONAL REGISTRANTS
STATE OR OTHER REGISTRATION NO./ ADDRESS, INCLUDING ZIP CODE AND
JURISDICTION OF NO. OF I.R.S. EMPLOYER TELEPHONE NUMBER, INCLUDING
EXACT NAME OF REGISTRANT INCORPORATION OR SHARES IDENTIFICATION AREA CODE, OF REGISTRANT'S
AS SPECIFIED IN ITS CHARTER ORGANIZATION OUTSTANDING NUMBER PRINCIPAL EXECUTIVE OFFICE
- ----------------------------- -------------- ---------- -------------- -------------------------
Building Materials Delaware 10 333-69749-01/ 1361 Alps Road
Manufacturing Corporation 22-3626208 Wayne, New Jersey 07470
(973) 628-3000
Building Materials Delaware 10 333-69749-02/ 300 Delaware Avenue
Investment Corporation 22-3626206 Wilmington, Delaware 19801
(302) 427-5960
PART I
ITEM 1.BUSINESS
GENERAL
Building Materials Corporation of America ("BMCA") is a leading national
manufacturer of a broad line of asphalt roofing products and accessories for the
steep slope and low slope roofing markets. We also manufacture specialty
building products and accessories for the professional and do-it-yourself
remodeling and residential construction industries. BMCA, incorporated under the
laws of Delaware in 1994, is a wholly-owned subsidiary of BMCA Holdings
Corporation, which is a wholly-owned subsidiary of G-I Holdings Inc. In 1994,
BMCA acquired the operating assets and certain liabilities of GAF Building
Materials Corporation, whose name has changed to G-I Holdings, Inc. G-I Holdings
Inc. is a wholly-owned subsidiary of G Holdings Inc. As of March 20, 2002,
Samuel J. Heyman beneficially owned (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934) approximately 99% of the capital stock of G Holdings. BMCA
does business under the name "GAF Materials Corporation."
To facilitate administrative efficiency, effective October 31, 2000, GAF
Corporation, the former indirect parent of BMCA, merged into its direct
subsidiary, G-I Holdings Inc. G-I Holdings Inc. then merged into its direct
subsidiary, G Industries Corp., which in turn merged into its direct subsidiary,
GAF Fiberglass Corporation. In that merger, GAF Fiberglass Corporation changed
its name to GAF Corporation. Effective November 13, 2000, GAF Corporation
(formerly known as GAF Fiberglass Corporation) merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the
merger to G-I Holdings Inc. G-I Holdings Inc. is now an indirect parent of BMCA
and BMCA's direct parent is BMCA Holdings Corporation. We refer to G-I Holdings
Inc. and any and all of its predecessor corporations, including GAF Corporation,
G-I Holdings Inc., G Industries Corp., GAF Fiberglass Corporation and GAF
Building Materials Corporation in this report as "G-I Holdings."
On January 5, 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the District of New Jersey in Newark, New Jersey due to its
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber. We refer to these claims in this report as "Asbestos Claims." G-I
Holdings is a privately-held holding company, and we are its only operating
subsidiary. We are not included in the bankruptcy filing.
Our executive offices are located at 1361 Alps Road, Wayne, New Jersey
07470 and our telephone number is (973) 628-3000.
STEEP SLOPE ROOFING
We are a leading manufacturer of a complete line of premium steep slope
roofing products. Steep slope roofing product sales represented approximately
65%, 67% and 73% of our net sales in 1999, 2000 and 2001, respectively. We have
improved our sales mix of steep slope roofing products in recent years by
increasing our emphasis on laminated shingles and accessory products which
generally are sold at higher prices with more attractive profit margins than our
standard strip shingle products. We believe that we are the largest manufacturer
of laminated steep slope roofing shingles and the second largest manufacturer of
strip shingles in the United States. (Statements contained in this report as to
our competitive position are based on industry information which we believe is
reliable.)
Our two principal lines of steep slope roofing shingles are the
Timberline(R) series and the Sovereign(R) series. We also produce certain
specialty shingles.
THE TIMBERLINE(R) SERIES.
The Timberline(R) series offers a premium laminated product line that adds
dramatic shadow lines and substantially improves the appearance of a roof. The
series includes:
o the Timberline(R) 30 shingle, a mid-weight laminated shingle which
serves as an economic trade-up for consumers, with a 30-year limited
warranty;
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o the Timberline(R) shingle, a heavyweight laminated shingle with superior
fire resistance and durability, with a 40-year limited warranty; and
o the Timberline Ultra(R) shingle, a super heavyweight laminated shingle
with the maximum durability of the Timberline(R) series, with a lifetime
limited warranty.
THE SOVEREIGN(R) SERIES.
The Sovereign(R) series includes:
o the standard 3-tab Sentinel(R) shingle with a 20-year limited warranty;
o the Royal Sovereign(R) shingle, a heavier 3-tab shingle, designed to
capitalize on the "middle market" for quality shingles, with a 25-year
limited warranty; and
o the Marquis(R) Weathermax(R) shingle, a superior performing heavyweight
3-tab shingle with a 30-year limited warranty.
SPECIALTY SHINGLES.
Our specialty asphalt shingles include:
o the Slateline(R) shingle, which offers the appearance of slate and
reduces labor costs in installation because of its larger size, with a
40-year limited warranty;
o the Grand Sequoia(R) shingle, a premier architectural shingle with a
lifetime limited warranty;
o the Country Mansion(R) shingle, a distinctive high-end architectural
shingle with a lifetime limited warranty;
o the Country Estates(TM) shingle, a versatile style, high-end
architectural shingle with a lifetime limited warranty; and
o the Grand Canyon(TM) shingle, a super heavyweight architectural shingle
with a rugged wood shake appearance with a lifetime limited warranty.
WEATHER STOPPER(R) ROOFING SYSTEM. In addition to shingles, we supply all
the components necessary to install a complete roofing system. Our Weather
Stopper(R) Roofing System begins with Weather Watch(R) and Stormguard(R)
waterproof underlayments for eaves, valleys and flashings to prevent water
seepage between the roof deck and the shingles caused by ice build-up and
wind-driven rain. Our Weather Stopper(R) Roofing System also includes
Shingle-Mate(R) glass reinforced underlayment, Timbertex(R) and Pacific
Ridge(TM) Hip and Ridge shingles, which are significantly thicker and larger
than standard hip and ridge shingles and provide dramatic accents to the slopes
and planes of a roof, and the Cobra(R) Ridge Vent, which provides attic
ventilation.
LOW SLOPE ROOFING
We manufacture a full line of modified bitumen and asphalt built-up roofing
products, liquid applied membrane systems and roofing accessories for use in the
application of low slope roofing systems. We also market thermoplastic and
elastomeric single-ply products, and in the first quarter of 2001, we began
manufacturing thermoplastic polyolefin products at our new plant in Mount
Vernon, Indiana. Low slope roofing represented approximately 27%, 26% and 22% of
our net sales in 1999, 2000 and 2001, respectively. We believe that we are the
second largest manufacturer of asphalt built-up roofing products and the largest
manufacturer of modified bitumen products in the United States.
We manufacture fiberglass-based felts under the trademark GAFGLAS(R), which
are made from asphalt impregnated glass fiber mat for use as a component in
asphalt built-up roofing systems. Most of our GAFGLAS(R) products are assembled
on the roof by applying successive layers of roofing with asphalt and topped, in
some applications, with gravel. Thermal insulation may be applied beneath the
membrane. We also manufacture base sheets, flashings and other roofing
accessories for use in these systems; our TOPCOAT(R) roofing system, a
liquid-applied membrane system designed to protect and waterproof existing
roofing systems; and roof maintenance products. In
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addition, we market perlite roofing insulation products, which consist of low
thermal insulation that is installed as part of a low slope roofing application
below the roofing membrane, isocyanurate foam as roofing insulation, packaged
asphalt and accessories such as vent stacks, roof insulation fasteners, cements
and coatings.
We sell modified bitumen products under the Ruberoid(R) and Brai(R)
Supreme(TM) trademarks. Modified bitumen products are used primarily
in re-roofing applications or in combination with glass membranes in
GAF CompositeRoof(TM) systems. These products consist of a roofing membrane
utilizing polymer-modified asphalt, which strengthens and increases flexibility
and is reinforced with a polyester non-woven mat or a glass mat. Modified
bitumen systems provide high strength characteristics, such as weatherability,
water resistance and labor cost savings due to ease of application.
SPECIALTY BUILDING PRODUCTS AND ACCESSORIES
We manufacture and market a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries. Specialty building products and accessories represented
approximately 8%, 7% and 5% of our net sales in 1999, 2000 and 2001,
respectively. These products primarily consist of steep slope attic ventilation
systems and metal and fiberglass air distribution products for the HVAC
industry.
MARKETING AND SALES
We have one of the industry's largest sales forces. A staff of technical
professionals who work directly with architects, consultants, contractors and
building owners provides support to the sales force. We market our roofing and
specialty building products and accessories through our own sales force of
approximately 250 experienced, full-time employees and independent sales
representatives who operate from six regional sales offices located across the
United States. A major portion of our roofing product sales are to wholesale
distributors who resell our products to roofing contractors and retailers. We
believe that our nationwide coverage has contributed to certain of our roofing
products being among the most recognized and requested brands in the industry.
Our Customer Advantage(TM) Program offers marketing and support services to
a nationwide network of MasterElite(TM) steep slope roofing contractors and
Authorized Installers. We view the Master Elite(TM) contractors and Authorized
Installers as an effective extension of our sales force which takes our products
directly to the homeowner. We also have established programs with approved
MasterSelect(TM), Platinum(TM) and Pride(TM) contractors to promote premium
warranty systems and service programs for our low slope roofing products.
No single customer accounted for more than 10% of our net sales in 2001,
except for The Home Depot, Inc. and American Builders & Contractors Supply
Company, Inc.
RAW MATERIALS
The major raw materials required for the manufacture of our roofing
products are asphalt, mineral stabilizer, glass fiber, glass fiber mat,
polyester mat and granules. Asphalt and mineral stabilizer are available from a
large number of suppliers on substantially similar terms. We currently have
contracts with several of these suppliers and others are available as
substitutes. In 2001, prices of most raw materials other than asphalt and energy
have been relatively stable, rising moderately with general industrial prices,
while the decrease in the price of asphalt was driven mostly by the decline in
crude oil prices during 2001.
The major raw materials required for the manufacture of our specialty
building products and accessories are steel tubes, sheet metal products,
aluminum, motors and cartons. These raw materials, other than motors, are
commodity-type products, the pricing for which is driven by supply and demand.
Prices of other raw materials used in the manufacture of specialty building
products and accessories are more closely tied to movements in inflation rates.
In 2001, substantially all of the motors used in our ventilation products were
purchased from a domestic supplier. All of these raw materials, including
motors, are available from a large number of suppliers on substantially similar
terms.
Five of our roofing plants have easy access to deep water ports thereby
permitting delivery of asphalt by ship, the most economical means of transport.
Our Nashville, Tennessee plant manufactures a significant portion of our
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glass fiber requirements for use in our Chester, South Carolina and Shafter,
California plants which manufacture glass fiber mat substrate. We purchase all
of our requirements for colored roofing granules from an affiliate,
International Specialty Products Inc., under a requirements contract, except for
the requirements of certain of our roofing plants which are supplied by third
parties. This contract expires on December 31, 2002, unless extended by the
parties. We refer to International Specialty Products Inc. as "ISP".
SEASONAL VARIATIONS AND WORKING CAPITAL
Sales of roofing and specialty building products and accessories in the
northern regions of the United States generally decline during the winter months
due to adverse weather conditions. Generally, our inventory practice includes
increasing inventory levels in the first and second quarters in order to meet
peak season demand in the months of June through November.
WARRANTY CLAIMS
We provide certain limited warranties covering most of our steep slope
roofing products for periods generally ranging from 20 to 40 years, although
certain of our styles provide for a lifetime limited warranty. Although terms of
warranties vary, we believe that our warranties generally are consistent with
those offered by our competitors. We also offer certain limited warranties and
guarantees of varying duration covering most of our low slope roofing products
and limited warranties covering most of our specialty building products and
accessories for periods generally ranging from 5 to 10 years, with lifetime
limited warranties on certain products. From time to time, we review the
reserves established for estimated probable future warranty claims.
COMPETITION
The roofing products industry is highly competitive and includes a number
of national competitors. These competitors in the steep slope roofing and
accessories markets are Owens-Corning, Tamko, Elcor and Certainteed, and in the
low slope roofing market are Johns Manville, Firestone and Carlisle. In
addition, there are numerous regional competitors, principally in the low slope
roofing market.
Competition is based largely upon products and service quality,
distribution capability, price and credit terms. We believe that we are
well-positioned in the marketplace as a result of our broad product lines in
both the steep slope and low slope markets, consistently high product quality,
strong sales force and national distribution capabilities. As a result of the
growth in demand for premium laminated shingles, a number of roofing
manufacturers, including our company, have increased their laminated shingle
production capacity in recent years.
Our specialty building products and accessories business is highly
competitive with numerous competitors due to the breadth of the product lines we
market. Major competitors include Certainteed, Solar Group Inc., Southwark, Inc,
Lomanco Inc. and Standex Air Distribution Products.
RESEARCH AND DEVELOPMENT
We primarily focus our research and development activities on the
development of new products, process improvements and the testing of alternative
raw materials and supplies. Our research and development activities, dedicated
to steep slope, low slope and fiberglass products, are located at technical
centers at Wayne, New Jersey and Nashville, Tennessee. Our research and
development expenditures were approximately $6.5, $5.9 and $5.9 million in 1999,
2000 and 2001, respectively.
PATENTS AND TRADEMARKS
We own or license approximately 110 domestic and 115 foreign patents or
patent applications. In addition, we own or license approximately 220 domestic
and 60 foreign trademark registrations or applications. While we believe the
patent protection covering certain of our products to be material to those
products, we do not believe that any single patent, patent application or
trademark is material to our business or operations. We believe that the
duration of the existing patents and patent licenses is consistent with our
business needs.
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ENVIRONMENTAL COMPLIANCE
Since 1970, federal, state and local authorities have adopted and amended a
wide variety of federal, state and local environmental laws and regulations
relating to environmental matters. These laws and regulations affect us because
of the nature of our operations and that of our predecessor and certain of the
substances that are, or have been used, produced or discharged at our or its
plants or at other locations. We made capital expenditures of approximately
$2.7, $2.5 and $1.3 million in 1999, 2000 and 2001, respectively, relating to
environmental compliance. These expenditures are included in additions to
property, plant and equipment. We anticipate that aggregate capital expenditures
relating to environmental compliance in 2002 and 2003 will be approximately $1.0
million in each year.
The environmental laws and regulations deal with air and water emissions or
discharges into the environment, as well as the generation, storage, treatment,
transportation and disposal of solid and hazardous waste, and the remediation of
any releases of hazardous substances and materials to the environment. We
believe that our manufacturing facilities comply in all material respects with
applicable laws and regulations. Although we cannot predict whether more
burdensome requirements will be adopted by governmental authorities in the
future, we believe that any potential liability for compliance with the laws and
regulations will not materially affect our business, liquidity or financial
position.
See Item 3, "Legal Proceedings--Environmental Litigation."
EMPLOYEES
At December 31, 2001, we employed approximately 3,400 people worldwide,
approximately 1,000 of which were subject to 13 union contracts. The contracts
are effective for three- to four-year periods. During 2001, five labor contracts
expired and were renegotiated. We believe that our relations with our employees
and their unions are satisfactory.
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ITEM 2.PROPERTIES
Our corporate headquarters and principal research and development
laboratories are located at a 100-acre campus-like office and research park
owned by a subsidiary of ISP, at 1361 Alps Road, Wayne, New Jersey 07470. We
occupy our headquarters pursuant to our management agreement with ISP. See Item
13, "Certain Relationships and Related Transactions--Management Agreement."
We own or lease the principal real properties described below. Unless
otherwise indicated, the properties are owned in fee. In addition to the
principal facilities listed below, we maintain sales offices and warehouses,
substantially all of which are in leased premises under relatively short-term
leases.
LOCATION FACILITY
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Alabama
Mobile .......................... Plant, Warehouses*
California
Fontana ......................... Plant, Regional Sales Office
Hollister ....................... Plant, Plant*
Shafter ......................... Plant
Stockton ........................ Plant, Plant, Warehouse*
Delaware
Wilmington ...................... Regional Sales Office*
Florida
Tampa ........................... Plant, Regional Sales Office
Georgia
Atlanta ......................... Sales Office*
Savannah ........................ Plant
Indiana
Mount Vernon .................... Plant, Plant
Michigan City ................... Plant
Illinois
Romeoville ...................... Regional Sales Office*
Maryland
Baltimore ....................... Plant
Massachusetts
Millis .......................... Plant, Warehouse*
Walpole ......................... Plant*
Minnesota
Minneapolis ..................... Plant
Mississippi
Purvis .......................... Plant
New Jersey
North Branch .................... Plant, Warehouse*
North Brunswick ................. Regional Sales Office*, Warehouse*
Wayne ........................... Headquarters*, Corporate Administrative
Offices*, Research Center*
North Carolina
Burgaw .......................... Plant
Goldsboro ....................... Plant
Ohio
Wadsworth ....................... Plant*
Pennsylvania
Erie ............................ Plant, Warehouse*
Wind Gap ........................ Plant
South Carolina
Chester ......................... Plant
Tennessee
Nashville ....................... Plant, Research Center*
Texas
Dallas .......................... Plant, Regional Sales Office, Warehouse*
Fannett ......................... Warehouse
- ----------
* Leased property
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In addition to the foregoing list, we have three manufacturing facilities
in Monroe, Georgia; Port Arthur, Texas; and Albuquerque, New Mexico that are
currently closed. We believe that our plants and facilities, which are of
varying ages and are of different construction types, have been satisfactorily
maintained, are in good condition, are suitable for their respective operations
and generally provide sufficient capacity to meet production requirements. Due
to the seasonality of our business, our production facilities generally run at
full capacity during the months necessary to meet our peak seasonal operating
demands. Each plant has adequate transportation facilities for both raw
materials and finished products. In 2001, we made capital expenditures of $28.1
million relating to property, plant and equipment.
ITEM 3.LEGAL PROCEEDINGS
BODILY INJURY CLAIMS.In connection with its formation, BMCA 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 of its parent, G-I Holdings. We frequently refer to these claims in this
report as "Asbestos Claims." As of March 30, 1997, BMCA had paid all of its
assumed asbestos-related liabilities. In January 2001, G-I Holdings filed a
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code due to its Asbestos Claims. This proceeding remains pending.
Claimants in the G-I Holdings bankruptcy, including judgment creditors,
might seek to satisfy their claims by asking the bankruptcy court to require the
sale of G-I Holdings' assets, including its holdings of BMCA Holdings
Corporation's common stock and its indirect holdings of BMCA's common stock.
That action could result in a change of control of our company. See Notes 11 and
16 to Consolidated Financial Statements. In addition, those claimants may seek
to file Asbestos Claims against our company (with approximately 1,900 alleged
Asbestos Claims pending against us as of December 31, 2001). We believe that we
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 BMCA. On June 22, 2001, following a hearing, the Bankruptcy Court
converted the temporary restraining order into a preliminary injunction, which
is expected to remain in effect pending confirmation of a Chapter 11 plan of
reorganization for the G-I Holdings estate. On February 7, 2001, G-I Holdings
filed a defendant class action in the United States Bankruptcy Court for the
District of New Jersey seeking a declaratory judgment that BMCA has no successor
liability for Asbestos Claims against G-I Holdings and that it is not the alter
ego of G-I Holdings. 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 we cannot predict whether any additional Asbestos Claims
will be asserted against us, or the outcome of any litigation relating to those
claims, we believe that we have meritorious defenses to any claim that we have
asbestos-related liability, although there can be no assurances in this regard.
ACTIONS RELATING TO G-I HOLDINGS' BANKRUPTCY.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 BMCA. The complaint requests substantive consolidation
of BMCA with G-I Holdings or an order directing G-I Holdings to cause BMCA to
file for bankruptcy protection. BMCA and G-I Holdings intend to vigorously
defend the lawsuit. We believe 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.
ASBESTOS-IN-BUILDING CLAIMS.G-I Holdings has also been named as a
co-defendant in asbestos-in-buildings cases for economic and property damage or
other injuries based upon an alleged present or future need to remove asbestos
containing materials from public and private buildings. We refer to the
asbestos-in-building claims in this report as the "Building Claims." Since these
actions were first initiated approximately 20 years ago, G-I Holdings has not
only successfully disposed of approximately 145 of these cases, but is a
co-defendant in only three remaining lawsuits, one of which has been dormant.
These actions have been stayed as to G-I Holdings pursuant to the G-I Holdings
bankruptcy case. No new Building Claims were filed in 2001. BMCA has not assumed
any liabilities with respect to Building Claims, and believes it will not
sustain any liability in connection with such claims.
INSURANCE MATTERS.In January 2000 and May 2000, G-I Holdings filed summary
actions in Superior Court of New Jersey, Middlesex County against several of its
insurers, which had indicated that the Center for Claims
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Resolution, or the CCR, a non-profit organization set up to administer and
handle asbestos-related personal injury claims against the participating
companies and in which G-I Holdings was a member, had claimed a right to G-I
Holdings' insurance proceeds to satisfy what the CCR contended are G-I Holdings'
share of settlements entered by the CCR while G-I Holdings was a member. On
March 17, 2000 and July 28, 2000, the trial court granted summary judgment in
favor of G-I Holdings, and the CCR's motions for a stay pending appeal were
denied by both the trial court and the appellate division. All insurers in both
actions have now paid the amounts in dispute to G-I Holdings. The CCR's appeal
of the trial and grant of summary judgment has been briefed and argued before
the appellate division.
In October 1983, G-I Holdings filed a lawsuit in Los Angeles, California
Superior Court against its past insurance carriers to obtain a judicial
determination that those carriers were obligated to defend and indemnify it for
Building Claims. G-I Holdings is seeking declaratory relief as well as
compensatory damages. This action is presently in the pre-trial pleading stage.
The parties have agreed to hold this action in abeyance pending developments in
the Building Claims. Because this litigation is in early stages and evidence and
interpretations of important legal questions are presently unavailable, it is
not possible to predict the future of this litigation.
