1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2001
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BUILDING MATERIALS CORPORATION
OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2952 22-3276290
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD A. WEINBERG, ESQ.
BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
STEPHEN E. JACOBS, ESQ.
MICHAEL E. LUBOWITZ, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
Series A 10 1/2% Senior Notes Due 2003........ $35,000,000 97.161% $34,006,350 $8,502(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantee of Series A 10 1/2 Senior Notes Due
2003........................................ $35,000,000 N/A N/A $0(2)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) under the Securities Act of 1933, as amended (the
"Securities Act").
(2) The Additional Registrants, each a wholly-owned subsidiary of Building
Materials Corporation of America, have guaranteed the payment of the Series
A 10 1/2 Senior Notes due 2003. Pursuant to Rule 457(n) under the Securities
Act, no filing fee is required.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
ADDITIONAL REGISTRANTS
PRIMARY
STATE OR OTHER STANDARD ADDRESS, INCLUDING ZIP CODE AND
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER TELEPHONE NUMBER, INCLUDING
EXACT NAME OF REGISTRANT INCORPORATION OR CLASSIFICATION IDENTIFICATION AREA CODE, OF REGISTRANT'S
AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICE
- --------------------------- ---------------- -------------- --------------- -------------------------------
Building Materials Delaware 2952 22-3626208 1361 Alps Road
Manufacturing Corporation Wayne, New Jersey 07470
(973) 628-3000
Building Materials Delaware 6749 22-3626206 300 Delaware Avenue
Investment Corporation Wilmington, Delaware 19801
(302) 427-5960
BMCA Insulation Products Delaware 5039 22-3275477 1361 Alps Road
Inc. Wayne, New Jersey 07470
(973) 628-3000
Ductwork Manufacturing Delaware 3440 58-2507312 25 Central Industrial Row
Corporation Purvis, MS 39475
(601) 794-5500
GAF Leatherback Corp. Delaware 2952 22-3497242 11 Hillcrest Road
Hollister, CA 95024-5050
(408) 636-5050
GAF Premium Products Inc. Delaware 3272 22-3383680 1361 Alps Road
Wayne, New Jersey 07470
(973) 628-3000
GAF Materials Corporation Delaware 2952 22-3563280 1361 Alps Road
(Canada) Wayne, New Jersey 07470
(973) 628-3000
GAFTECH Corporation Delaware 8741 22-2811609 1361 Alps Road
Wayne, New Jersey 07470
(973) 628-3000
LL Building Products Inc. Delaware 3444 58-2394554 4501 Circle 75 Parkway
Atlanta, GA 30339
(770) 953-6366
Wind Gap Real Property Delaware 7010 22-3383681 1361 Alps Road
Acquisition Corp. Wayne, New Jersey 07470
(973) 628-3000
EXACT NAME OF REGISTRANT
AS SPECIFIED IN ITS CHARTER REGISTRATION NO.
- --------------------------- ----------------
Building Materials 333-
Manufacturing Corporation
Building Materials 333-
Investment Corporation
BMCA Insulation Products 333-
Inc.
Ductwork Manufacturing 333-
Corporation
GAF Leatherback Corp. 333-
GAF Premium Products Inc. 333-
GAF Materials Corporation 333-
(Canada)
GAFTECH Corporation 333-
LL Building Products Inc. 333-
Wind Gap Real Property 333-
Acquisition Corp.
3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 6, 2001
PROSPECTUS
$35,000,000
BUILDING MATERIALS CORPORATION OF AMERICA
10 1/2% SENIOR NOTES DUE 2003
------------------------
This prospectus relates to the offering for resale from time to time by the
selling noteholder named in this prospectus of Building Materials Corporation of
America's 10 1/2% Senior Notes due 2003 which have a principal amount at
maturity of $35,000,000. We initially sold the notes to the selling noteholder
in a private placement on July 5, 2000 in a transaction exempt from the
registration requirements of the Securities Act of 1933. This prospectus has
been made available to the selling noteholder pursuant to our obligations under
a registration rights agreement.
The selling noteholder will receive all of the net proceeds from the sale
of these notes, although we will bear some of the expenses related to offering
these notes. The selling noteholder may offer and sell the notes directly to
purchasers or through underwriters, brokers, dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions. The notes may
be sold in one or more transactions at fixed or negotiated prices or at prices
based on prevailing market prices at the time of the sale.
------------------------
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS
PROSPECTUS.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 2001
4
SUMMARY
This summary highlights selected information from this prospectus and may
not contain all information that may be important to you. This prospectus
includes information regarding our business and detailed financial data. We
encourage you to read the detailed information and financial statements
appearing elsewhere in this prospectus.
WHO WE ARE
We are a leading national manufacturer of a broad line of asphalt roofing
products and accessories for the steep slope and low slope roofing markets
(previously referred to as the residential and commercial roofing product
lines). We also manufacture specialty building products and accessories for the
professional and do-it-yourself remodeling and residential construction
industries. We produce our products at 26 currently operating manufacturing
facilities. In addition, we have four manufacturing facilities that are
currently closed. We believe that we hold the number one or two market position
in each of the asphalt roofing product lines in which we compete (based on unit
sales), including leadership of the fast growing, premium laminated steep slope
shingles market. We believe our Timberline(R) product is the leading brand in
the steep slope roofing market, and our Ruberoid(R) product is the leading brand
in the modified bitumen market in the low slope roofing industry.
Through 2000, we have reported twelve out of thirteen years of increases in
operating income, before non-recurring charges. During the five-year period
ended December 31, 2000, our net sales and operating income, before
non-recurring charges, have increased at average annual compound rates of
approximately 11.9% and 7.7%, respectively. In 2000, net sales increased 5.9%.
The operating income margin before non-recurring items, however, declined to
5.1% in 2000 from 7.5% in 1999, primarily due 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. We believe that our
growth is primarily attributable to:
- improvement in our product mix, driven by a business strategy which
emphasizes our higher-margin products and systems;
- vertical integration and our low cost manufacturing operations;
- substantial capital spending programs for new property, plant and
equipment that have enabled us to expand capacity and reduce
manufacturing costs;
- the strength of our national distribution system; and
- broadening our product lines through niche-type acquisitions.
INDUSTRY OVERVIEW
The United States steep slope roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 85% of industry steep slope roofing unit sales in
1999. Steep slope asphalt roofing materials consist of strip shingles and higher
margin, premium laminated shingles, which represented approximately 54% and 46%,
respectively, of industry asphalt roofing unit sales in 2000. While total
asphalt steep slope roofing unit sales grew during the past five years (from
January 1, 1996 through December 31, 2000) at an average annual compound rate of
approximately 2%, unit sales of laminated shingles grew at an average annual
compound rate of approximately 14%. During the same period, sales of strip
shingles declined at a compound annual rate of approximately 4%. While we
believe that the growth of laminated shingle sales will continue to exceed the
growth of the overall steep slope asphalt roofing market, we have experienced
increased competition in this product line.
The United States low slope roofing industry comprises manufacturers of
asphalt built-up roofing, modified bitumen, thermoplastic and elastomeric
single-ply products and other roofing products. We believe approximately 70% of
low slope roofing industry membrane unit sales utilize asphalt built-up
1
5
roofing, modified bitumen products and thermoplastic and elastomeric single-ply
products, most of which we manufacture or market.
Over the past five years, approximately 80% of industry sales, as well as
our sales, of both steep slope and low slope roofing products were for
re-roofing, as opposed to new construction. As a result, our exposure and the
industry's exposure to cyclical downturns in the new construction market are
lower than for other building material manufacturers which produce, for example,
gypsum and wood. We expect that demand for steep slope re-roofing will continue
to increase as the existing housing stock ages and as homeowners upgrade from
standard strip roofing shingles to premium laminated shingles for enhanced
aesthetics and durability. We also expect low slope roofing demand to rise as
the construction of new commercial facilities increases and existing buildings
age.
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
67% of our net sales in 2000. 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. We produce two principal lines of shingles, the Timberline(R) series and
the Sovereign(R) series, as well as certain specialty shingles. In addition to
shingles, we supply all the components necessary to install a complete roofing
system.
LOW SLOPE ROOFING
We manufacture a full line of asphalt built-up roofing, modified bitumen
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 26% of our net
sales in 2000. 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 also manufacture or market base sheets,
flashings and other roofing accessories and perlite roofing insulation products,
which consist of low thermal insulation products installed below the roofing
membrane. We also market isocyanurate foam as roofing insulation, packaged
asphalt and accessories such as vent stacks, roof insulation fasteners, cements
and coating.
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 7% of our net sales in 2000. These products primarily consist of
steep slope attic ventilation systems and metal and fiberglass air distribution
products for the HVAC industry.
BUSINESS STRATEGY
The principal elements of our business strategy are the following:
INCREASE EMPHASIS ON HIGHER MARGIN, PREMIUM PRODUCTS
One of our strategies to grow net sales and profitability has been to
improve our product mix, with an increasing emphasis on laminated shingles and
longer-life, high performance premium strip and specialty shingles, which sell
at higher prices and profit margins than standard strip shingles. From January
1, 1996 and through December 31, 2000, our net sales of these premium shingles
have increased at an average
2
6
annual compound rate of approximately 14%. This growth has enabled us to
increase our premium product mix of steep slope sales. We expect to continue
this strategy to improve product mix by increasing sales of premium shingles.
ENHANCE LOW COST MANUFACTURING OPERATIONS
We believe that our plants are among the most modern in the industry. Since
1985 and through December 31, 2000, we have invested approximately $475 million
in new property, plant and equipment, principally to increase capacity and
implement process improvements to reduce manufacturing costs. This capital
program included the construction of two manufacturing facilities in Shafter,
California and Michigan City, Indiana in 2000. We also completed construction on
a third manufacturing facility in Mount Vernon, Indiana and started production
at that facility in the first quarter of 2001. This capital program also
included the installation of efficient in-line lamination equipment in a number
of our roofing plants, as well as the modernization of our glass mat facilities.
We have reduced our manufacturing costs as a result of this capital program,
along with the rigorous application of our process and quality control
standards.
CAPITALIZE ON OUR NATIONAL DISTRIBUTION SYSTEM
We have one of the industry's largest sales forces, which is supported by a
staff of technical professionals who work directly with architects, consultants,
contractors and building owners. We market our roofing products through our own
sales force of approximately 230 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 the wholesale distribution channel offers the most
attractive margins of all roofing market distribution channels and represents
the principal distribution channel for professionally installed asphalt roofing
products, and that our nationwide coverage has contributed to certain of our
roofing products being among the most recognized and requested brands in the
industry.
BROADEN PRODUCT LINES THROUGH NICHE-TYPE ACQUISITIONS
Our acquisition strategy is focused on niche-type acquisitions, designed to
either complement existing product lines, further the geographic reach of our
business or increase our market share. We are primarily interested in acquiring
businesses which can benefit from our strong national distribution network,
manufacturing technology and marketing expertise.
RECENT DEVELOPMENTS
On January 5, 2001, G-I Holdings Inc., one of our parent corporations,
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
prospectus as "Asbestos Claims." G-I Holdings, the successor to GAF Corporation
by merger, is a privately-held holding company, and we are its primary operating
subsidiary and principal asset. We are not included in the bankruptcy filing.
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 the parent of BMCA and of
BMCA's direct parent, BMCA Holdings Corporation. We refer to G-I Holdings Inc.
and any and all of its
3
7
predecessor corporations, including GAF Corporation, G-I Holdings Inc., G
Industries Corp., GAF Fiberglass Corporation and GAF Building Materials
Corporation, in this prospectus as "G-I Holdings."
On December 22, 2000, we completed a series of transactions that included
(1) entering into a new $100 million secured credit facility with the lenders
under our existing revolving credit facility; (2) amending and restating our
existing $110 million revolving credit facility and (3) receiving consents from
holders of our outstanding senior notes, including these notes, to certain
amendments to the indentures under which those notes were issued. We refer to
the new secured credit facility in this prospectus as the "New Credit Agreement"
and the amended and restated existing revolving credit facility as the "Existing
Credit Agreement." As a result of these transactions, all obligations under the
New Credit Agreement and the Existing Credit Agreement, including the
obligations under the subsidiary guarantees thereunder, and our obligations
under a $7.0 million precious metal note and approximately $3.5 million of
obligations under a standby letter of credit, which we refer to in this
prospectus collectively as the "Other Indebtedness," are secured by a
first-priority lien on substantially all of our assets and the assets of our
subsidiaries. We refer to these assets in this prospectus as the "Collateral."
The New Credit Agreement and the Existing Credit Agreement have been guaranteed
by all of our current and future direct and indirect domestic subsidiaries,
other than BMCA Receivables Corporation. In addition, our obligations under our
outstanding senior notes, including these notes, are secured by a
second-priority lien on the Collateral and have been guaranteed by the
subsidiaries that guaranteed the New Credit Agreement and the Existing 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 New Credit Agreement, the
Existing 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. We refer to these
transactions collectively in this prospectus as the "Transactions." For a more
detailed description of these transactions, see "The Transactions."
* * *
Our executive offices are located at 1361 Alps Road, Wayne, New Jersey
07470 and our telephone number is (973) 628-3000. Industry information is based
upon our estimates and data from the Asphalt Roofing Manufacturers Association.
4
8
SUMMARY OF THE TERMS OF THE NOTES
On July 5, 2000, we completed the private placement of $35,000,000
aggregate principal amount of our 10 1/2% Senior Notes due 2002. In connection
with the private placement, we entered into a registration rights agreement with
BNY Capital Markets, Inc., as the initial purchaser, in which we agreed, under
certain circumstances, to file for the benefit of holders of the notes a shelf
registration statement covering public resales of the notes. In connection with
completing the Transactions, we amended that registration rights agreement, and
the maturity of these notes was extended to September 18, 2003. See "The
Transactions." This prospectus is part of that shelf registration statement, and
the notes being offered hereby are those initially sold by us in the private
placement.
Issuer........................ Building Materials Corporation of America.
Issue......................... $35,000,000 aggregate principal amount of
Series A 10 1/2% Senior Notes due 2003. The
notes are being offered by BNY Capital Markets,
Inc., the selling noteholder.
Maturity...................... September 18, 2003.
Interest Payment Dates........ The notes will pay interest in cash at a rate
of 10 1/2% per annum, payable on January 1,
April 1, July 1 and October 1, commencing April
1, 2001.
Original Issue Discount....... Each note was issued at a meaningful discount
from its stated principal amount. You will be
required to include amounts in gross income for
federal income tax purposes in advance of the
receipt of the cash to which the income is
attributable. See "Material U.S. Federal Income
Tax Consequences."
Change of Control Put and
Call.......................... Upon a change of control you will have the
right to require us to purchase your notes at a
purchase price equal to 101% of their aggregate
principal amount on the date of repurchase,
plus any accrued and unpaid interest. After the
expiration of your right to require us to
repurchase your notes, we will have the option
to purchase all of the outstanding notes at a
purchase price equal to 100% of their aggregate
principal amount, plus the applicable premium,
together with any accrued and unpaid interest
to the purchase date. We cannot otherwise
redeem the notes. See "Description of the
Notes -- Certain Definitions" for the
definitions of change of control and applicable
premium.
Guarantees.................... The notes are fully and unconditionally
guaranteed, jointly and severally, on a senior
basis by all of our current and future direct
and indirect domestic subsidiaries, other than
BMCA Receivables Corporation. We refer to these
subsidiaries in this prospectus as the
"Guarantors." See "Description of the
Notes -- Guarantees."
Security...................... BMCA's obligations under the notes (and the
guarantees thereunder) are secured by a
second-priority lien on the Collateral. After
the obligations under the Existing Credit
Agreement, the New Credit Agreement and the
Other Indebtedness (or any facilities used to
refinance all or part of any of them) are paid
in full, the Collateral will be released and
the notes will no longer be secured by the
Collateral, subject to
5
9
limited exceptions. For a more detailed
description of the security, see "Description
of the Notes -- Security."
Ranking....................... The notes are BMCA's senior obligations. The
notes rank equally with BMCA's 7 3/4% Senior
Notes due 2005, 8 5/8% Senior Notes due 2006,
8% Senior Notes due 2007 and 8% Senior Notes
due 2008. We refer to these other senior notes
in this prospectus as the "Other Senior Notes"
and together with these notes, the "Senior
Notes."
The Senior Notes are subordinated to our
obligations under the New Credit Agreement, the
Existing Credit Agreement and the Other
Indebtedness to the extent of the Collateral
securing all of those obligations. As of
December 31, 2000, the notes were subordinated
to approximately $119.3 million of debt
obligations under the New Credit Agreement, the
Existing Credit Agreement and the Other
Indebtedness.
Certain Covenants............. Subject to some restrictions contained in the
New Credit Agreement, the Existing Credit
Agreement and the indentures governing the
Senior Notes, we may incur additional debt,
including secured debt. The restrictions on our
ability to incur additional secured debt
contained in the indentures governing the Other
Senior Notes are substantially similar to those
contained in the indenture governing these
notes. The indentures governing our Senior
Notes, including these notes, however, permit
the incurrence of additional debt, including
secured debt, that would otherwise be
prohibited under the indentures if such debt
would have been permitted to be incurred under
the New Credit Agreement and the Existing
Credit Agreement as each such agreement was in
effect on December 22, 2000. The New Credit
Agreement and the Existing Credit Agreement
include financial covenants and a specific debt
limitation covenant that, unlike the
indentures, restrict our ability to incur debt
regardless of our interest coverage ratio. In
addition to the limitation on incurring
indebtedness described above, the indenture
governing the notes contains covenants which,
among other things and subject to certain
exceptions, restrict our ability to:
- make certain payments and dividends;
- issue capital stock of certain of our
subsidiaries;
- issue guarantees;
- enter into transactions with stockholders and
affiliates;
- create liens;
- sell assets; and
- consolidate or merge with, or sell all or
substantially all of our assets to, another
person.
Form of Notes................. The notes will be represented by one or more
global securities deposited with The Bank of
New York for the benefit of The
6
10
Depository Trust Company. You will not receive
notes in certificated form unless one of the
events set forth under the heading "Description
of the Notes -- Form of Notes" occurs. Instead,
beneficial interests in the notes will be shown
on, and transfer of these interests will be
effected only through, records maintained in
book-entry form by The Depository Trust Company
with respect to its participants.
Use of Proceeds............... We will not receive any cash proceeds from the
resale by the selling noteholder of the notes.
This prospectus fulfills our obligation under
the registration rights agreement between BNY
Capital Markets, Inc., as the initial purchaser
of the notes, and us.
7
11
SUMMARY FINANCIAL DATA
We derived the summary consolidated financial data in the following table
from our Consolidated Financial Statements beginning on page F-1. The results
for the year ended December 31, 1998 include the results of the LL Building
Products Inc. business from its date of 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 we sold in September 2000, including net sales of $22.9
million. See Note 4 to Consolidated Financial Statements.
The pro forma operating data is intended to give you a better picture of
what our business would have looked like if the following transactions had each
occurred on January 1, 2000:
- the issuance of the notes;
- the repayment of our $31.9 million bank term loan; and
- the sale of certain assets of the security products business of LL
Building Products Inc.
The pro forma financial information does not project the financial position or
the results of operations for any future period or represent what the financial
position or results of operations would have been if the transactions described
above had been completed at the date indicated.
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1999 2000
-------- -------- --------
(MILLIONS)
OPERATING DATA:
Net sales.......................................... $1,088.0 $1,140.0 $1,207.8
Operating income(1)................................ 47.5 83.1 63.9
Interest expense................................... 50.0 48.3 53.5
Income (loss) before income taxes and extraordinary
losses.......................................... 13.5 40.2 (17.2)
Income (loss) before extraordinary losses.......... 8.4 25.3 (10.8)
Net income (loss).................................. (9.8) 24.0 (11.2)
DECEMBER 31, 2000
-----------------
(MILLIONS)
BALANCE SHEET DATA:(2)
Cash and cash equivalents................................. $ 82.7
Total working capital..................................... 129.9
Total assets.............................................. 771.2
Long-term debt less current maturities.................... 674.7
Total stockholders' deficit............................... (77.9)
8
12
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1999 2000
------- ------- -------
(MILLIONS, EXCEPT RATIO DATA)
OTHER DATA:
Depreciation........................................... $ 28.9 $ 33.0 $ 36.4
Goodwill amortization.................................. 2.1 2.0 2.0
Capital expenditures and acquisitions.................. 134.5 45.8 61.5
Cash flow from:
Operating activities................................ 56.9 82.5 41.1
Investing activities................................ (30.6) 2.3 29.2
Financing activities................................ (14.2) (53.9) (43.4)
EBITDA(3).............................................. 94.7 124.2 75.5
Ratio of earnings to fixed charges(4).................. 1.2x 1.7x 0.7x
Ratio of EBITDA to interest expense(3)................. 1.9x 2.6x 1.4x
YEAR ENDED
DECEMBER 31, 2000
(UNAUDITED)
--------------------
(MILLIONS, EXCEPT
RATIO DATA)
PRO FORMA OPERATING DATA:(5)
Adjusted EBITDA(6)........................................ $ 58.0
Interest expense.......................................... 54.1
Loss before extraordinary losses.......................... (11.2)
Ratio of earnings to fixed charges(4)..................... 0.7x
Ratio of Adjusted EBITDA to interest expense(6)........... 1.1x
- ---------------
(1) Operating income for the years ended December 31, 1998, 1999 and 2000
includes $27.6, $2.7 and $15.0 million, respectively, of one-time charges
and a gain on sale of assets of $17.5 million in 2000. See Notes 4 and 5 to
Consolidated Financial Statements.
(2) See "Capitalization" and Note 11 to Consolidated Financial Statements.
(3) EBITDA is calculated as income before income taxes and extraordinary items,
increased by interest expense, depreciation, goodwill and other
amortization. As an indicator of our operating performance, EBITDA should
not be considered as an alternative to net income or any other measure of
performance under generally accepted accounting principles.
(4) For purposes of these computations, earnings consist of income before income
taxes plus fixed charges and extraordinary items. Fixed charges consist of
interest on indebtedness, including amortization of debt issuance costs,
plus that portion of lease rental expense representative of interest,
estimated to be one-third of lease rental expense.
(5) The net effect of the pro forma adjustments was to increase our pro forma
loss before income taxes and extraordinary losses by $0.7 million for the
year 2000. As a result, our pro forma income tax benefit increased by $0.2
million for the year 2000 based on an effective marginal income tax rate of
37%.
(6) The Adjusted EBITDA data are being presented because this information
relates to debt covenants under the indentures governing our Senior Notes.
You should refer to these indentures for further information. Excluded from
the Adjusted EBITDA calculation is $0.3 million in extraordinary losses, net
of related income tax benefits, related to the repayment of our $31.9
million bank term loan.
9
13
The details of the calculations of Adjusted EBITDA are set forth below:
PRO FORMA
YEAR ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, 2000
2000 (UNAUDITED)
------------ ------------
(THOUSANDS)
Income (loss) before income taxes and extraordinary
losses*.......................................... $(17,186) $(17,841)
Add:
Interest expense................................. 53,468 54,123
Goodwill and other amortization.................. 2,866 2,866
Depreciation..................................... 36,350 36,350
Gain on sale of assets........................... -- (17,505)
-------- --------
Adjusted EBITDA.................................... $ 75,498 $ 57,993
======== ========
- ---------------
* The adjustments to reconcile historical and pro forma income before income
taxes and extraordinary losses reflect the adjustments to interest expense to
reflect the issuance of the notes, the repayment of our $31.9 million term
loan and the gain on sale of certain assets of the security products business
of LL Building Products Inc. as if each of those transactions had occurred
January 1, 2000. These adjustments are as follows:
YEAR ENDED
DECEMBER 31,
2000
(UNAUDITED)
------------
(THOUSANDS)
Historical income (loss) before income taxes and
extraordinary losses...................................... $(17,186)
Pro Forma adjustments:
Interest expense on the notes............................. (4,113)
Reduction of interest expense recorded on the notes....... 2,167
Reduction of interest expense for $31.9 million bank term
loan................................................... 1,291
--------
Pro Forma loss before income taxes and extraordinary
losses.................................................... $(17,841)
========
10
14
RISK FACTORS
An investment in the notes is subject to a number of risks. You should
carefully consider the following factors, as well as the more detailed
descriptions elsewhere in this prospectus before making an investment in the
notes.
RISKS RELATED TO OUR COMPANY
WE ARE SUBSTANTIALLY LEVERAGED WHICH COULD AFFECT OUR ABILITY TO FULFILL OUR
OBLIGATIONS UNDER THE NOTES.
Our substantial outstanding debt has important consequences to you,
including the risk that we may not generate sufficient cash flow from operations
to pay principal and interest on our indebtedness, including the notes, or to
invest in our businesses. While we believe, based upon our historical and
anticipated performance, that we will be able to satisfy our obligations,
including those under the notes, from our cash flow from operations and
refinancings, we cannot assure you of this ability. While we can raise cash to
satisfy our obligations through potential sales of assets or equity, our ability
to raise funds by selling either assets or equity depends on our results of
operations, market conditions, restrictions contained in the New Credit
Agreement, the Existing Credit Agreement and the indentures governing our Senior
Notes and other factors. If we are unable to refinance indebtedness or raise
funds through sales of assets or equity or otherwise, we may be unable to pay
principal of and interest on the notes.
At December 31, 2000, we had total outstanding consolidated long-term debt
of $680.6 million and a stockholders' deficit of $77.9 million. Our interest
expense for the year ended December 31, 2000 was $53.5 million. Subject to
covenants contained in the New Credit Agreement, the Existing Credit Agreement
and the indentures governing our Senior Notes, we may incur additional
indebtedness, including additional secured debt. Any additional indebtedness we
may incur may rank equally or junior to the notes and will not by its terms rank
senior to the notes, except for the obligations under the New Credit Agreement,
the Existing Credit Agreement and the Other Indebtedness.
