SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
March 31, 1997 0-23752
OVERHEAD DOOR CORPORATION
(Exact Name of Registrant as Specified in its Charter)
INDIANA 35-0564120
(State of Incorporation) (I.R.S. Employer
Identification Number)
6750 LBJ Freeway 75240
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 233-6611
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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
There were 1,000 shares of the Registrant's Common Stock, $1 par value,
outstanding as of May 5, 1997.
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
Part I Financial Information
---------------------
Item 1. Financial Statements (unaudited)
--------------------------------
Condensed Consolidated Statements of Operations
Three months ended March 31, 1997 (Successor)
and the three months ended March 31, 1996 (Predecessor)..... 1
Condensed Consolidated Statements of
Financial Condition - March 31, 1997
and December 31, 1996....................................... 2
Condensed Consolidated Statements of
Cash Flows - Three months ended March 31, 1997 (Successor)
and three months ended March 31, 1996 (Predecessor)......... 3
Notes to Condensed Consolidated Financial
Statements.................................................. 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9
---------------------------------------------
Part II Other Information................................................. 10
-----------------
Signatures........................................................ 10
i
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Successor Predecessor
------------- ---------------
Three Months Ended March 31,
------------------------------
1997 1996
------------- ---------------
Net Sales $132,519 $126,242
Costs and Expenses
Cost of Products Sold 108,382 101,805
Selling, General & Administrative 15,555 15,469
Research and Development 1,560 1,494
Amortization 4,776 1,999
-------- --------
Total Costs and Expenses 130,273 120,767
-------- --------
Operating Income 2,246 5,475
Interest Expense 4,646 6,702
Other Expense, Net 878 474
-------- --------
Loss Before Income Taxes (3,278) (1,701)
Income Tax Benefit (2,227) (758)
-------- --------
Net Loss $ (1,051) $ (943)
======== ========
Net Loss Per Common Share $ (1,051) $ (943)
======== ========
Weighted Average Common Shares Outstanding 1,000 1,000
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
March 31, December 31,
1997 1996
---------- -------------
Unaudited) (See Note)
ASSETS
Current Assets
Cash and cash equivalents $ 4,748 $ 2,276
Notes and accounts receivable, less allowances
(1997-$6,880; 1996-$7,482) 78,448 88,670
Inventories, net 74,986 81,019
Prepayments and other current assets 27,853 26,407
-------- --------
Total Current Assets 186,035 198,372
Property, Plant and Equipment
Land and buildings 44,389 44,182
Machinery and equipment 44,347 43,706
Construction in progress 5,359 4,491
Accumulated depreciation (6,178) (4,134)
-------- --------
Total Property, Plant and Equipment 87,917 88,245
Cost in excess of net assets of businesses acquired,
less amortization (1997-$8,673; 1996-$5,598) 483,125 486,200
Other assets 72,811 73,443
-------- --------
Total Assets $829,888 $846,260
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 38,379 $ 52,441
Accrued liabilities 23,173 29,403
Current maturities of long-term debt 28,517 28,023
-------- --------
Total Current Liabilities 90,069 109,867
Long-term Debt, Less Current Maturities 210,934 206,336
Deferred Income Taxes 44,171 44,763
Other Long-term Liabilities 11,134 10,793
-------- --------
Total Noncurrent Liabilities 266,239 261,892
Shareholder's Equity
Common stock, par value $1 per share;
1,000 shares authorized and outstanding 1 1
Additional capital 472,860 472,860
Currency translation adjustment 392 262
Retained earnings 327 1,378
-------- --------
Total Shareholder's Equity 473,580 474,501
-------- --------
Total Liabilities and Shareholder's Equity $829,888 $846,260
======== ========
NOTE: The condensed consolidated statement of financial condition at December
31, 1996 has been derived from the audited financial statements at that
date.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Successor Predecessor
---------- ---------------
Three Months Ended March 31,
----------------------------
1997 1996
---------- ------------
OPERATING ACTIVITIES
Net Loss $(1,051) $ (943)