In all the Building Claims, which have been stayed as to G-I Holdings
pursuant to the G-I Holdings bankruptcy case, G-I Holdings' defense costs have
been paid by one of its primary carriers. While G-I Holdings expects that this
primary carrier continues to be obligated to defend and indemnify G-I Holdings,
this primary carrier has reserved its rights to later refuse to defend and
indemnify G-I Holdings and to seek reimbursement for some or all of the fees
paid to defend and resolve the Building Claims.
ENVIRONMENTAL LITIGATION
We, together with other companies, are a party to a variety of proceedings
and lawsuits involving environmental matters under the Comprehensive
Environmental Response Compensation and Liability Act and similar state laws, in
which recovery is sought for the cost of cleanup of contaminated sites or
remedial obligations are imposed, a number of which are in the early stages or
have been dormant for protracted periods. We refer to these proceedings and
lawsuits below as "Environmental Claims."
In connection with its formation, BMCA contractually assumed all
environmental liabilities of G-I Holdings relating to existing plant sites and
the business of BMCA as then conducted. The estimates referred to below reflect
those environmental liabilities assumed by BMCA and other environmental
liabilities of our company. The environmental liabilities of G-I Holdings which
were not assumed by BMCA relate primarily to closed manufacturing facilities.
G-I Holdings estimates that, as of December 31, 2001, its liability in respect
of the environmental liabilities of G-I Holdings not assumed by BMCA was
approximately $11.7 million, before the effect of the bankruptcy, and before
insurance recoveries reflected on its balance sheet of $10.0 million. BMCA
estimates its liability as of December 31, 2001 in respect of assumed and other
environmental liabilities is $2.0 million, and expects insurance recoveries
reflected on its balance sheet, as discussed below, of $0.8 million. Insurance
recoveries reflected on these balance sheets relate to both past expenses and
estimated future liabilities. We refer to these recoveries below as "estimated
recoveries."
At most sites, BMCA anticipates that liability will be apportioned among
the companies found to be responsible for the presence of hazardous substances
at the site. Although it is difficult to predict the ultimate resolution of
these claims, based on BMCA's evaluation of the financial responsibility of the
parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, BMCA estimates that its liability in respect of all
Environmental Claims, including certain environmental compliance expenses, will
be as discussed above. While we cannot predict whether adverse decisions or
events can occur in the future, in the opinion of management, the resolution of
such matters should not be material to our business, liquidity, results of
operations, cash flows or financial position. However, adverse decisions or
events, particularly as to increases in remedial costs, discovery of new
contamination, assertion of natural resource damages, and the liability and the
financial responsibility of our insurers and of the other parties involved at
each site and their insurers, could cause us to increase our estimate of our
liability in respect of those matters. It is not currently possible to estimate
the amount or range of any additional liability. For information relating to
other environmental compliance expenses, see Item 1, "Business--Environmental
Compliance".
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After considering the relevant legal issues and other pertinent factors,
BMCA believes that it will receive the estimated recoveries and the legal
expenses incurred by G-I Holdings on BMCA's behalf. We also believe that
recoveries could be in excess of the estimated recoveries for all Environmental
Claims, although there can be no assurances in this regard. BMCA believes it is
entitled to substantially full defense and indemnity under its insurance
policies for most Environmental Claims, although BMCA's insurers have not
affirmed a legal obligation under the policies to provide indemnity for those
claims.
In June 1997, G-I Holdings commenced litigation on behalf of itself and its
predecessors, successors, subsidiaries and related corporate entities in the
Superior Court of New Jersey, Somerset County, seeking amounts substantially in
excess of the estimated recoveries. This action was removed to the United States
Bankruptcy Court for the District of New Jersey in February 2001 in conjunction
with the G-I Holdings' bankruptcy case. The action is currently pending in the
bankruptcy court, although the defendant insurers have filed a motion to remand
the action to the Superior Court of New Jersey, Somerset County. While BMCA
believes that its claims are meritorious, there can be no assurance that BMCA
will prevail in its efforts to obtain amounts equal to, or in excess of, the
estimated recoveries.
We believe that we will not sustain any liability for environmental
liabilities of G-I Holdings other than those that we have contractually assumed
or that relate to the operations of our business. While we cannot predict
whether any claims for non-assumed environmental liabilities will be asserted
against us or our assets, or the outcome of any litigation relative to those
claims, we believe that we have meritorious defenses to those claims.
OTHER LITIGATION
On or about April 29, 1996, an action was commenced in the Circuit Court of
Mobile County, Alabama against G-I Holdings on behalf of a purported nationwide
class of purchasers of, or current owners of, buildings with certain asphalt
shingles manufactured by G-I Holdings and affiliated entities. The action
alleged, among other things, that those shingles were defective and sought
unspecified damages on behalf of the purported class. On September 25, 1998, we
agreed to settle this litigation on a national, class-wide basis for asphalt
shingles manufactured between January 1, 1973 and December 31, 1997. Following a
fairness hearing, the court granted final approval of the class-wide settlement
in April 1999. Under the terms of the settlement, we will provide property
owners whose shingles were manufactured during this period and which suffer
certain damages during the term of their original warranty period, and who file
a qualifying claim, with an opportunity to receive certain limited benefits
beyond those already provided in their existing warranty. Separate actions
commenced in 1997 in the Superior Court of New Jersey, Middlesex County, the
Superior Court of New Jersey, Passaic County and the Supreme Court of the State
of New York, County of Nassau, and in 1996 in Pointe Coupee Parish, Louisiana,
on behalf of purported classes alleging that our shingles were defective and
seeking unspecified damages, have been dismissed in light of the final approval
of the settlement agreement in the Mobile County, Alabama action.
In October 1998, G-I Holdings brought suit in the Superior Court of New
Jersey, Middlesex County, on our behalf, against certain of its insurers for
recovery of the defense costs in connection with the Mobile County, Alabama
class action and a declaration that the insurers are obligated to provide
indemnification for all damages paid pursuant to the settlement of this class
action and for other damages. This action is pending.
* * *
We believe that the ultimate disposition of the cases described above under
"Environmental Litigation," "Asbestos-in-Building Claims" and "Other Litigation"
will not, individually or in the aggregate, have a material adverse effect on
our liquidity, financial position or results of operations.
TAX CLAIM AGAINST G-I HOLDINGS
On September 15, 1997, G-I Holdings received a notice from the Internal
Revenue Service of a deficiency in the amount of $84.4 million (after taking
into account the use of net operating losses and foreign tax credits otherwise
available for use in later years) in connection with the formation in 1990 of
Rhone-Poulenc Surfactants and Specialties, L.P., a partnership in which G-I
Holdings held an interest. G-I Holdings has advised us that it believes
9
that it will prevail in this tax matter; although there can be no assurance in
this regard. We believe that the ultimate disposition of this matter will not
have a material adverse effect on our business, financial position or results of
operations. On September 21, 2001, the Internal Revenue Service filed a proof of
claim with respect to such deficiency against G-I Holdings in the G-I Holdings
bankruptcy. If that proof of claim is sustained, BMCA and/or certain of BMCA's
subsidiaries together with G-I Holdings and several current and former
subsidiaries of G-I Holdings, would be severally liable for a portion of those
taxes and interest. If the IRS were to prevail for the years in which BMCA
and/or certain of its subsidiaries were part of the G-I Holdings Group, BMCA
would be severally liable for approximately $40.0 million in taxes plus
interest, although this calculation is subject to uncertainty depending upon
various factors including G-I Holdings' ability to satisfy its tax liabilities
and the application of tax credits and deductions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKETS FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
There is no trading market for BMCA's common stock. As of March 20, 2002,
there is one holder of record of BMCA's Class A common stock and one holder of
record of its Class B common stock. See Item 12, "Security Ownership of Certain
Beneficial Owners and Management."
ITEM 6. SELECTED FINANCIAL DATA
See page F-7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See page F-2.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Financial Condition--Market-Sensitive
Instruments and Risk Management" on page F-6.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index on page F-1 and Financial Statements and Supplementary Data on
pages F-9 to F-42.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age, position and other
information with respect to the directors and executive officers of BMCA. Under
BMCA's By-laws, each director and executive officer continues in office until
the company's next annual meeting of stockholders and until his or her successor
is elected and qualified. On July 15, 1998, ISP merged with and into its parent,
ISP Holdings Inc., and ISP Holdings changed its name to International Specialty
Products Inc. As used in this section, "ISP" refers to both companies.
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- ----------------------------------------------
William W. Collins
Director, Chief Executive
Officer and President ........... 51 Mr. Collins has been President and Chief Executive
Officer of BMCA and some of its subsidiaries since
September 2000 and a director of these companies
since July 1999. He was President and Chief
Operating Officer of the same companies from
February 2000 to September 2000 and was Executive
Vice President and Chief Operating Officer of these
companies from July 1999 to February 2000. Mr.
Collins also was Senior Vice President--Marketing
and Sales, Steep Slope Roofing Products of BMCA and
some of its subsidiaries from November 1997 to July
1999. He was Vice President--Marketing and Sales,
Low Slope Roofing Products of BMCA from March 1996
to November 1997, and Vice President--Sales, Low
Slope of BMCA from December 1995 to March 1996.
Since July 1999, Mr. Collins also has been a
director of G-I Holdings, a corporation that filed a
voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code in January 2001 due
to its Asbestos Claims.
Richard A. Weinberg
Executive Vice President,
General Counsel
and Secretary ................... 42 Mr. Weinberg has been Executive Vice President,
General Counsel and Secretary of BMCA and its
subsidiaries since May 1998 and was Senior Vice
President, General Counsel and Secretary of BMCA and
its subsidiaries from May 1996 to May 1998. He has
been a director, Chief Executive Officer, President
and Secretary of G Industries Inc. since January
2002. Since September 2000, he has been Chief
Executive Officer, President, General Counsel and
Secretary of G-I Holdings, a corporation that filed
a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in January
2001 due to its Asbestos Claims, and previously
served as Executive Vice President, General Counsel
and Secretary of G-I Holdings and its subsidiaries
from May 1998 to September 2000. Prior to that time,
he held the positions of Senior Vice President,
General Counsel and Secretary of these companies
from May 1996 to May 1998. Mr. Weinberg has served
as a director of G-I Holdings since May 1996. He
also has been Executive Vice President, General
Counsel and Secretary of ISP and its subsidiaries
since May 1998 and was Senior Vice President,
General Counsel and Secretary of ISP and its
subsidiaries from May 1996 to May 1998. He was Vice
President and General Counsel of BMCA from September
1994 to May 1996.
11
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- ----------------------------------------------
David A. Harrison
Director, Senior Vice President--
Marketing, Contractor Services
and Corporate Development ...... 45 Mr. Harrison has been a director of BMCA and some of
its subsidiaries since September 2000. He also has
been Senior Vice President--Marketing, Contractor
Services and Corporate Development of BMCA and some
of its subsidiaries since July 2000. He is also
President of GAF Materials Corporation (Canada)
since July 2000. Mr. Harrison was Vice
President--Corporate Marketing and Development of
BMCA and some of its subsidiaries from November 1999
to July 2000, Vice President--Marketing Development
of BMCA and some of its subsidiaries from January
1997 to July 1999 and Senior Vice President--Steep
Slope Marketing of BMCA and some of its subsidiaries
from April 1996 to January 1997. From July 1999 to
November 1999, Mr. Harrison was Senior Vice
President, Corporate Marketing of Centex
Corporation, a company in the construction and
related financial services industries. Prior to
joining BMCA, Mr. Harrison was Vice President of
Global Marketing of Armstrong World Industries Inc.
from 1994 to 1996.
Robert B. Tafaro
Director, Senior Vice President
and General Manager--
Steep Slope Systems ............ 51 Mr. Tafaro has been a director of BMCA and some of
its subsidiaries since September 2000. He also has
been Senior Vice President and General
Manager--Steep Slope Systems of BMCA and some of its
subsidiaries since July 2000. He was Vice
President--Marketing and Sales, Low Slope Roofing
Products of BMCA and some of its subsidiaries from
November 1997 to July 2000. He was Vice
President--Steep Slope Marketing of BMCA from May
1997 to November 1997, Director of Steep Slope
Marketing of BMCA from February 1997 to May 1997,
and Eastern Regional Sales Manager of BMCA and its
predecessor company from July 1993 to February 1997.
Kenneth E. Walton
Director,
Senior Vice President--
Operations ...................... 45 Mr. Walton has been a director of BMCA and some of
its subsidiaries since September 2000. He also has
been Senior Vice President--Operations of BMCA and
some of its subsidiaries since July 2000. He was
Vice President--Steep Slope Operations of BMCA from
March 1999 to July 2000, Vice
President--Manufacturing of U.S. Intec, Inc., a
former subsidiary of BMCA, from December 1997 to
March 1999, Director of Manufacturing--Roofing and
Felt Operations of BMCA from April 1996 to December
1997 and Plant Manager--Mobile, Alabama roofing
facility of BMCA and its predecessor company from
May 1991 to April 1996.
12
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- ----------------------------------------------
John F. Rebele
Director, Senior Vice President
and Chief Financial Officer ..... 47 Mr. Rebele has been a director of BMCA since January
2001 and of BMCA's subsidiaries since March 2001. He
also has been Senior Vice President and Chief
Financial Officer of BMCA and some of its
subsidiaries since December 2001 and was Vice
President and Chief Financial Officer of the same
companies from January 2001 to December 2001. He was
Vice President--Finance of BMCA and some of its
subsidiaries from March 1998 to January 2001 and
Vice President and Controller of BMCA and some of
its subsidiaries from February 1994 to March 1998.
Susan B. Yoss
Senior Vice President .......... 43 Ms. Yoss has been Senior Vice President of BMCA and
its subsidiaries since August 2001 and was Senior
Vice President and Treasurer of the same companies
from July 1999 to August 2001 and was Vice President
and Treasurer of the same companies from February
1998 to July 1999. Since July 1999, she also has
been Senior Vice President, Chief Financial Officer
and Treasurer of G-I Holdings, a corporation that
filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in January
2001 due to its Asbestos Claims. Ms. Yoss has served
as Executive Vice President--Finance and Treasurer
of ISP and some of its subsidiaries since September
2000, was Senior Vice President and Treasurer of ISP
and some of its subsidiaries from July 1999 to
September 2000 and was Vice President and Treasurer
of ISP from February 1998 to July 1999. Ms. Yoss was
Assistant Treasurer of Joseph E. Seagram & Sons,
Inc., a global beverage and entertainment company,
for more than five years until February 1998.
13
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the four other most highly compensated executive officers of BMCA as
of December 31, 2001. The salaries and other compensation of Mr. Weinberg and
Ms. Yoss for services provided by them to our company are paid by ISP in
accordance with a management agreement between ISP and our company. See Note (7)
to the table below.
LONG-TERM
ANNUAL COMPENSATION(7) COMPENSATION
----------------------------------------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(1) COMPENSATION
- ------------------------- ----- ----- ------- ----------- ---------- -------------
William W. Collins .......... 2001 $284,583 $ 400,000 -- $19,462(2)
President and 2000 245,625 150,000 6,500 19,251(2)
Chief Executive 1999 194,750 100,000 5,000 15,463(2)
Officer
David A. Harrison ........... 2001 $233,500 $147,445 -- $16,822(3)
Senior Vice President 2000 207,375 39,995 $48,544(3) 4,500 9,722(3)
Marketing, Contractor 1999 115,578(3) 26,137(3) --(3) --(3) 11,037(3)
Services and Corporate
Development
Robert B. Tafaro ............ 2001 $231,751 $200,090 -- $18,920(4)
Senior Vice President and 2000 200,999 44,071 1,500 18,057(4)
General Manager--Steep 1999 164,000 36,183 -- 15,099(4)
Slope Systems
Kenneth E. Walton ........... 2001 $186,287 $117,738 -- $15,846(5)
Senior Vice President-- 2000 164,375 36,800 2,000 15,011(5)
Operations 1999 151,018 34,110 2,500 16,372(5)
John F. Rebele .............. 2001 $185,625 $114,002 -- $15,824(6)
Senior Vice President 2000 155,625 27,684 1,000 15,278(6)
and Chief Financial 1999 148,250 33,540 1,000 13,617(6)
Officer
- ------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
Compensation Program, except that a portion of the bonus amount paid to Mr.
Harrison in 1999 represented a special bonus award. The options relate to
shares of redeemable convertible preferred stock of BMCA. See "--Long-Term
Incentive Plan."
(2) Included in "All Other Compensation" for Mr. Collins are: $12,400, $12,150
and $11,450 representing BMCA's contribution under its 401(k) plan in 2001,
2000, and 1999, respectively; $4,902, $4,941 and $2,484 for the premiums
paid by BMCA for a life insurance policy in 2001, 2000 and 1999,
respectively; and $2,160, $2,160 and $1,529 for the premiums paid by BMCA
for a long-term disability policy in 2001, 2000 and 1999, respectively.
(3) Included in "Other Annual Compensation" for Mr. Harrison is $48,544 in
payment for moving-related expenses in 2000. Included in "All Other
Compensation" for Mr. Harrison are: $12,150, $6,089 and $9,188 representing
BMCA's contribution under its 401(k) plan in 2001, 2000 and 1999,
respectively; $2,655, $1,574 and $737 for the premiums paid by BMCA for a
life insurance policy in 2001, 2000 and 1999, respectively; and $2,017,
$2,059 and $1,112 for the premiums paid by BMCA for a long-term disability
policy in 2001, 2000 and 1999, respectively. Mr. Harrison resigned from his
employment with us in July 1999 and returned in November 1999.
(4) Included in "All Other Compensation" for Mr. Tafaro are: $12,400, $12,150
and $11,450 representing BMCA's contribution under its 401(k) plan in 2001,
2000 and 1999, respectively; $4,518, $3,913 and $2,078 for the premiums
paid by BMCA for a life insurance policy in 2001, 2000 and 1999,
respectively; and $2,002, $1,994 and $1,571 for the premiums paid by BMCA
for a long-term disability policy in 2001, 2000 and 1999, respectively.
14
(5) Included in "All Other Compensation" for Mr. Walton are: $12,150, $12,150
and $11,503 representing BMCA's contribution under its 401(k) plan in 2001,
2000 and 1999, respectively; $2,086, $1,223 and $3,416 for the premiums
paid by BMCA for a life insurance policy in 2001, 2000 and 1999,
respectively; and $1,610, $1,638 and $1,453 for the premiums paid by BMCA
for a long-term disability policy in 2001, 2000 and 1999, respectively.
(6) Included in "All Other Compensation" for Mr. Rebele are: $12,150, $12,150
and $11,350 representing BMCA's contribution under its 401(k) plan in 2001,
2000 and 1999, respectively; $2,070, $1,783 and $1,103 for the premiums
paid by BMCA for a life insurance policy in 2001, 2000 and 1999,
respectively; and $1,604, $1,345 and $1,164 for the premiums paid by BMCA
for a long-term disability policy in 2001, 2000 and 1999, respectively.
(7) The salary and other compensation of Mr. Weinberg and Ms. Yoss are paid by
ISP pursuant to our management agreement with ISP, except that BMCA granted
to Mr. Weinberg options to purchase 6,453 shares of redeemable convertible
preferred stock of BMCA in 1999. In 2001, Mr. Weinberg converted these
options to 2,500 incentive units, see "--Long-Term Incentive Plan." In
addition, in 2001, Mr. Weinberg exercised 1,500 units and received $60,178.
No allocation of compensation for services to BMCA is made pursuant to the
management agreement, except that BMCA reimbursed ISP $500,000 and $400,000
for Mr. Weinberg and $300,000 and $230,000 for Ms. Yoss for 2001 and 2000,
respectively, under the management agreement in respect of bonus amounts
earned in connection with services performed by them for BMCA during those
years. In addition, BMCA reimburses ISP, through payment of the management
fees payable under the management agreement, for the estimated costs ISP
incurs for providing the services of these officers. See Item 13, "Certain
Relationships and Related Transactions--Management Agreement."
LONG-TERM INCENTIVE PLAN
The following table sets forth information on awards granted to the
executive officers named in the Summary Compensation Table above during 2001
under our 2001 Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 2001
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
DATE SHARES, UNITS OTHER PERIOD NON-STOCK PRICE-BASED PLANS
OF OR OTHER UNTIL MATURATION --------------------------------------------
NAME GRANT RIGHTS (1) OR PAYOUT (1) THRESHOLD($)(2) TARGET($)(3) MAXIMUM($)(3)
- ----- ------ ---------- ---------------- -------------- ------------ -------------
William W. Collins 1/96 528(4) -- $170.60 -- --
7/97 987(4) -- 206.01 -- --
10/97 2,814(4) -- 219.81 -- --
7/98 1,238(4) -- 242.33 -- --
7/99 1,779(4) -- 281.11 -- --
7/00 2,089(4) -- 311.19 -- --
7/01 2,000 -- 278.73 -- --
David A. Harrison 1/00 849(4) -- $294.40 -- --
7/00 643(4) -- 311.19 -- --
7/01 800 -- 278.73 -- --
Robert B. Tafaro 1/96 352(4) -- $170.60 -- --
7/97 515(4) -- 206.01 -- --
7/98 1,032(4) -- 242.33 -- --
7/00 482(4) -- 311.19 -- --
7/01 800 -- 278.73 -- --
Kenneth E. Walton 1/96 410(4) -- $170.60 -- --
7/97 367(4) -- 206.01 -- --
10/97 150(4) -- 219.81 -- --
7/98 619(4) -- 242.33 -- --
4/99 382(4) -- 261.91 -- --
7/99 534(4) -- 281.11 -- --
7/00 643(4) -- 311.19 -- --
7/01 800 -- 278.73 -- --
15
LONG-TERM INCENTIVE PLAN -- AWARDS IN 2001 (CONTINUED)
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
DATE SHARES, UNITS OTHER PERIOD NON-STOCK PRICE-BASED PLANS
OF OR OTHER UNTIL MATURATION ---------------------------------------------
NAME GRANT RIGHTS (1) OR PAYOUT (1) THRESHOLD($)(2) TARGET($)(3) MAXIMUM($) (3)
- ----- ------ ---------- ---------------- -------------- ------------ ----------------
John F. Rebele 1/96 469(4) -- $170.60 -- --
7/97 515(4) -- 206.01 -- --
10/97 211(4) -- 219.81 -- --
7/98 619(4) -- 242.33 -- --
7/99 356(4) -- 281.11 -- --
7/00 321(4) -- 311.19 -- --
7/01 800 -- 278.73 -- --
- ----------
(1) Effective December 31, 2000, we adopted the 2001 Long-Term Incentive Plan,
which allows employees participating in our Preferred Stock Option Plan to
also participate in the 2001 Long-Term Incentive Plan. Our Long-Term
Incentive Plan provides long-term compensation to employees and key
management personnel based on BMCA's book value (as defined in the Plan).