YOU MAY NOT RECEIVE PAYMENT IN FULL BY FORECLOSING ON THE COLLATERAL IN THE
EVENT OF A DEFAULT ON THE NOTES.
Our obligations under our Senior Notes are secured by a second-priority
lien on the Collateral. The Collateral, however, is subject to a first-priority
lien in favor of the lenders under the New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness. This ranking means that, if the
first-priority lien holders were to sell or foreclose on the Collateral if an
event of default occurs under those agreements, you would only be entitled to
receive proceeds from the liquidation or sale of the Collateral in excess of the
amounts owed by us to the first-priority lien holders. In addition, we may
determine to refinance the New Credit Agreement, the Existing Credit Agreement
and the Other Indebtedness with an unsecured credit facility, in which event,
subject to certain limited exceptions, the Collateral would be released.
Our obligations to the first-priority lien holders are significant. As of
December 31, 2000, the notes were subordinated to approximately $119.3 million
of obligations under the New Credit Agreement, the Existing Credit Agreement and
the Other Indebtedness to the extent of the Collateral securing those
obligations. There may not be sufficient proceeds from the Collateral available
for payment in full to you once our obligations to our first-priority lien
holders are discharged in full in which case you would be a general unsecured
creditor. Moreover, as long as the New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness are outstanding, the trustee under the
indentures governing our Senior Notes will not have the authority to cause the
collateral agent under the collateral agent agreement to foreclose on the
Collateral.
OUR PARENT CORPORATIONS ARE DEPENDENT UPON OUR CASH FLOWS TO MEET THEIR CASH
REQUIREMENTS AND COULD CAUSE US TO MAKE DISTRIBUTIONS TO THEM WHICH WOULD REDUCE
CASH FLOWS AVAILABLE TO US.
Our parent corporations are essentially holding companies without
independent businesses or operations and, as such, are presently dependent upon
the earnings and cash flows of their subsidiaries,
11
15
principally BMCA, in order to meet their cash requirements. If our parent
corporations are unable to meet their cash requirements, they might take various
actions that could reduce our cash flows. This reduction could adversely affect
our ability to pay principal and interest on the notes. G-I Holdings Inc. and
BMCA Holdings Corporation, our parent corporations, are principally dependent
upon the cash flow of our company in order to satisfy their obligations and pay
their operating expenses, including tax liabilities. In order to satisfy those
obligations or pay those expenses, those corporations might take various
actions, including:
- causing us to make distributions to our stockholders by means of
dividends or otherwise;
- causing us to make loans to them; or
- causing BMCA Holdings Corporation to sell our common stock.
The only significant asset of our parent corporations is the stock of our
company. Creditors of our parent corporations could seek to cause those
corporations to sell our common stock or take similar action in order to satisfy
liabilities owed to them that could cause a change of control. See the risk
factor below regarding risks related to a change of control of BMCA. G-I
Holdings has advised us that it expects to obtain funds to meet its cash
requirements from, among other things, loans principally from us and from
payments from us pursuant to a tax sharing agreement we entered into with it.
OUR CONTROLLING STOCKHOLDER HAS THE ABILITY TO ELECT OUR ENTIRE BOARD OF
DIRECTORS AND CAN CONTROL THE OUTCOME OF ANY MATTER SUBMITTED TO OUR
STOCKHOLDERS.
We are an indirect subsidiary of G-I Holdings which is approximately 99%
beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) by Samuel J. Heyman. Accordingly, Mr. Heyman has the ability to elect
our entire Board of Directors and to determine the outcome of any other matter
submitted to our stockholders for approval, including, subject to the terms of
the indentures relating to the Senior Notes, mergers, consolidations and the
sale of all, or substantially all, of our assets. See "Security Ownership of
Certain Beneficial Owners and Management."
OUR PARENT CORPORATIONS ARE DEPENDENT UPON OUR CASH FLOWS TO SATISFY THEIR
OBLIGATIONS. IF G-I HOLDINGS IS UNSUCCESSFUL IN CHALLENGING ITS TAX DEFICIENCY
NOTICE, IT COULD CAUSE US TO MAKE DISTRIBUTIONS WHICH WOULD REDUCE OUR CASH
FLOW.
On September 15, 1997, G-I Holdings received a tax deficiency notice for
the 1990 fiscal year relating to Rhone-Poulenc Surfactants and Specialties,
L.P., a partnership in which G-I Holdings held an interest. This notice could
result in G-I Holdings incurring liabilities significantly in excess of the
deferred tax liability recorded in 1990 in connection with this matter. G-I
Holdings has advised us that it believes it will prevail in the surfactants
partnership matter, although we cannot assure you of this result. See
"Business -- Tax Claim Against G-I Holdings," "Certain Relationships -- Tax
Sharing Agreement" and Note 7 to Consolidated Financial Statements. If G-I
Holdings is unsuccessful in challenging its tax deficiency notice and is unable
to satisfy its tax obligations, it might take various actions that could reduce
our cash flows as described above in the risk factor regarding our parent
corporations' dependence on our cash flows. This reduction could adversely
affect our ability to pay principal and interest on the notes.
As a member of the consolidated group for federal income tax purposes that
has included G-I Holdings, we are severally liable for some federal income tax
liabilities of the G-I Holdings consolidated tax group. We are indemnified under
certain circumstances for those tax liabilities, principally by G-I Holdings. In
light of G-I Holdings' recent bankruptcy filing, we cannot assure you that G-I
Holdings will have sufficient assets to satisfy its indemnification obligation
to us. See "Summary -- Recent Developments," the risk factors below regarding
risks related to G-I Holdings' bankruptcy and Notes to Consolidated Financial
Statements.
12
16
RISKS RELATED TO G-I HOLDINGS' BANKRUPTCY
IF G-I HOLDINGS IS FORCED TO SELL ITS INDIRECT HOLDINGS OF BMCA'S COMMON STOCK
AND A CHANGE OF CONTROL OCCURS, WE MAY BE UNABLE TO REPURCHASE YOUR NOTES. THIS
FAILURE WOULD CONSTITUTE AN EVENT OF DEFAULT UNDER THE INDENTURE RELATING TO THE
NOTES AND OUR OTHER DEBT INSTRUMENTS.
In January 2001, G-I Holdings filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos Claims. This
proceeding is in a preliminary stage. Those persons with claims against G-I
Holdings, which principally consist of persons with asbestos-related claims,
might seek to satisfy their claims by asking the bankruptcy court to require the
sale of G-I Holdings' assets, including G-I Holdings' indirect holdings of
BMCA's common stock. If a change of control, as defined in the indenture
relating to the notes, occurs, we cannot assure you that we will have available,
or be able to obtain, sufficient funds, or will be permitted by our debt
instruments, to repurchase your notes. The indenture relating to the notes
provides that if a change of control occurs, you will have the right to require
us to repurchase your notes at 101% of their principal amount, plus any accrued
and unpaid interest to the repurchase date. The Existing Credit Agreement and
the New Credit Agreement prohibit us from repurchasing any Senior Notes. Our
failure to repurchase your notes would constitute an event of default under the
indenture, which would in turn constitute a default under the Existing Credit
Agreement, the New Credit Agreement and the indentures governing our Other
Senior Notes. See "Description of the Notes -- Repurchase at Your Option." In
addition, if a change of control as defined in the Existing Credit Agreement and
the New Credit Agreement occurs, those facilities could be terminated and the
outstanding loans accelerated. This event could cause our outstanding Senior
Notes, including the notes, to be accelerated. If any of these events of default
were to occur, we may be unable to pay the accelerated principal amount of and
interest on the notes.
WE MAY EXPERIENCE AN INCREASE IN ASBESTOS CLAIMS FILED AGAINST OUR COMPANY.
Claimants in the G-I Holdings bankruptcy may seek to file Asbestos Claims
against our company (with 2,147 Asbestos Claims having been filed against us as
of December 31, 2000). We believe that we will not sustain any liability in
connection with these or any other asbestos-related claims. On February 2, 2001,
the United States Bankruptcy Court for the District of New Jersey issued a
temporary restraining order enjoining any existing or future claimant from
bringing Asbestos Claims against BMCA. The temporary restraining order expires
on April 23, 2001. In addition, 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. If we are unsuccessful in obtaining the declaratory judgment and the
temporary restraining order is not renewed, we could experience an increase in
Asbestos Claims asserted against us. 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. There can be no
assurance, however, that we will be successful in those defenses. See
"Business -- Legal Proceedings." In addition, G-I Holdings has indemnified us
with respect to Asbestos Claims. See "-- G-I Holdings may be unable to satisfy
its indemnification obligations owed to us," below.
G-I HOLDINGS MAY BE UNABLE TO SATISFY ITS INDEMNIFICATION OBLIGATIONS OWED TO
US.
G-I Holdings has indemnified us with respect to Asbestos Claims,
environmental claims and certain tax liabilities. See "Legal Proceedings." In
light of G-I Holdings' recent bankruptcy filing, G-I Holdings may not have
sufficient assets to satisfy these indemnification obligations to us. G-I
Holdings' inability to satisfy these indemnification obligations could have a
material adverse effect on our financial position and results of operations.
13
17
THE BANKRUPTCY COURT MAY CONSOLIDATE G-I HOLDINGS AND BMCA.
On February 8, 2001, the creditors committee formed in connection with G-I
Holdings' bankruptcy case filed a motion requesting substantive consolidation of
the assets and liabilities of BMCA with the assets and liabilities of G-I
Holdings or, alternatively, an order directing G-I Holdings to cause us to file
for bankruptcy protection. The committee asked the bankruptcy court to grant
them relief on an interim basis pending a final determination. On March 21,
2001, the court refused to grant the requested interim relief. Under applicable
bankruptcy law, a bankruptcy court could order substantive consolidation of the
assets and liabilities of other entities with G-I Holdings if the court
concludes that the requirements under the bankruptcy code have been satisfied.
We believe we have meritorious defenses to the motion for substantive
consolidation or alternate relief, and we intend to vigorously contest this
motion. We cannot assure you, however, that substantive consolidation will not
occur or that we will not be ordered to file for bankruptcy protection. If the
bankruptcy court concludes that our assets should be consolidated with those of
G-I Holdings, however, payments on indebtedness, including the notes, could be
delayed and reduced. See "Business -- Legal Proceedings."
RISKS RELATED TO THE NOTES
YOU MAY NOT BE ABLE TO SELL YOUR NOTES EASILY.
There is no established trading market for the notes and we cannot assure
you that an active or liquid trading market will develop for the notes or if one
develops, whether it will continue. BNY Capital Markets, Inc. has advised us
that it intends to make a market in the notes. However, BNY Capital Markets,
Inc. is not obligated to do so and may discontinue its market-making activities
at any time without notice. We do not intend to apply for listing of the notes
on any securities exchange or automated dealer quotation system. The liquidity
of any market for the notes will depend on the number of holders of the notes,
our own financial performance, the market for similar securities, the interests
of securities dealers in making a market in the notes and other factors.
14
18
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and, accordingly, file annual, quarterly and other information with
the Securities and Exchange Commission. You may read and copy the reports and
other information that we file with the Commission at the Commission's public
reference facilities at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the public reference
facilities by calling the Commission at 1-800-SEC-0330. You may also obtain
information about us from the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601-2511.
Copies of these materials also can be obtained from the Public Reference Section
of the Commission at prescribed rates. Our filings with the Commission are also
available to the public on the Commission's home page on the Internet at
http://www.sec.gov.
We have filed with the Commission a registration statement on Form S-1 with
respect to the notes to be resold by the selling noteholder in the offering.
This prospectus, which is a part of the registration statement, omits certain
information included in the registration statement. Statements made in this
prospectus as to the contents of any contract, agreement or other document are
not necessarily complete. With respect to each contract, agreement or other
document filed as an exhibit to the registration statement, we refer you to that
exhibit for a more complete description of the matter involved, and each of
those statements is deemed qualified in its entirety to that reference.
FORWARD-LOOKING STATEMENTS
This prospectus 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. You are urged to
consider these factors carefully in evaluating the forward-looking statements,
including the factors described under "Risk Factors." The forward-looking
statements included in this prospectus are made only as of the date of this
prospectus 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.
15
19
CAPITALIZATION
The following table presents our short-term debt and current maturities of
long-term debt and consolidated capitalization as of December 31, 2000. This
table should be read in conjunction with our Consolidated Financial Statements
and related notes included elsewhere in this prospectus.
AS OF
DECEMBER 31,
2000
------------
(THOUSANDS)
Short-term Debt and current maturities of Long-term Debt:
Short-term debt........................................... $ --
Current maturities of long-term debt...................... 5,908
--------
Total............................................. $ 5,908
========
Long-term Debt (excluding current maturities):(1)
10 1/2% Senior Notes due 2003............................. $ 34,235
7 3/4% Senior Notes due 2005.............................. 149,584
8 5/8% Senior Notes due 2006.............................. 99,704
8% Senior Notes due 2007.................................. 99,492
8% Senior Notes due 2008.................................. 154,334
Borrowings under the Existing Credit Agreement............ 70,000
Industrial revenue bonds.................................. 23,060
Precious Metal Note due 2003.............................. 7,002
Obligations under capital leases.......................... 35,140
Other notes payable....................................... 2,147
--------
Total Long-term Debt (excluding current
maturities)....................................... $674,698
========
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 shares issued and
outstanding............................................ 1
Class B Common Stock, $.001 par value per share; 100,000
shares authorized; 15,000 shares issued and
outstanding............................................
Additional paid-in capital.................................. --
Accumulated deficit......................................... (77,866)
--------
Total Stockholders' Equity (Deficit).............. (77,865)
========
Total Capitalization.............................. $596,833
========
- ---------------
(1) For a description of long-term debt, see Note 11 to Consolidated Financial
Statements.
16
20
SELECTED FINANCIAL DATA
We derived the selected consolidated operating data for the years ended
December 31, 1998, 1999 and 2000 and the consolidated balance sheet data as of
December 31, 1999 and 2000 from the Consolidated Financial Statements beginning
on page F-1. We derived the selected consolidated operating data for the years
ended December 31, 1996 and 1997 and the consolidated balance sheet data as of
December 31, 1996, 1997 and 1998 from audited financial statements not included
in this prospectus. As of January 1, 1997, G-I Holdings contributed all of the
capital stock of U.S. Intec, Inc. to BMCA. Accordingly, our historical
consolidated financial statements include U.S. Intec's results of operations
from the date of its acquisition by G-I Holdings (October 20, 1995), including
net sales of $99.0 million and net income of $1.3 million, for the year ended
December 31, 1996. 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. See the summary financial data on page 8 for the details of the
assumptions used in preparing the pro forma data below.
The pro forma financial information does not project the financial position
or the results of operations for any future period or represent what the
financial position or results of operations would have been if the transactions
described on page 8 giving effect to the pro forma financial data had been
completed at the dates indicated.
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999 2000
------ ------ -------- -------- --------
(MILLIONS)
OPERATING DATA:
Net sales................................... $852.0 $944.6 $1,088.0 $1,140.0 $1,207.8
Operating income(1)......................... 61.4 73.2 47.5 83.1 63.9
Interest expense............................ 32.0 43.0 50.0 48.3 53.5
Income (loss) before income taxes and
extraordinary losses..................... 27.9 45.7 13.5 40.2 (17.2)
Income (loss) before extraordinary losses... 17.1 27.8 8.4 25.3 (10.8)
Net income (loss)........................... 17.1 27.8 (9.8) 24.0 (11.2)
DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999 2000
------ ------ -------- -------- --------
(MILLIONS)
BALANCE SHEET DATA(2):
Total working capital....................... $247.3 $283.1 $ 220.1 $ 109.9 $ 129.9
Total assets................................ 702.0 829.7 867.0 895.1 771.2
Long-term debt less current maturities...... 405.7 563.9 596.9 600.7 674.7
Total stockholders' equity (deficit)........ 143.2 89.5 52.2 21.7 (77.9)
17
21
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998 1999 2000
------ ------- ------ ------ ------
(MILLIONS, EXCEPT RATIO DATA)
OTHER DATA:
Depreciation................................... $ 23.9 $ 25.0 $ 28.9 $ 33.0 $ 36.4
Goodwill amortization.......................... 1.7 1.9 2.1 2.0 2.0
Capital expenditures and acquisitions.......... 25.6 82.2 134.5 45.8 61.5
Cash flows from:
Operating activities........................ 53.1 (5.9) 56.9 82.5 41.1
Investing activities........................ (64.5) (125.6) (30.6) 2.3 29.2
Financing activities........................ 90.0 19.9 (14.2) (53.9) (43.4)
EBITDA(3)................................... 85.4 115.6 94.7 124.2 75.5
Ratio of earnings to fixed charges(4).......... 1.8x 2.0x 1.2x 1.7x 0.7x
Ratio of EBITDA to interest expense(3)......... 2.7x 2.7x 1.9x 2.6x 1.4x
YEAR ENDED
DECEMBER 31, 2000
(UNAUDITED)
------------------
(MILLIONS,
EXCEPT RATIO DATA)
PRO FORMA OPERATING DATA(5):
Adjusted EBITDA(6)........................................ $ 58.0
Interest expense.......................................... 54.1
Loss before extraordinary losses.......................... (11.2)
Ratio of earnings to fixed charges(4)..................... 0.7x
Ratio of Adjusted EBITDA to interest expense(6)........... 1.1x
- ---------------
(1) Operating income for the years ended December 31, 1998, 1999 and 2000
includes $27.6, $2.7 and $15.0 million, respectively, of one-time charges
and a gain on sale of assets of $17.5 million in 2000. See Notes 4 and 5 to
Consolidated Financial Statements.
(2) See "Capitalization" and Note 11 to Consolidated Financial Statements.
(3) EBITDA is calculated as income before income taxes and extraordinary items,
increased by interest expense, depreciation, goodwill and other
amortization. As an indicator of our operating performance, EBITDA should
not be considered as an alternative to net income or any other measure of
performance under generally accepted accounting principles.
(4) For purposes of these computations, earnings consist of income before income
taxes plus fixed charges and extraordinary items. Fixed charges consist of
interest on indebtedness, including amortization of debt issuance costs,
plus that portion of lease rental expense representative of interest,
estimated to be one-third of lease rental expense.
(5) The net effect of the pro forma adjustments was to increase our pro forma
loss before income taxes and extraordinary losses by $0.7 million for the
year 2000. As a result, our pro forma income tax benefit increased by $0.2
million for the year 2000 based on an effective marginal income tax rate of
37%.
(6) The Adjusted EBITDA data are being presented because this information
relates to debt covenants under the indentures governing our Senior Notes.
You should refer to these indentures for further information. Excluded from
the Adjusted EBITDA calculation is $0.3 million in extraordinary losses, net
of related income tax benefits, related to the repayment of our $31.9
million term loan. See "Summary Financial Data" for the details of the
calculations of Adjusted EBITDA.
18
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BMCA was formed in January 1994 to acquire the operating assets and certain
liabilities of G-I Holdings. See Note 1 to Consolidated Financial Statements.
RESULTS OF OPERATIONS
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 one-time 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 resulted from higher average selling prices and unit
volumes, while the decrease in net sales of low slope roofing products 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 one-time items in both years. Lower operating
results 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 steep slope and low slope roofing products, higher
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 million in
2000, primarily due to higher average borrowings and a higher average interest
rate. Other expense, net was $27.6 million 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.
1999 Compared with 1998
We recorded net income in 1999 of $24.0 million compared with a net loss of
$9.8 million in 1998. The net income in 1999 and the net loss in 1998 included
pre-tax nonrecurring charges of $2.7 million ($1.7 million after-tax) and $27.6
million ($17.1 million after-tax), respectively, and after-tax extraordinary
losses of $1.3 million and $18.1 million, respectively. Excluding the
extraordinary losses and nonrecurring charges in both years, net income would
have been $27.0 million in 1999 compared with
19
23
$25.4 million in 1998, an increase of 6.3%, with the increase primarily
attributable to higher operating income and lower interest expense, partially
offset by lower investment income.
Net sales for 1999 were $1,140.0 million, a 4.8% increase over net sales
for 1998 of $1,088.0 million. The sales growth was primarily due to the
inclusion of the LL Building Products Inc. business, acquired in June 1998, for
the full year (see Note 4 to Consolidated Financial Statements), together with
net sales gains in premium steep slope roofing products, partially offset by
lower net sales in low slope roofing products. The increase in net sales of
premium steep slope roofing products resulted from higher sales volumes and
average selling prices, while the decline in net sales of low slope roofing
products resulted from lower average selling prices.
Operating income, before the impact of nonrecurring charges, for 1999 was
$85.7 million, a 14.2% increase over the $75.1 million for 1998 and, as a
percentage of sales, improved to 7.5% in 1999 from 6.9% in 1998. The increase in
operating income in 1999 was primarily attributable to higher net sales for our
premium steep slope roofing products, the inclusion of the LL Building Products
Inc. business, acquired in June 1998, for the full year, and a modest
improvement in low slope roofing products, primarily the result of lower
selling, general and administrative expenses and manufacturing costs.
We recorded a pre-tax nonrecurring charge in 1999 of $2.7 million related
to the settlement of a legal matter and, in 1998, a $27.6 million pre-tax charge
of which $20.0 million related to the settlement of a national class action
lawsuit involving asphalt shingles, and $7.6 million related to a grant to our
former President and Chief Executive Officer of our restricted common stock and
certain cash payments to be made over a specified 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 this officer (see
Note 5 to Consolidated Financial Statements).
Interest expense declined to $48.3 million for 1999 from $50.0 million in
1998, due primarily to a lower average interest rate, partially offset by higher
average borrowings. The lower average interest rate resulted primarily from the
refinancing of $310 million in aggregate principal amount at maturity of our
11 3/4% Senior Deferred Coupon Notes due 2004 with substantially all of the net
proceeds from the issuances of $150 million in aggregate principal amount of our
7 3/4% Senior Notes due 2005, $155 million in aggregate principal amount of our
8% Senior Notes due 2008 and the $31.9 million bank term loan in July 1998,
December 1998 and August 1999, respectively. In connection with the above
refinancing, we recorded after-tax extraordinary losses of $1.3 million in 1999
and $18.1 million in 1998 related to premiums paid to repurchase the Deferred
Coupon Notes.
Other income, net, was $5.4 million in 1999 compared with $15.9 million in
1998. The decline was principally due to $10.3 million lower investment income.
LIQUIDITY AND FINANCIAL CONDITION
Net cash inflow during 2000 was $70.2 million before financing activities,
and included $41.1 million of cash generated from operations, the reinvestment
of $61.5 million for capital programs, the generation of $59.0 million from net
sales of available-for-sale securities and other short-term investments and
$31.7 million from the sale of assets.
Cash invested in additional working capital (excluding the non-cash leasing
transactions described below) totaled $19.8 million during 2000, primarily
reflecting increases in other current assets and decreases in accounts payable
and accrued liabilities (after non-cash transactions) of $0.7, $26.8 and $8.8
million, respectively, partially offset by decreases in accounts receivable and
inventories of $13.1 and $3.3 million, respectively. Cash from operating
activities also reflected a $45.2 million increase from related party/parent
corporation transactions (primarily due to the distribution to our parent
corporations, representing the write-off of $106.2 million of outstanding
advances to our parent corporations that we determined were uncollectible, $59.1
million of which was outstanding at December 31, 1999 and $47.1 million of which
was advanced in 2000) and a $9.3 million increase in the reserve for product
warranty
20
24
claims (primarily resulting from a $15.0 million product warranty reserve
adjustment, partially offset by claim payments).
In connection with the construction of two new manufacturing facilities, in
1999 we entered into two leases for certain machinery and equipment to be
utilized at our plants in Michigan City, Indiana and Shafter, California, which
leases meet the criteria of operating leases under Statement of Financial
Accounting Standards ("SFAS") No. 13 "Accounting for Leases." In connection with
these leases, at December 31, 1999, property, plant and equipment, net and
accrued liabilities included $65.6 million of assets under these leases. These
amounts were reversed during 2000 when the manufacturing facilities became fully
operational. This $65.6 million decrease in accrued liabilities was in addition
to other reductions aggregating $8.8 million.
In connection with the construction of our new manufacturing facility in
Mount Vernon, Indiana, in December 2000 we entered into an operating lease for
certain machinery and equipment to be utilized at this plant, at a total cost of
approximately $15.5 million.
Net cash used in financing activities totaled $43.4 million in 2000. We
generated $41.0 million of proceeds from the issuance of long-term debt,
including net proceeds of $34.0 million from our 10 1/2% Senior Notes due 2003
which were used to repay our $31.9 million bank term loan and for general
corporate purposes, and the $7.0 million precious metal note due 2003, which we
refer to as the Precious Metal Note. In addition, we borrowed an additional $70
million under the Existing Credit Agreement. Offsetting these cash inflows was
$38.1 million of repayments of long-term debt, principally the repayment of our
$31.9 million bank term loan, a $106.2 million distribution to our parent
corporations, representing the write-off of outstanding advances to our parent
corporations which we determined were uncollectible, and $10.0 million in
financing fees and expenses. See Note 15 to Consolidated Financial Statements.
As a result of the foregoing factors, cash and cash equivalents (excluding
securities at December 31, 1999) increased by $26.8 million during 2000 to $82.7
million.
In December 2000, we entered into the New Credit Agreement, which is to be
used for working capital purposes subject to certain restrictions. The New
Credit Agreement matures in August 2003. As of December 31, 2000, there were no
outstanding borrowings or letters of credit under the New Credit Agreement. In
connection with entering into the New Credit Agreement, the maturity date of our
Existing Credit Agreement was extended for an additional year to August 2003.