Adjustments to reconcile net loss to net cash
flows used for operating activities:
Depreciation and amortization 6,833 4,499
(Increase) in net operating assets (6,476) (20,021)
------- --------
Net Cash Flows Used for Operating Activities (694) (16,465)
INVESTING ACTIVITIES
Proceeds from sales of property, plant
and equipment - 3
Expenditures for property, plant and equipment (1,792) (967)
(Increase) in other assets (1,019) (825)
------- --------
Net Cash Flows Used for Investing Activities (2,811) (1,789)
FINANCING ACTIVITIES
Net proceeds from long-term borrowings on revolver 8,350 17,500
Principal payments on long-term debt (2,503) (1,564)
------- --------
Net Cash Flows Provided by Financing Activities 5,847 15,936
EFFECT OF EXCHANGE RATE CHANGES ON CASH 130 (125)
------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 2,472 (2,443)
CASH AND CASH EQUIVALENTS
Beginning of period 2,276 2,604
------- --------
End of period $ 4,748 $ 161
======= ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
Note A - Basis of Presentation
------------------------------
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. Although the Company believes the
disclosures made are adequate to make the information presented not
misleading, these condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1996.
In the opinion of the Registrant, all adjustments, which are of a normal
recurring nature, necessary to present the information fairly have been made.
Due to the seasonal nature of the Company's business the results of operations
for interim periods are not necessarily indicative of results for a full year.
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current presentation.
The consolidated financial statements include the accounts of Overhead Door
Corporation and its consolidated subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Overhead Door Incorporated
(the Parent) is a non-operating company whose only asset is its ownership of
100% of the outstanding common stock of Overhead Door Corporation (Overhead
Door). See Note B for the acquisition of the Parent as of July 18, 1996. The
accompanying financial statements subsequent to July 17, 1996 ("Successor"
financial statements) reflect the new basis of assets and liabilities acquired
as of July 18, 1996 including additional goodwill and the indebtedness
incurred to finance the acquisition. Financial statements for the periods
prior to July 18, 1996 ("Predecessor" financial statements) reflect the
basis of assets and liabilities of the previous owners of the Company.
Note B - Sanwa Acquisition
---------------------------
On July 18, 1996, all of the outstanding common stock of Overhead Door
Incorporated, a privately held Indiana corporation ("ODI"), the Company's
parent, was acquired (the "Sanwa Acquisition") by Sanwa Shutter Corporation,
of Tokyo, Japan ("Sanwa"). Sanwa USA Inc. ("Sanwa USA"), a newly formed
Delaware corporation which is wholly owned by Sanwa, now holds all of the
common stock of ODI. The total consideration paid or assumed was approximately
$710 million, including $470 million in cash to acquire ODI's common stock,
cancel options and warrants, and to redeem its preferred stock.
The Sanwa Acquisition was accounted for by the purchase method of accounting
and the excess of the purchase price over the fair value of the net assets
acquired is included in cost in excess of net assets of businesses acquired
in the consolidated statements of financial condition. The Company refinanced
its outstanding bank debt of approximately $154 million including
accrued interest.
4
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
MARCH 31, 1997
(UNAUDITED)
Sanwa USA loaned to the Company the amounts necessary to fully repay and
terminate the credit agreement which had represented all of the Company's
outstanding bank debt, in accordance with the terms of a new bridge loan
agreement between Sanwa USA and the Company.
The consolidated financial statements of the Company have given effect to the
Sanwa Acquisition from its effective date.
Note C - Litigation and Other Contingencies
--------------------------------------------
The Company is a defendant in various legal proceeding arising in the ordinary
course of business. The following discussion should be read in conjunction
with the litigation and other contingencies footnote included in the Company's
annual report on Form 10-K for the year ended December 31, 1996.