Our Long-Term Incentive Plan authorizes the grant of incentive units to
eligible employees. Our Long-Term Incentive Plan is administered by a
committee appointed by our board of directors. The number of incentive
units granted is determined by the committee in its sole discretion.
Generally, incentive units vest cumulatively, in 20% increments over five
years, except that incentive units granted in exchange for preferred stock
options retain the vested status and vesting schedule of the options
exchanged. The committee may, in its sole discretion, however, grant
incentive units with any vesting schedule, other than that normally
provided in the 2001 Long-Term Incentive Plan. Vesting will end upon the
termination of an employee's employment with us or any subsidiary for any
reason. Incentive units generally are exercisable for a period of six years
from the date of grant. In the event of a change of control of BMCA (as
defined), all incentive units will become fully and immediately vested and
payable in cash.
(2) Set forth under the "Threshold" column is the "initial value" (as defined)
per unit at which the respective incentive units were granted. The value of
incentive units is determined at the end of each fiscal quarter based on
our book value at that date less book value as of the date of grant divided
by 1,000,010. Our Long-Term Incentive Plan will terminate five years after
its effective date of December 2000, unless terminated sooner by the
committee.
(3) Upon exercise of an incentive unit, a participant will receive in cash the
excess, if any, of the value of such incentive unit as of the relevant
valuation date on or, in the event of an exercise between valuation dates,
immediately preceding the exercise date, over the initial value of such
incentive unit, subject to all appropriate withholdings. Accordingly, the
dollar value of future payouts is not readily ascertainable.
(4) These incentive units were granted in exchange for stock options to
purchase shares of our preferred stock previously granted under our
Preferred Stock Option Plan.
EMPLOYMENT SECURITY AGREEMENTS
In June 2001, we entered into employment security agreements with certain
of our executive officers and key personnel, including Messrs. Collins,
Harrison, Tafaro, Walton and Rebele, in an effort to retain these individuals as
well as provide security to us and the executives and to provide for continuity
of management in the event of a change in control. The agreements have no
expiration date and provide for a single-sum payment consisting of two to three
times salary and bonus and related benefits if employment is terminated within a
thirty-six month period following the change in control event. Each officer who
is a member of the board of directors is a party to an employment security
agreement.
A "change in control", as defined in the agreements, would occur when (1)
the Heyman Group (as described below) ceases to be the beneficial owner,
directly or indirectly, of a majority voting power of the voting stock of BMCA,
(2) the transfer or sale of a substantial portion of the property of BMCA in any
transaction or series of transactions to any entity or entitites other than an
entity of which the Heyman Group owns at least 80% of such entity's capital
stock or beneficial interest or (3) any person or entity, other than the Heyman
Group, assumes, without
16
the consent of the Heyman Group, management responsibilities for the affairs of
G-I Holdings or any subsidiary thereof.
Under the agreements, the "Heyman Group" means (1) Samuel J. Heyman, his
heirs, administrators, executors and entities of which a majority of the voting
stock is owned by Samuel J. Heyman, his heirs, administrators or executors and
(2) any entity controlled, directly or indirectly, by Samuel J. Heyman or his
heirs, administrators or executors. Also for purposes of this section,
"beneficial ownership" shall be determined in accordance with Rule 13d under the
Securities Exchange Act of 1934, as amended.
COMPENSATION OF DIRECTORS
Our directors do not receive any additional compensation for their services
as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
We do not have a separate compensation committee. Compensation policies are
established by our board of directors, each member of which is also one of our
executive officers. See Item 13, "Certain Relationships and Related
Transactions."
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 20, 2001, 100% of our outstanding shares of Class A common
stock and Class B common stock were owned of record by BMCA Holdings
Corporation.
The following table sets forth information with respect to the ownership of
BMCA's common stock, as of March 20, 2001, by each other person known to us to
own beneficially more than 5% of either class of the common stock outstanding on
that date and by all of our directors and executive officers as a group.
AMOUNT AND
NATURE OF TOTAL
BENEFICIAL PERCENT VOTING
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP OF CLASS POWER
- -------------- ------------------------------------- --------- ------ ------
Class A Common Stock Samuel J. Heyman 1,015,010(2) 100.0% 98.5%
All directors and executive officers of
BMCA as a group (7 persons) -- -- --
Class B Common Stock Samuel J. Heyman 15,000(2) 100.0% 1.5%
All directors and executive officers of
BMCA as a group (7 persons) -- -- --
- ----------
(1) The business address for Mr. Heyman is 1361 Alps Road, Wayne, New Jersey
07470.
(2) The number of shares shown as being beneficially owned (as defined in Rule
13d-3 of the Exchange Act) by Mr. Heyman attributes ownership of the shares
of BMCA common stock owned by BMCA Holdings Corporation, an indirect
wholly-owned subsidiary of G Holdings, to Mr. Heyman. As of March 20, 2002,
Mr. Heyman beneficially owned (as defined in Rule 13d-3 of the Exchange
Act) approximately 99% of the capital stock of G Holdings.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
Pursuant to a management agreement, ISP Management Company, Inc., a
wholly-owned indirect subsidiary of ISP (of which Samuel J. Heyman beneficially
owns, as defined in Rule 13d-3 of the Exchange Act, approximately 81%), provides
some general management, administrative, legal, telecommunications, information
and facilities services to us, including the use of our headquarters in Wayne,
New Jersey. We were charged approximately
17
$6.7 million in 2001 for these services under the management agreement,
inclusive of the services provided to G-I Holdings. These charges consist of
management fees and other reimbursable expenses attributable to us, or incurred
by ISP Management for our benefit. They are based on an estimate of the costs
ISP Management incurs to provide those services. Effective January 1, 2002, the
management agreement was amended to adjust the management fees payable under the
agreement. The management agreement also provides that we are responsible for
providing management services to G-I Holdings and some of its subsidiaries and
that G-I Holdings pay to us a management fee for these services. The aggregate
amount paid by G-I Holdings to us for services rendered under the management
agreement in 2001 was approximately $0.6 million. We also allocate a portion of
the management fees payable by us under the management agreement to separate
lease payments for the use of our headquarters. Based on the services provided
in 2001 under the management agreement, the aggregate amount payable by us to
ISP Management under the management agreement for 2002, inclusive of the
services provided to G-I Holdings, is expected to be approximately $6.1 million.
Some of our executive officers receive their compensation from ISP Management.
ISP Management is indirectly reimbursed for this compensation through payment of
the management fee and other reimbursable expenses payable under the management
agreement.
Due to the unique nature of the services provided under the management
agreements, comparisons with third party arrangements are difficult. However, we
believe that the terms of the management agreement taken as a whole are no less
favorable to us than could be obtained from an unaffiliated third party.
CERTAIN PURCHASES
We purchase all of our colored roofing granules requirements from ISP under
a requirements contract, except for the requirements of some of our roofing
plants which are supplied by third parties. Effective January 1, 2002, this
contract was amended to provide, among other things, that the contract will
expire on December 31, 2002, unless extended by the parties. In 2001, we
purchased in the aggregate approximately $63.4 million of mineral products from
ISP.
TAX SHARING AGREEMENT
We entered into a tax sharing agreement dated January 31, 1994 with G-I
Holdings with respect to the payment of federal income taxes and related
matters. During the term of the tax sharing agreement, which is effective for
the period during which we or any of our domestic subsidiaries is included in a
consolidated federal income tax return for the G-I Holdings consolidated tax
group, we are obligated to pay G-I Holdings an amount equal to those federal
income taxes we would have incurred if we, on behalf of ourselves and our
domestic subsidiaries, filed our own federal income tax return. Unused tax
attributes will carry forward for use in reducing amounts payable by us to G-I
Holdings in future years, but cannot be carried back. If we ever were to leave
the G-I Holdings consolidated tax group, we would be required to pay to G-I
Holdings the value of any tax attributes to which we would succeed under the
consolidated return regulations to the extent the tax attributes reduced the
amounts otherwise payable by us under the tax sharing agreement. Under limited
circumstances, the provisions of the tax sharing agreement could result in us
having a greater liability under the agreement than we would have had if we and
our domestic subsidiaries had filed our own separate federal income tax return.
Under the tax sharing agreement, we and each of our domestic subsidiaries are
responsible for any taxes that would be payable by reason of any adjustment to
the tax returns of G-I Holdings or its subsidiaries for years prior to the
adoption of the tax sharing agreement that relate to our business or assets or
the business or assets of any of our domestic subsidiaries. Although, as a
member of the G-I Holdings consolidated tax group, we are severally liable for
all federal income tax liabilities of the G-I Holdings consolidated tax group,
including tax liabilities not related to our business, we do not believe we
should be liable, under any circumstances, for liabilities other than those
arising from our operations and the operations of our domestic subsidiaries and
tax liabilities for tax years pre-dating the tax sharing agreement that relate
to our business or assets and the business or assets of any of our domestic
subsidiaries. The tax sharing agreement provides for analogous principles to be
applied to any consolidated, combined or unitary state or local income taxes.
Under the tax sharing agreement, G-I Holdings makes all decisions with respect
to all matters relating to taxes of the G-I Holdings consolidated tax group. The
provisions of the tax sharing agreement take into account both the federal
income taxes we would have incurred if we filed our own separate federal income
tax return and the fact that we are a member of the G-I Holdings consolidated
tax group for federal income tax purposes.
18
INTERCOMPANY BORROWINGS
BMCA makes loans to, and borrows from, G-I Holdings and its subsidiaries
from time to time at prevailing market rates. As of December 31, 2001, a $2.5
million loan, including interest of $0.1 million, was owed to BMCA by BMCA
Holdings Corporation at an interest rate of 4.75%. In addition, no loans were
owed by us to affiliates. We also make non-interest bearing advances to
affiliates, of which no balance was outstanding at December 31, 2000 and 2001.
During 2000, we made a distribution of $106.2 million ($59.1 million of which
represents a non-cash distribution in 2000 relating to the 1999 receivable from
G-I Holdings) to our parent corporations. The distribution of $106.2 million in
2000 represented the write-off of outstanding advances made to our parent
corporations that we determined were uncollectible. See Note 15 to Consolidated
Financial Statements.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this report:
(a)(1) Financial Statements: See Index on page F-1.
(a)(2) Financial Statement Schedules: See Index on page F-1.
(a)(3) Exhibits:
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
2.1 Reorganization Agreement, dated as of December 31, 1998, by and among
BMCA, Building Materials Manufacturing Corporation and Building
Materials Investment Corporation (incorporated by reference to Exhibit
2.1 to BMCA's Registration Statement on Form S-4 (Registration No.
333-69749) (the "2008 Notes S-4")).
3.1 Amended and Restated Certificate of Incorporation of BMCA (incorporated
by reference to Exhibit 3.1 to BMCA's Form 10-K for the year ended
December 31, 1999).
3.2 By-laws of BMCA (incorporated by reference to Exhibit 3.2 to BMCA's
Registration Statement on Form S-4 (Registration No. 33-81808)) (the
"Deferred Coupon Note Registration Statement").
3.3 Certificate of Incorporation of Building Materials Manufacturing
Corporation (incorporated by reference to Exhibit 3.3 to BMCA's Form
10-K for the fiscal year ended December 31, 1998 (the "1998 10-K")).
3.4 By-laws of Building Materials Manufacturing Corporation (incorporated by
reference to Exhibit 3.4 to the 1998 10-K).
3.5 Certificate of Incorporation of Building Materials Investment
Corporation (incorporated by reference to Exhibit 3.5 to the 1998 10-K).
3.6 By-laws of Building Materials Investment Corporation (incorporated by
reference to Exhibit 3.6 to the 1998 10-K).
4.1 Indenture, dated July 5, 2000, between BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.13 to BMCA's Form 10-K for the
year ended December 31, 2000 (the "2000 10-K").
4.2 First Supplemental Indenture, dated as of December 4, 2000, to the
Indenture dated as of July 5, 2000, between BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.14 to the 2000 10-K).
4.3 Registration Rights Agreement, dated July 5, 2000, between BMCA and BNY
Capital Markets Inc. (incorporated by reference to Exhibit 4.15 to the
2000 10-K).
19
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
4.4 First Amendment to the Registration Rights Agreement, dated as of
December 4, 2000, to Registration Rights Agreement dated July 5, 2000,
among BMCA, as issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors, and BNY
Capital Markets, Inc., as initial purchaser (incorporated by reference
to Exhibit 4.16 to the 2000 10-K).
4.5 Indenture, dated as of December 9, 1996, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 333-20859)).
4.6 First Supplemental Indenture, dated as of January 1, 1999, to Indenture
dated as of December 9, 1996 among BMCA, as issuer, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation,
as guarantors, and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.7 of the 2008 Notes S-4).
4.7 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of December 9, 1996 among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.5 to the 2000 10-K).
4.8 Indenture, dated as of October 20, 1997, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 333-41531)).
4.9 First Supplemental Indenture, dated as of January 1, 1999, to Indenture
dated as of October 20, 1997 among BMCA, as issuer, Building Materials
Manufacturing Corporation, as co-obligor, Building Materials Investment
Corporation, as guarantor, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 10.8 of the 2008 Notes S-4).
4.10 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of October 20, 1997 among BMCA and Building Materials
Manufacturing Corporation, as issuers, Building Materials Investment
Corporation, as guarantor, the Additional Guarantors signatory thereto,
as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.7 to the 2000 10-K).
4.11 Indenture, dated as of July 17, 1998, between BMCA and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 333-60633)).
4.12 First Supplemental Indenture, dated as of January 1, 1999, to Indenture
dated as of July 17, 1998 among BMCA, as issuer, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation,
as guarantors, and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.9 of the 2008 Notes S-4).
4.13 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of July 17, 1998 among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.9 to the 2000 10-K).
4.14 Indenture, dated as of December 3, 1998, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to the
2008 Notes S-4).
4.15 First Supplemental Indenture dated as of January 1, 1999 to Indenture
dated as of December 3, 1998 among BMCA, as issuer, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation,
as guarantors, and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.4 to the 2008 Notes S-4).
4.16 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of December 3, 1998 among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.12 to the 2000 10-K).
10.1 Amended and Restated Management Agreement, dated as of January 1, 1999,
among GAF, G-I Holdings Inc., G Industries Corp., Merick Inc., GAF
Fiberglass Corporation, ISP, GAF Building Materials Corporation, GAF
Broadcasting Company, Inc., BMCA and ISP Opco Holdings Inc.
(incorporated by reference to Exhibit 10.1 to the 1998 10-K).
20
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
10.2 Amendment No. 1 to the Management Agreement, dated as of January 1, 2000
(incorporated by reference to Exhibit 10.2 to International Specialty
Products Inc. Annual Report on Form 10-K for the year ended December 31,
1999).
10.3 Amendment No. 2 to the Management Agreement, dated as of January 1, 2001
(incorporated by reference to Exhibit 10.3 to International Specialty
Products Inc. Annual Report on Form 10-K for the year ended December 31,
2000).
10.4 Amendment No. 3 to the Amended and Restated Management Agreement, dated
as of June 27, 2001 by and among G-I Holdings Inc., Merick Inc.,
International Specialty Products Inc., ISP Investco LLC, GAF
Broadcasting Company, Inc., Building Materials Corporation of America
and ISP Management Company, Inc. as assignee of ISP Chemco Inc.
(incorporated by reference to Exhibit 10.7 to the ISP Chemco Inc.
Registration Statement on Form S-4 (Registration No. 333-70144)).
10.5 Amendment No. 4 to the Amended and Restated Management Agreement, dated
as of January 1, 2002 by and among G-I Holdings Inc., Merick Inc.,
International Specialty Products Inc., ISP Investco LLC, GAF
Broadcasting Company, Inc., Building Materials Corporation of America
and ISP Management Company, Inc.
10.6 Form of Option Agreement relating to Series A Cumulative Redeemable
Convertible Preferred Stock (incorporated by reference to Exhibit 10.9
to BMCA's Form 10-K for the year ended December 31, 1996).*
10.7 Forms of Amendment to Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by reference to
Exhibit 10.12 to BMCA's Form 10-K for the year ended December 31, 1997
(the "1997 Form 10-K").*
10.8 Form of Option Agreement relating to Series A Cumulative Redeemable
Convertible Preferred Stock (incorporated by reference to Exhibit 10.13
to the 1997 Form 10-K).*
10.9 BMCA Preferred Stock Option Plan (incorporated by reference to Exhibit
4.2 to BMCA's Registration Statement on Form S-8 (Registration No.
333-60589)).*
10.10 BMCA 2001 Long-Term Incentive Plan. (incorporated by reference to
Exhibit 10.8 to the 2000 10-K).*
10.11 Tax Sharing Agreement, dated as of January 31, 1994, among GAF, G-I
Holdings Inc. and BMCA (incorporated by reference to Exhibit 10.6 to the
Deferred Coupon Note Registration Statement).
10.12 Amendment to Tax Sharing Agreement, dated as of March 19, 2001, between
G-I Holdings and BMCA (incorporated by reference to Exhibit 10.10 to the
2000 10-K).
10.13 Reorganization Agreement, dated as of January 31, 1994, among GAF
Building Materials Corporation, G-I Holdings Inc. and BMCA (incorporated
by reference to Exhibit 10.9 to the Deferred Coupon Note Registration
Statement).
10.14 Credit Agreement, dated as of December 4, 2000, by and among BMCA, the
lenders party thereto, and The Bank of New York, as agent for the
lenders and as Swing Line Lender (the "Credit Agreement") (incorporated
by reference to Exhibit 10.12 to the 2000 10-K).
10.15 Amendment No. 1, dated as of December 22, 2000, to the Credit Agreement
(incorporated by reference to Exhibit 10.13 to the 2000 10-K).
10.16 Amendment No. 2, dated as of March 8, 2001, to the Credit Agreement
(incorporated by reference to Exhibit 10.14 to the 2000 10-K).
10.17 Amended and Restated Credit Agreement, dated as of December 4, 2000, by
and among BMCA, the lenders party thereto, Fleet National Bank as
Documentation Agent, Bear Stearns Corporate Lending Inc. as Syndication
Agent and the Bank of New York as Swing Line Lender and as
Administration Agent with BNY Capital Markets Inc. as Lead Arranger and
Bookrunner (the "Amended and Restated Credit Agreement") (incorporated
to reference to Exhibit 10.15 to the 2000 10-K).
10.18 Amendment No. 1, dated as of December 22, 2000, to the Amended and
Restated Credit Agreement (incorporated by reference to Exhibit 10.16 to
the 2000 10-K).
10.19 Amendment No. 2, dated as of March 8, 2001, to the Amended and Restated
Credit Agreement (incorporated by reference to Exhibit 10.17 to the 2000
10-K).
21
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
10.20 Security Agreement, dated December 22, 2000, by and among BMCA and each
of the grantors party thereto and The Bank of New York as Collateral
Agent (incorporated to reference to Exhibit 10.18 to the 2000 10-K).
10.21 Collateral Agent Agreement, dated December 22, 2000, by and among BMCA,
such Subsidiary of BMCA a party thereto, the 1999 Administrative Agent
(as defined therein), each Senior Note Trustee (as defined therein), the
2000 Administrative Agent (as defined therein), the Chase Manhattan
Bank, Fleet National Bank and the Bank of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.19 to the 2000 10-K).
10.22 Employment Security Agreement between BMCA and William W. Collins,
effective May 2001.*
10.23 Employment Security Agreement between BMCA and David A Harrison,
effective June 2001.*
10.24 Employment Security Agreement between BMCA and Robert B. Tafaro,
effective June 2001.*
10.25 Employment Security Agreement between BMCA and Kenneth E. Walton,
effective June 2001.*
10.26 Employment Security Agreement between BMCA and John F. Rebele, effective
June 2001.*
21 Subsidiaries of BMCA.
23.1 Consent of Arthur Andersen LLP.
99.1 Letter to Commission pursuant to Temporary Note 3T, dated March 26, 2002.
- ----------
* Management and/or compensation plan or arrangement
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 2001.
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 CORPORATION OF AMERICA
BUILDING MATERIALS MANUFACTURING CORPORATION
Date: March 26, 2002 BY: /s/ WILLIAM W. COLLINS
---------------------------------------------
Name: William W. Collins
Title: Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of each
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
-------- ----- -----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer March 26, 2002
- ----------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ JOHN F. REBELE Senior Vice President, Chief Financial March 26, 2002
- ----------------------------------------------- Officer and Director (Principal
John F. Rebele Financial Officer)
/s/ DAVID A. HARRISON Director March 26, 2002
- -----------------------------------------------
David A. Harrison
/s/ ROBERT B. TAFARO Director March 26, 2002
- -----------------------------------------------
Robert B. Tafaro
/s/ KENNETH E. WALTON Director March 26, 2002
- -----------------------------------------------
Kenneth E. Walton
/s/ JAMES T. ESPOSITO Vice President and Controller March 26, 2002
- ----------------------------------------------- (Principal Accounting Officer)
James T. Esposito
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BUILDING MATERIALS INVESTMENT CORPORATION
Date: March 26, 2002 BY: /S/ WILLIAM W. COLLINS
---------------------------------------
Name: William W. Collins
Title: Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of each
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
-------- ----- -----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer March 26, 2002
- ----------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ BARRY A. CROZIER Director March 26, 2002
- -----------------------------------------------
Barry A. Crozier
/s/ JOHN F. REBELE Director, Senior Vice President and March 26, 2002
- ----------------------------------------------- Chief Financial Officer
John F. Rebele (Principal Financial and
Accounting Officer)
24
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
2.1 Reorganization Agreement, dated as of December 31, 1998, by and among
BMCA, Building Materials Manufacturing Corporation and Building
Materials Investment Corporation (incorporated by reference to Exhibit
2.1 to BMCA's Registration Statement on Form S-4 (Registration No.
333-69749) (the "2008 Notes S-4")).
3.1 Amended and Restated Certificate of Incorporation of BMCA (incorporated
by reference to Exhibit 3.1 to BMCA's Form 10-K for the year ended
December 31, 1999).
3.2 By-laws of BMCA (incorporated by reference to Exhibit 3.2 to BMCA's
Registration Statement on Form S-4 (Registration No. 33-81808)) (the
"Deferred Coupon Note Registration Statement").