Our obligations under the Existing Credit Agreement and the New Credit
Agreement, as well as our obligations under the Other Indebtedness, including
the Precious Metal Note, aggregated $77.0 million of borrowings and $42.3
million of letters of credit outstanding at December 31, 2000. All of those
obligations are secured by a first-priority lien on the Collateral on a pro rata
basis. The Senior Notes are secured by a second-priority lien on the Collateral
for so long as the first-priority lien remains in effect, subject to certain
limited exceptions.
Under the terms of the New Credit Agreement, the Existing Credit Agreement
and the Senior Notes, we are subject to certain financial covenants, including,
among others, interest coverage, minimum consolidated 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
our parent corporations and on incurring liens, restrictions on investments and
other payments. Dividends and other restricted payments, except for demand loans
of specified amounts, made to any parent corporation are prohibited in 2001 and
are subject to limitations, as described in those agreements, in future periods.
As of December 31, 2000, 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 of $2 million. In addition, if a
change of control as defined in the New Credit Agreement and the Existing 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, 2000, we were in compliance with all covenants under the New Credit
Agreement, the Existing Credit Agreement and the Senior Notes.
21
25
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
certain of 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 consolidate in
full the indebtedness under the New Credit Agreement, the Existing 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 New Credit Agreement, the Existing 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.
On July 5, 2000, we issued $35 million in aggregate principal amount at
maturity of these notes at 97.161% of the principal amount. We used the net
proceeds from this issuance to repay our $31.9 million bank term loan and for
general corporate purposes. In connection with entering into the New Credit
Agreement, the maturity date of these notes was extended to September 2003.
See Note 11 to Consolidated Financial Statements for further information
regarding our debt instruments.
At December 31, 2000, we had total outstanding consolidated indebtedness of
$680.6 million, of which $5.9 million matures prior to December 31, 2001, and a
stockholders' deficit of $77.9 million. We anticipate funding these obligations
principally from our cash, operations and/or borrowings, which may include
borrowings from affiliates.
In March 1993, we sold our trade accounts receivable to a trust, without
recourse, pursuant to an agreement which provided for a maximum of $75 million
in cash to be made available to us based on eligible receivables outstanding
from time to time. In November 1996, we repurchased the receivables sold
pursuant to the 1993 agreement and sold them to a special purpose subsidiary of
ours, BMCA Receivables Corporation, without recourse, which in turn sold them to
a new trust, without recourse, pursuant to new agreements. The new agreements
provide for a maximum of $115 million in cash to be made available to us based
on eligible receivables outstanding from time to time. This facility expires in
December 2001.
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, 2000, no loans were
owed to us by G-I Holdings and no loans were owed by us to affiliates. In
addition, we make non-interest bearing advances to affiliates, of which no
amounts were outstanding at December 31, 2000. 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 "Business -- Legal Proceedings" for further information regarding
asbestos-related matters. See Note 3 to 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 2000, we completed construction of a new
fiberglass roofing mat manufacturing facility in Shafter, California and a new
steep slope roofing shingle manufacturing facility in Michigan City, Indiana. We
also have completed construction of a new manufacturing facility in Mount
Vernon, Indiana for a single-ply
22
26
low slope membrane roofing system. We commenced production at that facility in
the first quarter of 2001. 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 during 2000 four manufacturing
facilities located in Monroe, Georgia; Port Arthur, Texas; Corvallis, Oregon;
and Albuquerque, New Mexico. As market growth and customer demand improves, we
may reinstate production at one or more of these manufacturing facilities in the
future. The effect of closing these facilities was not material to our results
of operations.
We utilize interest rate swap agreements to lower funding costs, diversify
sources of funding and manage interest rate exposure. In June 1998, we
terminated our outstanding swaps related to a series of notes no longer
outstanding with an aggregate ending notional principal amount of $60.0 million,
resulting in gains of $0.7 million. The gains were deferred and amortized as a
reduction of interest expense over the remaining original life of the swaps. By
utilizing swaps, we reduced our interest expense by $1.9, $0.2 and $0 million in
1998, 1999 and 2000, respectively. See Note 11 to Consolidated Financial
Statements.
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 the increase in
cost of energy and asphalt purchases used in our manufacturing process
principally due to rising oil prices and increased demand for asphalt by the
paving industry. While 2000 net sales exceeded those of 1999, energy and asphalt
cost increases, partially offset by price increases, had a negative impact on
2000 operating income. We expect that these energy and asphalt costs will
continue to have an adverse impact on 2001 operating income as compared with the
impact of these costs on operating income on a historical basis.
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.
We also entered into financial instruments in the ordinary course of
business in order to manage our exposure to market fluctuations on our
short-term investments. The financial instruments we employed to reduce market
risk included hedging instruments. The counterparties to these financial
instruments were major financial institutions with high credit standings. The
amounts subject to credit risk were generally limited to the amounts, if any, by
which the counterparties' obligations exceeded our obligations. We controlled
credit risk through credit approvals, limits and monitoring procedures.
DECEMBER 31, 1999 DECEMBER 31, 2000
----------------- -----------------
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(IN MILLIONS)
Equity-related financial instruments...................... $0.9 $0.0 $0.0 $0.0
All of the financial instruments in the above table had a maturity of less
than one year. 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.
23
27
THE TRANSACTIONS
On December 22, 2000, we completed a series of transactions designed to
increase our liquidity to enable us to have greater financial flexibility in the
future. We refer to these transactions in this prospectus as the "Transactions."
We entered into the New Credit Agreement with the lenders that are also party to
our Existing Credit Agreement. We also amended and restated our Existing Credit
Agreement. In addition, the lenders under the Existing Credit Agreement agreed
to extend its maturity until August 18, 2003. Our obligations under the New
Credit Agreement (including the subsidiary guarantees thereunder), the Existing
Credit Agreement (including the subsidiary guarantees thereunder) and the Other
Indebtedness are secured by a first-priority lien in favor of The Bank of New
York, as collateral agent, on the Collateral. The New Credit Agreement and the
Existing Credit Agreement are guaranteed by all of the Guarantors. The
Guarantors also guarantee our obligations under the Senior Notes and Building
Materials Manufacturing Corporation's obligations under the 8% Notes due 2007.
BMCA's obligations under the Senior Notes and Building Materials Manufacturing
Corporation's obligations under the 2007 Notes (including the subsidiary
guarantees thereunder) are secured by a second-priority lien on the Collateral.
The descriptions of the Existing Credit Agreement, the New Credit Agreement, the
Other Indebtedness, the security agreement and the collateral agent agreement,
which we refer to collectively in this prospectus as the "Credit Documents," set
forth below are only summaries and are qualified in their entirety by reference
to the relevant terms of the documents which we have filed as exhibits to the
registration statement of which this prospectus is a part.
THE NEW CREDIT AGREEMENT
The New Credit Agreement is a $100 million secured revolving credit
facility due August 18, 2003. The facility is secured by a first-priority lien
on the Collateral. The Collateral is pledged in favor of The Bank of New York,
as collateral agent, on a pro rata basis with the obligations under the Existing
Credit Agreement and the Other Indebtedness. Our obligations under the New
Credit Agreement are guaranteed by the Guarantors.
Borrowings under the New Credit Agreement may only be advanced when cash,
cash equivalents and marketable securities of our company and its subsidiaries
other than BMCA Receivables Corporation on a consolidated basis, are less than
$50 million. At any time when our cash, cash equivalents and marketable
securities exceed $50 million, we will be required to repay any outstanding
borrowings in an amount equal to that excess. This prepayment obligation does
not apply with respect to borrowings under the Existing Credit Agreement.
Prior to an event of default under the New Credit Agreement, borrowings
bear interest, at our option, at a rate per annum equal to either: (A) the
Alternate Base Rate or (B) LIBOR for interest periods of 1, 2, 3 or 6 months
plus, in each case, the appropriate applicable margin set forth in the New
Credit Agreement. The Alternate Base Rate is defined as the greater of (1) The
Bank of New York's prime commercial lending rate as publicly announced to be in
effect from time to time or (2) the Federal Funds Rate (as published by the
Federal Reserve Bank of New York) plus 1/2 of 1.0%. Upon the occurrence and
during the continuance of an event of default, borrowings bear interest at a
rate per annum equal to the Alternate Base Rate plus the applicable margin plus
2.0%.
The New Credit Agreement also provides that in the event we become the
subject of any bankruptcy proceedings, the lenders will, subject to bankruptcy
court approval, refinance the New Credit Agreement, the Existing 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 New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness and would be in an aggregate amount equal
to the then committed amount of 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. That facility would allow for the cash payment of
interest on the Senior Notes as required by the indentures governing those
notes, except that no interest could be paid at any time during the continuance
of a default or event of default
24
28
under that debtor-in-possession facility or if BMCA fails to comply with the
fixed charge coverage ratio contained in that debtor-in-possession facility. The
New Credit Agreement contemplates the possibility that BMCA could, under limited
circumstances, enter into an alternate debtor-in-possession facility with
lenders other than the existing lenders.
The New Credit Agreement contains customary representations and warranties.
It also contains both affirmative and negative covenants, including, among
others, restrictions on mergers, consolidations and acquisitions; dispositions
of assets and capital stock; investments; amendment of certain of our documents
(including the indentures governing our Senior Notes); capital expenditures;
prepayment of the Senior Notes and certain other indebtedness; affiliate
transactions; upstream transfers; capital leases and sale-leaseback
transactions; asbestos cost payments; and tax sharing payments. The New Credit
Agreement also contains the following covenants:
Financial Covenants. We are required to maintain as of the end of any
fiscal quarter during the period beginning on December 22, 2000 and ending on or
about June 30, 2002 an interest coverage ratio of not less than 1.35 to 1.00 and
during the period beginning on July 1, 2002 and thereafter an interest coverage
ratio of not less than 1.50 to 1.00. In addition, we are required to maintain as
of the end of any fiscal quarter Consolidated EBITDA (as defined in the New
Credit Agreement) for the immediately preceding four fiscal quarters of not less
than $80 million.
Restrictions on Incurrence of Indebtedness. The New Credit Agreement
permits the following debt:
(1) debt under the Credit Documents;
(2) debt of BMCA or any of its subsidiaries existing on December 22,
2000, including the Senior Notes;
(3) BMCA's Intercompany Investments (as defined in the New Credit
Agreement);
(4) the Precious Metal Note; and
(5) debt with respect to capital leases and purchase money
indebtedness of BMCA or any of its subsidiaries (including any extension,
replacement or refinance of such capital lease or purchase money
indebtedness); provided that any such extension, replacement or refinance
(x) does not result in an increase in the outstanding principal amount of
such capital lease or purchase money indebtedness from that in effect on
December 22, 2000, and (y) does not result in the annual lease
payments/debt service payable under such capital lease or purchase money
indebtedness (as so extended, replaced or refinanced) exceeding the annual
lease payments/debt service (without giving effect to any balloon or
similar payments) payable under such capital lease or purchase money
indebtedness immediately prior to such extension, replacement or refinance.
Restrictions on Liens. The New Credit Agreement permits the following
liens:
(1) liens for any tax or governmental charge in the ordinary course of
business which are not delinquent or which are being contested in
accordance with the New Credit Agreement, provided that enforcement of such
liens is stayed pending such contest;
(2) liens in connection with worker's compensation, unemployment
insurance or other social security obligations (but not ERISA);
(3) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety,
performance and appeal bonds, contractual or warranty requirements and
other obligations of like nature arising in the ordinary course of
business;
(4) zoning ordinances, easements, rights of way, minor defects,
irregularities and other similar restrictions affecting real property which
do not materially adversely affect the value of such real property or the
financial condition of BMCA or of BMCA and its subsidiaries taken as a
whole or materially impair its use for the operation of the business of
BMCA or any such subsidiary;
25
29
(5) liens arising by operation of law, such as mechanics',
materialmen's, carriers', or warehousemen's liens incurred in the ordinary
course of business which are not delinquent or which are being contested in
accordance with the New Credit Agreement, provided that enforcement of such
liens is stayed pending such contest;
(6) liens arising out of judgments or decrees which are being
contested in accordance with the New Credit Agreement, provided that
enforcement of such liens is stayed pending such contest;
(7) liens in favor of the Administrative Agent, the issuing banks and
the lenders under the New Credit Agreement and the Existing Credit
Agreement and liens in favor of the Collateral Agent under the security
agreement and the collateral agent agreement;
(8) broker's liens securing the payment of commissions and management
fees in the ordinary course of business;
(9) liens on property (including replacements of property or additions
or accessions thereto pursuant to applicable law) existing on December 22,
2000;
(10) liens under capital leases or purchase money indebtedness
permitted by the New Credit Agreement; provided that such liens attach only
to the property so acquired pursuant to such capital leases or purchase
money indebtedness (including replacements thereof or additions or
accessions thereto pursuant to applicable law); and
(11) liens arising solely from the filing of UCC financing statements
for precautionary purposes in connection with true operating leases or
conditional sales of property that are otherwise permitted under the New
Credit Agreement and under which BMCA or any of its subsidiaries is lessee
or on accounts receivable and related intangible rights in connection with
certain non-recourse sales of accounts receivable of BMCA.
Restricted Payments. The New Credit Agreement prohibits BMCA from making
any restricted payments except that:
- a wholly-owned subsidiary of BMCA may make restricted payments to BMCA or
any Guarantor; and
- BMCA may make demand loans (which loans shall be evidenced by a demand
note) to any of its parent companies in an aggregate amount for all such
loans not exceeding:
(A) for the period from December 4, 2000 until December 4, 2001, the
unused portion of the Annual Asbestos Basket for such period minus
the Parent L/C Amount minus the Appeal Security Undrawn Amount (each
as defined below);
(B) for the period from December 4, 2001 until December 4, 2002,
$20,000,000 (not to exceed $10,000,000 per fiscal quarter) plus the
unused portion of the Annual Asbestos Basket for the period from
December 4, 2000 until December 4, 2002 minus the Parent L/C Amount
minus the Appeal Security Undrawn Amount; and
(C) for the period from December 4, 2002 until December 4, 2003,
$5,000,000 plus the unused portion of the Annual Asbestos Basket for
the period from December 4, 2000 until December 4, 2003 plus any
unused portion of that $20,000,000 for the period from December 4,
2001 until December 4, 2002 minus the Parent L/C Amount minus the
Appeal Security Undrawn Amount.
The "Annual Asbestos Basket" is equal to $8,000,000.
The "Parent L/C Amount" is an amount equal to (1) the aggregate original
face amount of all Parent Letters of Credit issued on or after December 4, 2000
plus (2) the amount of each increase to the face amount of any such Parent
Letter of Credit minus (3) the sum of, without duplication (A) the amount of
each reduction to the face amount of any such Parent Letter of Credit not
resulting from any
26
30
drawing thereunder and (B) the undrawn face amount of any such Parent Letter of
Credit that has been terminated.
The "Appeal Security Undrawn Amount" is an amount equal to (1) the
aggregate original amount of all Appeal Security deposited on or after December
4, 2000 plus (2) the amount of each increase to the face amount of any letter of
credit constituting Appeal Security minus (3) the sum of, without duplication
(A) the amount of each reduction to the face amount of any such letter of credit
not resulting from any drawing thereunder, (B) the undrawn face amount of any
such letter of credit that has been terminated, and (C) the undrawn face amount
of any such Appeal Security that has been returned to the Borrower or any of its
Subsidiaries.
"Parent Letters of Credit" are letters of credit issued after December 4,
2000 for the benefit of any of our parent corporations.
An "Appeal Security" is cash, letters of credit, or any other security
deposited by us or any of our subsidiaries on or after December 4, 2000 to
secure any appeal bond or similar instrument in connection with any asbestos
litigation.
THE EXISTING CREDIT AGREEMENT
The Existing Credit Agreement is a $110 million secured revolving credit
facility, the maturity of which was extended to August 18, 2003. The terms of
the Existing Credit Agreement were amended to contain substantially the same
terms as the New Credit Agreement. The obligations under the Existing Credit
Agreement are also secured by a first-priority lien on the Collateral to be
shared on a pro rata basis with the lenders under the New Credit Agreement and
the Other Indebtedness.
THE OTHER INDEBTEDNESS
The Other Indebtedness consists of the obligations under the Precious Metal
Note. BMCA issued this note to The Chase Manhattan Bank to replace the
obligations owed to The Chase Manhattan Bank under a leasing agreement with BMCA
regarding platinum used by BMCA in the ordinary course of its business. The
Other Indebtedness also consists of approximately $3.5 million in obligations
under a standby letter of credit issued by Fleet National Bank in connection
with one of BMCA's manufacturing facilities and any future hedging arrangements
entered into with counterparties that are lenders or affiliates of lenders under
the New Credit Agreement and the Existing Credit Agreement. There are no hedging
arrangements in place as of December 31, 2000.
THE SECURITY AGREEMENT AND THE COLLATERAL AGENT AGREEMENT
The security agreement grants a security interest in the Collateral in
favor of the collateral agent, on behalf of the lenders under the New Credit
Agreement, the Existing Credit Agreement, the Other Indebtedness and the holders
of the Senior Notes. The collateral agent agreement provides for the sharing of
proceeds with respect to any foreclosure or other remedy in respect of the
Collateral.
Under the collateral agent agreement, the collateral agent can only take
action to enforce the security interest in the Collateral upon instructions from
a Required Lender Representative that a Notice of Default (as described below)
has been given and not withdrawn. For so long as the New Credit Agreement
remains outstanding, the Required Lender Representative is the Administrative
Agent under the New Credit Agreement. After the New Credit Agreement has been
paid in full in cash but for so long as the Existing Credit Agreement remains
outstanding, the Required Lender Representative is the Administrative Agent
under the Existing Credit Agreement. After the New Credit Agreement and the
Existing Credit Agreement have been paid in full in cash, the Required Lender
Representative is the holders of the Other Indebtedness acting together. As a
result, without the consent of the Administrative Agent (acting upon the
instruction of a majority in interest of those holders with a first-priority
lien on the Collateral) under the New Credit Agreement, the Administrative Agent
under the Existing Credit Agreement or the holders of the Other Indebtedness,
the trustee under the indentures governing the Senior
27
31
Notes will be unable to cause the collateral agent to foreclose on the
Collateral. The collateral agent agreement will not affect, however, any rights
of the holders of the Senior Notes or the trustee under the indentures governing
the Senior Notes in connection with any defaults thereunder.
A Notice of Default includes both a Notice of Actionable Default and a
Notice of Acceleration Default. A Notice of Acceleration Default involves a
written certification of an event of default under one of the indentures
governing the Senior Notes, the New Credit Agreement, the Existing Credit
Agreement or the Other Indebtedness which event of default has resulted in an
acceleration of such Senior Notes or other indebtedness. A Notice of Actionable
Default involves a written certification of an event of default under one of the
indentures governing the Senior Notes, the New Credit Agreement, the Existing
Credit Agreement or the Other Indebtedness that has not yet resulted in an
acceleration of such Senior Notes or other indebtedness.
The lenders under the Existing Credit Agreement, the New Credit Agreement
and the Other Indebtedness are not permitted to instruct the collateral agent to
release a security interest in specific portions of the Collateral without the
consent of the requisite holders of the Senior Notes. That prohibition does not
apply if (1) the net cash proceeds of the Collateral so released are used to pay
amounts owing under the Credit Documents, and, to the extent provided for in the
collateral agent agreement, the Senior Notes, (2) the release of Collateral is
expressly permitted or required by the terms of the Credit Documents as such
agreements were in effect on December 22, 2000, (3) the release is required as a
matter of law or (4) the lenders under the Existing Credit Agreement and the New
Credit Agreement make a determination that maintaining such Collateral would be
materially adverse to all of the secured parties.
If the New Credit Agreement, the Existing Credit Agreement and the Other
Indebtedness are repaid in full in cash (and a secured credit facility is not
entered into to replace those facilities), holders of the Senior Notes would no
longer have any lien on the Collateral. The lien on the Collateral would remain,
however, if (1) the repayment of those facilities was not then permitted by the
terms of the indentures governing the Senior Notes, (2) an event of default
under the indentures governing the Senior Notes, the Existing Credit Agreement
or the New Credit Agreement exists at the time of such repayment (including if
BMCA is then the subject of bankruptcy proceedings) or (3) the cash for such
repayment was obtained through the concurrent sale of assets of BMCA or its
subsidiaries.
AMENDMENTS TO THE INDENTURES
Pursuant to the terms of a Consent Solicitation Statement dated December 6,
2000, as supplemented on December 20, 2000, we solicited consent from the
holders of our Senior Notes to, among other things, amend each of the applicable
indentures in order to permit the transactions contemplated by the Credit
Documents and to cause them to become effective. We obtained the consent of a
majority of the principal amount of each series of outstanding Senior Notes. As
a result, the amendments became effective for all holders of the Senior Notes.
In addition, holders who consented to the amendments also consented to receive
quarterly interest payments rather than semi-annual interest payments. We are
currently soliciting consent from the non-consenting holders to also receive
quarterly interest payments. The amendments, among other things, amended each of
the indentures to include express exceptions for the New Credit Agreement, the
Existing Credit Agreement and the Other Indebtedness and to allow for any debt
and liens contemplated by the Credit Documents, and to permit the making of
restricted payments, if such debt, liens or payments would otherwise have been
permitted to be made under the Existing Credit Agreement and the New Credit
Agreement as each such agreement was in effect on December 22, 2000. The
amendments also added provisions designed to allow us to create future liens on
our properties and/or assets, whether owned at the date of issue of the
applicable series of notes or acquired thereafter, provided that all of the
applicable series of notes are equally and ratably secured by such liens. The
first-priority liens (1) in favor of the lenders under the New Credit Agreement
and the Existing Credit Agreement and (2) with respect to the obligations under
the Other Indebtedness were exceptions to the requirement to equally and ratably
secure the senior notes. The following is a summary of the amendments to the
28
32
indentures governing the Senior Notes that became effective on December 22,
2000. You can find more detailed description of the terms of these notes under
"Description of the Notes."
LIMITATION ON DEBT AND PREFERRED STOCK OF THE COMPANY AND ITS
SUBSIDIARIES. The amendments to the indentures permit us to incur additional
debt that would otherwise be prohibited under the indentures if such debt would
have been permitted to be incurred under the Existing Credit Agreement and the
New Credit Agreement as each such agreement was in effect on December 22, 2000.
For a description of the debt permitted to be incurred under the New Credit
Agreement and the Existing Credit Agreement, see "-- The New Credit
Agreement -- Restrictions on Incurrence of Indebtedness." Each of the indentures
was also amended to permit, beginning on December 22, 2001, a $30 million basket
of additional debt that may be incurred even if certain coverage ratios
contained in the indentures are not met. In addition, specific exceptions for
the debt represented by the New Credit Agreement and the Other Indebtedness were
added to each of the indentures.
LIMITATION ON RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS. Until
December 22, 2003, the amendments to the indentures permit us to make restricted
payments within the meaning of each indenture to the extent, and only to the
extent that, we are permitted to make such payments under the terms of the
Existing Credit Agreement and the New Credit Agreement as each such agreement
was in effect on December 22, 2000. For a description of the restricted payments
permitted by the terms of the New Credit Agreement and the Existing Credit
Agreement, see "-- The New Credit Agreement -- Restricted Payments." Following
December 22, 2003, except for limited exceptions, we are only permitted to make
restricted payments in an aggregate principal amount not to exceed $15 million
in any fiscal year.
LIMITATION ON LIENS. Each of the indentures was modified to expressly
permit the incurrence of liens so long as the applicable series of notes are
equally and ratably secured by any such liens. Each of the indentures was
amended to expressly permit the first-priority lien granted in favor of the
lenders party to the New Credit Agreement, the lenders party to the Existing
Credit Agreement and the lenders party to the Other Indebtedness and any liens
to be granted in connection with any refinancing thereof. The amendments to the
indentures permit us to incur liens that would otherwise be prohibited under the
indentures if such liens would have been permitted to be incurred under the
Existing Credit Agreement and the New Credit Agreement as each such agreement
was in effect on December 22, 2000. For a description of the liens permitted by
the terms of the New Credit Agreement and the Existing Credit Agreement, see
"The New Credit Agreement -- Restrictions on Liens." Each of the indentures was
also amended to permit, beginning on December 22, 2001, a $30 million basket of
additional liens that may be incurred.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. Each of the indentures was amended to permit the restrictions on
the ability of a subsidiary to pay dividends or make distributions on capital
stock contained in the New Credit Agreement.
AMENDMENTS, SUPPLEMENTS AND WAIVERS. Each of the indentures provides for
the amendment, supplement or waiver of each indenture by us without the consent
of holders of the notes under limited circumstances. Each of the indentures was
amended to provide that, when authorized by a resolution of our Board of
Directors, we may amend or supplement the applicable indenture to secure the
applicable notes without having to obtain the consent of the holders of the
applicable notes as long as the notes are equally and ratably secured by that
lien.
29
33
BUSINESS
BMCA, incorporated under the laws of Delaware in 1994 is a 99.9%-owned
subsidiary of BMCA Holdings Corporation, which is a wholly-owned subsidiary of
G-I Holdings. Samuel J. Heyman beneficially owns (as defined in Rule 13d-3 of
the Exchange Act) approximately 99% of G-I 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 the parent of BMCA and of
BMCA's direct parent, 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 prospectus as "G-I Holdings."
We are 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. We produce our products at 26 currently operating manufacturing
facilities. In addition, we have four manufacturing facilities that are
currently closed. We believe that we hold the number one or two market position
in each of the asphalt product lines in which we compete (based on unit sales),
including leadership of the fast growing, premium laminated steep slope shingles
and modified bitumen low slope roofing markets. Based on brand awareness
studies, our Timberline(R) product is the leading brand in steep slope roofing,
and our Ruberoid(R) product is the leading brand in the built-up roofing and
modified bitumen low slope roofing markets.