At March 31, 1997, the Company was a defendant in 50 cases, all pending in the
state courts in California, in which damages are sought for property damage
alleged to have been caused or contributed to by aluminum windows manufactured
by Premier Product, a former division of the Company which was divested in
1989. The suits allege various theories of liability, including negligence
and contract under California's ten year construction defect statute of
limitations. The Company denies liability in each of the lawsuits.
The Company filed a Complaint for Declaratory Judgment in August 1995, in the
United States District Court for the Northern District of Texas against The
Chamberlain Group, Inc. The Complaint requests a declaratory judgment that a
line of residential garage door openers which the Company has recently
introduced does not infringe a particular patent owned by Chamberlain.
Chamberlain has filed a counterclaim against the Company alleging that such
openers do infringe its patent and that such infringement is willful. An
injunction and unspecified damages are requested.
The Company is self-insured with respect to a portion of its potential losses
relating to product and general liability and workers' compensation claims.
The Company is responsible for the first $0.5 million of loss related to each
product or general liability claim and the first $0.3 million of loss related
to each worker's compensation claim. Third-party insurance, up to $50.0
million, is maintained for losses in excess of these amounts. The Company
maintains reserves for anticipated self insurance losses.
Although the results of any litigation or claim cannot be predicted with
certainty, management believes that the outcome of pending litigation and
claims, when considered in conjunction with self insurance reserves
established therefore ($13.3 million at March 31, 1997 and $13.2 million at
December 31, 1996) will not have a material adverse effect on the Company's
results of operations or financial condition.
5
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
MARCH 31, 1997
(UNAUDITED)
The Company has been determined by the United States Environmental Protection
Agency (the "EPA") to be a potentially responsible party concerning a
Superfund third-party waste disposal site near Syracuse, New York. No Record
of Decision has been issued for this site by the EPA, and due to the
uncertainties it is not possible at this time to determine what the Company's
future liability (if any) in connection with this site will be. However, with
the limited information currently available, the Company estimates that its
liability at this site could be between $1.5 million and $6.0 million. The
Company has created a reserve in prior years for environmental liabilities for
the site of $1.5 million. This reserve may need to be changed from time to
time as more information becomes available, and there can be no assurance that
the existing reserves will be adequate for the intended purpose. After
consideration of this reserve, the above stated estimated liability is not
expected to have a material adverse effect on the Company's results of
operations, financial condition or liquidity.
At March 31, 1997 and December 31, 1996, accounts receivable from companies in
the construction industry totaled $70.5 million and $82.2 million,
respectively. The Company extends credit and requires collateral, if
necessary, based on the evaluation of each customer's financial condition.
Note D- Inventories
-------------------
Substantially all inventories are valued on the LIFO method. The accounting
records for any interim period do not reflect inventory values as between raw
materials, work-in-process and finished goods. The March 31, 1997 amounts
represent an estimated breakdown between raw materials, work-in-process, and
finished goods inventories, based upon each category's proportionate share at
December 31, 1996. The cost of material included in cost of products sold
during the interim periods is determined by using estimated material cost
rates. Inventories are classified as follows:
March 31, December 31,
1997 1996
--------- ------------
(in thousands)
At current cost:
Raw materials $30,827 $33,245
Work in process 13,312 14,356
Finished goods 30,514 32,908
------- -------
74,653 80,509
Difference between current cost over LIFO 333 510
------- -------
Inventories, net $74,986 $81,019
======= =======
Current cost of inventories is determined using the first-in, first-out (FIFO)
method of inventory accounting, which approximates current cost.
6
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
MARCH 31, 1997
(UNAUDITED)
Note E - Income Taxes
---------------------
The principal differences between the U.S. federal income tax rate and the
Company's effective income tax rate for the three months ended March 31, 1997
are state income taxes and amortization of goodwill.