3.3 Certificate of Incorporation of Building Materials Manufacturing
Corporation (incorporated by reference to Exhibit 3.3 to BMCA's Form
10-K fr the fiscal year ended December 31, 1998 (the "1998 10-K")).
3.4 By-laws of Building Materials Manufacturing Corporation (incorporated by
reference to Exhibit 3.4 to the 1998 10-K).
3.5 Certificate of Incorporation of Building Materials Investment
Corporation (incorporated by reference to Exhibit 3.5 to the 1998 10-K).
3.6 By-laws of Building Materials Investment Corporation (incorporated by
reference to Exhibit 3.6 to the 1998 10-K).
4.1 Indenture, dated July 5, 2000, between BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.13 to BMCA's Form 10-K for the
year ended December 31, 2000 (the "2000 10-K").
4.2 First Supplemental Indenture, dated as of December 4, 2000, to the
Indenture dated as of July 5, 2000, between BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.14 to the 2000 10-K).
4.3 Registration Rights Agreement, dated July 5, 2000, between BMCA and BNY
Capital Markets Inc. (incorporated by reference to Exhibit 4.15 to the
2000 10-K).
4.4 First Amendment to the Registration Rights Agreement, dated as of
December 4, 2000, to Registration Rights Agreement dated July 5, 2000,
among BMCA, as issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors, and BNY
Capital Markets, Inc., as initial purchaser (incorporated by reference
to Exhibit 4.16 to the 2000 10-K).
4.5 Indenture, dated as of December 9, 1996, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 333-20859)).
4.6 First Supplemental Indenture, dated as of January 1, 1999, to Indenture
dated as of December 9, 1996 among BMCA, as issuer, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation,
as guarantors, and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.7 of the 2008 Notes S-4).
4.7 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of December 9, 1996 among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.5 to the 2000 10-K).
4.8 Indenture, dated as of October 20, 1997, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 333-41531)).
4.9 First Supplemental Indenture, dated as of January 1, 1999, to Indenture
dated as of October 20, 1997 among BMCA, as issuer, Building Materials
Manufacturing Corporation, as co-obligor, Building Materials Investment
Corporation, as guarantor, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 10.8 of the 2008 Notes S-4).
25
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
4.10 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of October 20, 1997 among BMCA and Building Materials
Manufacturing Corporation, as issuers, Building Materials Investment
Corporation, as guarantor, the Additional Guarantors signatory thereto,
as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.7 to the 2000 10-K).
4.11 Indenture, dated as of July 17, 1998, between BMCA and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 333-60633).
4.12 First Supplemental Indenture, dated as of January 1, 1999, to Indenture
dated as of July 17, 1998 among BMCA, as issuer, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation,
as guarantors, and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.9 of the 2008 Notes S-4).
4.13 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of July 17, 1998 among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.9 to the 2000 10-K).
4.14 Indenture, dated as of December 3, 1998, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to the
2008 Notes S-4).
4.15 First Supplemental Indenture dated as of January 1, 1999 to Indenture
dated as of December 3, 1998 among BMCA, as issuer, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation,
as guarantors, and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.4 to the 2008 Notes S-4).
4.16 Second Supplemental Indenture, dated as of December 4, 2000, to
Indenture dated as of December 3, 1998 among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory
thereto, as additional guarantors, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.12 to the 2000 10-K).
10.1 Amended and Restated Management Agreement, dated as of January 1, 1999,
among GAF, G-I Holdings Inc., G Industries Corp., Merick Inc., GAF
Fiberglass Corporation, ISP, GAF Building Materials Corporation, GAF
Broadcasting Company, Inc., BMCA and ISP Opco Holdings Inc.
(incorporated by reference to Exhibit 10.1 to the 1998 10-K).
10.2 Amendment No. 1 to the Management Agreement, dated as of January 1, 2000
(incorporated by reference to Exhibit 10.2 to International Specialty
Products Inc. Annual Report on Form 10-K for the year ended December 31,
1999).
10.3 Amendment No. 2 to the Management Agreement, dated as of January 1, 2001
(incorporated by reference to Exhibit 10.3 to International Specialty
Products Inc. Annual Report on Form 10-K for the year ended December 31,
2000).
10.4 Amendment No. 3 to the Amended and Restated Management Agreement, dated
as of June 27, 2001 by and among G-I Holdings Inc., Merick Inc.,
International Specialty Products Inc., ISP Investco LLC, GAF
Broadcasting Company, Inc., Building Materials Corporation of America
and ISP Management Company, Inc., as assignee of ISP Chemco Inc.
(incorporated by reference to Exhibit 10.7 to the ISP Chemco Inc.
Registration Statement on Form S-4 (Registration No. 333-70144)).
10.5 Amendment No. 4 to the Amended and Restated Management Agreement, dated
as of January 1, 2002 by and among G-I Holdings Inc., Merick Inc.,
International Specialty Products Inc., ISP Investco LLC, GAF
Broadcasting Company, Inc., Building Materials Corporation of America
and ISP Management Company, Inc.
10.6 Form of Option Agreement relating to Series A Cumulative Redeemable
Convertible Preferred Stock (incorporated by reference to Exhibit 10.9
to BMCA's Form 10-K for the year ended December 31, 1996).*
10.7 Forms of Amendment to Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by reference to
Exhibit 10.12 to BMCA's Form 10-K for the year ended December 31, 1997
(the "1997 Form 10-K").*
26
EXHIBIT
NUMBER DESCRIPTIONS
- ------- ------------
10.8 Form of Option Agreement relating to Series A Cumulative Redeemable
Convertible Preferred Stock (incorporated by reference to Exhibit 10.13
to the 1997 Form 10-K).*
10.9 BMCA Preferred Stock Option Plan (incorporated by reference to Exhibit
4.2 to BMCA's Registration Statement on Form S-8 (Registration No.
333-60589)).*
10.10 BMCA 2001 Long-Term Incentive Plan. (incorporated by reference to
Exhibit 10.8 to the 2000 10-K).*
10.11 Tax Sharing Agreement, dated as of January 31, 1994, among GAF, G-I
Holdings Inc. and BMCA (incorporated by reference to Exhibit 10.6 to the
Deferred Coupon Note Registration Statement).
10.12 Amendment to Tax Sharing Agreement, dated as of March 19, 2001, between
G-I Holdings and BMCA (incorporated by reference to Exhibit 10.10 to the
2000 10-K).
10.13 Reorganization Agreement, dated as of January 31, 1994, among GAF
Building Materials Corporation, G-I Holdings Inc. and BMCA (incorporated
by reference to Exhibit 10.9 to the Deferred Coupon Note Registration
Statement).
10.14 Credit Agreement, dated as of December 4, 2000, by and among BMCA, the
lenders party thereto, and The Bank of New York, as agent for the
lenders and as Swing Line Lender (the "Credit Agreement") (incorporated
by reference to Exhibit 10.12 to the 2000 10-K).
10.15 Amendment No. 1, dated as of December 22, 2000, to the Credit Agreement
(incorporated by reference to Exhibit 10.13 to the 2000 10-K).
10.16 Amendment No. 2, dated as of March 8, 2001, to the Credit Agreement
(incorporated by reference to Exhibit 10.14 to the 2000 10-K).
10.17 Amended and Restated Credit Agreement, dated as of December 4, 2000, by
and among BMCA, the lenders party thereto, Fleet National Bank as
Documentation Agent, Bear Stearns Corporate Lending Inc. as Syndication
Agent and the Bank of New York as Swing Line Lender and as
Administration Agent with BNY Capital Markets Inc. as Lead Arranger and
Bookrunner (the "Amended and Restated Credit Agreement") (incorporated
to reference to Exhibit 10.15 to the 2000 10-K).
10.18 Amendment No. 1, dated as of December 22, 2000, to the Amended and
Restated Credit Agreement (incorporated by reference to Exhibit 10.16 to
the 2000 10-K).
10.19 Amendment No. 2, dated as of March 8, 2001, to the Amended and Restated
Credit Agreement (incorporated by reference to Exhibit 10.17 to the 2000
10-K).
10.20 Security Agreement, dated December 22, 2000, by and among BMCA and each
of the grantors party thereto and The Bank of New York as Collateral
Agent (incorporated to reference to Exhibit 10.18 to the 2000 10-K).
10.21 Collateral Agent Agreement, dated December 22, 2000, by and among BMCA,
such Subsidiary of BMCA a party thereto, the 1999 Administrative Agent
(as defined therein), each Senior Note Trustee (as defined therein), the
2000 Administrative Agent (as defined therein), the Chase Manhattan
Bank, Fleet National Bank and the Bank of New York, as Collateral Agent
(incorporated by reference to Exhibit 10.19 to the 2000 10-K).
10.22 Employment Security Agreement between BMCA and William W. Collins,
effective May 2001.*
10.23 Employment Security Agreement between BMCA and David A Harrison,
effective June 2001.*
10.24 Employment Security Agreement between BMCA and Robert B. Tafaro,
effective June 2001.*
10.25 Employment Security Agreement between BMCA and Kenneth E. Walton,
effective June 2001.*
10.26 Employment Security Agreement between BMCA and John F. Rebele, effective
June 2001.*
21 Subsidiaries of BMCA.
23.1 Consent of Arthur Andersen LLP.
99.1 Letter to Commission pursuant to Temporary Note 3T, dated March 26,
2002.
- ----------
* Management and/or compensation plan or arrangement
27
BUILDING MATERIALS CORPORATION OF AMERICA
FORM 10-K
INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS,
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
PAGE
-----
Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................... F-2
Selected Financial Data .................................................. F-7
Report of Independent Public Accountants ................................. F-8
Consolidated Statements of Operations for the three years ended
December 31, 2001 ........................................................ F-9
Consolidated Balance Sheets as of December 31, 2000 and 2001 ............. F-10
Consolidated Statements of Cash Flows for the three years ended
December 31, 2001 ........................................................ F-11
Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended December 31, 2001 .............................. F-13
Notes to Consolidated Financial Statements ............................... F-14
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited) ................................ F-42
SCHEDULES
Consolidated Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts ...................... S-1
F-1
BUILDING MATERIALS CORPORATION OF AMERICA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Building Materials Corporation of America ("BMCA"), a subsidiary of BMCA
Holdings Corporation, was formed in January 1994 to acquire the operating assets
and certain liabilities of GAF Building Materials Corporation, whose name was
changed to G-I Holdings Inc., an indirect parent of BMCA. G-I Holdings Inc. is a
wholly-owned subsidiary of G Holdings Inc. See Note 1 to Consolidated Financial
Statements.
To facilitate administrative efficiency, effective October 31, 2000, GAF
Corporation, the former indirect parent of BMCA, merged into its direct
subsidiary, G-I Holdings Inc. G-I Holdings Inc. then merged into its direct
subsidiary, G Industries Corp., which in turn merged into its direct subsidiary,
GAF Fiberglass Corporation. In that merger, GAF Fiberglass Corporation changed
its name to GAF Corporation. Effective November 13, 2000, GAF Corporation
(formerly known as GAF Fiberglass Corporation) merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the
merger to G-I Holdings Inc. G-I Holdings Inc. is now an indirect parent of BMCA
and BMCA's direct parent is BMCA Holdings Corporation. References herein to "G-I
Holdings" mean G-I Holdings Inc. and any and all of its predecessor
corporations, including GAF Corporation, G-I Holdings Inc., G Industries Corp.,
GAF Fiberglass Corporation and GAF Building Materials Corporation.
RESULTS OF OPERATIONS
2001 COMPARED WITH 2000
We recorded net income in 2001 of $18.8 million compared with a net loss of
$11.2 million in 2000. Excluding the impact in 2000 of the pre-tax gain of $17.5
million ($11.0 million after-tax) from the sale of the security products
business of our subsidiary, LL Building Products Inc., a pre-tax charge of $15.0
million ($9.5 million after-tax) related to an increase in product warranty
reserves, pre-tax losses from the sale of investment securities of $18.1 million
($11.4 million after-tax) and an after-tax extraordinary loss of $0.3 million,
the net loss would have been $1.0 million in 2000. Results for 2000 also
included operating income of the security products business of LL Building
Products Inc., which was sold in September 2000, of $3.7 million pre-tax ($2.3
million after-tax). The increase in 2001 net earnings was primarily the result
of higher operating income and lower other expenses, partially offset by higher
interest expense.
Net sales for 2001 were $1,293.0 million compared with $1,207.8 million in
the same period of 2000 representing an increase of 7.1%. Excluding the impact
of the sale of the security products business of LL Building Products Inc., net
sales were higher by 9.1% in 2001. Higher net sales in 2001 were primarily
attributable to an increase in net sales of premium steep slope roofing
products, partially offset by lower net sales in low slope roofing products and
the sale of the security products business of LL Building Products Inc. The
increase in net sales of premium steep slope roofing products in 2001 resulted
from higher unit volumes and higher average selling prices, while the decline in
net sales of low slope roofing products resulted from lower unit volumes and
lower average selling prices.
Operating income for 2001 was a $97.0 million compared with $63.9 million
in 2000, representing an increase of $33.1 million or 51.8%. Excluding the $3.7
million of operating income of the security products business of LL Building
Products Inc., together with the $17.5 million gain on sale of these assets and
the $15.0 million product warranty reserve charge in 2000, operating income
would have been higher by $39.3 million or 68.1% in 2001. Higher operating
results in 2001 were primarily attributable to an increase in premium steep
slope roofing products net sales along with lower manufacturing costs, partially
offset by higher selling, general and administrative expenses, a decrease in net
sales of low slope roofing products, and the sale of the security products
business of LL Building Products Inc. The higher selling, general and
administrative expenses in 2001 were principally due to higher volume related
transportation and warehouse expenses.
We recorded in 2000 a $17.5 million pre-tax gain from the sale of certain
assets of the security products business of LL Building Products Inc. (see Note
4 to Consolidated Financial Statements), a pre-tax charge of $15.0 million
related to an increase in product warranty reserves (see Note 2 to Consolidated
Financial Statements), pre-tax losses
F-2
from the sale of investment securities of $18.1 million, and an after-tax
extraordinary loss of $0.3 million related to the write-off of unamortized
deferred financing fees in connection with the extinguishment of debt.
Interest expense increased from $53.5 million in 2000 to $60.8 million in
2001 primarily due to lower capitalized interest and higher average borrowings,
partially offset by lower interest rates. 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 $6.4 million for
2001 compared to $27.6 million in 2000, with the decrease primarily attributable
to the pre-tax loss of $18.1 million from the sale of investment securities
occurring in 2000 and lower other expenses in 2001.
2000 COMPARED WITH 1999
We recorded a net loss in 2000 of $11.2 million compared with net income of
$24.0 million in 1999. The net loss in 2000 included a one-time pre-tax gain of
$17.5 million ($11.0 million after-tax), a pre-tax charge of $15.0 million ($9.5
million after-tax), pre-tax losses from the sale of investment securities of
$18.1 million ($11.4 million after-tax), and an after-tax extraordinary loss of
$0.3 million. The net income in 1999 included a pre-tax nonrecurring charge of
$2.7 million ($1.7 million after-tax) and an after-tax extraordinary loss of
$1.3 million. Excluding the one-time gains and losses in both years, the net
loss for 2000 would have been $1.0 million compared with net income of $27.0
million in 1999, with the decrease primarily the result of lower operating
income, lower investment income and higher interest expense.
Net sales for 2000 were $1,207.8 million, a 5.9% increase over net sales
for 1999 of $1,140.0 million, with the increase due to net sales gains in
premium steep slope roofing products, partially offset by slightly lower net
sales of low slope roofing products. The increase in net sales of premium steep
slope roofing products in 2000 resulted from higher average selling prices and
unit volumes, while the decrease in net sales of low slope roofing products in
2000 primarily resulted from lower unit volumes, partially offset by higher
average selling prices.
Operating income for 2000 was $61.4 million compared with $85.7 million
reported in 1999, excluding the one-time items in both years. Lower operating
results in 2000 were primarily attributable to the higher cost of energy and raw
material purchases, principally the cost of asphalt due to high oil prices and
increased demand for asphalt by the paving industry, partially offset by higher
average selling prices for premium steep slope and low slope roofing products,
higher premium steep slope roofing products unit volumes and lower manufacturing
costs.
We recorded in 2000 a $17.5 million pre-tax gain from the sale of certain
assets of the security products business of LL Building Products Inc. (see Note
4 to Consolidated Financial Statements), a pre-tax charge of $15.0 million
related to an increase in product warranty reserves (see Note 2 to Consolidated
Financial Statements), pre-tax losses from the sale of investment securities of
$18.1 million, and an after-tax extraordinary loss of $0.3 million related to
the write-off of unamortized deferred financing fees in connection with the
extinguishment of debt. In 1999, we recorded pre-tax nonrecurring charges of
$2.7 million related to the settlement of a legal matter and an after-tax
extraordinary loss of $1.3 million representing the premium paid upon the
extinguishment of debt.
Interest expense increased from $48.3 million in 1999 to $53.5 in 2000
primarily due to higher average borrowings and a higher average interest rate.
Other expense, net was $27.6 million in 2000 compared to other income, net of
$5.4 million in 1999, with the decrease primarily due to the pre-tax loss of
$18.1 million from the sale of investment securities, lower investment income
and higher other expenses.
LIQUIDITY AND FINANCIAL CONDITION
Net cash inflow during 2001 was $45.2 million before financing activities,
including $73.3 million of cash generated from operations and the reinvestment
of $28.1 million for capital programs.
Cash invested in additional working capital totaled $25.7 million during
2001, primarily reflecting increases in accounts receivable and inventory of
$26.6 and $0.5 million, respectively, partially offset by increases in accounts
payable and accrued liabilities of $0.7 and $0.7 million, respectively. Cash
provided by operating activities also reflected net proceeds from the sale of
accounts receivable of $34.7 million, a $1.1 million decrease from related
parties/parent corporations transactions and a $6.0 million decrease in the
reserve for product warranty claims.
F-3
Net cash used in financing activities totaled $81.5 million in 2001,
consisting of $70.0 million in repayments of our borrowings under our amended
and restated $110 million secured revolving credit facility which we refer to as
the "Existing Credit Agreement", $6.0 million of repayments of long-term debt, a
$2.5 million loan to our parent corporation, and $3.0 million in financing fees
and expenses. See Note 15 to Consolidated Financial Statements. Our 101/2%
Senior Notes due 2003, our 73/4% Senior Notes due 2005, our 85/8% Senior Notes
due 2006, our 8% Senior Notes due 2007 and our 8% Senior Notes due 2008 are
collectively referred to as the "Senior Notes."
As a result of the foregoing factors, cash and cash equivalents decreased
by $36.4 million during 2001 to $46.4 million.
In December 2000, we entered into a new $100 million secured revolving
credit facility which we refer to as the "New Credit Agreement" which is to be
used for working capital purposes subject to certain restrictions. The Existing
Credit Agreement and the New Credit Agreement mature in August 2003. As of
December 31, 2001, there were no outstanding borrowings under the Existing
Credit Agreement or the New Credit Agreement and $41.7 million of letters of
credit were outstanding under the Existing Credit Agreement. Our obligations
under the Existing Credit Agreement and the New Credit Agreement, as well as our
obligations under our $7.0 million precious metal note due 2003, which we refer
to as the "Precious Metal Note", and approximately $3.5 million of obligations
under a standby letter of credit, collectively referred to as the "Other
Indebtedness", aggregated $7.0 million of borrowings and $45.2 million of
letters of credit outstanding at December 31, 2001. All those obligations are
secured by a first-priority lien on substantially all of our assets and the
assets of our subsidiaries on a pro-rata basis. We refer to these assets below
as the "Collateral." The Existing Credit Agreement and the New Credit Agreement
have been guaranteed by all of our current and future direct and indirect
domestic subsidiaries, other than BMCA Receivables Corporation. Our Senior Notes
are secured by a second-priority lien on these assets for so long as the
first-priority lien remains in effect, subject to certain limited exceptions and
have been guaranteed by our subsidiaries that guaranteed the Existing Credit
Agreement and the New Credit Agreement. In connection with these transactions,
we entered into a security agreement which grants a security interest in the
Collateral in favor of the collateral agent on behalf of the lenders under the
Existing Credit Agreement, the New Credit Agreement and the Other Indebtedness
and the holders of our outstanding Senior Notes. We also entered into a
collateral agent agreement which provides, among other things, for the sharing
of proceeds with respect to any foreclosure or other remedy in respect of the
Collateral.
Under the terms of the Existing Credit Agreement, the New Credit Agreement
and the indentures governing our Senior Notes, we are subject to certain
financial covenants. These include, among others,
o interest coverage,
o minimum consolidated EBITDA (earnings before income taxes and
extraordinary items increased by interest expense, depreciation,
goodwill and other amortization),
o limitations on the amount of annual capital expenditures and
indebtedness,
o restrictions on distributions to our parent corporations and on
incurring liens, and
o restrictions on investments and other payments. Dividends and other
restricted payments are prohibited, except demand loans of specified
amounts made to any parent corporation, subject to limitations, as
described in those agreements, in future periods. As of December 31,
2001, after giving effect to the most restrictive of the aforementioned
restrictions, we could not have paid dividends or made other restricted
payments except for demand loans up to $5.0 million. In addition, if a
change of control as defined in the Existing Credit Agreement and the
New Credit Agreement occurs, those agreements could be terminated and
the loans under those agreements accelerated by the holders of that
indebtedness. If that event occurred, it would cause our outstanding
Senior Notes to be accelerated. As of December 31, 2001, we were in
compliance with all covenants under the Existing Credit Agreement, the
New Credit Agreement and the indentures governing our Senior Notes.
In connection with entering into the New Credit Agreement, we also issued a
$7.0 million Precious Metal Note in order to finance precious metals used in our
manufacturing processes.
The Existing Credit Agreement and the New Credit Agreement also provide
that in the event we become the subject of any bankruptcy proceedings, the
lenders will, subject to bankruptcy court approval, refinance and
F-4
consolidate in full the indebtedness under the Existing Credit Agreement, the
New Credit Agreement and the Other Indebtedness with a new debtor-in-possession
facility. The terms and conditions of that debtor-in-possession facility would
be substantially identical to the Existing Credit Agreement, the New Credit
Agreement and the Other Indebtedness, and would be in an aggregate amount equal
to the then committed amount under the New Credit Agreement plus $110 million
plus the principal amount of the Other Indebtedness. That facility would mature
on August 18, 2004 and would be secured by a first-priority security interest in
all of the Collateral.
See Note 11 to Consolidated Financial Statements for further information
regarding our debt instruments.