Our 26 currently operating manufacturing facilities consist of roofing
manufacturing facilities, a thermoplastic polyolefin manufacturing plant,
roofing accessory plants, glass mat manufacturing plants, a liquid roofing
membrane and adhesive plant, a fiber-cement shingle and siding plant, a glass
fiber manufacturing plant and attic ventilation and air distribution products
plants. During the five-year period ended December 31, 2000, our net sales have
increased at an average annual compound rate of approximately 11.9%. We believe
that our growth is primarily attributable to:
- improvement in our product mix, driven by a business strategy which
emphasizes our higher-margin products and systems;
- vertical integration and our low cost manufacturing operations;
- substantial capital spending programs for new property, plant and
equipment that have enabled us to expand capacity and reduce
manufacturing costs;
- the strength of our national distribution system; and
- broadening our product lines through niche-type acquisitions.
In response to current market conditions, to better service shifting
customer demand and to reduce costs, we closed in 2000 four manufacturing
facilities located in Monroe, Georgia; Port Arthur, Texas; Corvallis, Oregon;
and Albuquerque, New Mexico. As market growth and customer demand improves, we
may reinstate production at one or more of these manufacturing facilities in the
future. The effect of closing these facilities was not material to our results
of operations.
INDUSTRY OVERVIEW
The United States steep slope roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 85% of industry steep slope
30
34
roofing unit sales in 1999. Steep slope asphalt roofing materials consist of
strip shingles and higher margin, premium laminated shingles, which represented
approximately 54% and 46%, respectively, of industry asphalt roofing unit sales
in 2000. While total asphalt steep slope unit sales grew during the past five
years (from January 1, 1996 through December 31, 2000) at an average annual
compound rate of approximately 2%, unit sales of laminated shingles grew at an
average annual compound rate of approximately 14%. During the same period, sales
of strip shingles declined at a compound annual rate of approximately 4%. While
we believe that the growth of laminated shingle sales will continue to exceed
the growth of the overall steep slope asphalt roofing market, we have
experienced increased competition in this product line.
The United States low slope roofing industry comprises manufacturers of
asphalt built-up roofing, modified bitumen, thermoplastic and elastomeric
single-ply products and other roofing products. We believe approximately 70% of
low slope roofing industry unit sales utilize asphalt built-up roofing, modified
bitumen products and thermoplastic and elastomeric single-ply products, most of
which we manufacture or market.
Over the past five years, approximately 80% of industry sales, as well as
our sales, of both steep slope and low slope roofing products were for
re-roofing, as opposed to new construction. As a result, our exposure and the
industry's exposure to cyclical downturns in the new construction market are
lower than for other building material manufacturers which produce, for example,
gypsum and wood. We expect that demand for steep slope re-roofing will continue
to increase as the existing housing stock ages and as homeowners upgrade from
standard strip roofing shingles to premium laminated shingles for enhanced
aesthetics and durability. We also expect low slope roofing demand to rise as
the construction of new low slope facilities increases and existing buildings
age.
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
67% of our net sales in 2000. 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.
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:
- the Timberline(R) 25 shingle, a mid-weight laminated shingle which serves
as an economic trade-up for consumers, with a 25-year limited warranty;
- the Timberline(R) shingle, with a 30-year limited warranty, a heavyweight
laminated shingle with superior fire resistance and durability; and
- the Timberline Ultra(R) shingle, with a 40-year limited warranty, a super
heavyweight laminated shingle with the maximum durability of the
Timberline(R) series.
The Sovereign(R) Series.
The Sovereign(R)series includes:
- the standard 3-tab Sentinel(R) shingle with a 20-year limited warranty;
- the Royal Sovereign(R) shingle, a heavier 3-tab shingle with a 25-year
limited warranty, designed to capitalize on the "middle market" for
quality shingles; and
31
35
- 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:
- the Slateline(R) shingle, offering the appearance of slate and labor
savings in installation because of its larger size, with a 40-year
limited warranty;
- the Grand Sequoia(R) shingle, a premier architectural shingle with a
40-year limited warranty;
- the Country Mansion(R) shingle, a distinctive high-end architectural
shingle with a lifetime limited warranty;
- the Country Estates(TM) shingle, a versatile style, high-end
architectural shingle with a lifetime limited warranty; and
- 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 26% of our net
sales in 2000. 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; the TOPCOAT(R) roofing system, a
liquid-applied membrane system designed to protect and waterproof existing
roofing systems; and roof maintenance products. In 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.
32
36
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 7% of our net sales in 2000. These products primarily consist of
steep slope attic ventilation systems and metal and fiberglass air distribution
products for the HVAC industry.
On September 29, 2000, we sold certain manufacturing and other assets
related to the Compton, California based security products division of LL
Building Products Inc. for net cash proceeds of approximately $27.1 million. In
connection with this transaction, we recorded a $17.5 million pre-tax operating
gain during 2000.
SUBSTANTIAL CAPITAL PROGRAMS
We believe our plants are among the most modern in the industry. Since 1985
and through December 31, 2000, we have invested approximately $475 million in
new property, plant and equipment, principally to increase capacity and
implement process improvements to reduce manufacturing costs. This capital
program included the construction of two new manufacturing facilities in
Shafter, California and Michigan City, Indiana in 2000. We also completed
construction on a third manufacturing facility in Mount Vernon, Indiana and
started production at that facility in the first quarter of 2001. This capital
program also included the installation of efficient in-line lamination equipment
in a number of our roofing plants, as well as the modernization of our glass mat
facilities. We have reduced our manufacturing costs as a result of this capital
program, along with the rigorous application of our process and quality control
standards.
NEW PRODUCT DEVELOPMENT
We believe that we have been among the most innovative industry leaders in
terms of the introduction of new products, having been the first to develop the
three-dimensional laminated roofing shingle, Timberline(R), which created an
entire new product line within the asphalt roofing industry. Some of our new
steep slope products introduced since 1995 include:
- the Timberline(R) 25 shingle, which serves as an economic trade-up for
consumers;
- the Grand Sequoia(R) shingle, a premier architectural shingle;
- the Country Mansion(R) shingle, a distinctive high-end architectural
shingle;
- the Country Estates(TM) shingle, a versatile style, high-end
architectural shingle; and
- the Grand Canyon(TM) shingle, a super heavyweight architectural shingle
with a rugged wood shake appearance.
In 1995, we introduced GAF CompositeRoof(TM), a new low slope roofing
product that combines the tensile strength of built-up roofing with the
flexibility and superior elongation of modified bitumen membranes. In 1997, we
introduced Flexply(R) 6, an enhanced performing premium built-up roofing felt,
and Stratavent(R), a premium venting base sheet used in built-up roofing
systems. In 2000, we introduced Everguard(R) TPO(2) Plus(TM), a single-ply
membrane which is an advance in single-ply roofing systems and Cobra Ridge Vent
II(TM), a hard plastic vent.
ACQUISITIONS
Our acquisition strategy is focused on niche-type acquisitions, designed to
either complement existing product lines, further the geographic reach of our
business or increase our market share. We are primarily
33
37
interested in acquiring businesses which can benefit from our strong national
distribution network, manufacturing technology and marketing expertise. Our
recent acquisitions include:
- substantially all of the assets of Leslie-Locke Inc., a manufacturer and
marketer of specialty building products and accessories for the
professional and do-it-yourself remodeling and residential construction
industries;
- substantially all of the assets of the Leatherback Industries division of
Hollinee Corporation, which is engaged in the manufacture and sale of
asphalt-saturated roofing felts and other felt and construction paper
products;
- substantially all of the assets of Major Group, Incorporated, the
manufacturer of the TOPCOAT(R) Roofing System, a liquid-applied polymer
membrane system designed to protect and waterproof existing metal
roofing; and
- U.S. Intec, a leading national manufacturer of low slope roofing
products.
See Note 4 to Consolidated Financial Statements.
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 230 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 10% or more of our net sales in 2000,
except for The Home Depot, Inc. and American Builders & Contractors Supply
Company, Inc., which accounted for approximately 13% and 11%, respectively, of
our 2000 net sales.
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. We currently have contracts with several of these
suppliers and others are available as substitutes. In 2000, prices of most raw
materials other than asphalt and energy have been relatively stable, rising
moderately with general industrial prices, while the price of asphalt tends to
move in step with the price of crude oil. Energy costs increased significantly
in 2000 due to increased demand for such items.
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 2000, 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.
34
38
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 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, 2001, unless extended by the
parties.
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 (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 ranging from 5 to 10 years. 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.
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. We have experienced increased competition
in this area due to these factors.
Our specialty roofing 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, ATCO Rubber Products
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 $6.0, $6.5 and $5.9 million in 1998,
1999 and 2000, respectively.
35
39
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 International Specialty Products Inc., at 1361 Alps
Road, Wayne, New Jersey 07470. We occupy our headquarters pursuant to our
management agreement with ISP. See "Certain Relationships -- 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
- -------- --------
Alabama
Mobile.................................. Plant, Warehouses*
California
Fontana................................. Plant, Sales Office
Hollister............................... Plant, Plant*
Shafter................................. Plant
Stockton................................ Plant, Plant, Warehouse*
Florida
Tampa................................... Plant, Sales Office
Georgia
Atlanta................................. Administrative Offices*, Sales Office*
Savannah................................ Plant, Sales Office
Indiana
Mount Vernon............................ Plant, Plant, Sales Office
Michigan City........................... Plant
Illinois
Romeoville.............................. Sales Office*
Maryland
Baltimore............................... Plant
Massachusetts
Millis.................................. Plant, Sales Office, Warehouse*
Walpole................................. Plant*
Minnesota
Minneapolis............................. Plant, Sales Office
Mississippi
Purvis.................................. Plant
New Jersey
North Branch............................ Plant, Warehouse*
North Brunswick......................... Sales Office*, Warehouse*
Wayne................................... Headquarters*, Corporate Administrative
Offices*, Research Center*
North Carolina
Burgaw.................................. Plant
Goldsboro............................... Plant
Ohio
Wadsworth............................... Plant*
Pennsylvania
Erie.................................... Plant, Sales Office, Warehouse*
Wind Gap................................ Plant
36
40
LOCATION FACILITY
- -------- --------
South Carolina
Chester................................. Plant
Tennessee
Nashville............................... Plant, Research Center*
Texas
Dallas.................................. Plant, Sales Office, Warehouse*
Fannett................................. Warehouse
- ---------------
* Leased Property
In addition to the foregoing list, we have four manufacturing facilities in
Monroe, Georgia; Corvallis, Oregon; 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. Each plant has adequate transportation facilities for
both raw materials and finished products. In 2000, we made capital expenditures
of $61.5 million relating to plant, property and equipment.
PATENTS AND TRADEMARKS
We own or license approximately 100 domestic and 110 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.
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
$0.6, $2.7 and $2.5 million in 1998, 1999 and 2000, 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 2001 and 2002 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 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 "-- Environmental Litigation."
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
prospectus as "Asbestos Claims." As of March 30, 1997, BMCA had paid all of its
assumed asbestos-related liabilities.
37
41
G-I Holdings has agreed to indemnify BMCA against any other existing or future
claims related to asbestos-related liabilities if asserted against BMCA. In
January 2001, G-I Holdings filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos Claims. This
proceeding is in a preliminary stage. In light of G-I Holdings' recent
bankruptcy filing, G-I Holdings may not have sufficient assets to satisfy these
indemnification obligations to us.
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.
Such 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 2,147 Asbestos Claims having
been filed against us as of December 31, 2000). 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. The
temporary restraining order expires on April 23, 2001. 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. In addition, G-I Holdings has indemnified us with
respect to Asbestos Claims. In light of G-I Holdings' recent bankruptcy filing,
G-I Holdings may not have sufficient assets to satisfy these indemnification
obligations to us.
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
February 21, 2001, G-I Holdings moved to dismiss the complaint. 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 prospectus as the "Building Claims." Since
these actions were first initiated approximately 19 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 2000. BMCA has not assumed
any liabilities with respect to Building Claims, and G-I Holdings has agreed to
indemnify BMCA against those liabilities in the event any claims are asserted
against it. For a discussion of the possible consequences to us of the failure
of G-I Holdings to satisfy judgments against it relating to Building Claims, see
"-- Bodily Injury Claims" above.
Insurance Matters. In January 1993, G-I Holdings filed an action with the
United States District Court in Philadelphia against certain product liability
insurers whose policies will or may be called upon to respond to Asbestos
Claims. This action sought a declaratory judgment against various third-party
defendant product liability insurers to the effect that those insurers are
obligated to provide coverage for
38
42
Asbestos Claims. In March 2000, G-I Holdings reached a settlement with the final
remaining insurer who was a defendant in G-I Holdings' amended complaint and has
dismissed this action.
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 Resolution, 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 contends 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 is appealing the court's grant of summary judgment.
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 until such time as they
are better able to evaluate developments as they may occur 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, G-I Holdings' defense costs have been paid by
one of its primary carriers. While G-I Holdings expects that this primary
carrier will continue 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. G-I Holdings believes that it will be able to resolve those
cases for amounts within the total indemnity obligations available from this
primary carrier.
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, 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, 2000, its liability in respect
of the environmental liabilities of G-I Holdings not assumed by BMCA was
approximately $9.3 million, before insurance recoveries reflected on its balance
sheet of $9.1 million. BMCA estimates its liability as of December 31, 2000 in
respect of assumed and other environmental liabilities is $1.3 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. For information relating to other environmental
compliance expenses, see "-- Environmental Compliance" above.
39
43
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 well 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 March 1995, G-I Holdings commenced litigation on behalf of itself and
its predecessors, successors, subsidiaries and related corporate entities in the
United States District Court for the District of New Jersey seeking amounts
substantially in excess of the estimated recoveries. The court dismissed this
action in December 1997 for lack of federal jurisdiction, and defendant insurers
appealed the dismissal. The appeal was denied by the Third Circuit Court of
Appeals in March 1999. In June 1997, G-I Holdings filed a similar action against
the insurers in the Superior Court of New Jersey, Somerset County, which 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. In
addition, G-I Holdings has indemnified us with respect to those claims. In light
of G-I Holdings' recent bankruptcy filing, G-I Holdings may not have sufficient
assets to satisfy these indemnification obligations. For the possible
consequences to us of the failure of G-I Holdings to satisfy judgments against
it in environmental-related lawsuits or otherwise, see "-- Bodily Injury Claims"
above.
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. In October and
December 1998, the 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, were stayed pending
the outcome of the fairness hearing on the settlement agreement in the Mobile
County, Alabama action. The Middlesex County, New Jersey, the Pointe Coupee
Parish, Louisiana and the Nassau County, New York actions have been dismissed in
light of the final approval of the settlement agreement in the Mobile County,
Alabama action, and we expect that the remaining action also will be dismissed.
40
44
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. The claim of the IRS for interest and penalties,
after taking into account the effect on the use of net operating losses and
foreign tax credits, could result in G-I Holdings incurring liabilities
significantly in excess of the deferred tax liability of $131.4 million that it
recorded in 1990 in connection with this matter. G-I Holdings has advised us
that it believes that it will prevail in this matter, although we cannot assure
you of this result. 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. G-I Holdings has agreed to indemnify us against any tax
liability associated with the surfactants partnership. In light of G-I Holdings'
recent bankruptcy filing, G-I Holdings may not have sufficient assets to satisfy
its indemnification obligation to us. For the possible consequences to us of the
failure of G-I Holdings to satisfy this liability and other information relating
to G-I Holdings, see "Legal Proceedings -- Bodily Injury Claims" above.
EMPLOYEES
At December 31, 2000, we employed approximately 3,200 people worldwide,
approximately 900 of which were subject to 13 union contracts. The contracts are
effective for three- to four-year periods. During 2000, three labor contracts
expired and were renegotiated. We believe that our relations with our employees
and their unions are satisfactory.
41
45
MANAGEMENT
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, International Specialty Products
Inc. 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 AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- --------------------------------
William W. Collins................... 50 Mr. Collins has been President and Chief Executive
Director, Chief Executive Officer Officer of BMCA and certain of its subsidiaries since
and President 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, Residential Roofing
Products of BMCA and certain of its subsidiaries from
November 1997 to July 1999. He was Vice
President -- Marketing and Sales, Commercial Roofing
Products of BMCA from March 1996 to November 1997, and
Vice President -- Sales, Commercial 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.................. 41 Mr. Weinberg has been Executive Vice President, General
Executive Vice President, General Counsel and Secretary of BMCA and its subsidiaries since
Counsel and Secretary May 1998 and was Senior Vice President, General Counsel
and Secretary of BMCA and its subsidiaries from May 1996
to May 1998. 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.
42
46
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- --------------------------------
David A. Harrison.................... 44 Mr. Harrison has been a director of BMCA and certain of
Director, Senior Vice its subsidiaries since September 2000. He also has been
President -- Marketing, Contractor Senior Vice President -- Marketing, Contractor Services
Services and Corporate Development and Corporate Development of BMCA and certain of its
subsidiaries since July 2000. He is also President of
GAF Materials Corporation (Canada). Mr. Harrison was
Vice President -- Corporate Marketing and Development of
BMCA and certain of its subsidiaries from November 1999
to July 2000, Vice President -- Marketing Development of
BMCA and certain of its subsidiaries from January 1997
to July 1999 and Senior Vice President -- Residential
Marketing of BMCA and certain 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..................... 50 Mr. Tafaro has been a director of BMCA and certain of
Director, Senior Vice President and its subsidiaries since September 2000. He also has been
General Manager -- Steep Slope Senior Vice President and General Manager -- Steep Slope
Systems Systems of BMCA and certain of its subsidiaries since
July 2000. He was Vice President -- Marketing and Sales,
Commercial Roofing Products of BMCA and certain of its
subsidiaries from November 1997 to July 2000. He was
Vice President -- Residential Marketing of BMCA from May
1997 to November 1997, Director of Residential 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.................... 44 Mr. Walton has been a director of BMCA and certain of
Director, Senior Vice its subsidiaries since September 2000. He also has been
President -- Operations Senior Vice President -- Operations of BMCA and certain
of its subsidiaries since July 2000. He was Vice
President -- Residential 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.
43
47
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- --------------------------------
Susan B. Yoss........................ 42 Ms. Yoss has been Senior Vice President and Treasurer of
Senior Vice President and Treasurer BMCA and its subsidiaries since July 1999 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 certain of
its subsidiaries since September 2000, was Senior Vice
President and Treasurer of ISP and certain 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.
John F. Rebele....................... 46 Mr. Rebele has been a director of BMCA since January
Director, Vice President and Chief 2001 and of certain of BMCA's subsidiaries since March
Financial Officer 2001. He also has been Vice President and Chief
Financial Officer of BMCA and certain of its
subsidiaries since January 2001. He was Vice
President -- Finance of BMCA and certain of its
subsidiaries from March 1998 to January 2001 and Vice
President and Controller of BMCA and certain of its
subsidiaries from February 1994 to March 1998.
44
48
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, 2000, together with any person who served as BMCA's Chief
Executive Officer in 2000. The salaries and other compensation of Messrs. Heyman
and 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
COMPENSATION
-------------
ANNUAL COMPENSATION OTHER SECURITIES
--------------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(1) COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------- ------------
William W. Collins.................. 2000 $245,625 $150,000 6,500 $19,251(2)
President and Chief Executive 1999 194,750 100,000 5,000 15,463(2)
Officer 1998 168,000 69,871 3,000 14,899(2)
William C. Lang..................... 2000 $257,500 $ 15,202 5,000 $21,400(3)
Executive Vice President, 1999 242,500 100,000 5,000 20,871(3)
Chief Administrative Officer 1998 207,083 94,145 4,200 17,965(3)
and Chief Financial Officer(3)
David A. Harrison................... 2000 $207,375 $ 39,995 $48,544(4) 4,500 $ 9,722(4)
Senior Vice President -- 1999 115,578(4) 26,137(4) --(4) --(4) 11,037(4)
Marketing, Contractor Services 1998 163,250 35,482 7,171(4) 1,000 16,681(4)
and Corporate Development
Robert B. Tafaro.................... 2000 $200,999 $ 44,071 1,500 $18,057(5)
Senior Vice President and 1999 164,000 36,183 15,099(5)
General Manager -- Steep Slope 1998 135,842 35,152 2,500 14,226(5)
Systems
Kenneth E. Walton................... 2000 $164,375 $ 36,800 2,000 $15,011(6)
Senior Vice
President -- Operations 1999 151,018 34,110 2,500 16,372(6)
1998 127,310 21,735 1,500 19,214(6)
Samuel J. Heyman.................... 2000 (7) (7) (7) (7)
Former Chairman of the Board, 1999 (7) (7) (7) (7)
President and Chief Executive 1998 (7) (7) (7) (7)
Officer(7)
- ---------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
Compensation Program, except that a portion of the bonus amounts paid to Mr.
Lang in 1998 and 2000, Mr. Harrison in 1999 and Mr. Tafaro in 1998
represented special bonus awards to those executive officers. The options
relate to shares of redeemable convertible preferred stock of BMCA. See
"-- Options."
(2) Included in "All Other Compensation" for Mr. Collins are: $12,150, $11,450
and $11,450, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $4,941, $2,484 and $2,122 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $2,160, $1,529 and $1,327 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively. In February 2000,
Mr. Collins was elected President and Chief Operating Officer of BMCA and in
September 2000 was elected as our President and Chief Executive Officer.
(3) Included in "All Other Compensation" for Mr. Lang are: $12,400, $11,700 and
$11,700, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $6,840, $7,267 and $4,459 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $2,160, $1,904 and $1,806 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively. Effective January
2001, Mr. Lang no longer holds the positions of Executive Vice President,
Chief Administrative Officer and Chief Financial Officer of BMCA. We have
entered into an agreement with Mr. Lang in connection with his
(Footnotes continued on next page)
45
49
(Footnotes continued from prior page)
separation from employment with our company pursuant to which, among other
things, we will pay Mr. Lang nine months severance.
(4) Included in "Other Annual Compensation" for Mr. Harrison are $48,544 and
$7,171 in payment for moving-related expenses in 2000 and 1998,
respectively. Included in "All Other Compensation" for Mr. Harrison are:
$6,089, $9,188 and $11,450, representing BMCA's contribution under its
401(k) plan in 2000, 1999 and 1998, respectively; $1,574, $737 and $3,671
for the premiums paid by BMCA for a life insurance policy in 2000, 1999 and
1998, respectively; and $2,059, $1,112 and $1,560 for the premiums paid by
BMCA for a long-term disability policy in 2000, 1999 and 1998, respectively.
Mr. Harrison resigned from his employment with us in July 1999 and returned
in November 1999.
(5) Included in "All Other Compensation" for Mr. Tafaro are: $12,150, $11,450
and $11,283, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $3,913, $2,078 and $1,706 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $1,994, $1,571 and $1,237 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively.
(6) Included in "All Other Compensation" for Mr. Walton are: $12,150, $11,503
and $11,450, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $1,223, $3,416 and $6,594 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $1,638, $1,453 and $1,170 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively.
(7) The salary and other compensation of Messrs. Heyman and 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. See "-- Options." No
allocation of compensation for services to BMCA is made pursuant to the
management agreement, except that BMCA reimbursed ISP $400,000 and $230,000
under the management agreement in respect of bonus amounts earned by Mr.
Weinberg and Ms. Yoss, respectively, for 2000 in connection with services
performed by them for BMCA during that year. 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 "Certain Relationships -- Management Agreement." Mr.
Heyman resigned as our President in February 2000 and as our Chief Executive
Officer and Chairman of the Board in September 2000.
OPTIONS
The following table summarizes options to acquire BMCA's redeemable
convertible preferred stock granted during 2000 to the executive officers named
in the Summary Compensation Table above and the potential realizable value of
options held by those persons.
BMCA PREFERRED STOCK OPTION GRANTS IN 2000(1)
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF BOOK VALUE
SECURITIES OPTIONS GRANTED APPRECIATION
UNDERLYING TO EMPLOYEES IN --------------------------
NAME OPTIONS GRANTED FISCAL 2000 5% 10%
- ---- --------------- --------------- ----------- -----------
William W. Collins...................... 6,500 10.5% $311,620 $767,536
William C. Lang......................... 5,000 8.1 239,708 590,412
David A. Harrison....................... 4,500 7.3 215,737 531,371
Robert B. Tafaro........................ 1,500 2.4 71,912 177,124
Kenneth E. Walton....................... 2,000 3.2 95,883 236,165
- ---------------
(1) The BMCA preferred stock options represent options to purchase shares of
redeemable convertible preferred stock of BMCA. Each share of preferred
stock is convertible, at the holder's option, into shares of Class A common
stock of BMCA at a formula price based on Book Value (as defined in
46
50
the option agreement) as of the date of grant. The options vest over five
years from the date of grant. 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 BMCA's option, for a redemption price equal to the
exercise price per share plus accrued and unpaid dividends. The Class A
common stock of BMCA issuable upon conversion of the preferred stock is
subject to repurchase by BMCA under certain circumstances at a price equal
to its then current Book Value. The exercise price of the options is equal
to the fair value per share of the preferred stock at the date of grant. The
options expire nine years after the date of grant. See Note 2 to the table
below for additional information relating to outstanding stock options.