At March 31, 1997 the total deferred tax liability for taxable temporary
differences was $55.5 million and the total deferred tax asset for deductible
temporary differences and operating loss carryforwards was $26.0 million net
of a $2.3 million valuation allowance. The net noncurrent deferred tax
liability totaled $44.1 million and the net current deferred tax asset which
is included in Prepayments and Other Current Assets totaled $14.7 million.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Net Sales during the first three months of 1997 were $132.5 million, a 5.0%
increase from the $126.2 million recorded in the same period in 1996. Higher
sales of residential sectional doors, commercial rolling and sectional doors,
residential and commercial operators, sliding entrance doors, and swinging
entrance doors were offset by lower sales of vehicular doors and dock
levelers.
Gross profit decreased by $0.3 million from $24.4 million in the first three
months of 1996 to $24.1 million for the same period in 1997. As a percentage
of net sales, gross profit declined from 19.4% in the first quarter of 1996 to
18.2% in the first quarter of 1997. This decline was mainly due to a shift in
the product mix to sales of lower margin products. For interim reporting
purposes, the cost of material included in cost of products sold is determined
using estimated material cost rates and the results from physical inventories
taken during all quarters of the year.
Operating income for the first three months of 1997 was $2.2 million, a
decrease of $3.3 million from the $5.5 million reported in 1996. Amortization
expense of $4.7 million in the first quarter of 1997 as compared to $2.0
million in the first quarter of 1996, as a result of the Sanwa Acquisition,
was the principal cause for this decline.
Interest expense decreased to $4.6 million in the first three months of 1997
from $6.7 million for the same period in 1996. The decrease is mainly due to
amortization of a bond premium recorded at the time of the Sanwa Acquisition
and lower interest rates on outstanding debt. Other Expense is higher at $0.9
million due to higher costs associated with a previously divested product line
operation.
The income tax benefit of $2.2 million in the first three months of 1997
compares to $0.8 million in the same period of 1996. The increased benefit is
due to an increased pre-tax loss in 1997 as compared to 1996.
Financial Condition
-------------------
The Company uses a Revolving Credit Facility to help fund seasonal cash flow
requirements. The outstanding balance of the Revolving Credit Facility at
March 31, 1997 was $36.7 million. Availability under the Revolving Credit
Facility at March 31, 1997 was $11.2 million. Due to the seasonal nature of
the Company's business, borrowings to fund working capital needs generally
increase beginning late in the second quarter and begin to decline late in the
fourth quarter. In the first quarter of 1997 the Company repaid $2.5 million
of bank term loans.
Capital expenditures were $1.8 million during the first quarter of 1997 as
compared to $1.0 million in the first quarter of 1996. The increase includes
upgrades in technical systems and facilities in support of the Company's
business.
For the three months ended March 31, 1997, net cash flows used for operating
activities totaled $0.7 million compared with $16.5 million for the first
three months of 1996. The higher use of funds in 1996 was mainly to reduce
accounts payable levels.
The Company has a historical seasonal pattern of improved results over the
last half of a calendar year when compared to the first half of a year. While
there is no way of assuring that this pattern will continue, the Company has
no reason to believe that construction industry patterns will change in the
foreseeable future. The Company believes that the cash flow generated by its
operations, together with borrowings under the Revolving Credit Facility,
should be sufficient to fund its cash needs during the balance of the year.
8
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
Part II. Other Information
-----------------
Item 1. Incorporated by reference to Note C, Litigation and Other
Contingencies, in Part I of this report.
Item 2-5. All items are either inapplicable or would be responded to in the
negative.
Item 6. Exhibits and Reports on Form 8-K.
(a) None
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements 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.
OVERHEAD DOOR CORPORATION
-------------------------
Date: May 14, 1997 By: /s/ John C. Macaulay
-------------------- ------------------------------------
John C. Macaulay
Vice President/Controller
(Chief Accounting Officer)
Date: May 14, 1997 By: /s/ James F. Brum
-------------------- ------------------------------------
James F. Brum
Executive Vice President
(Chief Financial Officer)
9