At December 31, 2001, we had total outstanding consolidated indebtedness of
$605.5 million, of which $5.6 million matures prior to December 31, 2002, and a
stockholders' deficit of $61.6 million. We anticipate funding these obligations
principally from our cash, operations and/or borrowings.
In December 2001, we entered into a new accounts receivable securitization
agreement under which we sell certain of our trade accounts receivable to a
special purpose subsidiary of ours, BMCA Receivables Corporation, without
recourse, which in turn sells them to a third party, without recourse. The
agreement provides for a maximum of $115.0 million in cash to be made available
to us based on the sale of eligible receivables outstanding from time to time.
This agreement expires in December 2004 and is subject to financial and other
covenants including a material adverse change in business conditions, financial
or otherwise. This agreement replaces a prior accounts receivable facility,
which expired December 2001. See Note 8 to Consolidated Financial Statements.
We make loans to, and borrow from, G-I Holdings and its subsidiaries from
time to time at prevailing market rates. As of December 31, 2001, BMCA Holdings
Corporation owed us $2.5 million, including interest of $0.1 million,
representing a loan for payments made during 2001, at an interest rate of 4.75%.
At December 31, 2001, no loans were owed by us to affiliates. In addition, from
time to time we make non-interest bearing advances to affiliates, of which no
amounts were outstanding at December 31, 2001. See Note 15 to Consolidated
Financial Statements.
On January 5, 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code due to asbestos
claims. See Item 3, "Legal Proceedings" for further information regarding
asbestos-related matters. See Note 3 to the Consolidated Financial Statements.
Our parent corporations, G-I Holdings and BMCA Holdings Corporation, are
essentially holding companies without independent businesses or operations. As a
result, they are presently dependent upon the earnings and cash flows of their
subsidiaries, principally our company, in order to satisfy their obligations,
including various tax and other claims and liabilities including tax liabilities
relating to Rhone-Poulenc Surfactants & Specialties, L.P., a Delaware limited
partnership in which G-I Holdings held an interest. We do not believe that the
dependence of our parent corporations on the cash flows of their subsidiaries
should have a material adverse effect on our operations, liquidity or capital
resources. For further information, see Notes 3, 7, 11, 15 and 16 to
Consolidated Financial Statements.
We use capital resources to maintain existing facilities, expand our
operations and make acquisitions. In the first quarter of 2001, we commenced
production at a new manufacturing facility in Mt. Vernon, Indiana for a single
ply low slope membrane roofing system. We expect to generate funding for our
capital program from results of operations and leasing transactions.
In response to current market conditions, to better service shifting
customer demand and to reduce costs, we closed four manufacturing facilities in
2000 located in Monroe, Georgia; Port Arthur, Texas; Corvallis, Oregon; and
Albuquerque, New Mexico. In December 2001, we sold the Corvallis, Oregon
facility. The sale of this facility did not have a material impact on the
results of operations. See Note 4 to the Consolidated Financial Statements. As
market growth and customer demand improves, we may reinstate production at one
or more of the remaining three closed manufacturing facilities in the future.
The effect of closing these facilities was not material to our results of
operations.
We do not believe that inflation has had an effect on our results of
operations during the past three years. However, we cannot assure you that our
business will not be affected by inflation in the future, or by increases in the
cost of energy and asphalt purchases used in our manufacturing process
principally due to fluctuating oil prices.
F-5
MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
During 2000 and in prior years, our investment strategy was to seek returns
in excess of money market rates on our available cash while minimizing market
risks. We invested primarily in international and domestic arbitrage and
securities of companies involved in acquisition or reorganization transactions,
including at times, common stock short positions which were offset against long
positions in securities which were expected, under certain circumstances, to be
exchanged or converted into the short positions. With respect to our equity
positions, we were exposed to the risk of market loss. See Note 2 to
Consolidated Financial Statements. We are no longer permitted to engage in those
activities under the terms of the Existing Credit Agreement and the New Credit
Agreement.
Under the terms of the Existing Credit Agreement and the New Credit
Agreement, we are only permitted to enter into hedging arrangements that protect
against or mitigate the effect of fluctuations in interest rates, foreign
exchange rates or prices of commodities used in our business.
* * *
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains both historical and
forward-looking statements. All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements within the meaning
of section 27A of the Securities Act and section 21E of the Securities Exchange
Act of 1934. These forward-looking statements are only predictions and generally
can be identified by use of statements that include phrases such as "believe,"
"expect," "anticipate," "intend," "plan," "foresee" or other similar words or
phrases. Similarly, statements that describe our objectives, plans or goals also
are forward-looking statements. Our operations are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. The forward-looking
statements included herein are made only as of the date of this Annual Report on
Form 10-K and we undertake no obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances. We cannot assure you
that projected results or events will be achieved.
F-6
BUILDING MATERIALS CORPORATION OF AMERICA
SELECTED FINANCIAL DATA
The following table presents our selected consolidated financial data. As
of January 1, 1997, G-I Holdings contributed all of the capital stock of U.S.
Intec, Inc. to BMCA. The results for the year ended December 31, 1997 include
the results of the Leatherback Industries business from the date of its
acquisition (March 14, 1997), including net sales of $30.2 million. The results
for the year ended December 31, 1998 include the results of the LL Building
Products Inc. business from the date of its acquisition (June 1, 1998),
including net sales of $53.3 million, and the results for the year ended
December 31, 2000 include the results of the LL Building Products Inc. security
products business, certain assets of which were sold in September 2000,
including net sales of $22.9 million.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1998 1999 2000 2001
------ -------- -------- -------- --------
(MILLIONS)
OPERATING DATA:
Net sales ...................................... $944.6 $1,088.0 $1,140.0 $1,207.8 $1,293.0
Operating income ............................... 73.2 47.5* 83.1* 63.9* 97.0
Interest expense ............................... 43.0 50.0 48.3 53.5 60.8
Income (loss) before income taxes
and extraordinary losses ..................... 45.7 13.5 40.2 (17.2) 29.8
Income (loss) before extraordinary losses ...... 27.8 8.4 25.3 (10.8) 18.8
Net income (loss) .............................. 27.8 (9.8) 24.0 (11.2) 18.8
- ----------
* After non-recurring charges of $27.6 and $2.7 million in 1998 and 1999,
respectively, and a charge of $15.0 million and a gain on sale of assets of
$17.5 million in 2000.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1998 1999 2000 2001
------ -------- -------- -------- --------
(MILLIONS)
BALANCE SHEET DATA:
Total working capital .......................... $283.1 $ 220.1 $ 109.9 $ 129.9 $ 84.6
Total assets ................................... 829.7 867.0 895.1 771.2 706.3
Long-term debt less current maturities ......... 563.9 596.9 600.7 674.7 599.9
Total stockholders' equity (deficit) ........... 89.5 52.2 21.7 (77.9) (61.6)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1998 1999 2000 2001
------ -------- -------- -------- --------
(MILLIONS)
OTHER DATA:
Depreciation ................................... $ 25.0 $ 28.9 $ 33.0 $ 36.4 $ 37.2
Goodwill amortization .......................... 1.9 2.1 2.0 2.0 2.0
Capital expenditures and acquisitions .......... 82.2 134.5 45.8 61.5 28.1
F-7
BUILDING MATERIALS CORPORATION OF AMERICA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited the accompanying consolidated balance sheets of Building
Materials Corporation of America (a Delaware corporation and wholly-owned
subsidiary of BMCA Holdings Corporation) and subsidiaries as of December 31,
2000 and 2001, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above, appearing on
pages F-9 to F-41 of this Form 10-K, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on page S-1 of
this Form 10-K is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 15, 2002
F-8
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
----------------------------------------
1999 2000 2001
----------------------------------------
(THOUSANDS)
Net sales ......................................... $1,140,039 $1,207,759 $1,293,042
---------- ---------- ----------
Costs and expenses:
Cost of products sold .......................... 812,697 893,776 923,745
Selling, general and administrative ............ 239,560 250,542 270,280
Goodwill amortization .......................... 2,034 2,024 2,024
Gain on sale of assets ......................... -- (17,505) --
Warranty reserve adjustment .................... -- 15,000 --
Nonrecurring charges ........................... 2,650 -- --
---------- ---------- ----------
Total costs and expenses .................... 1,056,941 1,143,837 1,196,049
---------- ---------- ----------
Operating income .................................. 83,098 63,922 96,993
Interest expense .................................. (48,317) (53,468) (60,803)
Other income (expense), net ....................... 5,440 (27,640) (6,409)
---------- ---------- ----------
Income (loss) before income taxes and
extraordinary losses ........................... 40,221 (17,186) 29,781
Income tax (provision) benefit .................... (14,882) 6,359 (11,019)
---------- ---------- ----------
Income (loss) before extraordinary losses ......... 25,339 (10,827) 18,762
Extraordinary losses, net of income tax
benefits of $761 and $194, respectively ........ (1,296) (330) --
---------- ---------- ----------
Net income (loss) ................................. $ 24,043 $ (11,157) $ 18,762
========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
F-9
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
------------------------
2000 2001
--------- ---------
(THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents ...................................................... $ 82,747 $ 46,387
Accounts receivable, trade, less reserve of $1,798 and $1,058, respectively .... 19,474 23,490
Accounts receivable, other ..................................................... 51,843 39,769
Tax receivable from parent corporations ........................................ 1,500 --
Inventories .................................................................... 101,702 102,245
Other current assets ........................................................... 3,925 3,890
--------- ---------
Total Current Assets ........................................................ 261,191 215,781
Property, plant and equipment, net ................................................ 362,464 352,067
Excess of cost over net assets of businesses acquired, net of
accumulated amortization of $14,346 and $16,370, respectively .................. 65,317 63,294
Deferred income tax benefits ...................................................... 42,897 32,924
Tax receivable from parent corporations ........................................... 7,500 9,000
Other noncurrent assets ........................................................... 31,800 33,259
--------- ---------
Total Assets ...................................................................... $ 771,169 $ 706,325
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt ........................................... $ 5,908 $ 5,556
Accounts payable ............................................................... 57,520 58,235
Payable to related parties ..................................................... 10,052 8,910
Accrued liabilities ............................................................ 42,888 43,548
Reserve for product warranty claims ............................................ 14,900 14,900
--------- ---------
Total Current Liabilities ................................................... 131,268 131,149
--------- ---------
Long-term debt less current maturities ............................................ 674,698 599,896
--------- ---------
Reserve for product warranty claims ............................................... 28,756 22,741
--------- ---------
Other liabilities ................................................................. 14,312 14,178
--------- ---------
Commitments and Contingencies
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 ..................... -- --
Loan receivable from parent corporation ........................................ -- (2,536)
Accumulated deficit ............................................................ (77,866) (59,104)
--------- ---------
Total Stockholders' Equity (Deficit) ........................................ (77,865) (61,639)
--------- ---------
Total Liabilities and Stockholders' Equity (Deficit) .............................. $ 771,169 $ 706,325
========= =========
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
F-10
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001
--------- --------- ---------
(THOUSANDS)
Cash and cash equivalents, beginning of year ........................ $ 24,989 $ 55,952 $ 82,747
--------- --------- ---------
Cash provided by (used in) operating activities:
Net income (loss) ................................................ 24,043 (11,157) 18,762
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Extraordinary losses ........................................ 1,296 330 --
Gain on sale of assets ...................................... -- (17,505) --
Depreciation ................................................ 32,986 36,350 37,196
Goodwill and other amortization ............................. 2,675 2,866 3,794
Deferred income taxes ....................................... 14,132 (7,475) 9,973
Noncash interest charges .................................... 3,321 2,648 4,556
Increase in working capital items ................................ (26,200) (19,791) (25,744)
Increase (decrease) in reserve for product
warranty claims ............................................... (14,318) 9,342 (6,015)
Purchases of trading securities .................................. (139,522) (980) --
Proceeds from sales of trading securities ........................ 243,097 2,172 --
Proceeds from sale of accounts receivable ........................ 5,640 925 34,669
(Increase) decrease in other assets .............................. (4,501) 1,264 (3,981)
Decrease in other liabilities .................................... (2,335) (2,676) (93)
Change in net receivable from/payable to
related parties/parent corporations ........................... (48,793) (13,972) (1,142)
Other, net ....................................................... (3,404) 517 1,286
--------- --------- ---------
Net cash provided by (used in) operating activities ................. 88,117 (17,142) 73,261
--------- --------- ---------
Cash provided by (used in) investing activities:
Capital expenditures ............................................. (45,322) (61,543) (28,085)
Acquisitions ..................................................... (515) -- --
Proceeds from sale of assets ..................................... -- 31,702 --
Purchases of available-for-sale securities ....................... (76,048) (882) --
Purchases of held-to-maturity securities ......................... (2,349) -- --
Proceeds from sales of available-for-sale securities ............. 97,400 58,284 --
Proceeds from held-to-maturity securities ........................ 7,758 -- --
Proceeds from sales of other short-term investments .............. 21,421 1,590 --
--------- --------- ---------
Net cash provided by (used in) investing activities ................. 2,345 29,151 (28,085)
--------- --------- ---------
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt ......................... 37,943 41,046 --
Increase (decrease) in borrowings under revolving credit
facilities .................................................... -- 70,000 (70,000)
Repayments of long-term debt ..................................... (35,954) (38,056) (5,973)
Distributions to parent corporations ............................. (60,000) (47,029) --
Loan to parent corporation ....................................... -- -- (2,536)
Net issuance (repurchase) of common stock ........................ 870 (1,180) --
Financing fees and expenses ...................................... (2,358) (9,995) (3,027)
--------- --------- ---------
Net cash provided by (used in) financing activities ................. (59,499) 14,786 (81,536)
--------- --------- ---------
Net change in cash and cash equivalents ............................. 30,963 26,795 (36,360)
--------- --------- ---------
Cash and cash equivalents, end of year .............................. $ 55,952 $ 82,747 $ 46,387
========= ========= =========
F-11
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
------------------------------
1999 2000 2001
-------- -------- --------
(THOUSANDS)
Supplemental Cash Flow Information:
Effect on cash from (increase) decrease in
working capital items*:
Accounts receivable ........................ $(11,309) $ 13,140 $(26,611)
Inventories ................................ (14,912) 3,292 (543)
Other current assets ....................... 1,423 (653) 35
Accounts payable ........................... 9,917 (26,814) 715
Accrued liabilities ........................ (11,319) (8,756) 660
-------- -------- --------
Net effect on cash from increase in
working capital items .................... $(26,200) $(19,791) $(25,744)
======== ======== ========
Cash paid during the period for:
Interest (net of amount capitalized) ....... $ 44,109 $ 49,105 $ 59,996
Income taxes (including taxes paid
pursuant to the Tax Sharing Agreement) ... 1,250 10,121 1,046
- ----------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net receivables from/payable to related
parties/parent corporations. In addition, the increase in receivables shown
above does not reflect the cash proceeds from the sale of certain of the
Company's receivables (see Note 8); such proceeds are reflected in cash from
operating activities. See Note 1 for a description of the non-cash
contribution of certain assets, including the glass fiber manufacturing
facility located in Nashville, Tennessee, and certain related liabilities.
See Notes 5 and 15 for a description of non-cash capital contributions and
distributions.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
F-12
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED LOAN
CAPITAL STOCK OTHER RECEIVABLE
AND ADDITIONAL COMPREHENSIVE FROM PARENT ACCUMULATED COMPREHENSIVE
PAID-IN CAPITAL INCOME (LOSS) CORPORATION DEFICIT INCOME (LOSS)
--------------- ------------- ----------- ----------- -------------
(THOUSANDS)
Balance, December 31, 1998 ....................... $ 94,190 $(19,884) $ -- $(22,089)
Comprehensive income-year ended
December 31, 1999:
Net income ................................... -- -- -- 24,043 $ 24,043
--------
Other comprehensive income, net of tax:
Unrealized holding gains arising during the
period, net of income taxes of $1,270 ...... -- 1,424 -- -- 1,424
Less: Reclassification adjustment for gains
included in net income, net of income tax
effect of $1,227 ........................... -- 2,089 -- -- 2,089
-------- --------
Change in unrealized losses on
available-for-sale securities .............. -- (665) -- -- (665)
Minimum pension liability adjustment ......... -- 1,605 -- -- 1,605
--------
Comprehensive income $ 24,983
========
Distributions to parent corporations ........... (58,046) -- -- (1,954)
Capital contributions .......................... 3,619 -- -- --
Exercise of stock options ..................... 870 -- -- --
-------- -------- -------- --------
Balance, December 31, 1999 ....................... $ 40,633 $(18,944) $ -- $ --
Comprehensive income-year ended
December 31, 2000:
Net loss ..................................... -- -- -- (11,157) $(11,157)
--------
Other comprehensive income, net of tax:
Unrealized holding gains arising during the
period, net of income taxes of $3,577 ...... -- 6,091 -- -- 6,091
Less: Reclassification adjustment for losses
included innet loss, net of income tax
effect of $6,755 ........................... -- (11,502) -- -- (11,502)
-------- --------
Change in unrealized losses on
available-for-sale securities .............. -- 17,593 -- -- 17,593
Minimum pension liability adjustment ......... -- 1,351 -- -- 1,351
--------
Comprehensive income $ 7,787
========
Distributions to parent corporations ........... (39,452) -- -- (66,709)
Net repurchase of common stock ................. (1,180) -- -- --
-------- -------- -------- --------
Balance, December 31, 2000 ....................... $ 1 $ -- $ -- $(77,866)
Comprehensive income-year ended
December 31, 2001:
Net income ................................... -- -- 18,762 $ 18,762
========
Loan to parent corporation ..................... -- -- (2,536) --
-------- -------- -------- --------
Balance, December 31, 2001 ....................... $ 1 $ -- $ (2,536) $(59,104)
======== ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
F-13
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Building Materials Corporation of America (the "Company") was formed on
January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation
("BHC"), which is a wholly-owned subsidiary of G-I Holdings Inc. G-I Holdings
Inc. is a wholly-owned subsidiary of G Holdings Inc.
To facilitate administrative efficiency, effective October 31, 2000, GAF
Corporation, the former indirect parent of the Company, merged into its direct
subsidiary, G-I Holdings Inc. G-I Holdings Inc. then merged into its direct
subsidiary, G Industries Corp., which in turn merged into its direct subsidiary,
GAF Fiberglass Corporation. In that merger, GAF Fiberglass Corporation changed
its name to GAF Corporation. Effective November 13, 2000, GAF Corporation
(formerly known as GAF Fiberglass Corporation), merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the
merger to G-I Holdings Inc. G-I Holdings Inc. is now an indirect parent of the
Company and the Company's direct parent is BHC. References below to G-I Holdings
means G-I Holdings Inc. and any and all of its predecessor Corporations,
including GAF Corporation, G-I Holdings Inc., G Industries Corp., GAF Fiberglass
Corporation and GAF Building Materials Corporation.
NOTE 1. FORMATION OF THE COMPANY
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the steep slope and low slope roofing
markets. The Company also manufactures and markets specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. See Note 14.
Effective as of January 31, 1994, G-I Holdings transferred to the Company
all of its business and assets, other than three closed manufacturing
facilities, certain deferred tax assets and receivables from affiliates. The
Company recorded the assets and liabilities related to such transfer at G-I
Holdings' historical costs. The Company contractually assumed all of G-I
Holdings' liabilities, except (i) all of G-I Holdings' environmental
liabilities, other than environmental liabilities relating to the Company's
plant sites and its business as then- conducted, (ii) all of G-I Holdings' tax
liabilities, other than tax liabilities arising from the operations or business
of the Company and (iii) all of G-I Holdings' asbestos-related liabilities,
other than the first $204.4 million of such liabilities (whether for indemnity
or defense) relating to then-pending asbestos-related bodily injury cases and
previously settled asbestos-related bodily injury cases which the Company
contractually assumed and agreed to pay.
Effective August 18, 1999, G-I Holdings, in a series of transactions,
contributed certain assets, including the Company's glass fiber manufacturing
facility in Nashville, Tennessee (the "Nashville facility"), and certain related
liabilities to the Company. Accordingly, the Company's historical consolidated
financial statements reflect the results of operations, cash flows and assets
and liabilities of the Nashville facility.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
All subsidiaries are consolidated and intercompany transactions have been
eliminated.
FINANCIAL STATEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates.
Actual results could differ from those estimates. In the opinion of management,
the financial statements herein contain all adjustments necessary to present
fairly the financial position and the results of operations and cash flows of
the Company for the periods presented. The Company has a policy to review the
recoverability of long-lived assets and identify and measure any potential
impairments. The Company does not anticipate any changes in management estimates
that would have a material impact on operations, liquidity or capital resources,
subject to the matters discussed in Note 16.
F-14
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on deposit and certain debt
securities purchased with original maturities of six months or less.
SHORT-TERM INVESTMENTS
For securities classified as "trading" (including short positions),
unrealized gains and losses were reflected in income. For securities classified
as "available-for-sale," unrealized gains and losses, net of income tax effect,
were included in a separate component of stockholders' equity, "Accumulated
other comprehensive loss," and were $0 and $0 million as of December 31, 2000
and 2001, respectively.
"Other income (expense), net" includes $12.8, ($18.1) and $0 million of net
realized and unrealized gains (losses) on securities in 1999, 2000 and 2001,
respectively. The determination of cost in computing realized and unrealized
gains and losses is based on the specific identification method.
Under the Company's new $100 million secured credit facility (the "New
Credit Agreement") and the Company's amended and restated existing $110 million
secured credit facility (the "Existing Credit Agreement") (see Note 11), the
Company is limited to entering into investments in highly rated commercial
paper, U.S. government backed securities, certain time deposits and hedging
arrangements that protect against or mitigate the effect of fluctuations in
interest rates, foreign exchange rates or prices of commodities used in the
Company's business.
INVENTORIES
Inventories are stated at the lower of cost or market. The LIFO (last-in,
first-out) method is utilized to determine cost for a portion of the Company's
inventories. All other inventories are determined principally based on the FIFO
(first-in, first-out) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed principally on the straight-line method
based on the estimated economic lives of the assets. The Company uses an
economic life of 5 to 25 years for land improvements, 10 to 40 years for
buildings and building equipment and 3 to 20 years for machinery and equipment,
which includes furniture and fixtures. Certain interest charges are capitalized
during the period of construction as part of the cost of property, plant and
equipment.
EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED ("GOODWILL")
Goodwill is amortized on the straight-line method over a period of
approximately 40 years. The Company believes that the goodwill is recoverable.