BMCA PREFERRED STOCK OPTIONS AND OPTION EXERCISES AND VALUES AT DECEMBER 31,
2000
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
PREFERRED OPTIONS IN-THE-MONEY
AT 12/31/00 PREFERRED OPTIONS
SHARES ACQUIRED VALUE EXERCISABLE/ AT 12/31/00
NAME ON EXERCISE REALIZED UNEXERCISABLE(1)(2) EXERCISABLE/UNEXERCISABLE(3)
- ---- --------------- -------- ----------------------- ----------------------------
William W. Collins.......... -- -- 8,031/15,587 $183,941/$98,998
William C. Lang............. -- -- 4,982/13,055 94,008/77,817
David A. Harrison........... -- -- 500/4,000 0/0
Robert B. Tafaro............ -- -- 2,237/3,424 64,584/29,106
Kenneth E. Walton........... -- -- 2,452/5,334 65,340/23,864
- ---------------
(1) With respect to the stock options for 6,453 shares of preferred stock held
by Mr. Weinberg, options for 2,581 shares of preferred stock were
exercisable and options for 3,872 shares of preferred stock were
unexercisable at December 31, 2000.
(2) Effective December 31, 2000, we adopted the 2001 Long-Term Incentive Plan
which, among other things, will allow certain employees participating in the
preferred stock option program to also participate in the new incentive plan
and to elect to exchange their outstanding stock options for incentive units
under the new incentive plan.
(3) Options for 12,118, 8,037, 0, 4,161 and 4,286 shares of preferred stock were
in-the-money for Messrs. Collins, Lang, Harrison, Tafaro and Walton,
respectively, at December 31, 2000. Options for 6,453 shares of preferred
stock were in-the-money for Mr. Weinberg at December 31, 2000. The value of
these unexercised in-the-money options held by Mr. Weinberg at December 31,
2000 was $10,410 and $15,614 for exercisable and unexercisable options,
respectively.
COMPENSATION OF DIRECTORS
The directors of BMCA do not receive any compensation for their services as
such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
We do not have a separate compensation committee. Compensation decisions
are determined by our Board of Directors, each member of which is also one of
our executive officers. See "Certain Relationships."
47
51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 23, 2001, approximately 99.9% of our outstanding Class A common
stock and all of our outstanding Class B common stock are owned of record by
BMCA Holdings Corporation. All of the outstanding capital stock of BMCA Holdings
Corporation is owned of record by G-I Holdings.
The following table sets forth information with respect to the ownership of
BMCA's common stock, as of March 23, 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) 99.9% 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, a wholly-owned
subsidiary of G-I Holdings, to Mr. Heyman. As of March 23, 2001, Mr. Heyman
beneficially owned (as defined in Rule 13d-3 of the Exchange Act)
approximately 99.4% of the capital stock of G-I Holdings.
48
52
CERTAIN RELATIONSHIPS
MANAGEMENT AGREEMENT
Pursuant to a management agreement, International Specialty Products Inc.
(of which Samuel J. Heyman beneficially owns (as defined in Rule 13d-3 of the
Exchange Act) approximately 79%) provides certain general management,
administrative, legal, telecommunications, information and facilities services
to us, including the use of our headquarters in Wayne, New Jersey. ISP charged
us $6.0 million in 2000 for providing these services. These charges consist of
management fees and other reimbursable expenses attributable to us, or incurred
by ISP for our benefit. They are based on an estimate of the costs ISP incurs to
provide such services. Effective January 1, 2001, the management agreement was
amended to extend the term of the agreement through March 31, 2001, to provide
for the automatic extension of the agreement for successive quarterly periods
unless the agreement is terminated by a party, and to adjust the management fees
payable under the agreement. In addition, the management agreement was amended
to provide that we rather than ISP be responsible for providing management
services to G-I Holdings and certain of its subsidiaries and that G-I Holdings
pay us a management fee for these services. Based on the services provided to
G-I Holdings in 2000 under the management agreement, the aggregate amount
payable by G-I Holdings to us for services to be rendered under the management
agreement in 2001 is expected to be 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 by ISP in 2000 to us and G-I Holdings under the management agreement,
the aggregate amount payable by us to ISP under the management agreement for
2001 is expected to be approximately $6.6 million. Certain of our executive
officers receive their compensation from ISP. ISP 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 certain of our roofing
plants, which are supplied by third parties. Effective January 1, 2001, this
contract was amended and restated to provide, among other things, that the
contract will expire on December 31, 2001, unless extended by the parties. In
2000, we purchased in the aggregate approximately $59.3 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 certain 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 certain
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
49
53
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, G-I Holdings has agreed to indemnify us and our subsidiaries for
all tax liabilities of the G-I Holdings consolidated tax group other than tax
liabilities 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. In light of G-I Holdings' recent bankruptcy
filing, G-I Holdings may not have sufficient assets to satisfy these
indemnification obligations. See the risk factor discussing G-I Holdings'
inability to satisfy its indemnification obligations. See "Business -- Legal
Proceedings -- Bodily Injury Claims." 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.
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, 2000, no loans
were owed to BMCA by G-I Holdings and no loans were owed by us to affiliates. In
addition, we make non-interest bearing advances to affiliates, of which $59.1
million and $0 were outstanding at December 31, 1999 and 2000, respectively. In
1999 and 2000, we made distributions of $60.0 and $106.2 million, respectively,
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.
50
54
SELLING NOTEHOLDER
The following table sets forth certain information regarding the beneficial
ownership of these notes by the selling noteholder. All information contained in
the table below is based upon beneficial ownership as of March 1, 2001 as
reported to us by BNY Capital Markets, Inc.
AMOUNT OF NOTES AMOUNT OF NOTES
BENEFICIALLY OWNED AMOUNT OF NOTES BENEFICIALLY OWNED
SELLING NOTEHOLDER BEFORE OFFERING BEING OFFERED AFTER OFFERING(1)
- ------------------ ------------------ --------------- ------------------
BNY Capital Markets, Inc.................... $35,000,000 $35,000,000 $0.00
- ---------------
(1) This table assumes that all notes owned by the selling noteholder which are
offered by this prospectus are being sold. The selling noteholder reserves
the right to accept or reject, in whole or in part, any proposed sale of
notes. The selling noteholder also may offer and sell less than the number
of notes indicated. The selling noteholder is not making any representation
that any notes covered by this prospectus will or will not be offered for
sale.
BNY Capital Markets, Inc., the selling noteholder, has engaged in
investment banking and other commercial dealings in the ordinary course of
business with us. BNY Capital Markets, Inc. received customary fees and
commissions for its services. BNY Capital Markets, Inc. and its affiliates may
in the future engage in investment banking and other commercial dealings with
us.
51
55
DESCRIPTION OF THE NOTES
You can find the definitions of certain terms used in this section under
the subheading "Certain Definitions." In this section, the words "we," "our" and
"us" refer only to Building Materials Corporation of America, as a separate
entity, and do not include any of its subsidiaries.
We issued the notes under an indenture between us and The Bank of New York,
as trustee, dated as of July 5, 2000, as amended by the First Supplemental
Indenture, dated as of December 4, 2000. The terms of the notes include those
stated in the indenture and those made part of the indenture by reference to the
Trust Indenture Act of 1939.
The following description is a summary of certain of the material
provisions of the indenture. It does not restate that agreement in its entirety.
We urge you to read the indenture because it, and not this description, defines
your rights as holders of these notes. We have filed the indenture and the first
supplemental indenture as an exhibit to the registration statement which
includes this prospectus.
BRIEF DESCRIPTION AND RANKING OF THE NOTES
The notes:
- are secured by the Collateral, subject to its release as described in
"-- Security" below;
- are senior in right of payment to all our subordinated and unsecured
debt;
- rank equally in right of payment to our 7 3/4% Senior Notes due 2005, our
8 5/8% Senior Notes due 2006, our 8% Senior Notes due 2007 and our 8%
Senior Notes due 2008; and
- rank junior to our borrowings under the New Credit Agreement, the
Existing Credit Agreement and the Other Indebtedness to the extent of the
Collateral.
GUARANTEES
The notes are unconditionally guaranteed by all of our current and future
direct and indirect wholly-owned domestic subsidiaries, other than BMCA
Receivables Corporation.
The guarantees:
- are joint and several obligations of each guarantor;
- are senior in right of payment to all existing and future unsecured and
subordinated indebtedness of each guarantor;
- rank equally in right of payment to each guarantor's guarantee under the
Other Senior Notes; and
- rank junior to each guarantor's guarantee under the New Credit Agreement,
the Existing Credit Agreement and the Other Indebtedness to the extent of
the Collateral.
Upon the sale or disposition, by merger or otherwise, of all of the capital
stock of a guarantor to an entity which is not one of our subsidiaries, that
guarantor will be deemed released from all obligations under its guarantee. The
other guarantors will remain liable for the full amount of principal and
interest on the notes as provided in its guarantee.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, the guarantees could be voided, or claims in respect
of the guarantees could be subordinated to all other debts of that guarantor,
if, among other things, the guarantor, at the time it incurred the indebtedness
evidenced by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of the guarantee;
- was insolvent or rendered insolvent by reason of that incurrence;
52
56
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In the event that a guarantee would constitute or result in a violation of
the federal bankruptcy law or any applicable fraudulent conveyance or similar
law of any relevant jurisdiction, the liability of the guarantor under its
guarantee will be reduced to the maximum amount permissible under the applicable
fraudulent conveyance or similar law.
SECURITY
Our obligations under the notes are secured by a second-priority lien in
favor of The Bank of New York, as collateral agent, in substantially all of the
assets of BMCA and each Guarantor (as defined below), including the equity
interests of each of BMCA's and each Guarantor's subsidiaries (limited to
two-thirds of the equity interests of any subsidiary that is a controlled
foreign corporation), the equity interests of BMCA Receivables Corporation,
material real property, intellectual property, receivables, cash, cash
equivalents and marketable securities. All of the property and assets set forth
in the previous sentence are collectively referred to in this prospectus as the
Collateral. The notes, including the subsidiary guarantees thereunder, are
guaranteed by all of BMCA's current and future direct and indirect domestic
subsidiaries, other than BMCA Receivables Corporation. We refer to these
subsidiaries collectively as the "Guarantors."
The Collateral is also subject to a first-priority lien in favor of the
lenders under the New Credit Agreement, the Existing Credit Agreement and the
Other Indebtedness.
The Security Agreement grants a security interest in the Collateral to The
Bank of New York, as Collateral Agent, on behalf of the lenders under the New
Credit Agreement, the Existing Credit Agreement, the Other Indebtedness and the
holders of the Senior Notes. The Collateral Agent Agreement provides for the
sharing of proceeds with respect to any foreclosure or other remedy in respect
of the Collateral securing obligations under the New Credit Agreement, the
Existing Credit Agreement, the Other Indebtedness and the Senior Notes.
Under the collateral release provisions contained in the Collateral Agent
Agreement, the collateral agent can only take action to enforce the security
interest in the Collateral upon instructions from a Required Lender
Representative that a Notice of Default (as described below) has been given and
not withdrawn. For so long as the New Credit Agreement remains outstanding, the
Required Lender Representative is the Administrative Agent under the New Credit
Agreement. After the New Credit Agreement has been paid in full in cash but for
so long as the Existing Credit Agreement remains outstanding, the Required
Lender Representative is the Administrative Agent under the Existing Credit
Agreement. After the New Credit Agreement and the Existing Credit Agreement have
been paid in full in cash, the Required Lender Representative is the holders of
the Other Indebtedness acting together. As a result, without the consent of the
Administrative Agent (acting upon the instruction of a majority in interest of
those holders with a first-priority lien on the Collateral) under the New Credit
Agreement, the Administrative Agent under the Existing Credit Agreement or the
holders of the Other Indebtedness, the Trustee under the indentures governing
the Senior Notes will be unable to cause the Collateral Agent to foreclose on
the Collateral. The Collateral Agent Agreement will not affect, however, any
rights of the holders of the Senior Notes or the Trustee under the indentures
governing the Senior Notes in connection with any defaults under the indentures.
If an event of default occurs under the indenture governing the notes and a
declaration of acceleration occurs as a result, the trustee, on behalf of the
holders of the notes, in addition to any rights or remedies available to it
under the indenture, must notify the collateral agent under the Collateral Agent
Agreement.
A Notice of Default includes both a Notice of Actionable Default and a
Notice of Acceleration Default. A Notice of Acceleration Default involves a
written certification of an event of default under one
53
57
of the indentures governing the Senior Notes, the New Credit Agreement, the
Existing Credit Agreement or the Other Indebtedness which event of default has
resulted in an acceleration of such Senior Notes or other indebtedness. A Notice
of Actionable Default involves a written certification of an event of default
under one of the indentures governing the Senior Notes, the New Credit
Agreement, the Existing Credit Agreement or the Other Indebtedness that has not
yet resulted in an acceleration of such Senior Notes or other indebtedness.
The lenders under the Existing Credit Agreement, the New Credit Agreement
and the Other Indebtedness are not permitted to instruct the collateral agent to
release a security interest in specific portions of the Collateral without the
consent of the requisite holders of the Senior Notes except to the extent that
(1) the net cash proceeds of the Collateral so released are used to pay amounts
owing under the Credit Documents, and, to the extent provided for in the
Collateral Agent Agreement, the Senior Notes, (2) the release of Collateral is
expressly permitted or required by the terms of the Credit Documents as such
agreements were in effect on December 22, 2000, (3) the release is required as a
matter of law or (4) the lenders under the Existing Credit Agreement and the New
Credit Agreement make a determination that maintaining such Collateral would be
materially adverse to all of the secured parties.
If the New Credit Agreement, the Existing Credit Agreement and the Other
Indebtedness are repaid in full in cash (and a secured credit facility is not
entered into to replace those facilities), holders of the Senior Notes would no
longer have any lien on the Collateral unless (1) the repayment of those
facilities was not then permitted by the terms of the indentures governing the
Senior Notes, (2) an event of default under the indentures governing the Senior
Notes, the Existing Credit Agreement or the New Credit Agreement exists at the
time of such repayment (including if BMCA is then the subject of bankruptcy
proceedings) or (3) the cash for such repayment was obtained through the
concurrent sale of assets of BMCA or its subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
We issued on July 5, 2000 notes with an aggregate principal amount of
$35,000,000 to BNY Capital Markets, Inc. The notes may be transferred in
integral multiples of $1,000. We may issue additional notes under the indenture
in the future provided that the aggregate principal amount of all outstanding
notes under the indenture does not exceed $150,000,000. The notes will mature on
September 18, 2003.
Interest on the notes accrues at the rate of 10 1/2% per annum and is
payable quarterly on January 1, April 1, July 1 and October 1, commencing on
April 1, 2001. We will make each interest payment to holders of record of the
notes on the immediately preceding December 15, March 15, June 15 and September
15. The interest rate on the notes is subject to increase by an additional 0.5%
per annum if the shelf registration statement of which this prospectus is a part
ceases to be effective prior to December 22, 2002 (or such later time as
provided in the registration rights agreement).
If we fail to pay interest on the notes, we will pay the unpaid interest,
plus, to the extent permitted by law, any interest payable on the unpaid
interest, to the persons who are registered holders of the notes on a subsequent
special record date. This special record date will be the fifteenth day before
the date fixed by us for the payment of unpaid interest, whether or not that day
is a business day. At least 15 days before the special record date, we will mail
or cause to be mailed to each registered holder and the trustee a notice that
states the special record date, the payment date and the amount of unpaid
interest to be paid.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
We are not obligated to set aside funds or to establish a separate account
for your benefit to make the required interest and principal payments on the
notes.
54
58
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a registered holder of the notes gives us wire transfer instructions, we
will make all principal, premium, if any, and interest payments on those notes
in accordance with those instructions. All other payments on the notes will be
made at the office or agency of the paying agent and registrar within the City
and State of New York unless we elect to make interest payments by check mailed
to the holders at their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to you.
TRANSFER AND EXCHANGE
You may transfer or exchange your notes in accordance with the indenture.
The registrar and the trustee may require you to furnish, among other things,
appropriate endorsements and transfer documents and we may require you to pay
any taxes and fees required by law or permitted by the indenture. We are not
required to transfer or exchange any note selected for redemption. We also are
not required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of the note
for all purposes.
REPURCHASE AT YOUR OPTION
Change of Control
If a Change of Control (as defined in the section entitled "Certain
Definitions" below) occurs, you will have the right to require us to repurchase
all or any part, equal to $1,000 or an integral multiple of $1,000, of your
notes on the date which is 25 business days after the date the Change of Control
notice is mailed or required to be mailed. In the Change of Control offer, we
will offer cash equal to 101% of the aggregate principal amount of notes
repurchased plus accrued and unpaid interest on the repurchased notes, if any,
to the payment date. Within ten business days following any Change of Control,
we will mail a notice to you describing the transaction or transactions that
constitute the Change of Control and offering to repurchase notes on the payment
date specified in the Change of Control notice. The procedures for this purchase
will be described in the notice. We will comply with all applicable federal and
state securities laws in connection with the repurchase of the notes as a result
of a Change of Control.
Each Change of Control notice will state:
(1) that the Change of Control offer is being made in accordance with
the indenture and that all notes tendered will be accepted for payment;
(2) the purchase price and the payment date;
(3) that any note not tendered will continue to accrue interest;
(4) that, unless we fail to pay for a note in the Change of Control
offer, any note accepted for payment will cease to accrue interest after
the payment date;
(5) that, if you elect to have a note purchased pursuant to a Change
of Control offer, you will be required to surrender the note in accordance
with the instructions set forth in the Change of Control notice;
(6) that we have the right, as described in the next paragraph, to
purchase any notes not tendered at the call price; and
(7) the circumstances and relevant facts regarding the Change of
Control.
55
59
If a Change of Control occurs, and holders do not require us to purchase
all outstanding notes as described above, we may purchase all, but not less than
all, of the outstanding notes at the following price:
(1) 100% of the principal amount of the notes then outstanding; plus
(2) accrued interest to the date of purchase; plus
(3) the Applicable Premium (as defined in the section entitled
"Certain Definitions" below).
We must give you notice of any purchase to be made as described in this
paragraph no later than 10 days after the payment date applicable to the Change
of Control giving rise to the purchase. We must purchase the notes within 30
days of the date of this notice.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
indenture. We urge you to read the indenture for the full definition of all of
these terms.
"Acquired Debt", with respect to any Person, means:
(1) Debt, including any then unutilized commitment under any revolving
working capital facility, of an entity, which entity is acquired by that
Person or any of its subsidiaries after July 5, 2000; provided that the
Debt, including any revolving working capital facility,
(A) is outstanding at the time of the acquisition of the acquired
entity,
(B) is not created in contemplation of the acquisition and
(C) is not, directly or indirectly, recourse, including by way of
set-off, to that Person or its subsidiaries or any of their respective
assets other than to the entity and its subsidiaries acquired and the
assets of the entity and its subsidiaries acquired;
(2) Debt of that Person that is not, directly or indirectly, recourse,
including by way of set-off, to that Person and its subsidiaries or any of
their respective assets other than to specified assets acquired by that
Person or its subsidiaries after July 5, 2000, which Debt is outstanding at
the time of the acquisition of those assets and is not created in
contemplation of the acquisition; or
(3) refinancings of Debt described in clause (1) or (2), provided that
the recourse with respect to the refinancing Debt is limited to the same
extent as the Debt refinanced.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of the Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have the correlative meanings. For the avoidance
of doubt, ISP and its Affiliates, so long as they are under common control with
us, will be deemed to be our Affiliates.
"Applicable Premium" means, with respect to any note, the greater of:
(1) 1.0% of the principal amount of the note; and
(2) the excess, if any, of:
(A) the present value of the remaining interest payments, principal
and future optional redemption premium of the note, discounted on a
semi-annual bond equivalent basis from the maturity date of the note to
the applicable date of purchase at a per annum interest rate equal to
the Treasury Yield for the purchase date plus 100 basis points, over
(B) the sum of the principal amount of the note plus accrued and
unpaid interest to the purchase date.
56
60
"Asset Sale" means, with respect to any Person, the sale, lease, assignment
or other disposition, including, without limitation, dispositions pursuant to
any consolidation, merger or sale and leaseback transaction, by that Person or
any of its subsidiaries in any single transaction or series of related
transactions which consists of the disposition of:
(1) any Capital Stock of any subsidiary; or
(2) all or substantially all of the properties and assets of any
division or line of business of that Person or any subsidiary of that
Person, other than of a Non-Recourse Subsidiary, to any other Person other
than our company or one of our subsidiaries.
For the purposes of this definition, the term "Asset Sale" will not
include:
(1) any sale, lease, assignment or other disposition of properties or
assets that is governed by the provisions described under "-- Limitation on
Merger or Sale of Assets" or
(2) any sale, lease, assignment or other disposition by a Person that
has outstanding senior debt securities all of which
(A) are rated BBB- or higher by S&P and have not been placed on
credit watch by S&P for a possible downgrade or
(B) are rated Baa3 or higher by Moody's and have not been placed on
credit watch by Moody's for a possible downgrade.
"Average Life" means, with respect to any Debt, the quotient obtained by
dividing
(1) the sum of the products of
(A) the number of years from the date of the transaction or event
giving rise to the need to calculate the Average Life of the Debt to the
date, or dates, of each successive scheduled principal payment of the
Debt multiplied by
(B) the amount of each principal payment by
(2) the sum of all principal payments.
"Capitalized Lease Obligation" means any rental obligation that, in
accordance with GAAP, is required to be classified and accounted for as a
capitalized lease. The amount of Debt represented by the rental obligation will
be the capitalized amount of the rental obligation determined in accordance with
GAAP and the stated maturity of the rental obligation will be the date of the
last payment of rent or any other amount due in respect of the rental
obligation.
"Capital Stock" of any Person means any and all shares, interests,
including partnership interests, warrants, rights, options or other interests,
participations or other equivalents of or interests in, however designated,
equity of such Person, including common or preferred stock, whether now
outstanding or issued after July 5, 2000, but excluding any debt securities
convertible into or exchangeable for such equity.
"Cash Equivalents" means:
(1) marketable direct obligations Issued by, or unconditionally
Guaranteed by, the United States government or Issued by any agency of the
United States government and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of their
acquisition;
(2) marketable direct obligations Issued by any state of the United
States or any political subdivision of any state or any public
instrumentality of any state maturing within one year from the date of
their acquisition and, at the time of their acquisition, having one of the
two highest ratings obtainable from either S&P or Moody's;
57
61
(3) commercial paper maturing no more than one year from the date of
its creation and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of their acquisition issued by any commercial bank
organized under the laws of the United States or any state in the United
States or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition of the certificates of deposit or
bankers' acceptances combined capital surplus of not less than
$500,000,000;
(5) Eurodollar time deposits maturing within one year from the date of
acquisition of the time deposits and issued or accepted by any commercial
bank having at the date of acquisition of the time deposits combined
capital and surplus of not less than $500,000,000;
(6) repurchase obligations with a term of not more than thirty days
for underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in clause
(4) above; and
(7) investments in money market funds having assets in excess of
$500,000,000 and which invest substantially all their assets in securities
of the types described in clauses (1) through (6) above.
"Change of Control" means the occurrence of any of the following events:
(1) prior to the time that at least 15% of our then outstanding voting
stock or the then outstanding voting stock of Parent or any subsidiary of
Parent of which we are also a subsidiary is publicly traded on a national
securities exchange or in the NASDAQ national market system, the Permitted
Holders cease to be the "beneficial owner", as defined in Rules 13d-3 and
13d-5 under the Exchange Act, directly or indirectly, of majority voting
power of our voting stock, whether as a result of issuance of our
securities or securities of any of our Affiliates, any merger,
consolidation, liquidation or dissolution of our company or any of our
Affiliates, any direct or indirect transfer of securities by any Permitted
Holder or by Parent or any of its subsidiaries or otherwise. For purposes
of this clause (1) and clause (2) below, the Permitted Holders will be
deemed to beneficially own any voting stock of a corporation held by any
other corporation so long as the Permitted Holders beneficially own,
directly or indirectly, a majority of the voting stock of the parent
corporation;
(2) any "Person", as that term is used in sections 13(d) and 14(d) of
the Exchange Act, other than one or more Permitted Holders, is or becomes
the beneficial owner, as defined in clause (1) above, except that a Person
will be deemed to have "beneficial ownership" of all shares that the Person
has the right to acquire, whether the right is exercisable immediately or
only after the passage of time, directly or indirectly, of more than 35% of
our voting stock or the voting stock of Parent; provided that the Permitted
Holders beneficially own, as defined in clause (1) above, directly or
indirectly, in the aggregate a lesser percentage of our voting stock or the
voting stock of Parent than the other Person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of our Board of Directors or the Board of Directors of
Parent; or
(3) during any period of two consecutive years, individuals who at the
beginning of the period constituted our Board of Directors, together with
any new directors whose election by that Board or whose nomination for
election by our shareholders including predecessors, was approved by a vote
of a majority of our directors then still in office who were either
directors at the beginning of the period or whose election or nomination
for election was previously approved, cease for any reason to constitute a
majority of our Board of Directors, then in office.
"Common Stock" of any Person means any and all shares, interests,
participations, or other equivalents, however designated, of the Person's common
stock whether now outstanding or issued after July 5, 2000.
"Collateral Agent Agreement" means the collateral agent agreement, dated as
of December 4, 2000, among the Company, the subsidiary guarantors identified
therein, The Chase Manhattan Bank, Fleet National Bank, The Bank of New York, as
collateral agent, and The Bank of New York, as indenture
58
62
trustee, and The Bank of New York, as administrative agent under the Credit
Agreement and the New Credit Agreement, as the same may be amended, supplemented
or otherwise modified from time to time.
"Consent Solicitation Statement" means that certain consent solicitation
statement of the Company and Building Materials Manufacturing Corporation dated
December 6, 2000, as supplemented on December 20, 2000.
"Consolidated EBITDA Coverage Ratio" with respect to any Person for any
period means the ratio of:
(1) the aggregate amount of EBITDA of that Person for that period to
(2) Consolidated Interest Expense of that Person for that period;
provided, that:
(A) if the Person or any subsidiary of the Person has Issued any
Debt or Capital Stock since the beginning of the period that remains
outstanding on the date the calculation is made or if the transaction
giving rise to the need to calculate the Consolidated EBITDA Coverage
Ratio is an Issuance of Debt or Capital Stock, or both, EBITDA and
Consolidated Interest Expense for that period will be calculated after
giving effect, on a pro forma basis, to the issuance of that Debt or
Capital Stock as if that Debt or Capital Stock had been Issued on the
first day of that period and the discharge of any other Debt or Capital
Stock refinanced or otherwise discharged with the proceeds of the new
Debt or Capital Stock as if the discharge had occurred on the first day
of that period;
(B) if since the beginning of the period the Person or any
subsidiary of the Person will have made any asset sales out of the
ordinary course of business, EBITDA for that period will be reduced by
an amount equal to the EBITDA, if positive, directly attributable to the
assets which are the subject of the asset sale for that period, or
increased by an amount equal to the EBITDA, if negative, directly
attributable to the assets for that period and Consolidated Interest
Expense for that period will be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt or
Capital Stock of that Person or any subsidiary of that Person refinanced
or otherwise discharged with respect to that Person and its continuing
subsidiaries, including as a result of the assumption of the Debt or
Capital Stock by the purchaser of the assets, provided that the Person
or any of its subsidiaries is no longer liable for that Debt or Capital
Stock, in connection with that asset sale for that period, or if the
Capital Stock of any subsidiary of the Person is sold, the Consolidated
Interest Expense for that period directly attributable to the Debt of
the subsidiary to the extent the Person and its continuing subsidiaries
are no longer liable for the Debt after the sale; and
(C) if since the beginning of the period that Person or any
subsidiary of that Person, by merger or otherwise, shall have made an
Investment in any subsidiary of that Person, or any Person which becomes
a subsidiary of that Person, or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing
a calculation to be made under this clause (C), which constitutes all of
an operating unit of a business, EBITDA and Consolidated Interest
Expense for that period shall be calculated after giving pro forma
effect thereto, as if that Investment or acquisition occurred on the
first day of the period.
For purposes of this definition, pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the Person
with respect to which the calculation is being made. If any Debt or Capital
Stock bears a floating rate of interest and is being given pro forma effect, the
interest on the Debt and the dividends on the Capital Stock shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period.
59
63
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the sum of:
(1) the interest expense of that Person and its consolidated
subsidiaries, other than interest expense related to Non-Recourse Debt, for
the period as determined in accordance with GAAP consistently applied, plus
(2) the amount of all dividends paid or accrued on any series of
Preferred Stock, other than non-Redeemable Stock, of that Person and its
subsidiaries, other than Non-Recourse Subsidiaries.
"Consolidated Net Income" or "Consolidated Net Loss" means, with respect to
any Person, for any period, the consolidated net income or net loss of that
Person and its consolidated subsidiaries for the period as determined in
accordance with GAAP, adjusted, to the extent included in calculating the net
income or net loss, by excluding:
(1) all extraordinary gains or losses in the period;
(2) net income or net loss of any other Person attributable to any
period prior to the date of combination of that other Person with that
Person or any of its subsidiaries on a "pooling of interests" basis;
(3) net gains or net losses in respect of dispositions of assets by
that Person or any of its subsidiaries, including pursuant to a
sale-and-leaseback arrangement, other than in the ordinary course of
business;
(4) the net income or net loss of any subsidiary of that Person to the
extent that the declaration of dividends or distributions by that
subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that subsidiary or its shareholders;
(5) the net income or net loss of any other Person that is not a
subsidiary of the first Person with respect to which Consolidated Net
Income is being calculated and in which any other Person, other than the
first Person and/or any of its subsidiaries, has an equity interest or of a
Non-Recourse Subsidiary of the first Person, except to the extent of the
amount of dividends or other distributions actually paid or made to the
first Person or any of its subsidiaries by the other Person during the
period, subject, in the case of a dividend or distribution received by a
subsidiary of the first Person, to the limitations contained in clause (4)
above;
(6) any interest income resulting from loans or investments in
Affiliates, other than cash interest income actually received;
(7) any reserve established at the time our Affiliates first acquired
U.S. Intec; and
(8) the cumulative effect of a change in accounting principles.
In determining Consolidated Net Income or Consolidated Net Loss, gains or
losses resulting from the early retirement, extinguishment or refinancing of
indebtedness for money borrowed, including any associated fees and expenses
shall be deducted or added back, respectively.
"Consolidated Net Worth" of any Person means, at any date, all amounts that
would, in conformity with GAAP, be included under shareholders' equity on a
consolidated balance sheet of the Person as at that date less, to the extent
otherwise included, any amounts attributable to Redeemable Stock.
"Credit Agreement" means the amended and restated Credit Agreement, dated
as of December 4, 2000, among the Company, 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
Administrative Agent, as the same may be amended, supplemented, refinanced
(including by the DIP Facility) or otherwise modified from time to time.
60
64
"Debt" of any Person means, without duplication:
(1) the principal in respect of:
(A) indebtedness of the Person for money borrowed; and
(B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Person is responsible
or liable, other than those payable to government agencies to defer the
payment of workers' compensation liabilities, taxes, assessments or
other obligations, and provided in the ordinary course of business of
the Person;
(2) all Capital Lease Obligations of the Person;
(3) all obligations of the Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of the Person
and all obligations of the Person under any title retention agreement, but
excluding trade accounts payable and other accrued current liabilities
arising in the ordinary course of business;
(4) all obligations of the Person for the reimbursement of any obligor
on any letter of credit, bankers' acceptance or similar credit transaction.
This clause does not include obligations with respect to letters of credit
securing obligations, other than obligations described in (1) through (3)
above, entered into in the ordinary course of business of the Person to the
extent the letters of credit are not drawn upon or, if and to the extent
drawn upon, the drawing is reimbursed no later than the third business day
following receipt by the Person of a demand for reimbursement following
payment on the letter of credit;
(5) the amount of all obligations of the Person with respect to the
redemption, repayment or other repurchase of any Preferred Stock, but
excluding any accrued dividends;
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the payment of
which, in either case, the Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including guarantees of
those obligations and dividends; and
(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any lien on any property or asset of that
Person whether or not the obligation is assumed by that Person, the amount
of the obligation being deemed to be the lesser of the value of that
property or assets or the amount of the obligation secured.
For purposes of the "Limitation on Asset Sales" covenant our Debt or Debt
of any of our subsidiaries will include the provision for existing or future
asbestos-related bodily injury claims, as set forth in our then most recent
consolidated financial statement.
"DIP Facility" shall have the meaning ascribed to such term in the New
Credit Agreement.
"EBITDA" with respect to any Person for any period means the Consolidated
Net Income of that Person for the period, adjusted to the extent deducted in
calculating the Consolidated Net Income by adding back, without duplication:
(1) income tax expense of that Person and its subsidiaries accrued in
accordance with GAAP for the period, other than income taxes attributable
to extraordinary items or other items excluded from the definition of
Consolidated Net Income;
(2) Consolidated Interest Expense of that Person for the period;
(3) depreciation expense of that Person for the period;
(4) amortization expense of that Person for the period; and
61
65
(5) minority interest in any non Wholly-Owned Recourse Subsidiary that
is otherwise consolidated in the financial statements of that Person, but
only so long as the subsidiary is consolidated with that Person for the
period for U.S. federal income tax purposes.
"Granules Contracts" means (1) the supply agreement, dated as of January 1,
1995 between us and ISP Technologies, Inc., as amended through July 5, 2000 and
(2) the letter dated November 9, 1995 from ISP Mineral Products Inc. to U.S.
Intec.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
the Person directly or indirectly guaranteeing any Debt or other obligation,
contingent or otherwise, of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of the Person:
(1) to purchase or pay, or advance or supply funds for the purchase or
payment of, that Debt or other obligation of the other Person, whether
arising by virtue of participation arrangements, by agreement to keep well,
to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise; or
(2) entered into for the purpose of assuring the obligee of that Debt
or other obligation in any other manner of the payment of the obligation or
to protect the obligee against loss in respect of the obligation, in whole
or in part;
provided, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Investment" means any direct or indirect advance, loan or other extension
of credit or capital contribution to, by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others, or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities Issued by, any other Person. An Investment does
not include advances or loans to customers in the ordinary course of business,
which are recorded in accordance with GAAP, at the time made as accounts
receivable on the balance sheet of the Person making the advances or loans.
"ISP" means International Specialty Products Inc., a Delaware corporation,
and its successors.
"Issue" means issue, assume, Guarantee, incur or otherwise become liable
for; provided that any Debt or Capital Stock of a Person existing at the time a
Person becomes a subsidiary of another Person, whether by merger, consolidation,
acquisition or otherwise, shall be deemed to be issued by the subsidiary at the
time it becomes a subsidiary of the other Person.
"Management Agreement" means the amended and restated management agreement,
dated as of January 1, 1999, among GAF Corporation, G-I Holdings Inc., G
Industries Corp., Merick Inc., GAF Fiberglass Corporation, ISP, GAF Building
Materials Corporation, GAF Broadcasting Company, Inc., us and ISP Opco Holdings
Inc., as amended through July 5, 2000.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Assets" means assets, singly or in the aggregate, the book or
fair market value of which equals 5% or more of our consolidated tangible
assets, as set forth on our most recently publicly available balance sheet.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by us or any of our subsidiaries from the Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to the Asset
Sale, including, without limitation, legal, accounting and investment
banking fees and sales commissions;
(2) taxes paid or payable
62
66
(A) including, without limitation, income taxes reasonably
estimated to be actually payable as a result of any disposition of
property within two years of the date of disposition, including under
any tax sharing arrangements and
(B) after taking into account any reduction in tax liability due to
available tax credits or deductions applicable to the transaction;
(3) a reasonable reserve for the after-tax cost of any indemnification
obligations, fixed and/or contingent, attributable to seller's indemnities
to the purchaser undertaken by us or any of our subsidiaries in connection
with the Asset Sale; and
(4) repayment of Debt that is required to be repaid in connection with
the Asset Sale, under the agreements governing the Debt or Asset Sale.
"New Credit Agreement" means the secured credit agreement, dated as of
December 4, 2000, among the Company, the Lenders party thereto, and The Bank of
New York, as Swing Line Lender and as Administrative Agent, as the same may be
amended, supplemented, refinanced (including by the DIP Facility) or otherwise
modified from time to time.
"Non-Recourse Debt" of any Person means Debt or the portion of Debt:
(1) as to which neither Parent nor any of its subsidiaries, other than
a Non-Recourse Subsidiary:
(A) provides credit support, including any undertaking, agreement
or instrument which would constitute Debt;
(B) is directly or indirectly liable; or
(C) constitutes the lender; and
(2) no default with respect to which, including any rights which the
holders of the Debt may have to take enforcement action against the assets
of a Non-Recourse Subsidiary, would permit, upon notice, lapse of time or
both, any holder of any other Debt of the Person or its subsidiaries, other
than Non-Recourse Subsidiaries, to declare a default on the other Debt or
cause the payment of the other Debt to be accelerated or payable prior to
its stated maturity.
"Non-Recourse Subsidiary" of any Person means a subsidiary:
(1) which has been designated as a Non-Recourse Subsidiary;
(2) which has not acquired any assets directly or indirectly from
Parent or any of its subsidiaries other than at fair market value,
including by the receipt of Capital Stock of the Non-Recourse Subsidiary;
provided that, if any acquisition or series of related acquisitions
involves assets having a value in excess of $2,000,000, the acquisition or
series of related acquisitions shall be approved by a majority of our Board
of Directors in a board resolution which shall set forth that the
acquisitions are being, or have been, made at fair market value; and
(3) which has no Debt other than Non-Recourse Debt.
"Other Indebtedness" means the obligations under that certain promissory
note issued by BMCA to The Chase Manhattan Bank dated as of the effective date
of the New Credit Agreement which was issued to replace the obligations of BMCA
under that certain platinum bullion lease effective December 1, 2000 (and any
subsequent confirmations of such lease entered into prior to the effective date
of the New Credit Agreement) and approximately $3.5 million of obligations under
a standby letter of credit, dated as of June 4, 1999, issued by Fleet National
Bank in connection with BMCA's Shafter, California facility, as each may be
amended, supplemented, refinanced (including by the DIP Facility) or otherwise
modified from time to time and any hedging obligations entered into with
counterparties that are the lenders or affiliates of the lenders under the New
Credit Agreement and the Credit Agreement.
"Parent" means GAF Corporation so long as it owns, and any other Person
which acquires or owns, directly or indirectly, 80% or more of our voting stock.
63
67
"Permitted Holders" 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 Person controlled, directly or indirectly, by Samuel J. Heyman
or his heirs, administrators or executors.
"Permitted Lien" means:
(1) liens for taxes, assessments and governmental charges to the
extent not required to be paid under the indenture;
(2) statutory liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like liens arising in
the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by an appropriate process of
law, and for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made;
(3) pledges or deposits in the ordinary course of business to secure
lease obligations or non-delinquent obligations under workers'
compensation, unemployment insurance or similar legislation;
(4) liens to secure the performance of public statutory obligations
that are not delinquent, appeal bonds, performance bonds or other
obligations of a like nature, other than for borrowed money;
(5) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with our business and the businesses of
our subsidiaries, taken as a whole;
(6) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in
connection with the importation of goods;
(7) judgment and attachment liens not giving rise to a default or
event of default;
(8) leases or subleases granted to others not interfering in any
material respect with our business and the business of our subsidiaries,
taken as a whole;
(9) liens encumbering deposits made in the ordinary course of business
to secure non-delinquent obligations arising from statutory, regulatory,
contractual or warranty requirements of us or any of our subsidiaries for
which a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made;
(10) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating other than any
interest or title resulting from or arising out of default by us or any of
our subsidiaries of our obligations under any lease which is material;
(11) liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases or conditional sales
of personal property that are otherwise permitted under the indenture and
under which we or any of our subsidiaries is lessee;
(12) broker's liens securing the payment of commissions and management
fees in the ordinary course of business;
(13) liens on cash and cash equivalents posted as margin pursuant to
the requirements of any bona fide hedge agreement relating to interest
rates, foreign exchange or commodities listed on public exchanges, but only
to the extent these liens are required from customers generally, regardless
of creditworthiness, in accordance with customary market practice;
(14) liens on cash collateralizing reimbursement obligations in
respect of letters of credit issued for our account or the account of any
of our subsidiaries in the ordinary course of business, other than letters
of credit issued as credit support for any Debt;
64
68
(15) liens arising in respect of accounts receivable arising as a
result of non-recourse sales of accounts receivable; and
(16) liens on stock or assets of any Non-Recourse Subsidiary securing
Debt owing by the Non-Recourse Subsidiary.
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes, however designated, which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of the corporation,
over shares of Capital Stock of any other class of the corporation. Preferred
Stock of any Person shall include Redeemable Stock of the Person.
"Private Exchange Notes" mean a like principal amount of our debt
securities identical in all material respects to the notes that may be issued to
the initial purchaser under the circumstances set forth in the registration
rights agreement.
"Receivables Financing Agreement" means the Pooling and Servicing
Agreement, dated as of November 1, 1996, among us, BMCA Receivables Corporation
and The Bank of New York, as trustee, and related agreements, as amended or
supplemented.
"Recourse Subsidiaries" of any Person means all subsidiaries of that Person
other than Non-Recourse Subsidiaries of that Person.
"Redeemable Stock" means, with respect to any Person, Capital Stock of that
Person that by its terms or otherwise
(1) is required, directly or indirectly, to be redeemed on or prior to
the ninetieth day after the stated maturity of the notes,
(2) is redeemable or puttable, directly or indirectly, at the option
of the holder at any time on or prior to the ninetieth day after the stated
maturity of the notes, or
(3) is exchangeable or convertible into another security, other than a
security that is not itself Redeemable Stock.
"Restricted Investment" means, with respect to us or any of our
subsidiaries, an Investment in one of our Affiliates; provided, that the
following shall not be Restricted Investments:
(1) Investments in our company or any of our Recourse Subsidiaries;
(2) Investments in Unrestricted Affiliates; and
(3) Investments in Affiliates that become, as a result of the
Investment, Recourse Subsidiaries.
"Restricted Payment" means
(1) the declaration or making of any dividend or of any other payment
or distribution, other than dividends, payments or distributions payable
solely in shares of our Capital Stock other than Redeemable Stock, on or
with respect to our Capital Stock, other than Redeemable Stock; and
(2) any payment on account of the purchase, redemption, retirement or
other acquisition for value of our Capital Stock, other than Redeemable
Stock.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under the
Securities Act.
65
69
"Significant Subsidiary" means
(1) any of our subsidiaries, other than a Non-Recourse Subsidiary,
which at the time of determination either:
(A) had assets which, as of the date of our most recent quarterly
consolidated balance sheet, constituted at least 5% of our total assets
on a consolidated basis as of that date, in each case determined in
accordance with GAAP; or
(B) had revenues for the 12-month period ending on the date of our
most recent quarterly consolidated statement of income which constituted
at least 5% of our total revenues on a consolidated basis for that
period; or
(2) any of our subsidiaries, other than a Non-Recourse Subsidiary,
which, if merged with all of our "defaulting subsidiaries" (as that term is
defined in the indenture), would at the time of determination either:
(A) have had assets which, as of the date of our most recent
quarterly consolidated balance sheet, would have constituted at least
10% of our total assets on a consolidated basis as of that date; or
(B) have had revenues for the 12-month period ending on the date of
our most recent quarterly consolidated statement of income which would
have constituted at least 10% of our total revenues on a consolidated
basis for that period, each determination being made in accordance with
GAAP.
"Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity, as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
applicable redemption date or, if the Statistical Release is no longer
published, any publicly available source of similar data, most nearly equal to
the then remaining Average Life of the notes; provided that, if the Average Life
of the notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Yield shall be
obtained by linear interpolation calculated to the nearest one-twelfth of a year
from the weekly average yields of United States Treasury securities for which
yields are given, except that if the average life of the notes is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Affiliate" means a Person, other than one of our subsidiaries
except a Non-Recourse Subsidiary, controlled by, or under common control with,
us in which no Affiliate of ours, other than (1) our company or a Wholly-Owned
Recourse Subsidiary, (2) any of our directors or officers or director or officer
of any of our subsidiaries, whose primary employment is by us or any of our
subsidiaries other than a Non-Recourse Subsidiary, except for Permitted Holders
or members of their immediate family and (3) another Unrestricted Affiliate, has
an Investment.
"U.S. Government Obligations" means money or direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"Wholly-Owned Recourse Subsidiary" means a subsidiary of a Person, other
than a Non-Recourse Subsidiary, all the Capital Stock of which, other than
directors' qualifying shares, is owned by that Person or another Wholly-Owned
Recourse Subsidiary of that Person.
"Wholly-Owned Subsidiary" means a subsidiary all the Capital Stock of
which, other than directors' qualifying shares, is owned by the applicable
corporation or another Wholly-Owned Subsidiary of the applicable corporation.
66
70
MATERIAL OPERATING RESTRICTIONS
Summary
In general, subject to several exceptions, the indenture will limit, among
other things:
- the incurrence of additional debt by us and certain of our subsidiaries
unless certain leverage ratios are met or if the debt is permitted by the
terms of the Credit Agreement and the New Credit Agreement as each such
agreement was in effect on December 22, 2000;
- the issuance of preferred stock by us and our subsidiaries;
- the making of investments in other persons in excess of certain maximum
aggregate dollar amounts;
- until December 22, 2003, the payment of dividends on our capital stock
unless the payment of the dividends is permitted by the terms of the
Credit Agreement and the New Credit Agreement as each such agreement was
in effect on December 22, 2000;
- after December 22, 2003, the making of restricted payments in an amount
exceeding $15 million per year;
- the creation of liens unless the notes are equally and ratably secured by
that lien;
- transactions with affiliates, other than transactions permitted by other
sections of the indenture, unless those transactions are on arms' length
terms and approved by our Board of Directors and, in transactions that
exceed a specified dollar amount or if each member of our Board of
Directors has a personal stake in the transactions, a nationally
recognized investment banking firm has given a written opinion regarding
the fairness of the transaction;
- the ability of any of our subsidiaries to create restrictions on the
subsidiary's ability to pay dividends or debt owed to us or any of our
other subsidiaries;
- sales of assets, unless the sales are for fair market value,
substantially for cash, and, in certain circumstances, the proceeds from
the sales are used to prepay debt, including the notes, or to invest in
additional assets; and
- consolidations, mergers and transfers of all or substantially all of our
assets, unless the successor entity expressly agrees to assume our
obligations under the indenture, no event of default has occurred or is
continuing, additional debt could be incurred and the surviving person
has a net worth not less than ours.
The foregoing summary discusses only material provisions of some of the
covenants applicable to the notes. We urge you to read the indenture and the
more detailed description of these terms set forth below.
The indenture contains, among others, the following covenants:
Limitation on Debt. (a) The indenture provides that we shall not, and
shall not permit any of our subsidiaries to Issue, directly or indirectly, any
Debt unless, at the time of the Issuance and after giving effect to the
Issuance:
(1) no default or event of default shall have occurred and be
continuing; and
(2) our Consolidated EBITDA Coverage Ratio for our most recently
completed four consecutive fiscal quarters ending at least 45 days prior to
the date the Debt is Issued is at least 2.00 to 1.00.
(b) Even if we do not meet the above conditions, the indenture provides
that we may Issue the following Debt:
(1) The notes (other than the additional notes), the Private Exchange
Notes and the guarantees thereof by the guarantors;
(2) (A) Debt Issued by us to, and held by, one of our Wholly-Owned
Recourse Subsidiaries and (B) Debt of one of our Recourse Subsidiaries
Issued to, and held by, us or one of our Wholly-
67
71
Owned Recourse Subsidiaries; provided that any subsequent transfer of this
Debt, other than to us or to one of our Wholly-Owned Recourse Subsidiaries,
shall be deemed, in each case, to constitute the Issuance of this Debt by
us or the Subsidiary;
(3) Debt the proceeds of which are used by us to acquire assets;
provided, that, after giving effect to the Issuance of this Debt that
otherwise complies with this clause (3), the aggregate amount of all Debt
then outstanding at any time under this clause (3), including all
refinancings of debt then outstanding, shall not at any time exceed
$80,000,000;
(4) Acquired Debt;
(5) (A) Debt outstanding on July 5, 2000, including our 7 3/4% Senior
Notes due 2005, our 8 5/8% Senior Notes due 2006, our 8% Senior Notes due
2007 and our 8% Senior Notes due 2008, and (B) Debt Issued to refinance any
Debt permitted by paragraph (a) above, this clause (5) or by clauses (1),
(3), (7), (9) and (10); provided, that, in the case of a refinancing:
(a) the amount of the Debt Issued shall not exceed the principal
amount or the accreted value, in the case of Debt Issued at a discount,
of the Debt refinanced plus, in each case, the reasonable costs incurred
by the issuer in connection with the refinancing;
(b) the Average Life and Stated Maturity of the Debt Issued shall
equal or exceed that of the Debt refinanced;
(c) the Debt Issued shall not rank senior in right of payment to
the Debt being refinanced;
(d) if the Debt being refinanced does not bear interest in cash
prior to a specified date, the refinancing Debt shall not bear interest
in cash prior to the specified date;
(e) if the Debt being refinanced is Debt permitted by clause (3)
above, the refinancing Debt is not secured by any assets not securing
the Debt refinanced or securing any improvements, additions or
replacements of those assets; and
(f) the obligors with respect to the refinancing Debt shall not
include any Persons who were not obligors, including predecessors of
those Persons, with respect to the Debt being refinanced;
(6) Non-Recourse Debt of one of our Non-Recourse Subsidiaries and
Guarantees of Non-Recourse Debt of Non-Recourse Subsidiaries which
Guarantees are recourse only to the stock of the Non-Recourse Subsidiaries;
(7) Debt under the Credit Agreement in an aggregate principal amount
not to exceed $110,000,000;
(8) Debt secured by receivables, including to refinance the
Receivables Financing Agreement, provided that the Debt does not exceed 85%
of the face amount of the receivables;
(9) Debt represented by the Other Indebtedness as such agreements were
in effect on the effective date of the New Credit Agreement;
(10) Debt represented by the New Credit Agreement in an aggregate
principal amount not to exceed $100,000,000;
(11) Debt permitted to be incurred under the Credit Agreement or the
New Credit Agreement as each such agreement was in effect on the effective
date thereof; and
(12) beginning on December 22, 2001, Debt, other than Debt identified
in clauses (1) through (11) above, in an aggregate principal amount
outstanding at any one time not to exceed $30,000,000.
Limitation on Preferred Stock. The indenture provides that we may, and our
subsidiaries may, issue the following Preferred Stock:
(1) Preferred Stock of our company or Preferred Stock of any of our
subsidiaries issued to and held by us or one of our Wholly-Owned Recourse
Subsidiaries; provided that any subsequent transfer
68
72
of that Preferred Stock, other than to us or to one of our Wholly-Owned
Recourse Subsidiaries, or if the Wholly-Owned Recourse Subsidiary ceases to
be one of our Wholly-Owned Recourse Subsidiaries shall be deemed, in each
case, to constitute the Issuance of that Preferred Stock by us or the
subsidiary;
(2) Preferred Stock, other than Preferred Stock described in clause
(1) but including the Preferred Stock referred to in the proviso to clause
(1) above; provided that the liquidation value of any Preferred Stock
issued pursuant to this clause (2) shall constitute Debt for purposes of
this covenant and dividends on such Preferred Stock shall be included in
determining our Consolidated Interest Expense for purposes of calculating
our Consolidated EBITDA Coverage Ratio under paragraph (a) of "Limitation
on Debt;" and
(3) Preferred Stock of our company, other than Redeemable Stock.