To determine if goodwill is recoverable, the Company compares the net carrying
amount to undiscounted projected cash flows of the underlying businesses to
which the goodwill pertains. If goodwill is not recoverable, the Company would
record an impairment based on the difference between the net carrying amount and
fair value. See New Accounting Standard discussion below.
DEBT ISSUANCE COSTS
Debt issuance costs are amortized to expense over the life of the related
debt.
F-15
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
SOFTWARE DEVELOPMENT COSTS
Included in other assets at December 31, 2000 and 2001 were $6.8 and $6.3
million, respectively, of capitalized purchased software development costs. Such
costs are amortized over a 5 year period. For 1999, 2000 and 2001, the Company
amortized $0.6, $0.8 and $1.8 million, respectively, related to such costs.
REVENUE RECOGNITION
Revenue is recognized at the time products are shipped to the customer.
SHIPPING AND HANDLING COSTS
Shipping and handling costs are included in "Selling, general and
administrative" expenses and amounted to $79.1, $84.6 and $91.3 million in 1999,
2000 and 2001, respectively.
RESEARCH AND DEVELOPMENT
Research and development expenses are charged to operations as incurred and
were $6.5, $5.9 and $5.9 million in 1999, 2000 and 2001, respectively.
WARRANTY CLAIMS
The Company provides certain limited warranties covering most of its steep
slope roofing products for periods generally ranging from 20 to 40 years, with
lifetime limited warranties on certain specialty shingle products. The Company
also offers certain limited warranties and guarantees of varying duration
covering most of its low slope roofing products and limited warranties covering
most of its specialty building products and accessories for periods generally
ranging from 5 to 10 years, with lifetime limited warranties on certain
products. Income from warranty contracts related to low slope roofing products
is recognized over the life of the agreements, and is included in the reserve
for product warranty claims, net of the related costs of the warranty, along
with the administrative and legal costs associated with monitoring and settling
claims each year. For 1999, 2000 and 2001, administrative and legal costs for
steep slope and low slope roofing products amounted to $1.0, $1.4 and $1.5
million, respectively. The reserve for product warranty claims is estimated on
the basis of historical and projected claims activity. The accuracy of the
estimate of additional costs is dependent on the number and cost of future
claims submitted during the warranty periods. The Company believes that the
reserves established for estimated probable future product warranty claims are
adequate.
The Company recorded a $15.0 million product warranty reserve adjustment in
the fourth quarter of 2000 based on an evaluation of claims activity for 2000.
This adjustment was recorded for a specific alleged product defect relating to
prior production processes, and accordingly, has been separately presented in
the Consolidated Statements of Operations. A settlement was reached in 1998 in a
national class action lawsuit related to this alleged product defect which
provides customers who purchased asphalt shingles manufactured from 1973 through
1997 the right to receive certain limited benefits beyond those already provided
in their existing product warranty. See Item 3, "Legal Proceedings-Other
Litigation", which is incorporated herein by reference.
As discussed in Item 3 "Legal Proceedings-Other Litigation", in October
1998 G-I Holdings brought suit against certain of its insurers for recovery of
the defense costs in connection with the class action described above and a
declaration that the insurers are obligated to provide indemnification for all
damages paid pursuant to the settlement of this class action and for other
damages. As of December 31, 2001, this action is pending.
F-16
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
ENVIRONMENTAL LIABILITY
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters. The Company estimates
that its liability in respect of such environmental matters, and certain other
environmental compliance expenses, as of December 31, 2001, is $2.0 million,
before reduction for insurance recoveries reflected on its balance sheet of $0.8
million. The Company's liability is reflected on an undiscounted basis. See Item
3, "Legal Proceedings--Environmental Litigation," which is incorporated herein
by reference, for further discussion with respect to environmental liabilities
and estimated insurance recoveries.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Comprehensive income and its components in annual and interim financial
statements include net income, unrealized gains and losses from investments in
available-for-sale securities, net of income tax effect, and minimum pension
liability adjustments. The Company has chosen to disclose comprehensive income
in the Consolidated Statements of Stockholders' Equity (Deficit).
Changes in the components of "Accumulated other comprehensive income
(loss)" for the years 1999, 2000 and 2001 are as follows:
UNREALIZED GAINS MINIMUM ACCUMULATED
(LOSSES) ON PENSION OTHER
AVAILABLE-FOR-SALE LIABILITY COMPREHENSIVE
SECURITIES ADJUSTMENT INCOME (LOSS)
------------------ ---------- -------------
(THOUSANDS)
Balance, December 31, 1998 ....... $(16,928) $(2,956) $(19,884)
Change for the year 1999 ......... (665) 1,605 940
-------- ------- --------
Balance, December 31, 1999 ....... $(17,593) $(1,351) $(18,944)
Change for the year 2000 ......... 17,593 1,351 18,944
-------- ------- --------
Balance, December 31, 2000 ....... $ -- $ -- $ --
Change for the year 2001 ......... -- -- --
-------- ------- --------
Balance, December 31, 2001 ....... $ -- $ -- $ --
======== ======= ========
NEW ACCOUNTING STANDARD
On June 30, 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method of accounting and eliminates the pooling method of
accounting. SFAS No. 141 will not have an impact on the Company's business since
the Company has historically accounted for all business combinations using the
purchase method of accounting. With the adoption of SFAS No. 142, effective
January 1, 2002, goodwill 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.
RECLASSIFICATIONS
Certain reclassifications have been made to conform to current year
presentation.
F-17
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. ASBESTOS-RELATED BODILY INJURY CLAIMS
In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of liabilities for asbestos-related
bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos
Claims") of its parent, G-I Holdings. As of March 30, 1997, the Company had paid
all of its assumed asbestos-related liabilities. In January 2001, G-I Holdings
filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code due to its Asbestos Claims. This proceeding remains pending.
Claimants in the G-I Holdings bankruptcy, including judgment creditors,
might seek to satisfy their claims by asking the bankruptcy court to require the
sale of G-I Holdings' assets, including its holdings of BHC's common stock and
its indirect holdings of the Company's common stock. That action could result in
a change of control of the Company. In addition, those claimants may seek to
file Asbestos Claims against the Company (with approximately 1,900 alleged
Asbestos Claims pending against the Company as of December 31, 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 restraining order into a preliminary
injunction, which is expected to remain in effect pending confirmation of a
Chapter 11 plan of reorganization for the G-I Holdings estate. On February 7,
2001, G-I Holdings 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.
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Item 3,"Legal Proceedings," which
is incorporated herein by reference, and Notes 11 and 16.
NOTE 4. DISPOSITIONS
On September 29, 2000, the Company sold certain manufacturing and other
assets related to the Compton, California based security products business of LL
Building Products Inc. for net cash proceeds of approximately $27.1 million,
which resulted in a pre-tax gain of $17.5 million. The security products
business did not have a material impact on the Company's results of operations.
In December 2001, the Company sold the Corvallis, Oregon manufacturing
facility for approximately $0.9 million. This sale did not have a material
impact on the Company's results of operations.
F-18
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. NONRECURRING CHARGES
In July 1998, the Company recorded a pre-tax nonrecurring charge of $7.6
million related to a grant to its former President and Chief Executive Officer
of 30,000 shares of restricted common stock of the Company (a portion of which
such officer transferred to trusts for the benefit of his children) and related
cash payments to be made over a period of time (substantially all of which was
earned) in connection with the termination by an affiliate of preferred stock
options and stock appreciation rights held by such officer. Of the $7.6 million
charge, $2.5 million represented the value as of the date of grant of the 30,000
shares of restricted common stock, and $5.1 million represented the aggregate
amount of the cash payments to which such officer was entitled (subject to
certain future vesting requirements). The shares of restricted stock were
subject to certain rights of the Company to purchase, and of such officer and
the trusts to sell to the Company, such shares at Book Value (as defined).
Effective June 30, 1999, such officer terminated his employment with the
Company. For 1999, through the date of his termination, the net book value of
the 30,000 shares of restricted common stock held by such officer appreciated
$0.6 million. In connection with this termination, the Company's obligation to
such officer to pay an aggregate of $3.0 million (representing the balance of
the cash payments described above) was cancelled and was treated as an
additional capital contribution.
Effective September 30, 1999, an agreement relating to restricted common
stock between the Company and its former President and Chief Executive Officer
and the trusts (to which a portion of such restricted common stock was
transferred to the benefits of his children), was terminated. Such officer and
the trusts contributed such stock to BHC in consideration for equity interests
in BHC. As a result of this transaction, the $0.6 million appreciation in the
net book value of the restricted common stock described above, was treated as an
additional capital contribution.
In connection with the settlement of a legal matter, the Company recorded a
nonrecurring charge of $2.7 million in September 1999. Such amount includes
legal expenses incurred to defend such action.
NOTE 6. MANUFACTURING FACILITIES SHUTDOWN
In response to current market conditions, to better service shifting
customer demand and to reduce costs, the Company closed four manufacturing
facilities during 2000 located in Monroe, Georgia; Port Arthur, Texas;
Corvallis, Oregon; and Albuquerque, New Mexico. As market growth and customer
demand improves, the Company may reinstate production at one or more of these
manufacturing facilities in the future. The effect of closing these facilities
was not material to the Company's results of operations. See Note 4 regarding
disposition of the Corvallis, Oregon facility in 2001.
NOTE 7. INCOME TAXES (PROVISION) BENEFIT
Income tax (provision) benefit, which has been computed on a separate
return basis, consists of the following:
YEAR ENDED DECEMBER 31,
---------------------------------
1999 2000 2001
-------- ------- --------
(THOUSANDS)
Federal-- deferred ....................... $(13,682) $ 5,423 $(10,386)
-------- ------- --------
State and local:
Current ............................... (750) (1,116) (1,046)
Deferred .............................. (450) 2,052 413
-------- ------- --------
Total state and local .............. (1,200) 936 (633)
-------- ------- --------
Income tax (provision) benefit ........... $(14,882) $ 6,359 $(11,019)
======== ======= ========
F-19
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAXES (PROVISION) BENEFIT -- (CONTINUED)
The differences between the income tax (provision) benefit computed by
applying the statutory Federal income tax rate to pre-tax income, and the income
tax (provision) benefit reflected in the Consolidated Statements of Operations
are as follows:
YEAR ENDED DECEMBER 31,
---------------------------------
1999 2000 2001
-------- ------- --------
(THOUSANDS)
Statutory (provision) benefit ............ $(14,077) $ 6,015 $(10,423)
Impact of:
State and local taxes, net of
Federal benefits .................... (780) 608 (413)
Nondeductible goodwill amortization ... (275) (185) (286)
Other, net ............................ 250 (79) 103
-------- ------- --------
Income tax (provision) benefit ........... $(14,882) $ 6,359 $(11,019)
======== ======= ========
The components of the net deferred tax assets are as follows:
DECEMBER 31,
---------------------
2000 2001
-------- --------
(THOUSANDS)
Deferred tax liabilities related to property,
plant and equipment ................................ $ (9,449) $(24,604)
-------- --------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes ........ 42,154 36,351
Net operating losses not yet utilized
under the Tax Sharing Agreement ................. 10,192 21,177
-------- --------
Total deferred tax assets ......................... 52,346 57,528
-------- --------
Net deferred tax assets .............................. $ 42,897 $ 32,924
======== ========
As of December 31, 2001, the Company had $57.2 million of net operating
loss carryforwards available to offset future taxable income, as follows:
YEAR OF
EXPIRATION (THOUSANDS)
-------- ---------
2011 ........................................................ $ 2,088
2020 ........................................................ 55,147
---------
Total net operating loss carryforwards ...................... $57,235
=========
Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that future taxable income will more likely
than not be sufficient to utilize fully the deferred tax assets recorded.
As of December 31, 2000 and 2001, included in current assets is a tax
receivable from parent corporations of $1.5 million and $0, respectively, and
included in long-term assets is a tax receivable from parent corporations of
$7.5 and $9.0 million, respectively, representing amounts paid to G-I Holdings
under the Tax Sharing Agreement (as defined below), as amended, which the
Company will apply under the Tax Sharing Agreement against future tax sharing
payments due G-I Holdings over the next several years based on current income
estimates.
F-20
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAXES (PROVISION) BENEFIT -- (CONTINUED)
The Company and its subsidiaries entered into a tax sharing agreement (the
"Tax Sharing Agreement") dated January 31, 1994 with G-I Holdings with respect
to the payment of federal income taxes and related matters. During the term of
the Tax Sharing Agreement, which is effective for the period during which the
Company or any of its domestic subsidiaries is included in a consolidated
federal income tax return for the G-I Holdings consolidated tax group, the
Company is obligated to pay G-I Holdings an amount equal to those federal income
taxes it would have incurred if the Company, on behalf of itself and its
domestic subsidiaries, filed its own federal income tax return. Unused tax
attributes will carry forward for use in reducing amounts payable by the Company
to G-I Holdings in future years, but cannot be carried back. If the Company ever
were to leave the G-I Holdings consolidated tax group, it would be required to
pay to G-I Holdings the value of any tax attributes to which it would succeed
under the consolidated return regulations to the extent the tax attributes
reduced the amounts otherwise payable by the Company under the Tax Sharing
Agreement. Under limited circumstances, the provisions of the Tax Sharing
Agreement could result in the Company having a greater liability under the
agreement than it would have had if it and its domestic subsidiaries had filed
its own separate federal income tax return. Under the Tax Sharing Agreement, the
Company and each of its domestic subsidiaries are responsible for any taxes that
would be payable by reason of any adjustment to the tax returns of G-I Holdings
or its subsidiaries for years prior to the adoption of the Tax Sharing Agreement
that relate to the Company's business or assets or the business or assets of any
of its domestic subsidiaries. Although, as a member of the G-I Holdings
consolidated tax group, the Company is severally liable for certain federal
income tax liabilities of the G-I Holdings consolidated tax group, including tax
liabilities not related to its business, the Company should have no liability,
under any circumstances, other than liabilities arising from the Company's
operations and the operations of its domestic subsidiaries and tax liabilities
for tax years pre-dating the Tax Sharing Agreement that relate to the Company's
business or assets and the business or assets of any of our domestic
subsidiaries. The Tax Sharing Agreement provides for analogous principles to be
applied to any consolidated, combined or unitary state or local income taxes.
Under the Tax Sharing Agreement, G-I Holdings makes all decisions with respect
to all matters relating to taxes of the G-I Holdings consolidated tax group. The
provisions of the Tax Sharing Agreement take into account both the federal
income taxes the Company would have incurred if it filed its own separate
federal income tax return and the fact that the Company is a member of the G-I
Holdings consolidated tax group for federal income tax purposes.
On September 15, 1997, G-I Holdings received a notice from the Internal
Revenue Service (the "IRS") of a deficiency in the amount of $84.4 million
(after taking into account the use of net operating losses and foreign tax
credits otherwise available for use in later years) in connection with the
formation in 1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the
"surfactants partnership"), a partnership in which G-I Holdings held an
interest. G-I Holdings has advised the Company that it believes that it will
prevail in this tax matter, although there can be no assurance in this regard.
The Company believes that the ultimate disposition of this matter will not have
a material adverse effect on its business, financial position or results of
operations. On September 21, 2001, the Internal Revenue Service filed a proof of
claim with respect to such deficiency against G-I Holdings in the G-I Holdings
bankruptcy. If that proof of claim is sustained, the Company and/or certain of
the Company's subsidiaries together with G-I Holdings and several current and
former subsidiaries of G-I Holdings would be severally liable for a portion of
those taxes and interest. If the IRS were to prevail for the years in which the
Company and/or certain of its subsidiaries were part of the G-I Holdings Group,
the Company would be severally liable for approximately $40.0 million in taxes
plus interest, although this calculation is subject to uncertainty depending
upon various factors including G-I Holdings' ability to satisfy its tax
liabilities and the application of tax credits and deductions.
F-21
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. SALE OF ACCOUNTS RECEIVABLE
In March 1993, the Company sold its trade accounts receivable
("receivables") to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75.0 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company entered into new agreements which provided for a maximum of
$115.0 million, pursuant to which it sold the receivables to a special purpose
subsidiary of the Company, BMCA Receivables Corporation, without recourse, which
in turn sold them without recourse. In December 2001, this facility matured and
$115.0 million was repaid to settle previous amounts made available to the
Company.
In December 2001, the Company entered into a new Accounts Receivable
Securitization Agreement ("the Agreement") under which the Company sells certain
of its trade accounts receivable to BMCA Receivables Corporation, without
recourse, which in turn sells them to a third party, without recourse. The
Agreement provides for a maximum of $115.0 million in cash to be made available
to the Company based on the sale of eligible receivables outstanding from time
to time. This Agreement expires in December 2004 and is subject to financial and
other covenants including a material adverse change in business conditions,
financial or otherwise.
As of December 31, 2001, the Company had $99.7 million outstanding under
the Agreement. The excess of accounts receivable sold over the net proceeds
received is included in "Accounts receivable, other." BMCA Receivables
Corporation is not a guarantor under the Company's debt obligations. See notes
11 and 17. The effective cost to the Company varies with LIBOR and is included
in "Other income (expense), net" and amounted to $5.5, $6.9 and $4.0 million in
1999, 2000 and 2001, respectively.
NOTE 9. INVENTORIES
At December 31, 2000 and 2001, $11.2 and $9.2 million, respectively, of
inventories were valued using the LIFO method. Inventories consist of the
following:
DECEMBER 31,
-----------------------
2000 2001
--------- ---------
(THOUSANDS)
Finished goods ........................... $ 61,606 $ 66,417
Work-in process .......................... 16,938 8,800
Raw materials and supplies ............... 27,743 29,573
--------- ---------
Total ................................ 106,287 104,790
Less LIFO reserve ........................ (4,585) (2,545)
--------- ---------
Inventories .............................. $ 101,702 $ 102,245
========= =========
NOTE 10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
DECEMBER 31,
-----------------------
2000 2001
--------- ---------
(THOUSANDS)
Land and land improvements ............... $ 32,603 $ 35,677
Buildings and building equipment ......... 75,299 79,075
Machinery and equipment .................. 369,102 389,445
Construction in progress ................. 20,776 19,033
--------- ---------
Total ................................ 497,780 523,230
Less accumulated depreciation
and amortization ....................... (135,316) (171,163)
--------- ---------
Property, plant and equipment, net ....... $ 362,464 $ 352,067
========= =========
F-22
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. PROPERTY, PLANT AND EQUIPMENT -- (CONTINUED)
Included in the net book value of machinery and equipment at December 31,
2000 and 2001 was $8,863 and $7,688, respectively, for assets under capital
leases.
NOTE 11. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
----------------------
2000 2001
--------- ---------
(THOUSANDS)
10 1/2% Senior Notes due 2003 .................... $ 34,235 $ 34,528
7 3/4% Senior Notes due 2005 ..................... 149,584 149,675
8 5/8% Senior Notes due 2006 ..................... 99,704 99,753
8% Senior Notes due 2007 ......................... 99,492 99,567
8% Senior Notes due 2008 ......................... 154,334 154,418
Borrowings under Existing Credit Agreement ....... 70,000 --
Industrial revenue bonds with various interest
rates and maturity dates to 2029 ............... 23,060 22,995
Obligations on equipment loans ................... 28 --
Precious Metal Note due 2003 ..................... 7,002 7,002
Obligations under capital leases (Note 16) ....... 39,966 35,141
Other notes payable .............................. 3,201 2,373
--------- ---------
Total ........................................ 680,606 605,452
Less current maturities .......................... (5,908) (5,556)
--------- ---------
Long-term debt less current maturities ........... $ 674,698 $ 599,896
========= =========
On July 5, 2000, the Company issued $35.0 million in aggregate principal
amount of 10 1/2% Senior Notes, due 2002 at 97.161% of the principal amount, the
maturity date of which was extended to September 2003 (the "2003 Notes") in
connection with the Company entering into the New Credit Agreement in December
2000 (see below). The Company used the net proceeds from issuance of the 2003
Notes to repay a $31.9 million bank term loan due 2004 (the "Term Loan") with
the remaining net proceeds used for general corporate purposes. In connection
with the extinguishment of this debt, unamortized deferred financing fees of
approximately $0.3 million, net of tax, were written-off as an after-tax
extraordinary loss. The net proceeds of the Term Loan had been used, in 1999, to
purchase, and subsequently cancel, the remaining $29.9 million in aggregate
principal amount of the Company's outstanding 11 3/4% Senior Deferred Coupon
Notes due 2004. The redemption price was 105.875% of the principal amount
outstanding, and the premium was recorded as an after-tax extraordinary loss,
net of tax, of approximately $1.3 million.
On December 3, 1998, the Company issued $155 million in aggregate principal
amount of 8% Senior Notes due 2008 (the "2008 Notes"). On July 17, 1998, the
Company issued $150 million in aggregate principal amount of 7 3/4% Senior Notes
due 2005 (the "2005 Notes"). In October 1997, the Company issued $100 million in
aggregate principal amount of 8% Senior Notes due 2007 (the "2007 Notes"). In
December 1996, the Company issued $100 million in aggregate principal amount of
8 5/8% Senior Notes due 2006 (the "2006 Notes"). Holders of the 2003 Notes, the
2005 Notes, the 2006 Notes, the 2007 Notes and the 2008 Notes (collectively, the
"Senior Notes") have the right under the indentures governing such notes to
require the Company to purchase the Senior Notes at a price of 101% of the
principal amount thereof, and the Company has the right to redeem the Senior
Notes at a price of 101% of the principal amount thereof, plus, in each case,
the Applicable Premium (as defined therein), together with any accrued and
unpaid interest, in the event of a Change of Control (as defined therein).
F-23
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
In August 1999, the Company entered into the Existing Credit Agreement. In
December 2000, the Existing Credit Agreement was amended to extend its maturity
until August 2003. The terms of the Existing Credit Agreement provide for a $110
million secured revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $110 million in the aggregate. The Existing Credit
Agreement bears interest at a floating rate based on the lenders' base rate, the
federal funds rate or the Eurodollar rate. As of December 31, 2001, there were
no outstanding borrowings and $41.7 million of letters of credit were
outstanding under the Existing Credit Agreement.