Guarantees. To the extent we or any of our subsidiaries Guarantee any of
our Debt or Debt of any other subsidiary, the Guarantee and the Debt will be
deemed to be the same Debt and only the amount of the Debt will be deemed to be
outstanding. If we or any of our subsidiaries Guarantee any Debt of a Person
that, subsequent to the Issuance of the Guarantee, becomes one of our
subsidiaries, the Guarantee and the Debt Guaranteed shall be deemed to be the
same Debt, which shall be deemed to have been Issued when the Guarantee was
Issued and shall be deemed to be permitted to the extent the Guarantee was
permitted when Issued.
Limitation on Restricted Payments and Restricted Investments. (a) Subject
to clause (c) below, so long as no default or an event of default shall have
occurred and be continuing, we may make, and our subsidiaries may make, directly
or indirectly, any Restricted Payment or Restricted Investment so long as, at
the time of the Restricted Payment or Restricted Investment and immediately
after giving effect to the Restricted Payment or Restricted Investment, the
aggregate amount of Restricted Payments made since July 5, 2000 and the
aggregate amount of Restricted Investments made since July 5, 2000 and then
outstanding shall not exceed the sum of:
(1) 75% of our cumulative Consolidated Net Income, or minus 100% of
our cumulative Consolidated Net Loss, accrued during the period beginning
April 3, 1994 and ending on the last day of the fiscal quarter for which
financial information has been made publicly available by us but ending no
more than 135 days prior to the date of the Restricted Payment or
Restricted Investment, treating the period as a single accounting period;
(2) 100% of the net cash proceeds, including the fair market value of
property other than cash as determined by our Board of Directors in good
faith, as evidenced by a board resolution, received by us from any Person,
other than one of our subsidiaries, from the Issuance and sale subsequent
to April 3, 1994 of our Capital Stock, other than Redeemable Stock, or as a
capital contribution; provided that, if the value of the non-cash
contribution is in excess of $10,000,000, we shall have received the
written opinion of a nationally recognized investment banking firm that the
terms thereof, from a financial point of view, are fair to our shareholders
or the shareholders of the subsidiary, in their capacity as shareholders,
the determination as to the value of any non-cash consideration referred to
in this clause (2) to be made by the investment banking firm, and the
opinion shall have been delivered to the trustee;
(3) 100% of the net cash proceeds received by us from the exercise of
options or warrants on our Capital Stock, other than Redeemable Stock,
since April 3, 1994;
(4) 100% of the net cash proceeds received by us from the conversion
into Capital Stock, other than Redeemable Stock, of convertible Debt or
convertible Preferred Stock issued and sold, other than to a subsidiary of
ours, since April 3, 1994; and
(5) $60,000,000.
The amount expended for purposes of calculating the aggregate amount of
Restricted Payments and Restricted Investments, if other than in cash, shall be
the fair market value of the property as determined
69
73
by our Board of Directors in good faith as of the date of payment or investment.
Our designation, or the designation by any of our subsidiaries, of a subsidiary
as a Non-Recourse Subsidiary shall be deemed to be the making of a Restricted
Investment by us in an amount equal to the outstanding Investments made by us
and our subsidiaries in the Person being designated a Non-Recourse Subsidiary at
the time of the designation.
(b) Subject to clause (c) below, as long as no default or event of default
shall have occurred and be continuing, the indenture provides that,
notwithstanding the limitations in clause (a) above, we can make the following
payments and investments:
(1) the making of any Restricted Payment or Restricted Investment
within 60 days after (A) the date of declaration of the Restricted Payment
or Restricted Investment or (B) the making of a binding commitment in
respect of the Restricted Payment or Restricted Investment; provided that
at the date of declaration or commitment the Restricted Payment or
Restricted Investment complied with paragraph (a) of this covenant;
(2) any Restricted Payment or Restricted Investment made out of the
net cash proceeds we received from the substantially concurrent sale of our
Common Stock, other than to a subsidiary of ours; provided that the net
cash proceeds utilized shall not be included in paragraph (a) in
determining the amount of Restricted Payments or Restricted Investments we
could make under paragraph (a) of this covenant;
(3) cumulative Investments in Non-Recourse Subsidiaries not in excess
of $50,000,000 in the aggregate determined as of the date of the
Investment, the amount expended, if other than cash, to be determined by
our Board of Directors, as evidenced by a board resolution; and
(4) repurchases of our Capital Stock, in each case, from our employees
or employees of any of our subsidiaries, other than any Permitted Holder;
provided, however, that the aggregate amount of Restricted Payments made
under this clause shall not exceed $1,500,000 in any fiscal year.
Restricted Payments or Restricted Investments made pursuant to clause (2),
(3) or (4) shall not be deducted in determining the amount of Restricted
Payments or Restricted Investments made or then outstanding under paragraph (a)
of this covenant.
(c) Notwithstanding the foregoing, until December 22, 2003, we will be
permitted to make a Restricted Payment to the extent, and only to the extent,
that such payment is permitted by the terms of the Credit Agreement or the New
Credit Agreement as each such agreement was in effect on December 22, 2000.
Following December 22, 2003, we will only be permitted to make Restricted
Payments pursuant to paragraph (a) above in an aggregate principal amount not to
exceed $15,000,000 in any fiscal year.
Limitation on Liens. The indenture provides that we shall not, and our
subsidiaries shall not, directly or indirectly, incur or suffer to exist the
following liens upon their respective property or assets whether owned on July
5, 2000 or acquired after that date, or on any income or profits from, those
assets unless the notes are equally and ratably secured by such lien; provided
that if the Debt secured by such lien is subordinate or junior in right of
payment to the notes then the lien securing such Debt shall be subordinate or
junior in priority to the lien securing the notes at least to the same extent as
such Debt is subordinate or junior to the notes.
The foregoing restrictions shall not apply to:
(1) liens existing on July 5, 2000;
(2) Permitted Liens;
70
74
(3) Purchase money liens on our assets or improvements or additions to
those assets existing or created within 180 days after the time of
acquisition of or improvements or additions to those assets, or
replacements of those assets; provided that
(A) the acquisition, improvement or addition is otherwise permitted
by the indenture,
(B) the principal amount of Debt, including Debt in respect of
Capitalized Lease Obligations, secured by each lien on each asset shall
not exceed the cost, including all Debt secured thereby, whether or not
assumed, of the item subject thereto, and the liens shall attach solely
to the particular item of property so acquired, improved or added and
any additions or accessions to the assets, or replacements of the
assets, and
(C) the aggregate amount of Debt secured by liens permitted by this
clause (3) shall not at any time exceed $40,000,000;
(4) liens to secure refinancing of any Debt secured by liens described
in clauses (1) through (3) above and (5) below; provided that
(A) refinancing does not increase the principal amount of Debt
being refinanced and
(B) the lien of the refinancing Debt does not extend to any asset
not securing the Debt being refinanced or improvements or additions to
the assets, or replacements of the assets;
(5) liens securing Acquired Debt; provided that
(A) any lien secured the Acquired Debt at the time of the
incurrence of the Acquired Debt and the lien and Acquired Debt were not
incurred by us or any of our subsidiaries or by the Person being
acquired or from whom the assets were acquired in connection with, or in
anticipation of, the incurrence of the Acquired Debt by us or by one of
our subsidiaries and
(B) any lien does not extend to or cover any property or assets of
ours or of any of our subsidiaries other than the property or assets
that secured the Acquired Debt prior to the time the Debt became
Acquired Debt of ours or of one of our subsidiaries;
(6) liens on receivables securing Debt permitted by clause (b)(8)
under the "Limitation on Debt" covenant;
(7) liens securing intercompany Debt permitted by paragraph (b)(2)
under the "Limitation on Debt" covenant;
(8) liens securing the Credit Agreement, the New Credit Agreement and
the Other Indebtedness (including Liens to be granted in connection with
any Refinancing of the Credit Agreement, the New Credit Agreement and the
Other Indebtedness);
(9) liens permitted under the Credit Agreement or the New Credit
Agreement as each such agreement was in effect on the effective date of the
New Credit Agreement; and
(10) beginning on December 22, 2001, liens on our assets and assets of
our subsidiaries in addition to those referred to in clauses (1) through
(9), provided that the liens only secure our Debt and Debt of our
subsidiaries in an aggregate amount not to exceed at any one time
outstanding $30,000,000.
Limitation on Transactions with Affiliates.
(a) The indenture provides that we shall not enter, and our subsidiaries
shall not enter, directly or indirectly, into any transaction or series of
related transactions, including, without limitation, any loan,
71
75
advance or investment or any purchase, sale, lease or exchange of property or
the rendering of any service, with any of our Affiliates, other than the
following transactions:
(1) the making of a Restricted Payment or Restricted Investment
otherwise permitted by the "Limitation on Restricted Payments and
Restricted Investments" covenant or those transactions specifically
permitted by paragraph (b) under that covenant,
(2) transactions between or among our Non-Recourse Subsidiaries, or
(3) transactions between or among us and our subsidiaries, other than
Non-Recourse Subsidiaries,
unless the terms of the transaction or series of transactions (other than the
transactions contemplated in subparagraphs (1), (2) and (3)) are set forth in
writing and are at least as favorable as those available in a comparable
transaction in arms-length dealings from an unrelated Person.
With respect to transactions entered into in reliance on this paragraph (a)
(other than the transactions contemplated in subparagraphs (1), (2) and (3)), if
any transaction or series of related transactions involves aggregate payments or
other consideration in excess of $10,000,000, the transaction or series of
related transactions must be approved by a majority of those members of our
Board of Directors or the Board of Directors of the subsidiary, having no
personal stake in the business, transaction or transactions. These provisions do
not apply to any purchase or sale of inventory in the ordinary course of
business, but shall apply to any long-term arrangement involving the purchase of
granules or glass fiber from, or the provision of management services of the
type currently provided under the Management Agreement by, an Affiliate of ours,
including ISP or one of its subsidiaries. In addition, if that transaction or
series of related transactions, other than any purchase or sale of inventory in
the ordinary course of business or other than purchases of granules or glass
fiber from an Affiliate of ours, including ISP or one of its subsidiaries,
involves aggregate payments or other consideration in excess of $35,000,000, we
or the subsidiary must have also received a written opinion from a nationally
recognized investment banking firm that the transaction or series of related
transactions is fair to our shareholders or the shareholders of the subsidiary
from a financial point of view and the opinion must have been delivered to the
trustee. The value of any noncash consideration in transactions entered into in
reliance on this paragraph (a) will be determined by a majority of those members
of our Board of Directors or the Board of Directors of the subsidiary, having no
personal stake in the business, transaction or transactions.
In addition, if each member of our Board of Directors or the Board of
Directors of the subsidiary proposing to engage in a transaction or series of
related transactions described in the immediately preceding paragraph has a
personal stake in the business, transaction or transactions, we or the
subsidiary may enter into the transaction or series of transactions if we or the
subsidiary shall have received the written opinion of a nationally recognized
investment banking firm that the terms thereof, from a financial point of view,
are fair to our shareholders or the shareholders of the subsidiary, in their
capacity as such and the opinion shall have been delivered to the trustee. The
determination as to the value of any non-cash consideration referred to in the
immediately preceding paragraph will be made by that investment banking firm.
(b) The indenture provides that notwithstanding the limitations in clause
(a) above, the following transactions are permitted:
(1) the purchase of granules from an Affiliate of ours, including ISP
or a subsidiary of ISP; provided that
(A) subject to paragraph (c) of this covenant, the price and other
terms shall not be less favorable to us than those set forth in the
Granules Contracts or
(B) a nationally recognized investment banking firm or accounting
firm has delivered a written opinion to us to the effect that either the
terms thereof are fair to us from a financial point of view or are on
terms at least as favorable to us as those available in comparable
transactions in arms'-length dealings from an unrelated third party;
72
76
(2) the continuance of the Management Agreement, including with an
Affiliate of ours other than ISP;
(A) in accordance with its terms or on terms no less favorable to
us than those contained in the Management Agreement or
(B) on other terms provided that we shall have received the written
opinion of a nationally recognized investment banking firm or accounting
firm that either the terms thereof, from a financial point of view, are
fair to us or are on terms at least as favorable to us as those
available in comparable transactions in arms'-length dealings from an
unrelated Person;
(3) any transaction between us or one of our subsidiaries and its own
employee stock ownership or benefit plan;
(4) any transaction with an officer or director of ours or of any
subsidiary of ours entered into in the ordinary course of business,
including compensation or employee benefit arrangements with any officer or
director;
(5) any business or transaction with an Unrestricted Affiliate;
(6) borrowings by us or our subsidiaries from Affiliates of ours;
provided that the loans are unsecured, are prepayable at any time without
penalty, contain no restrictive covenants and the effective cost of
borrowings do not exceed the interest rate then in effect from time to time
under the Credit Agreement or any refinancings of the Credit Agreement, or,
if that agreement is not outstanding, under our unsecured bank debt;
(7) payments made pursuant to the tax sharing agreement; or
(8) purchases made pursuant to the glass fiber contract, provided that
the terms of that contract are set forth in writing and are at least as
favorable to us as those available in a comparable transaction in
arms-length dealings with an unrelated Person.
(c) We shall not, and our subsidiaries shall not, amend, modify or waive
any provision of the tax sharing agreement, the Granules Contracts or the glass
fiber contract in any manner which is significantly adverse to us or to you. An
extension or modification of any of the Granules Contracts, or any similar
granules purchase contract, or the glass fiber contract on terms at least as
favorable to us as those available at the time of the extension or modification,
or any such new agreement, in a comparable transaction in arms-length dealings
with an unrelated Person shall not be deemed significantly adverse to us or you.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The indenture provides that we shall not, and our subsidiaries,
other than Non-Recourse Subsidiaries, shall not, directly or indirectly, create
or otherwise cause to exist or become effective any encumbrance or restriction
on the ability of any subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
or pay any Debt owed to us or any of our subsidiaries,
(2) make loans or advances to us or any of our subsidiaries,
(3) transfer any of its properties or assets to us or
(4) incur or suffer to exist liens in favor of the holders.
The preceding restrictions will not apply to encumbrances or restrictions
existing under or by reason of any of the following:
(A) applicable law;
(B) the indenture and the indentures governing our 7 3/4% Senior Notes
due 2005, our 8 5/8% Senior Notes due 2006, our 8% Senior Notes due 2007
and our 8% Senior Notes due 2008;
73
77
(C) customary provisions restricting subletting or assignment of any
lease or license or other commercial agreement;
(D) any instrument governing Acquired Debt of any Person, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than that Person and its
subsidiaries, or the property or assets of that Person and its
subsidiaries, acquired;
(E) the liens specifically permitted by the provisions described under
"-- Limitation on Liens;" provided that those liens and the terms governing
those liens do not, directly or indirectly, restrict us or our subsidiaries
from granting other liens, except as to the assets subject to those liens;
(F) the Credit Agreement, the Receivables Financing Agreement, other
Debt existing on July 5, 2000 or the New Credit Agreement; and
(G) any refinancing of the Credit Agreement, the Receivables Financing
Agreement, any other Debt existing on July 5, 2000 or the New Credit
Agreement; provided that the terms and conditions of any refinancing
agreements relating to the terms described in paragraphs (1) through (4)
above are no less favorable to us than those contained in the agreements
governing the Debt being refinanced.
Limitation on Asset Sales. The indenture provides that we shall not, and
our subsidiaries shall not, directly or indirectly, consummate an Asset Sale
unless:
(1) we or such subsidiary, receives consideration, including non-cash
consideration, whose fair market value shall be determined in good faith by
our Board of Directors or the Board of Directors of such subsidiary, as
evidenced by a board resolution, at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of,
as determined in good faith by its Board of Directors, as evidenced by a
board resolution;
(2) at least 75% of the consideration received by us or such
subsidiary, shall be cash or Cash Equivalents; provided that this clause
(2) shall not prohibit any Asset Sale for which we or the subsidiary
receives 100% of the consideration, directly or through the acquisition of
capital stock of a Person, in operating assets; and
(3) in the case of an Asset Sale by us or any of our subsidiaries, we
shall commit to apply the Net Cash Proceeds of such Asset Sale within 300
days of the consummation of the Asset Sale, and shall apply the Net Cash
Proceeds within 360 days of receipt of the proceeds:
(A) to invest in the businesses that we and our Recourse
Subsidiaries are engaged in at the time of the Asset Sale or any like or
related business;
(B) to pay or satisfy any of our Debt or any Debt of our
subsidiaries, other than Debt which is subordinated by its terms to the
notes, or Preferred Stock of a subsidiary, including the Debt referred
to in the last sentence of the definition thereof or make provision for
the payment of Preferred Stock, through an escrow or other fund; and/or
(C) to offer to purchase the notes in a tender offer, a "Net
Proceeds Offer," at a redemption price equal to 100% of the principal
amount of the notes plus accrued interest on the notes to the date of
purchase; provided, however, that we shall, to the extent required under
the indentures governing our 7 3/4% Senior Notes due 2005, our 8 5/8%
Senior Notes due 2006, our 8% Senior Notes due 2007 and our 8% Senior
Notes due 2008,
(a) first offer to purchase any of our outstanding 8 5/8% Senior
Notes due 2006 in a tender offer at a redemption price equal to 100%
of the principal amount of the notes plus accrued interest on the
notes to the date of purchase,
(b) then offer to purchase any of our outstanding 8% Senior
Notes due 2007 in a tender offer at a redemption price equal to 100%
of the principal amount of the notes plus accrued interest on the
notes to the date of purchase,
74
78
(c) then offer to purchase any of our outstanding 7 3/4% Senior
Notes due 2005 in a tender offer at a redemption price equal to 100%
of the principal amount of the notes plus accrued interest on the
notes to the date of purchase, and
(d) then offer to purchase any of our outstanding 8% Senior
Notes due 2008 in a tender offer at a redemption price equal to 100%
of the principal amount of the notes plus accrued interest on the
notes to the date of purchase;
provided further, however, that we may defer making a Net Proceeds Offer
until the aggregate Net Cash Proceeds from Asset Sales to be applied
pursuant to this clause (3)(C) equal or exceed $25,000,000; provided
that (1) we may retain up to $7,000,000 of Net Cash Proceeds from Asset
Sales in any twelve-month period, without complying with clause (3), and
(2) any Asset Sale that would result in a Change of Control shall not be
governed by this covenant but shall be governed by the provisions
described above under "-- Repurchase at Your Option -- Change of
Control."
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations under the Exchange Act to the
extent such laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Net Proceeds Offer.
Restriction on Transfer of Certain Assets to Subsidiaries. The indenture
provides that if we transfer or cause to be transferred, in one transaction or a
series of related transactions, Material Assets to any one or more of our
Non-Recourse Subsidiaries, we shall cause the transferee subsidiary to
(1) execute and deliver to the trustee a supplemental indenture in
form reasonably satisfactory to the trustee pursuant to which such
transferee subsidiary shall unconditionally Guarantee, on a senior basis,
all of our obligations under the notes and
(2) deliver to the trustee an opinion of counsel that the supplemental
indenture has been duly executed and delivered by the transferee
subsidiary.
Investment Company Act. The indenture provides that we will not take any
action that would require us or any of our subsidiaries to register as an
investment company under the Investment Company Act of 1940.
Reports to the Securities and Exchange Commission and You. We will file
with the trustee and provide to you, within 15 days after we file them with the
Commission, copies of our annual report and the information, documents and other
reports, or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe, which we are required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, without exhibits
in your case, unless you make such request in writing. Notwithstanding that we
may not be required to remain subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, we will continue to file with the Commission
and provide the trustee and you with the annual reports and information,
documents and other reports, or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe, which are specified in
Sections 13 and 15(d) of the Exchange Act, without exhibits in your case, unless
you make that request in writing. We also will comply with the other provisions
of Section 314(a) of the Trust Indenture Act of 1939.
So long as any of the notes remain outstanding, we shall cause each annual,
quarterly and other financial report mailed or otherwise furnished by us
generally to public stockholders to be filed with the trustee and mailed to the
holders of record at their addresses appearing in the register of notes
maintained by the Registrar, in each case at the time of such mailing or
furnishing to the stockholders.
We shall provide to you or any beneficial owner of notes any information
reasonably requested by you or the beneficial owner concerning us and our
subsidiaries, including financial statements, necessary in order to permit you
or the beneficial owner to sell or transfer notes in compliance with Rule 144A
under the Securities Act or any similar rule or regulation adopted by the
Commission.
75
79
NOTIFICATION TO COLLATERAL AGENT.
If an Event of Default occurs and is continuing, the Trustee shall notify
the Collateral Agent (as defined in the Collateral Agent Agreement) of such
default pursuant to the terms of the Collateral Agent Agreement and take any
action as may be required thereby.
LIMITATION ON MERGER OR SALE OF ASSETS
The indenture provides that we shall not consolidate with or merge with or
into or sell, assign, transfer or lease all or substantially all of our
properties and assets, either in one transaction or in a series of related
transactions, to any person, unless:
(1) we are the continuing Person, or the resulting, surviving or
transferee Person, if other than us, is a corporation organized and
existing under the laws of the United States or any state or the District
of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the trustee, in form reasonably satisfactory to
the trustee, all of our obligations under the notes and the indenture, and
the indenture shall remain in full force and effect;
(2) immediately before and immediately after giving effect to the
transaction, and treating any Debt which becomes an obligation of the
resulting, surviving or transferee Person or any of its subsidiaries as a
result of the transaction as having been issued by that Person or that
subsidiary at the time of the transaction, no default or event of default
shall have occurred and be continuing;
(3) immediately before and after giving effect to the transaction, the
resulting, surviving or transferee Person could incur at least $1.00 of
additional Debt under paragraph (a) of the "Limitation on Debt" covenant;
and
(4) immediately after giving effect to the transaction, the resulting,
surviving or transferee Person has a Consolidated Net Worth in an amount
which is not less than our Consolidated Net Worth immediately prior to the
transaction.
In connection with any consolidation, merger, sale, assignment, transfer or
lease contemplated by this covenant, we will deliver, or cause to be delivered,
to the trustee, in form and substance reasonably satisfactory to the trustee, an
officers' certificate and an opinion of counsel, each stating that the
consolidation, merger, sale, assignment, transfer or lease and the accompanying
supplemental indenture comply with this covenant and the Trust Indenture Act and
that all conditions precedent provided for in the indenture relating to the
transaction have been complied with.
Upon any consolidation or merger or any sale, assignment, transfer or lease
of all or substantially all of our assets in accordance with the preceding two
paragraphs, the successor corporation formed by the consolidation or into which
we are merged or to which the sale, assignment, transfer or lease is made, shall
succeed to, and be substituted for, and may exercise every right and power of,
our company under the indenture, with the same effect as if the successor
corporation had been named as the company under the indenture, and, except in
the case of a lease, we will be discharged from all obligations and covenants
under the indenture and the notes.
EVENTS OF DEFAULT
An event of default will occur under the indenture if:
(1) we fail to pay interest on any note when the same becomes due and
payable and the failure continues for a period of 30 days;
(2) (A) we fail to pay the principal of any note when the same becomes
due and payable at maturity or otherwise or (B) we fail to redeem or
repurchase notes when required pursuant to the indenture or the notes;
(3) we fail to comply with provisions described under "-- Limitation
on Merger or Sale of Assets;"
76
80
(4) we fail to comply for 30 days after notice with any of our
obligations (i) under the indenture regarding the maintenance of our
corporate existence and the corporate existence of our subsidiaries (other
than Non-Recourse Subsidiaries) or (ii) described under "-- Repurchase at
Your Option-Change of Control" or "-- Material Operating Restrictions"
(other than "-- Limitation on Asset Sales", "-- Restriction on Transfer of
Certain Assets to Subsidiaries" and "-- Investment Company Act");
(5) we fail to comply for 60 days after notice with our other
agreements contained in the indenture or the notes, other than those
referred to in clauses (1) through (4) above;
(6) principal of or interest on our Debt or Debt of any of our
Significant Subsidiaries is not paid within any applicable grace period or
is accelerated by the holders of the Debt because of a default and the
total amount that is unpaid or accelerated exceeds $15,000,000 or its
foreign currency equivalent and the default continues for 5 days after
notice;
(7) certain events of bankruptcy, insolvency or reorganization of our
company or any of our Significant Subsidiaries occurs pursuant to or within
the meaning of any bankruptcy law;
(8) any judgment or order for the payment of money in excess of
$15,000,000 in the aggregate is rendered against us or any of our
Significant Subsidiaries and
(A) there is a period of 60 days following the entry of the
judgment or order during which the judgment or order is not discharged,
waived or the execution of the judgment stayed and the default continues
for 10 days after the notice specified below or
(B) foreclosure proceedings have begun and have not been stayed
within five days of the commencement of the foreclosure proceeding; or
(9) any guarantor's guarantee of the notes shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any guarantor shall deny or
disaffirm its obligations under its guarantee of the notes.
A default under clauses (4), (5), (6), (8) or (9) is not an event of
default until the trustee or the holders of at least 25% in aggregate principal
amount of the outstanding notes notify us in writing of the default, and we do
not cure the default within the time specified in the clause after receipt of
the notice.
The notice shall be given by the trustee if requested in writing by the
holders of at least 25% in aggregate principal amount of the outstanding notes.
When a default under clause (4), (5), (6), (8) or (9) is cured or remedied
within the specified period, it ceases to exist.
If an event of default, other than an event of default with respect to our
company specified in clause (7) above, occurs and is continuing, the trustee, by
written notice to us, or the holders of at least 25% in aggregate principal
amount of the outstanding notes, by written notice to us and the trustee, may
declare all unpaid principal of and accrued interest on the notes then
outstanding to be due and payable. Upon a declaration of acceleration, such
amount shall be due and payable immediately.