In December 2000, the Company entered into the New Credit Agreement, a $100
million secured revolving credit facility, which is to be used for working
capital purposes subject to certain restrictions. The New Credit Agreement
matures in August 2003, and bears interest at rates similar to the Existing
Credit Agreement. As of December 31, 2001, there were no outstanding borrowings
or letters of credit under the New Credit Agreement. Obligations under the
Existing Credit Agreement and the New Credit Agreement, as well as the Company's
obligations under a $7.0 million Precious Metal Note due 2003 (defined below)
and approximately $3.5 million of obligations under a standby letter of credit
(collectively, the "Other Indebtedness"), aggregated $7.0 million of borrowings
and $45.2 million of letters of credit outstanding at December 31, 2001. All
these obligations are secured by a first priority lien on substantially all of
the Company's assets and the assets of its subsidiaries (collectively, the
"Collateral") on a pro rata basis. The Existing Credit Agreement and the New
Credit Agreement have been guaranteed by all of the Company's current and future
direct and indirect domestic subsidiaries, other than BMCA Receivables
Corporation. The Senior Notes are secured by a second-priority lien on the same
assets for so long as the first-priority lien remains in effect, subject to
certain limited exceptions and have been guaranteed by the subsidiaries that
guaranteed the Existing Credit Agreement and the New Credit Agreement. In
connection with these transactions, the Company entered into a security
agreement which grants a security interest in the Collateral in favor of the
collateral agent on behalf of the lenders under the Existing Credit Agreement,
the New Credit Agreement and the Other Indebtedness and the holders of the
Company's outstanding Senior Notes. The Company also entered into a collateral
agent agreement which provides, among other things, for the sharing of proceeds
with respect to any foreclosure or other remedy in respect of the Collateral.
Under the terms of the Existing Credit Agreement, the New Credit Agreement
and the indentures governing the Senior Notes, the Company is subject to certain
financial covenants. These include, among others, interest coverage, minimum
EBITDA (earnings before income taxes and extraordinary items increased by
interest expense, depreciation, goodwill and other amortization), limitations on
the amount of annual capital expenditures and indebtedness, restrictions on
distributions to the Company's parent corporations and on incurring liens,
restrictions on investments and other payments. Dividends and other restricted
payments are prohibited, except demand loans of specified amounts made to any
parent corporation, subject to limitations, as described in those agreements, in
future periods. As of December 31, 2001, after giving effect to the most
restrictive of the aforementioned restrictions, the Company could not have paid
dividends or made other restricted payments, except for demand loans up to $5.0
million. In addition, if a change of control as defined in the Existing Credit
Agreement and the New Credit Agreement occurs, those agreements could be
terminated and the loans under those agreements accelerated by the holders of
that indebtedness. If that event occurred, it would cause the Company's
outstanding Senior Notes to be accelerated. As of December 31, 2001, the Company
was in compliance with all covenants under the Existing Credit Agreement, the
New Credit Agreement and the indentures governing the Senior Notes.
In connection with entering into the New Credit Agreement, the Company also
issued a $7.0 million note (the "Precious Metal Note") to finance precious
metals used in the Company's manufacturing processes.
F-24
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
The Existing Credit Agreement and the New Credit Agreement also provide
that in the event the Company shall become the subject of any bankruptcy
proceedings, the lenders will, subject to bankruptcy court approval, refinance
and consolidate in full the indebtedness under the Existing Credit Agreement,
the New Credit Agreement, and the Other Indebtedness with a new
debtor-in-possession facility (the "DIP" Facility") on terms and conditions
substantially identical to the Existing Credit Agreement, the New Credit
Agreement, and the Other Indebtedness, in an aggregate amount equal to the then
committed amount under the New Credit Agreement plus $110 million plus the
principal amount of the Other Indebtedness. The DIP Facility would mature on
August 18, 2004 and would be secured by a first-priority security interest in
all of the collateral.
In December 1995, the Company consummated a $40.0 million sale-leaseback of
certain equipment located at its Chester, South Carolina glass mat manufacturing
facility, in a transaction accounted for as a capital lease, and the gain has
been deferred. The lessor was granted a security interest in certain equipment
at the Chester facility. The lease term extends to December 2005 with an early
buyout option in June 2003. In December 1994, the Company consummated a $20.4
million sale-leaseback of certain equipment located at its Baltimore, Maryland
roofing facility, in a transaction accounted for as a capital lease, and the
gain has been deferred. The lessor was granted a security interest in the land,
buildings and certain equipment at the Baltimore facility. The lease term
extends to December 2004 with an early buyout option in July 2002. The Company
has four industrial revenue bond issues outstanding, which bear interest at
short-term floating rates. Interest rates on the foregoing obligations ranged
between 1.50% and 4.75% as of December 31, 2001.
The Company believes that the fair value of its non-public indebtedness
approximates the book value of such indebtedness, because the interest rates on
substantially all such indebtedness are at floating short-term rates or the debt
has a relatively short maturity. With respect to the Company's publicly traded
debt securities, the Company has obtained estimates of the fair values from an
independent source believed to be reliable. The estimated fair values of the
Company's indebtedness at December 31, 2000 and 2001 are as follows:
DECEMBER 31,
-----------------------
2000 2001
--------- ---------
(THOUSANDS)
2005 Notes ................................. $ 47,867 $125,727
2006 Notes ................................. 31,905 81,797
2007 Notes ................................. 31,837 75,920
2008 Notes ................................. 49,387 115,041
The aggregate maturities of long-term debt as of December 31, 2001 for the
next five years are as follows:
(THOUSANDS)
----------
2002 ............................................. $ 5,556
2003 ............................................. 47,985
2004 ............................................. 6,356
2005 ............................................. 158,260
2006 ............................................. 109,093
In the above table, maturities for the year 2003 include $35.0 million
related to the 2003 Notes and $7.0 million related to the Precious Metal Note.
Maturities for the year 2005 include $150 million related to the 2005 Notes and
$4.3 million related to the Baltimore manufacturing facility capital lease.
Maturities for the year 2006 include $100.0 million related to the 2006 Notes
and $9.1 million related to the Chester glass mat manufacturing facility capital
lease.
F-25
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS
Eligible, full-time employees of the Company are covered by various benefit
plans, as described below.
DEFINED CONTRIBUTION PLAN
The Company provides a defined contribution plan for certain salaried
eligible employees. The Company contributes up to 7% of participants'
compensation and also contributes fixed amounts, ranging from $50 to $750 per
year depending on age, to the accounts of participants who are not covered by a
Company-provided postretirement medical benefit plan. The aggregate
contributions by the Company were $4.4, $4.9 and $5.1 million for 1999, 2000 and
2001, respectively.
The Company provides a defined contribution plan for certain hourly
eligible employees. The Company contributes a discretionary matching
contribution equal to 100% of each participant's eligible contributions each
year up to a maximum of $1,000 for each participant. Such contributions were
$0.3, $0.3 and $0.2 million for 1999, 2000 and 2001, respectively.
DEFINED BENEFIT PLANS
The Company provides noncontributory defined benefit retirement plans for
certain hourly and salaried employees (the "Retirement Plans"). Benefits under
these plans are based on stated amounts for each year of service. The Company's
funding policy is consistent with the minimum funding requirements of ERISA.
The Company's net periodic pension cost for the Retirement Plans included
the following components:
YEAR ENDED DECEMBER 31,
-----------------------------
1999 2000 2001
------- ------- -------
(THOUSANDS)
Service cost .................................. $ 804 $ 751 $ 826
Interest cost ................................. 949 1,066 1,216
Expected return on plan assets ................ (1,270) (1,583) (1,993)
Amortization of unrecognized prior
service cost ................................ 31 33 33
Amortization of net losses from
earlier periods ............................. 107 14 19
------- ------- -------
Net periodic pension cost ..................... $ 621 $ 281 $ 101
======= ======= =======
F-26
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
The following tables set forth, for the years 2000 and 2001,
reconciliations of the beginning and ending balances of the benefit obligation,
fair value of plan assets, funded status, amounts recognized in the Consolidated
Balance Sheets and changes in accumulated other comprehensive (income) loss
related to the Retirement Plans:
DECEMBER 31,
--------------------
2000 2001
-------- --------
(THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year .............. $ 17,601 $ 20,216
Service cost ......................................... 751 826
Interest cost ........................................ 1,379 1,542
Amendments ........................................... 50 --
Actuarial losses (gains) ............................. 1,073 1,403
Benefits paid ........................................ (638) (686)
-------- --------
Benefit obligation at end of year .................... $ 20,216 $ 23,301
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year ....... $ 18,348 $ 23,435
Actual return on plan assets ......................... 3,100 2,068
Employer contributions ............................... 2,625 1,422
Benefits paid ........................................ (638) (686)
-------- --------
Fair value of plan assets at end of year ............. $ 23,435 $ 26,239
======== ========
Reconciliation of funded status:
Funded status ........................................ $ 3,219 $ 2,937
Unrecognized prior service cost ...................... 264 231
Unrecognized actuarial losses ........................ 473 2,315
-------- --------
Net amount recognized in Consolidated
Balance Sheets ..................................... $ 3,956 $ 5,483
======== ========
Amounts recognized in Consolidated Balance Sheets:
Prepaid benefit cost ................................. $ 3,956 $ 5,483
======== ========
Change for the year in accumulated other
comprehensive (income) loss:
Change in intangible asset ......................... $ 247 $ --
Change in additional minimum liability ............. (1,598) --
-------- --------
Total .............................................. $ (1,351) $ --
======== ========
In determining the projected benefit obligation, the weighted average
assumed discount rate was 7.50% and 7.25% for 2000 and 2001, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 2000 and 2001.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was not significant for
1999, 2000 and 2001.
BOOK VALUE APPRECIATION UNIT PLAN
A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vested over five years.
Upon exercise, employees were entitled to receive a cash payment based on the
increase in Book Value (as defined in the plan). This plan was terminated in
1999 with all eligible employees receiving their respective vested cash
payments. Expense accrued under this plan was $1.2 million for 1999.
F-27
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
POSTRETIREMENT MEDICAL AND LIFE INSURANCE
The Company generally does not provide postretirement medical and life
insurance benefits, although it subsidizes such benefits for certain employees
and certain retirees. Such subsidies were reduced or ended as of January 1,
1997.
Net periodic postretirement benefit cost included the following components:
YEAR ENDED DECEMBER 31,
-----------------------
1999 2000 2001
----- ----- -----
(THOUSANDS)
Service cost ........................................ $ 114 $ 92 $ 109
Interest cost ....................................... 476 354 318
Amortization of unrecognized prior service cost ..... (88) (94) (95)
Amortization of net gains from earlier periods ...... (209) (271) (269)
----- ----- -----
Net periodic postretirement benefit cost ............ $ 293 $ 81 $ 63
===== ===== =====
The following table sets forth, for the years 2000 and 2001,
reconciliations of the beginning and ending balances of the postretirement
benefit obligation, funded status and amounts recognized in the Consolidated
Balance Sheets related to postretirement medical and life insurance benefits:
DECEMBER 31,
--------------------
2000 2001
-------- --------
(THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year ............ $ 6,023 $ 4,845
Service cost ....................................... 92 109
Interest cost ...................................... 354 318
Amendments ......................................... (122) --
Actuarial gains .................................... (1,098) (316)
Benefits paid, net of participant contributions .... (404) (274)
-------- --------
Benefit obligation at end of year .................. $ 4,845 $ 4,682
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year ..... $ -- $ --
Employer contributions ............................. 404 274
Participant contributions .......................... 104 169
Benefits paid ...................................... (508) (443)
-------- --------
Fair value of plan assets at end of year ........... $ -- $ --
======== ========
Reconciliation of funded status:
Funded status ...................................... $ (4,845) $ (4,682)
Unrecognized prior service cost .................... (642) (548)
Unrecognized actuarial gains ....................... (5,227) (5,274)
-------- --------
Net amount recognized in Consolidated
Balance Sheets as accrued benefit cost ........... $(10,714) $(10,504)
======== ========
F-28
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
2001 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $700 to $1,000 per year. For retirees over age
65, this subsidy may be replaced by participation in a managed care program.
With respect to retirees who were formerly hourly employees, most such retirees
are subject to a $5,000 per person lifetime maximum benefit. Subject to such
lifetime maximum, a 9% and 6% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 2001
for such retirees under and over age 65, respectively. To the extent that the
lifetime maximum benefits have not been reached, the foregoing rates were
assumed to decrease gradually to an ultimate rate of 5% and 6%, respectively, by
the year 2009 and remain at that level thereafter. The weighted average assumed
discount rate used in determining the accumulated postretirement benefit
obligation was 7.50% and 7.25% for 2000 and 2001, respectively.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 2000 and 2001 by $33,000 and $9,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic postretirement benefit cost for the years 2000 and 2001 by
$2,400 and $700, respectively. A decrease of one percentage point in each year
would decrease the accumulated postretirement benefit obligation as of December
31, 2000 and 2001 by $31,000 and $8,000, respectively, and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the years 2000 and 2001 by $2,400 and $600, respectively.
NOTE 13. 2001 LONG-TERM INCENTIVE PLAN AND PREFERRED STOCK OPTION PLAN
On January 1, 1996, the Company established a plan to issue options to
certain employees to purchase shares of redeemable convertible preferred stock
("Preferred Stock") of the Company, exercisable at a price of $100 per share.
Each share of Preferred Stock is convertible, at the holder's option, into
shares of common stock of the Company at a formula price based on Book Value (as
defined in the option agreement) as of the date of grant. The options vest
rateably over five years and expire after nine years. Dividends will accrue on
the Preferred Stock from the date of issuance at the rate of 6% per annum. The
Preferred Stock is redeemable, at the Company's option, for a redemption price
equal to $100 per share plus accrued and unpaid dividends. The Preferred Stock,
and common stock issuable upon conversion of Preferred Stock into common stock,
is subject to repurchase by the Company under certain circumstances, at a price
equal to current Book Value (as defined in the option agreement). The exercise
price of the options to purchase Preferred Stock was equal to the estimated fair
value per share of the Preferred Stock at the date of grant. The options
exercised in 1999 and 2000 were converted into 4,611 and 1,868 shares of common
stock. During 1999 no expense was recorded in connection with the Preferred
Stock options.
The following is a summary of transactions pertaining to the plan:
YEAR ENDED DECEMBER 31,
----------------------------------
1999 2000 2001
-------- -------- --------
(NUMBER OF SHARES)
Outstanding, January 1 .................... 140,502 168,261 198,559
Granted ................................... 81,405 61,700 --
Exercised ................................. (8,704) (3,653) --
Forfeited ................................. (44,942) (27,749) --
Exchanged for incentive plan units ........ -- -- (198,559)
-------- -------- --------
Outstanding, December 31 .................. 168,261 198,559 --
======== ======== ========
Options exercisable, December 31 .......... 45,517 66,675 --
======== ======== ========
F-29
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. 2001 LONG-TERM INCENTIVE PLAN AND PREFERRED STOCK OPTION PLAN--
(CONTINUED)
Effective December 31, 2000, the Company adopted the 2001 Long-Term
Incentive Plan, which allows employees participating in the Preferred Stock
Option Plan to also participate in the 2001 Long-Term Incentive Plan. During
2001, all employees exchanged their preferred stock options for incentive plan
units effective as of December 31, 2000. The Long-Term Incentive Plan authorizes
the grant of incentive units ("Incentive Units") to eligible employees. The
Long-Term Incentive Plan is administered by a Committee appointed by the Board
of Directors. The number of Incentive Units granted is determined by the
Committee in its sole discretion. Generally, Incentive Units vest cumulatively,
in 20% increments over five years, except that Incentive Units granted in
exchange for Preferred Stock Options retain the vested status and vesting
schedule of the options exchanged. Incentive Units generally are exercisable for
a period of six years from the date of grant. The value of Incentive Units is
determined at the end of each fiscal quarter based on Book Value (as defined in
the plan) at that date less Book Value as of the date of grant divided by
1,000,010. The Incentive Plan will terminate five years after its effective date
of December 2000, unless terminated sooner by the Committee.
In 2001, employees exchanged an aggregate of 198,559 stock options granted
under the 1996 Plan (discussed above) for an aggregate of 81,862 Incentive
Units. In 2001, 21,001 Incentive Units were granted. At December 31, 2001,
80,114 Incentive Units were outstanding. Compensation expense for such Incentive
Units was $1.4 and $1.7 million in 2000 and 2001, respectively.
NOTE 14. BUSINESS SEGMENT INFORMATION
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the steep slope and low slope roofing
markets. The Company also manufacturers and markets specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. The steep slope roofing product line
primarily consists of premium laminated shingles, strip shingles, and certain
specialty shingles. Sales of steep slope roofing products in 1999, 2000 and 2001
were $736.7, $808.8 and $939.4 million and represented approximately 65%, 67%
and 73%, respectively, of the Company's net sales. The Company's low slope
roofing product line includes a full line of modified bitumen products, asphalt
built-up roofing, liquid applied membrane, and roofing accessories. Sales of low
slope roofing products and accessories in 1999, 2000 and 2001 were $315.4,
$311.7 and $283.7 million and represented approximately 27%, 26% and 22%,
respectively, of the Company's net sales. Sales of the specialty building
products and accessories product line in 1999, 2000 and 2001 were $87.9, $87.3
and $69.9 million and represented approximately 8%, 7% and 5%, respectively, of
the Company's net sales.
The Company aggregates the steep slope and low slope product lines into one
operating segment since they have similar economic characteristics and are
similar in each of the following areas: (i) the nature of the products and
services are similar in that they perform the same function -- the protection
and covering of steep slope and low slope roofs; (ii) the nature of the
production processes are similar; (iii) the type or class of customer for their
products and services are similar; (iv) the steep slope and low slope products
have the same distribution channels, whereby the main customers are wholesalers
or distributors; and (v) regulatory requirements are generally the same for both
the steep slope and low slope product lines. The specialty building products and
accessories product line did not meet quantitative thresholds in 2001 to be
considered as a reportable segment.
Included in net sales in 2000 were sales to two customers of 13% and 11%,
respectively, and, in 2001, 12% and 11%, respectively. No other customer
accounted for more than 10% of our net sales in 2000 and 2001.
F-30
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. RELATED PARTY TRANSACTIONS
Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating and
financing transactions between the Company and its affiliates:
DECEMBER 31,
--------------------
2000 2001
-------- -------
(THOUSANDS)
Tax receivable from parent corporations ..... $ 9,000 $ 9,000
======== =======
Payable to International Specialty
Products Inc. ("ISP") ..................... $(10,052) $(8,910)
======== =======
Loan receivable from parent corporation ..... $ -- $ 2,536
======== =======
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries from time to time at prevailing market rates (between 4.75% and
9.00% during 2001); however, no loans to G-I Holdings and its subsidiaries were
made during 2000, and during 2001, the highest amount of loans made by the
Company to BHC was $2.5 million. In addition, no loans were made to the Company
by G-I Holdings and its subsidiaries during 2000 and 2001. Loans to any parent
corporation are subject to limitations as outlined in the Existing Credit
Agreement, the New Credit Agreement and the Senior Notes. The Company advances
funds from time to time on a non-interest bearing basis to G-I Holdings and its
subsidiaries. There was no balance outstanding of such advances as of December
31, 2000 and 2001. During 2000, the Company made a distribution of $106.2
million ($59.1 million of which represents a non-cash distribution in 2000
relating to the 1999 receivable from G-I Holdings) to its parent corporations.
The distribution of $106.2 million in 2000 represents the write-off of
outstanding advances to the company's parent corporations during 2000 that the
Company determined were uncollectible. Included in current assets in 2000 is a
tax receivable from parent corporations of $1.5 million (such amount was
reclassified to long-term assets in 2001) and included in long-term assets is a
tax receivable from parent corporations of $7.5 and $9.0 million in 2000 and
2001, respectively, representing amounts paid to G-I Holdings under the Tax
Sharing Agreement. See Notes 7 and 16.
MINERAL PRODUCTS: The Company and its subsidiaries purchase all of their
colored roofing granules requirements from ISP under a requirements contract,
except for the requirements of some of their roofing plants which are supplied
by third parties. Effective January 1, 2002, this contract was amended to
provide, among other things, that the contract will expire on December 31, 2002,
unless extended by the parties. Such purchases by the Company and its
subsidiaries totaled $57.3, $59.3 and $63.4 million for 1999, 2000 and 2001,
respectively. The amount payable to ISP at December 31, 2000 and 2001 for such
purchases was $7.6 and $8.4 million, respectively.
MANAGEMENT AGREEMENTS: Pursuant to a Management Agreement (the "Management
Agreement"), ISP Management Company, Inc. ("ISP Management"), a wholly-owned
indirect subsidiary of ISP, provides certain general management, administrative,
legal, telecommunications, information and facilities services to the Company,
including the use of the Company's headquarters in Wayne, New Jersey. Charges to
the Company by ISP Management for these services under the management agreement,
inclusive of the services provided to G-I Holdings, discussed below, aggregated
$5.3, $6.0 and $6.7 million for 1999, 2000 and 2001, respectively. These charges
consist of management fees and other reimbursable expenses attributable to the
Company, or incurred by ISP Management for the benefit of the Company. The
amount payable to ISP for management fees as of December 31, 2000 and 2001 was
$1.5 and $0.5 million, respectively. Effective January 1, 2002, the Management
Agreement was amended to adjust the management fees payable under the agreement.
The Management Agreement also provides that the Company is responsible for
providing management services to G-I Holdings and certain of its subsidiaries
and that G-I Holdings pay to the Company a management fee for these services.
The aggregate amount paid by G-I Holdings to the Company for services rendered
under the Management Agreement in 2001 was approximately $0.6 million. The
Company also allocates a portion of the management fees payable by the Company
under the Management Agreement to separate lease payments for the use of the
Company's headquarters. Based on the services provided in
F-31
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. RELATED PARTY TRANSACTIONS -- (CONTINUED)
2001 under the Management Agreement, the aggregate amount payable by the Company
to ISP Management under the Management Agreement for 2002, inclusive of the
services provided to G-I Holdings, is expected to be approximately $6.1 million.
Certain of the Company's executive officers receive their compensation from ISP
Management. ISP Management is indirectly reimbursed for this compensation
through payment of the management fee and other reimbursable expenses payable
under the Management Agreement.
TAX SHARING AGREEMENT: See Note 7.
NOTE 16. COMMITMENTS AND CONTINGENCIES
The discussions as to legal matters involving the Company contained in Item
3, "Legal Proceedings--Environmental Litigation" and "--Other Litigation" are
incorporated herein by reference.
G-I Holdings and BHC are presently dependent upon the earnings and cash
flows of their subsidiaries, principally the Company, in order to satisfy their
net obligations, including various tax and other claims and liabilities (net of
certain insurance receivables), including tax liabilities relating to the
surfactants partnership (see Note 7). G-I Holdings has advised the Company that
it expects to obtain funds to satisfy G-I Holdings' operating expenses from,
among other things, loans from subsidiaries (principally the Company). See Notes
3, 7 and 15.
On January 5, 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos
Claims. The Company is not included in such bankruptcy filing. There are
restrictions under the indentures relating to the Senior Notes, the Existing
Credit Agreement and the New Credit Agreement on payments by the Company to its
parents.
During the twelve months ended December 31, 2002, the Company expects to
make distributions and/or advances to its parents to satisfy the obligations
discussed above to not more than the extent permitted by the Existing Credit
Agreement, the New Credit Agreement and the Senior Notes. The Company does not
believe that the dependence of its parent corporations on the cash flows of
their subsidiaries should have a material adverse effect on the operations,
liquidity or capital resources of the Company. See Notes 3, 7 and 11.
In June 2001, the Company entered into employment security agreements with
certain of its executive officers and key personnel. The agreements have no
expiration date and provide for a single-sum payment consisting of two to three
times salary and bonus and related benefits if employment is terminated within a
thirty-six month period following the change in control event.
The leases for certain property, plant and equipment at certain of the
Company's glass mat and roofing facilities are accounted for as capital leases
(see Note 11). The Company is also a lessee under operating leases principally
for warehouses, production machinery and equipment, and transportation and
computer equipment. Rental expense on operating leases was $15.5, $18.7 and
$26.2 million 1999, 2000 and 2001, respectively. Future minimum lease payments
for properties which were held under long-term noncancellable leases as of
December 31, 2001 were as follows:
F-32
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
CAPITAL OPERATING
LEASES LEASES
------- --------
(THOUSANDS)
2002 .......................................... $ 8,328 $ 17,146
2003 .......................................... 8,291 15,567
2004 .......................................... 8,183 14,896
2005 .......................................... 9,333 13,926
2006 .......................................... 9,285 11,437
Thereafter .................................... -- 30,467
------- --------
Total minimum payments ........................ 43,420 $103,439
========
Less interest included above .................. (8,279)
--------
Present value of net minimum lease payments ... $35,141
========
NOTE 17. GUARANTOR FINANCIAL INFORMATION
All of the Company's subsidiaries, other than BMCA Receivables Corporation
(see Note 8), are guarantors under the Existing Credit Agreement, the New Credit
Agreement and the indentures governing the Senior Notes. 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 Company, a
wholly-owned subsidiary of the Company, for a license fee stated as a percentage
of net sales. The license agreements are for a period of one year and are
subject to automatic renewal unless either party terminates with 60 days written
notice. Also, effective January 1, 1999, BMMC sells all finished goods to the
Company at a manufacturing profit.
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 to current year 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, the guarantor subsidiaries and the
non-guarantor subsidiary is not included herein because management has
determined that such information is not material to investors.
F-33
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------
Net sales .............................. $1,014,155 $125,884 $ -- $1,140,039
Intercompany net sales .................. 51,474 753,235 (804,709) --
---------- -------- --------- ----------
Total net sales ...................... 1,065,629 879,119 (804,709) 1,140,039
---------- -------- --------- ----------
Costs and expenses:
Cost of products sold ................. 845,616 771,790 (804,709) 812,697
Selling, general and administrative ... 159,458 80,102 239,560
Goodwill amortization ................. 1,290 744 2,034
Transition service agreement
(income) expense .................... (500) 500 --
Nonrecurring charges .................. 2,650 -- 2,650
---------- -------- --------- ----------
Total costs and expenses .......... 1,008,514 853,136 (804,709) 1,056,941
---------- -------- --------- ----------
Operating income ....................... 57,115 25,983 -- 83,098
Equity in loss of subsidiaries .......... 29,980 -- (29,980) --
Intercompany licensing income
(expense), net ........................ (30,425) 30,425 --
Interest expense ........................ (26,565) (21,752) (48,317)
Other income (expense), net ............. (7,489) 12,929 5,440
---------- -------- --------- ----------
Income before income taxes
and extraordinary losses .............. 22,616 47,585 (29,980) 40,221
Income tax (provision) benefit .......... 2,723 (17,605) (14,882)
---------- -------- --------- ----------
Income before extraordinary losses ..... 25,339 29,980 (29,980) 25,339
Extraordinary losses, net of income
tax benefits of $761 .................. (1,296) -- (1,296)
---------- -------- --------- ----------
Net income ............................. $ 24,043 $ 29,980 $ (29,980) $ 24,043
========== ======== ========= ==========
F-34
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
Net sales ..................................... $1,081,918 $125,841 $ -- $1,207,759
Intercompany net sales ........................ 45,771 822,283 (868,054) --
---------- -------- --------- ----------
Total net sales ............................. 1,127,689 948,124 (868,054) 1,207,759
---------- -------- --------- ----------
Costs and expenses:
Cost of products sold ....................... 916,485 845,345 (868,054) 893,776
Selling, general and administrative ......... 169,575 80,967 250,542
Goodwill amortization ....................... 1,304 720 2,024
Transition service agreement
(income) expense .......................... 100 (100) --
Gain on sale of assets ...................... -- (17,505) (17,505)
Warranty reserve adjustment ................. 15,000 -- 15,000
---------- -------- --------- ----------
Total costs and expenses ................. 1,102,464 909,427 (868,054) 1,143,837
---------- -------- --------- ----------
Operating income .............................. 25,225 38,697 -- 63,922
Equity in earnings of subsidiaries ............ 16,251 -- (16,251) --
Intercompany licensing income
(expense), net .............................. (32,458) 32,458 --
Interest expense .............................. (24,932) (28,536) (53,468)
Other expense, net ............................ (10,818) (16,822) (27,640)
---------- -------- --------- ----------
Income (loss) before income taxes
and extraordinary losses .................... (26,732) 25,797 (16,251) (17,186)
Income tax (provision) benefit ................ 15,905 (9,546) 6,359
---------- -------- --------- ----------
Income (loss) before extraordinary losses ..... (10,827) 16,251 (16,251) (10,827)
Extraordinary losses, net of income
tax benefits of $194 ........................ (330) -- (330)
---------- -------- --------- ----------
Net income (loss) ............................. $ (11,157) $ 16,251 $ (16,251) $ (11,157)
========== ======== ========= ==========
F-35
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------ ------------
Net sales ..................................... $1,182,581 $110,461 $ -- $1,293,042
Intercompany net sales ........................ 90,238 892,246 (982,484) --
---------- -------- --------- ----------
Total net sales ........................... 1,272,819 1,002,707 (982,484) 1,293,042
---------- -------- --------- ----------
Costs and expenses:
Cost of products sold ....................... 1,003,072 903,157 (982,484) 923,745
Selling, general and administrative ......... 198,336 71,944 270,280
Goodwill amortization ....................... 1,303 721 2,024
Transition service agreement (income) expense 100 (100) --
---------- -------- --------- ----------
Total costs and expenses .................. 1,202,811 975,722 (982,484) 1,196,049
---------- -------- --------- ----------
Operating income .............................. 70,008 26,985 -- 96,993
Equity in earnings of subsidiaries ............ 29,273 -- (29,273) --
Intercompany licensing income (expense), net .. (35,477) 35,477 --
Interest expense .............................. (43,357) (17,446) (60,803)
Other income (expense), net ................... (7,858) 1,449 (6,409)
---------- -------- --------- ----------
Income before income taxes .................... 12,589 46,465 (29,273) 29,781
Income tax (provision) benefit ................ 6,173 (17,192) (11,019)
---------- -------- --------- ----------
Net income .................................... $ 18,762 $ 29,273 $ (29,273) $ 18,762
========== ======== ========= ==========
F-36
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents ........................ $ 9,741 $ 73,006 $ -- $ -- $ 82,747
Accounts receivable, trade, net .................. 9,798 9,676 -- 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 ........................... 83,062 134,260 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 .................... (253,575) 249,612 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 ....................................... $530,071 $554,406 $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 ....................... 3,983 6,069 -- 10,052
Accrued liabilities .............................. 18,865 24,023 -- 42,888
Reserve for product warranty claims .............. 14,900 -- -- 14,900
-------- -------- ------- --------- --------
Total Current Liabilities ...................... 57,772 73,496 -- -- 131,268
Long-term debt less current maturities ............. 507,878 166,820 -- 674,698
Reserve for product warranty claims ................ 28,187 569 -- 28,756
Other liabilities .................................. 14,099 213 -- 14,312
-------- -------- ------- --------- --------
Total Liabilities .................................. 607,936 241,098 -- -- 849,034
Total Stockholders' Equity (Deficit) ............... (77,865) 313,308 43,418 (356,726) (77,865)
-------- -------- ------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit) ................................... $530,071 $554,406 $43,418 $(356,726) $771,169
======== ======== ======= ========= ========
F-37
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents ........................ $ 133 $ 46,254 $ -- $ -- $ 46,387
Accounts receivable, trade, net .................. 10,726 12,764 -- 23,490
Accounts receivable, other ....................... 5,005 1,827 32,937 39,769
Inventories ...................................... 63,077 39,168 -- 102,245
Other current assets ............................. 1,487 2,403 -- 3,890
-------- -------- ------- --------- --------
Total Current Assets ........................... 80,428 102,416 32,937 -- 215,781
Investment in subsidiaries ......................... 379,589 -- -- (379,589) --
Intercompany loans including accrued interest ...... 81,781 (81,781) -- --
Due from (to) subsidiaries, net .................... (213,596) 209,525 4,071 --
Property, plant and equipment, net ................. 45,128 306,939 -- 352,067
Excess of cost over net assets of businesses
acquired, net .................................... 40,080 23,214 -- 63,294
Deferred income tax benefits ....................... 32,924 -- -- 32,924
Tax receivable from parent corporations ............ 9,000 -- -- 9,000
Other assets ....................................... 16,654 16,605 -- 33,259
-------- -------- ------- --------- --------
Total Assets ....................................... $471,988 $576,918 $37,008 $(379,589) $706,325
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt ............. $ -- $ 5,556 $ -- $ -- $ 5,556
Accounts payable ................................. 19,393 38,842 -- 58,235
Payable to related parties ....................... 1,296 7,614 -- 8,910
Accrued liabilities .............................. 23,333 20,215 -- 43,548
Reserve for product warranty claims .............. 14,900 -- -- 14,900
-------- -------- ------- --------- --------
Total Current Liabilities ...................... 58,922 72,227 -- 131,149
Long-term debt less current maturities ............. 438,374 161,522 -- 599,896
Reserve for product warranty claims ................ 22,358 383 -- 22,741
Other liabilities .................................. 13,973 205 -- 14,178
-------- -------- ------- --------- --------
Total Liabilities .................................. 533,627 234,337 767,964
Total Stockholders' Equity (Deficit) ............... (61,639) 342,581 37,008 (379,589) (61,639)
-------- -------- ------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit) ................................. $471,988 $576,918 $37,008 $(379,589) $706,325
======== ======== ======= ========= ========
F-38
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
------- ------------ ---------- ------------
Cash and cash equivalents, beginning of year .......... $ 53 $ 24,936 $ -- $ 24,989
------- -------- ------- --------
Cash provided by (used in) operating activities:
Net income (loss) ..................................... (5,937) 29,980 24,043
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary losses ............................ 1,296 -- 1,296
Depreciation .................................... 4,026 28,960 32,986
Goodwill and other amortization ................. 1,931 744 2,675
Deferred income taxes ........................... 14,132 -- 14,132
Noncash interest charges ........................ 3,321 -- 3,321
(Increase) decrease in working capital items ....... 15,192 (40,065) (1,327) (26,200)
Decrease in product warranty claims ................ (10,628) (3,690) (14,318)
Purchases of trading securities .................... -- (139,522) (139,522)
Proceeds from sales of trading securities .......... -- 243,097 243,097
Proceeds from sale of accounts receivable .......... 5,640 -- 5,640
Increase in other assets ........................... (1,392) (3,109) (4,501)
Decrease in other liabilities ...................... (1,987) (348) (2,335)
Change in net receivable from/payable to
related parties/parent corporations ............. 58,713 (108,833) 1,327 (48,793)
Other, net ......................................... (18,020) 14,616 (3,404)
------- -------- ------- --------
Net cash provided by operating activities ............. 66,287 21,830 -- 88,117
------- -------- ------- --------
Cash provided by (used in) investing activities:
Capital expenditures ............................... (3,562) (41,760) (45,322)
Acquisitions ....................................... -- (515) (515)
Purchases of available-for-sale securities ......... -- (76,048) (76,048)
Purchases of held-to-maturity securities ........... -- (2,349) (2,349)
Proceeds from sales of available-for-sale
securities ...................................... -- 97,400 97,400
Proceeds from held-to-maturity securities .......... -- 7,758 7,758
Proceeds from sales of other short-term
investments ..................................... -- 21,421 21,421
------- -------- ------- --------
Net cash provided by (used in) investing activities ... (3,562) 5,907 -- 2,345
------- -------- ------- --------
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt ........... 31,850 6,093 37,943
Repayments of long-term debt ....................... (32,937) (3,017) (35,954)
Distributions to parent corporations ............... (60,000) -- (60,000)
Proceeds from issuance of common stock ............. 870 -- 870
Financing fees and expenses ........................ (2,358) -- (2,358)
------- -------- ------- --------
Net cash provided by (used in) financing activities ... (62,575) 3,076 -- (59,499)
------- -------- ------- --------
Net change in cash and cash equivalents ............... 150 30,813 -- 30,963
------- -------- ------- --------
Cash and cash equivalents, end of year ................ $ 203 $ 55,749 $ -- $ 55,952
======= ======== ======= ========
F-39
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
-------- ------------ ---------- ------------
Cash and cash equivalents, beginning of year .......... $ 203 $ 55,749 $ -- $ 55,952
-------- -------- ------- --------
Cash provided by (used in) operating activities:
Net income (loss) ..................................... (27,408) 16,251 (11,157)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary losses .............................. 330 -- 330
Gain on sale of assets ............................ -- (17,505) (17,505)
Depreciation ...................................... 4,406 31,944 36,350
Goodwill and other amortization ................... 2,146 720 2,866
Deferred income taxes ............................. (7,475) -- (7,475)
Noncash interest charges .......................... 1,922 726 2,648
(Increase) decrease in working capital items ........ (33,237) 5,107 8,339 (19,791)
Increase in product warranty claims ................. 9,317 25 9,342
Purchases of trading securities ..................... -- (980) (980)
Proceeds from sales of trading securities ........... -- 2,172 2,172
Proceeds from sale of accounts receivable ........... 925 -- 925
(Increase) decrease in other assets ................. 3,180 (1,916) 1,264
Decrease in other liabilities ....................... (2,303) (373) (2,676)
Change in net receivable from/payable to
related parties/parent corporations .............. 37,493 (43,126) (8,339) (13,972)
Other, net .......................................... 2,785 (2,268) 517
-------- -------- ------- --------
Net cash used in operating activities ................. (7,919) (9,223) -- (17,142)
-------- -------- ------- --------
Cash provided by (used in) investing activities:
Capital expenditures ................................ (1,417) (60,126) (61,543)
Proceeds from sale of assets ........................ -- 31,702 31,702
Purchases of available-for-sale securities .......... -- (882) (882)
Proceeds from sales of available-for-sale
securities ........................................ -- 58,284 58,284
Proceeds from sales of other short-term
investments ....................................... -- 1,590 1,590
-------- -------- ------- --------
Ne cash provided by (used in) investing activities .... (1,417) 30,568 -- 29,151
-------- -------- ------- --------
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt ............ 34,044 7,002 41,046
Increase in borrowings under revolving
credit facility ................................... 70,000 -- 70,000
Repayments of long-term debt ........................ (34,198) (3,858) (38,056)
Distributions to parent corporations ................ (47,029) (47,029)
Net repurchase of common stock ...................... (1,180) -- (1,180)
Financing fees and expenses ......................... (2,763) (7,232) (9,995)
-------- -------- ------- --------
Net cash provided by (used in) financing activities ... 18,874 (4,088) -- 14,786
-------- -------- ------- --------
Net change in cash and cash equivalents ............... 9,538 17,257 -- 26,795
-------- -------- ------- --------
Cash and cash equivalents, end of year ................ $ 9,741 $ 73,006 $ -- $ 82,747
======== ======== ======= ========
F-40
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2001
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
-------- ------------ ---------- ------------
- ------------------------
Cash and cash equivalents, beginning of year ........ $ 9,741 $ 73,006 $ -- $ 82,747
-------- -------- -------- --------
Cash provided by (used in) operating activities:
Net income (loss) ................................... (10,511) 29,273 18,762
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation .................................... 2,764 34,432 37,196
Goodwill and other amortization ................. 3,073 721 3,794
Deferred income taxes ........................... 9,973 -- 9,973
Noncash interest charges ........................ 3,270 1,286 4,556
(Increase) decrease in working capital items ...... (39,153) 2,477 10,932 (25,744)
Decrease in product warranty claims ............... (5,829) (186) (6,015)
Proceeds from sale of accounts receivable ......... 34,669 -- 34,669
Increase in other assets .......................... (2,673) (1,308) (3,981)
Decrease in other liabilities ..................... (85) (8) (93)
Change in net receivable from/payable to
related parties/parent corporations ............ 70,908 (61,118) (10,932) (1,142)
Other, net ........................................ 131 1,155 1,286
-------- -------- -------- --------
Net cash provided by operating activities ........... 66,537 6,724 -- 73,261
-------- -------- -------- --------
Cash provided by (used in) investing activities:
Capital expenditures .............................. (915) (27,170) (28,085)
-------- -------- -------- --------
Net cash used in investing activities ............... (915) (27,170) -- (28,085)
-------- -------- -------- --------
Cash provided by (used in) financing activities:
Decrease in borrowings under revolving
credit facility ................................. (70,000) -- (70,000)
Repayments of long-term debt ...................... (175) (5,798) (5,973)
Loan to parent corporation ........................ (2,536) -- (2,536)
Financing fees and expenses ....................... (2,519) (508) (3,027)
-------- -------- -------- --------
Net cash used in financing activities ............... (75,230) (6,306) -- (81,536)
-------- -------- -------- --------
Net change in cash and cash equivalents ............. (9,608) (26,752) -- (36,360)
-------- -------- -------- --------
Cash and cash equivalents, end of year .............. $ 133 $ 46,254 $ -- $ 46,387
======== ======== ======== ========
F-41
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
2000 BY QUARTER 2001 BY QUARTER
--------------------------------------- ---------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS)
Net sales ............................ $289.8 $325.8 $330.9 $261.3 $265.0 $354.9 $376.3 $296.8
Cost of products sold ................ 214.4 230.3 242.5 206.7 199.0 254.2 256.8 213.7
------ ------ ------ ------ ------ ------ ------ ------
Gross profit ......................... $ 75.4 $ 95.5 $ 88.4 $ 54.6 $ 66.0 $100.7 $119.5 $ 83.1
====== ====== ====== ====== ====== ====== ====== ======
Operating income (loss)* ............. $ 14.8 $ 28.6 $ 39.6 $(19.1) $ 9.5 $ 32.2 $ 43.6 $ 11.7
====== ====== ====== ====== ====== ====== ====== ======
Interest expense ..................... $ 12.4 $ 12.5 $ 13.4 $ 15.1 $ 15.2 $ 15.4 $ 15.0 $ 15.2
====== ====== ====== ====== ====== ====== ====== ======
Income (loss) before income taxes
and extraordinary losses .......... $ 1.2 $ 13.8 $ 23.5 $(55.7) $ (7.1) $ 14.9 $ 26.8 $ (4.8)
Income tax (provision) benefit ....... (0.5) (5.1) (8.7) 20.6 2.6 (5.5) (9.9) 1.8
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
extraordinary losses .............. 0.7 8.7 14.8 (35.1) (4.5) 9.4 16.9 (3.0)
Extraordinary losses ................. -- -- (0.3) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss) .................... $ 0.7 $ 8.7 $ 14.5 $(35.1) $ (4.5) $ 9.4 $ 16.9 $ (3.0)
====== ====== ====== ====== ====== ====== ====== ======
- ----------
* The operating income for the third and the fourth quarters of 2000 reflect a
$17.5 million gain on sale of assets, and a $15.0 million charge related to a
provision for warranty claims, respectively. See Notes 2 and 4 to Consolidated
Financial Statements.
F-42
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1999
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1999 EXPENSES DEDUCTIONS OTHER 1999
- ----------- --------- ---------- ---------- ----- ------------
(THOUSANDS)
Valuation and Qualifying Accounts Deducted from
Assets To Which They Apply:
Allowance for doubtful accounts ............... $ 4,035 $ 484 $ 500(a) $ -- $ 4,019(b)
Allowance for discounts ....................... 23,863 96,645 97,280 (33) 23,195
Reserve for inventory market valuation ........ 2,546 2,794 3,623 -- 1,717
Reserve for product warranty claims ........... 48,632 13,573 27,891 -- 34,314
YEAR ENDED DECEMBER 31, 2000
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 2000 EXPENSES DEDUCTIONS OTHER 2000
- ----------- --------- ---------- ---------- ----- ------------
(THOUSANDS)
Valuation and Qualifying Accounts Deducted from
Assets To Which They Apply:
Allowance for doubtful accounts ............... $ 4,019 $ 413 $ 2,634(a) $ -- $ 1,798(b)
Allowance for discounts ....................... 23,195 110,291 107,683 -- 25,803
Reserve for inventory market valuation ........ 1,717 658 1,083 (289) 1,003
Reserve for product warranty claims ........... 34,314 32,926 23,584 -- 43,656
YEAR ENDED DECEMBER 31, 2001
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 2001 EXPENSES DEDUCTIONS OTHER 2001
- ----------- --------- ---------- ---------- ----- ------------
(THOUSANDS)
Valuation and Qualifying Accounts Deducted from
Assets To Which They Apply:
Allowance for doubtful accounts ............... $ 1,798 $ 346 $ 786(a) $(300) $ 1,058(b)
Allowance for discounts ....................... 25,803 141,107 133,158 300 34,052
Reserve for inventory market valuation ........ 1,003 3,059 741 -- 3,321
Reserve for product warranty claims ........... 43,656 19,469 25,484 -- 37,641
- ----------
Notes:
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balances at December 31, 1999, 2000 and 2001 primarily reflect a
reserve for receivables sold to a trust (see Note 8 to Consolidated
Financial Statements).
S-1