If an Event of Default with respect to our company specified in clause (7)
above occurs, all unpaid principal of and interest on the notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of you or the trustee.
Under certain circumstances, the holders of a majority in aggregate
principal amount of the notes then outstanding may rescind an acceleration with
respect to the notes and its consequences.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an event of default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the notes unless
those holders have offered to the trustee reasonable indemnity or security
against any loss, liability or expense.
77
81
Except to enforce the right to receive payment of principal and premium, or
interest, if any, when due, no holder may pursue any remedy with respect to the
indenture or the notes unless:
(1) the holder has previously given the trustee notice that an event
of default is continuing;
(2) holders of at least 25% in principal amount at maturity of the
outstanding notes have requested the trustee to pursue the remedy;
(3) those holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the trustee has not complied with the request within 60 days after
the receipt of the request and the offer of security or indemnity; and
(5) the holders of a majority in principal amount at maturity of the
outstanding notes have not given the trustee a direction inconsistent with
the request within that 60-day period.
Subject to certain restrictions, the holders of a majority in principal
amount at maturity of the outstanding notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or of exercising any trust or power conferred on the trustee. The
trustee, however, may refuse to follow any direction that conflicts with law or
the indenture or that the trustee determines is unduly prejudicial to the rights
of any other noteholder or that would involve the trustee in personal liability.
The indenture provides that, if a default occurs and is continuing and is
known to the trustee, the trustee must mail to each noteholder notice of the
default within 90 days after it occurs. Except in the case of a default in the
payment of principal of or interest on any note, the trustee may withhold notice
if and so long as a committee of its trust officers in good faith determines
that withholding notice is in the interests of the holders. In addition, we are
required to deliver to the trustee, within 60 days after the end of each of our
fiscal quarters (120 days after the end of the last fiscal quarter of our fiscal
year), a certificate indicating whether the signers of the certificate know of
any default that occurred during the previous year. We are also required to
deliver to the trustee, within 10 days after the occurrence thereof, written
notice of any event which would constitute certain defaults, their status, and
what action we are taking or propose to take in respect thereof.
If an Event of Default occurs and is continuing, the trustee shall notify
the Collateral Agent (as defined in the Collateral Agent Agreement) of such
default pursuant to the terms of the Collateral Agent Agreement and take any
action as may be required thereby.
ABILITY TO TERMINATE OUR OBLIGATIONS
We may terminate at any time all our obligations and all obligations of the
guarantors under the notes and the indenture, except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the notes, to replace mutilated, destroyed, lost or
stolen notes and to maintain a registrar and paying agent in respect of the
notes. This is known as "legal defeasance." At any time we may terminate our
obligations under the covenants described under "-- Certain Covenants" and
"-- Repurchase at Your Option -- Change of Control," above and the operation of
clauses (3), (4), (5), (6), (7), with respect only to Significant Subsidiaries,
or (8) described under "-- Events of Default" above and the limitations
contained in clause (3) or (4) described under "-- Limitation on Merger or Sale
of Assets" above. This is known as "covenant defeasance."
We may exercise our legal defeasance option notwithstanding the prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the notes may not be accelerated because of an event of
default with respect thereto. If we exercise our covenant defeasance option,
payment of the notes may not be accelerated because of an event of default
specified in clause (3), (4), (5), (6), (7), with respect only to Significant
Subsidiaries, or (8) described under "-- Events of Default" above, or because of
our failure to comply with clause (3) or (4) described under "-- Limitation on
Merger or Sale of Assets" above.
78
82
In order to exercise either defeasance option, we must irrevocably deposit
in trust with the trustee money or U.S. government obligations for the payment
of principal and interest, if any, on the notes to redemption or maturity, and
must comply with certain other conditions, including, unless the notes will
mature or be redeemed within 30 days, delivering to the trustee an opinion of
counsel to the effect that holders of the notes will not recognize income, gain
or loss for federal income tax purposes as a result of the deposit and
defeasance and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred, and, in the case of legal defeasance
only, such opinion of counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable federal income tax law.
PROCEDURES TO MODIFY OR AMEND THE INDENTURE
Modifications and amendments of the indenture may be made by us and by the
trustee with the consent of the holders of a majority in aggregate principal
amount of the outstanding notes; provided that no modification or amendment may,
without the consent of the holder of each outstanding note affected thereby:
(1) change the stated maturity of the principal of, or any installment
of interest on, any note or reduce the principal amount of any note, the
rate of interest on any note or any premium payable upon the redemption of
any note, or change the coin or currency in which any note or any premium
or the interest on any note is payable, or impair the right to institute
suit for the enforcement of any payment after the stated maturity of any
note;
(2) reduce the percentage in principal amount of the outstanding
notes, the consent of the holders of which is required for any supplemental
indenture or the consent of the holders is required for any waiver of
compliance with certain provisions of the indenture or certain defaults
thereunder and their consequences provided for in the indenture;
(3) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past defaults
or relating to the waiver of certain covenants, except to increase any
percentage of outstanding notes required for those actions or to provide
that certain other provisions of the indenture cannot be modified or waived
without the consent of each noteholder affected thereby;
(4) waive a default in the payment of the principal of or interest on
any note or modify or waive our obligation to repurchase notes pursuant to
the provisions described above under "-- Repurchase at Your Option-Change
of Control" or "-- Limitation on Asset Sales;
(5) except as otherwise permitted by the covenants described under
"-- Limitation on Merger or Sale of Assets," consent to the assignment or
transfer by us of any of our rights and obligations under the indenture;
(6) make any change in the sections of the indenture governing
amendments with the consent of noteholders, the waiver of past defaults or
the rights of noteholders to receive payments;
(7) change the time at which any note must be redeemed or repaid in
accordance with the terms of the indenture and the notes; or
(8) release any guarantor from its guarantee of the notes other than
in accordance with the terms of the indenture.
It shall not be necessary for the consent of the holders to approve the
particular form of any proposed amendment, supplement or waiver, but it shall be
sufficient if the consent approves the substance of the amendment, supplement or
waiver. Any amendment, supplement or waiver shall be deemed effective upon
receipt by the trustee of the necessary consents and shall not require execution
of any supplemental indenture to be effective.
79
83
The holders of a majority in aggregate principal amount of the notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the indenture.
Neither we nor any of our subsidiaries shall, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any noteholder for or as an inducement to any consent, waiver or
amendment of any terms or provisions of the notes unless the consideration is
offered to be paid or agreed to be paid to all noteholders which consent, waive
or agree to amend in the time frame set forth in solicitation documents relating
to the consent, waiver or amendment.
GOVERNING LAW
The indenture and the notes will be governed by, and construed in
accordance with, the laws of the state of New York.
FORM OF NOTES
The certificates representing the notes will be issued in fully registered
form, without coupons. Except as described in the next paragraph, the notes will
be deposited with, or on behalf of DTC, and registered in the name of Cede &
Co., as DTC's nominee, in the form of a global note. Holders of the notes will
own book-entry interests in the global note evidenced by records maintained by
DTC.
Notes that are issued as described below under "-- Certificated Securities"
will be issued in the form of registered definitive certificates. These
certificated securities may, unless the global notes have previously been
exchanged for certificated securities, be exchanged for an interest in a global
note representing the principal amount of notes being transferred.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations, which are collectively referred to as the
participants, and to facilitate the clearance and settlement of transactions in
such securities between participants through electronic book-entry changes in
accounts of its participants. DTC's participants include securities brokers and
dealers, including the initial purchaser, banks and trust companies, clearing
corporations and certain other organizations, Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies,
which are collectively referred to as the indirect participants, that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. Persons who are not participants may beneficially own securities
held by or on behalf of DTC only through DTC's participants or DTC's indirect
participants.
We expect that, pursuant to procedures established by DTC:
(1) upon deposit of the global notes, DTC will credit the accounts of
participants designated by the initial purchaser with portions of the principal
amount of the global notes and
(2) ownership of the notes evidenced by the global notes will be shown on,
and the transfer of ownership of the notes will be effected only through,
records maintained by DTC (with respect to the interests of DTC's participants),
DTC's participants and DTC's indirect participants.
We advise prospective purchasers of the notes that the laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, your ability to transfer notes evidenced
by the global notes will be limited to that extent.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more participants to whose
account the interests in the global notes are credited and only in respect of
that portion of the aggregate principal amount of notes as to which that
participant has given direction. However, if there is an event of default under
the notes, DTC will exchange the global notes for certificated securities, which
it will distribute to its participants.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners will be governed by
80
84
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Redemption notices in respect of the notes
held in book-entry form will be sent to DTC. If less than all of the notes are
being redeemed, DTC will determine the amount of the interest of each
participant to be redeemed in accordance with its procedures. Although voting
with respect to the notes is limited, in those cases where a vote is required,
DTC will not itself consent or vote with respect to notes. Under its usual
procedures, DTC would mail an omnibus proxy to us as soon as possible after the
record date for that redemption. The omnibus proxy assigns DTC's consenting or
voting rights to those participants to whose accounts the notes are credited on
the record date (identified in a listing attached to the omnibus proxy).
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among participants, DTC is under no
obligation to perform or continue to perform these procedures. These procedures
may be discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants under the rules and procedures governing DTC or for any aspect of
the records of DTC or for maintaining, supervising or reviewing any records of
these entities relating to the notes. DTC may discontinue providing its services
as securities depositary with respect to the notes at any time by giving notice
to us. Under these circumstances, in the event that a successor securities
depositary is not obtained, we will print and deliver to you certificated
securities. Additionally, we may decide to discontinue use of the system of
book-entry transfers through DTC or any successor depositary. In that event, we
will print and deliver to you certificated securities. In each of the above
circumstances, we will appoint a paying agent with respect to the notes.
Beneficial interests in one global note may be transferred to a person who
takes delivery in the form of a beneficial interest in another global note only
upon receipt by the trustee of a written certification, in the form provided in
the indenture governing the notes, to the effect that the transfer is being made
in accordance with the indenture and with the Securities Act and any applicable
securities laws of any state of the United States or any other jurisdiction. Any
beneficial interest in one of the global notes that is transferred to a person
who takes delivery in the form of a beneficial interest in another global note
will, upon transfer, cease to be a beneficial interest in that global note and
become a beneficial interest in the other global note. In that event, that
transferee will thereafter be subject to all transfer restrictions, if any, and
other procedures applicable to beneficial interests in the other global note for
as long as it retains such beneficial interest.
So long as the holder of a global note is the registered owner of any
notes, the holder will be considered the sole holder under the indenture of any
notes evidenced by the global notes. Beneficial owners of notes evidenced by the
global notes will not be considered the owners or holders of those notes under
the indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the trustee thereunder.
Payments in respect of the principal of and premium, if any, interest and
liquidated damages, if any, on any notes registered in the name of the holder of
the global note on the applicable record date will be payable by the trustee to
or at the direction of the holder in its capacity as the registered holder under
the indenture. Under the terms of the indenture, we and the trustee may treat
the persons in whose names notes, including the global notes, are registered as
the owners of those notes for the purpose of receiving those payments.
Consequently, neither we nor the trustee has or will have any responsibility or
liability for the payment of those amounts to beneficial owners of notes. We
believe, however, that it is currently the policy of the DTC to immediately
credit the accounts of the relevant participants with those payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on DTC's records. Payments by DTC's participants and
indirect participants to the beneficial owners of notes will be governed by
standing instructions and customary practice and will be the responsibility of
DTC's participants and indirect participants.
81
85
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in a
global note, upon request to the trustee, may exchange that beneficial interest
for notes in the form of certificated securities. Upon any such issuance, the
trustee is required to register the certificated securities in the name of, and
cause the same to be delivered to, that person or persons, or that person's
nominee.
In addition, if (1) we notify the trustee in writing that DTC is no longer
willing to or able to act as a depositary and are unable to locate a qualified
successor within 90 days or (2) we, at our option, notify the trustee in writing
that we elect to cause the issuance of notes in the form of certificated
securities under the indenture, then, upon surrender by the holder of the global
note, notes in certificated form will be issued to each person that the holder
of the global note and DTC identify as being the beneficial owner of the related
notes.
Neither we nor the trustee will be liable for any delay by the holder of
the global note or DTC in identifying the beneficial owners of notes and we and
the trustee may conclusively rely on, and will be protected in relying on,
instructions from the holder of the global note or DTC for all purposes.
82
86
SUMMARY OF REGISTRATION RIGHTS OF SELLING NOTEHOLDER
We entered into a registration rights agreement with the initial purchaser
of the notes, pursuant to which we filed with the SEC and caused to become
effective a shelf registration statement of which this prospectus is a part.
Pursuant to the registration rights agreement, we are required to:
- use our best efforts to keep effective the shelf registration statement
until two years after the date of original issuance of the notes or until
all of the notes covered by the shelf registration statement shall have
been sold;
- cause the shelf registration statement and this prospectus and any
amendment or supplement thereto, as of the effective date of the shelf
registration statement, amendment or supplement, to comply in all
material respects with the Securities Act; and
- cause the shelf registration statement and this prospectus and any
amendment or supplement thereto, as of the effective date of the shelf
registration statement, amendment or supplement, not to contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
If the shelf registration statement ceases to be effective prior to
December 22, 2002 (or such later date if such two-year period has been extended
pursuant to the terms of the registration rights agreement or such shorter
period as described in the first bullet point above) then, additional interest
shall be assessed on the notes at a rate of 0.5% per annum of the principal
amount of the notes commencing on the date the shelf registration statement
ceases to be effective. Upon the shelf registration statement once again
becoming effective, the interest rate borne by the notes will be reduced to the
original interest rate. Additional interest will be determined by multiplying
the additional interest by a fraction, the numerator of which is the number of
days such additional interest was applicable during such period, determined on
the basis of a 360-day year comprised of twelve 30-day months, and the
denominator of which is 360.
We must notify the trustee within five days after the occurrence of an
event that results in additional interest payments under the registration rights
agreement. Any amount of additional interest due under the registration rights
agreement will be payable in cash semiannually in arrears on each interest
payment date, commencing with the first interest payment date after any
additional interest commences to accrue.
The registration rights agreement, as amended, has been filed as an exhibit
to the registration statement of which this prospectus is a part, and we refer
you to the registration rights agreement for a complete description of its
terms. See "Where to Find More Information." The registration rights agreement
requires us to pay all expenses incurred in connection with the registration,
offering and sale of the notes to the public, including the reasonable fees and
disbursements of one counsel for the selling noteholder. We have agreed to
indemnify the selling noteholder and any underwriters they may use against
certain civil liabilities, including liabilities under the Securities Act.
83
87
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences relating to the purchase, ownership and disposition of the notes by
United States Holders (as described below), and the material U.S. federal income
and estate tax consequences relating to the purchase, ownership and disposition
of the notes by Non-United States Holders (as described below). It does not
contain a complete analysis of all the potential tax considerations relating
thereto. This summary is limited to holders of notes who hold the notes as
"capital assets" (in general, assets held for investment). Special situations,
such as the following, are not addressed:
- tax consequences to holders who may be subject to special tax treatment,
such as tax-exempt entities, dealers in securities or currencies,
financial institutions, insurance companies, regulated investment
companies, traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings or corporations that
accumulate earnings to avoid U.S. federal income tax;
- tax consequences to persons holding notes as part of a hedging,
integrated, constructive sale or conversion transaction or a straddle or
other risk reduction transaction;
- tax consequences to holders whose "functional currency" is not the U.S.
dollar;
- tax consequences to pass-through entities and persons who hold notes
through a pass-through entity;
- tax consequences to holders who have ceased to be United States citizens
or to be taxed as resident aliens;
- alternative minimum tax consequences, if any; or
- any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder, and rulings, judicial decisions and
administrative interpretations thereunder, as of the date hereof. Those
authorities may be changed, perhaps retroactively, so as to result in U.S.
federal income tax consequences different from those discussed below.
CONSEQUENCES TO UNITED STATES HOLDERS
The following is a summary of the U.S. federal income tax consequences that
will apply to you if you are a United States Holder of notes. (Certain
consequences to "Non-United States Holders" of the notes are described under
"-- Consequences to Non-United States Holders" below.)
A "United States Holder" means a beneficial owner of a note that is:
- a citizen or resident of the United States;
- a corporation or other entity (other than a partnership, estate or trust)
created or organized in or under the laws of the United States or any
political subdivision of the United States;
- an estate, the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if, in general, a court within the United States is able to
exercise primary jurisdiction over its administration and one or more
U.S. persons have authority to control all of its substantial decisions.
(Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996 and
treated as U.S. persons prior to such date, that elect to continue to be
treated as U.S. persons will also be a United States Holder.)
Original Issue Discount
Because the notes were originally sold at a meaningful discount from their
principal amount at maturity, the issuance of the notes resulted in original
issue discount, referred to as "OID," in an amount
84
88
equal to the excess of the "stated redemption price at maturity" over the "issue
price" of the notes. The "issue price" of a note was $971.61. The "stated
redemption price at maturity" is the sum of all payments to be made on the
notes, other than "qualified stated interest." The term "qualified stated
interest" means, generally, stated interest that is unconditionally payable at
least annually at a qualifying rate, including a single fixed rate, during the
entire term of the debt instrument. All interest on the notes should be
qualified stated interest which will be taxed to a United States Holder as
ordinary income either at the time it accrues or is received in accordance with
such holder's method of accounting for U.S. federal income tax purposes.
A United States Holder of a note, in general, must include in ordinary
income OID calculated on a constant-yield to maturity method as prescribed by
Treasury regulations in advance of the receipt of the related cash payments. The
amount of OID included in gross income as interest by an initial United States
Holder of a note is the sum of the "daily portions" of OID with respect to that
note for each day during the taxable year or portion thereof in which the United
States Holder holds the note. This amount is referred to as "accrued OID." The
daily portion is determined by allocating to each day in any accrual period a
pro rata portion of the OID allocable to that accrual period. The amount of OID
allocable to any accrual period is equal to the difference between:
- the product of the note's adjusted issue price at the beginning of the
accrual period and the note's yield to maturity; and
- the qualified stated interest allocable to the accrual period.
OID allocable to the final accrual period is the difference between the
amount payable at maturity of the note and the note's "adjusted issue price" at
the beginning of the final accrual period. The "adjusted issue price" of a note
at the beginning of any accrual period is equal to its issue price increased by
the accrued OID for each prior accrual period.
Bond Premium
If a United States Holder purchases a note at a cost that is in excess of
all amounts payable on the note after the purchase date (exclusive of qualified
stated interest), which will be determined by reference to an earlier call date
if the call price would reduce the amount of the premium, then the excess would
be considered "bond premium" and the holder would not include any of the OID in
income.
A United States Holder who acquires a note with bond premium may elect
under Section 171 of the Code to amortize such bond premium on a constant
interest basis over the period from the acquisition date to the maturity date of
such note or, in certain circumstances, until an earlier call date, and, except
as future Treasury Regulations may otherwise provide, reduce the amount of
interest included in income in respect of the note by that amount. A United
States Holder who elects to amortize bond premium must reduce its adjusted basis
in the note by the amount of the allowable amortization. An election to amortize
bond premium would apply to all amortizable bond premium on all taxable bonds
held at or acquired after the beginning of the United States Holder's taxable
year as to which the election is made, and may be revoked only with the consent
of the Internal Revenue Service.
If an election to amortize bond premium is not made, a United States Holder
must include the full amount of each interest payment in income in accordance
with its regular method of accounting and generally will receive a tax benefit
from the bond premium only upon computing its gain or loss upon the sale or
other disposition or payment of the principal amount of the note.
Acquisition Premium
A complementary concept to bond premium is acquisition premium. A note is
acquired at an "acquisition premium" if the holder's adjusted tax basis in the
note exceeds the adjusted issue price of the debt but is less than or equal to
all amounts payable on the note after the purchase date (exclusive of qualified
stated interest). If a holder acquires a note at an acquisition premium, the
amount of OID includible in the holder's gross income generally is reduced in
each period in proportion to the percentage
85
89
of the unamortized OID at the date of acquisition represented by the acquisition
premium. Alternatively, a holder may elect to accrue the discount on a constant
yield basis.
Market Discount
Generally, the market discount rules discussed below apply to a United
States Holder whose tax basis in the note is less than such note's "revised
issue price" (as defined in Section 1278(a)(4) of the Code), which basically is
the note's then adjusted issue price for OID purposes.
Gain recognized on the disposition, including a redemption, of a note that
has accrued market discount will be treated as ordinary income, and not capital
gain, to the extent of the accrued market discount, provided that the amount of
market discount exceeds a statutorily defined de minimis amount. In addition, a
holder may be required to include in gross income, as ordinary interest income,
accrued market discount to the extent of partial principal payments received
with respect to the note. In such case, the amount of accrued market discount to
be recognized at the time of the disposition or retirement of the note will be
reduced accordingly. "Market discount" is defined as the excess, if any, of the
"revised issue price" of the obligation over the tax basis of the obligation in
the hands of the holder immediately after its acquisition.
Under the de minimis exception, there is no market discount if the excess
of the "revised issue price" of the obligation over the holder's tax basis in
the obligation is less than 0.25% of the stated redemption price at maturity
multiplied by the number of complete years after the acquisition date to the
note's date of maturity. Unless a holder elects otherwise, the accrued market
discount would be the amount calculated by multiplying the market discount by a
fraction, the numerator of which is the number of days the obligation has been
held by the holder and the denominator of which is the number of days after the
holder's acquisition of the obligation up to and including its maturity date.
If a United States Holder of a note acquired at market discount disposes of
the note in any transaction other than a sale, exchange or involuntary
conversion, even though otherwise non-taxable, like a gift, such United States
Holder may be deemed to have realized an amount equal to the fair market value
of the note and would be required to recognize as ordinary income any accrued
market discount to the extent of the deemed gain. A United States Holder of a
note acquired at a market discount also may be required to defer the deduction
of all or a portion of the interest on any indebtedness incurred or maintained
to carry the note until it is disposed of in a taxable transaction.
A United States Holder of a note acquired at market discount may elect to
include the market discount in income as it accrues either on a straight-line
basis or on a constant interest basis. This election would apply to all market
discount obligations acquired by the electing United States Holder on or after
the beginning of the United States Holder's taxable year as to which the
election is made and may be revoked only with the consent of the Internal
Revenue Service. If a United States Holder of a note so elects to include market
discount in income currently, the rules requiring ordinary income recognition
resulting from sales and certain other disposition transactions and deferral of
interest deductions would not apply.
Mandatory and Optional Redemption
In the event of a change of control, United States Holders have the right
to require us to repurchase the notes at a cash repurchase price equal to 101%
of their aggregate principal amount on the date of repurchase, plus any accrued
and unpaid interest. Treasury regulations provide that the right of holders of
debt to require redemption of the debt upon the occurrence of a change of
control will not affect the yield or maturity date of the debt unless, based on
all of the facts and circumstances as of the issue date, it is more likely than
not that a change of control giving rise to the redemption right will occur. We
do not intend to treat this redemption provision of the notes as affecting the
computation of the yield to maturity on the notes.
After the expiration of the United States Holders right to require us to
repurchase the notes, we will have the option to redeem all of the outstanding
notes at a purchase price equal to 100% of their aggregate
86
90
principal amount, plus the applicable premium, together with any accrued and
unpaid interest to the purchase date. Under Treasury regulations, we are deemed
to exercise any option to redeem if the exercise of the option would lower the
yield on the notes. We believe, and intend to take the position, that we will
not be treated as having exercised our option to redeem under these regulations.
Sale, Exchange, Redemption or Repayment of the Notes
Upon the disposition of a note by sale, exchange, redemption or repayment,
a United States Holder will generally recognize gain or loss in an amount equal
to the difference between (i) the amount of cash plus the fair market value of
any property received upon such disposition (other than amounts attributable to
accrued market discount or accrued interest on the note not previously included
in income, which will be treated as interest for U.S. federal income tax
purposes) and (ii) the United States Holder's adjusted tax basis in the note. A
United States Holder's tax basis in a note generally will be equal to the amount
such holder paid for the note, net of accrued interest, if any, increased by
accrued OID and by any accrued but unpaid stated interest and/or any accrued
market discount, in each case, to the extent that the holder previously included
such amount(s) in income and decreased by the amount of bond premium, if any,
amortized with respect to such note. Gain or loss recognized on the disposition
of a note generally will be long-term capital gain or loss if the note was held
by the holder for more than one year at the time of the disposition.
Non-corporate holders are generally subject to a maximum regular U.S. federal
income tax rate of 20% on net long-term capital gains. The deductibility of
capital losses is subject to certain limitations.
Backup Withholding and Information Reporting
We, or our designated paying agent, will, where required, report to holders
of notes and the Internal Revenue Service the amount of any interest paid on the
notes (or other reportable payments) in each calendar year and the amount of
tax, if any, withheld with respect to such payments.
Under current U.S. federal income tax law, a 31% backup withholding tax is
required with respect to certain interest and principal payments made to, and
the proceeds of sales by, certain United States Holders if such persons fail to
furnish their taxpayer identification number (i.e., social security number or
employer identification number) and other information. Certain persons,
including corporations and financial institutions, are exempt from backup
withholding. Holders of notes should consult their tax advisors as to their
qualification for an exemption from backup withholding and the procedure for
obtaining such an exemption. Backup withholding is not an additional tax. Any
amounts withheld under the backup withholding rules will be refunded or credited
against the holder's U.S. federal income tax liability, provided that the
required information is furnished timely to the Internal Revenue Service.
CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following discussion is limited to certain anticipated U.S. federal
income and estate tax consequences to a holder of a note that is an individual,
corporation, estate or trust that is not a United States Holder (a "Non-United
States Holder").
For purposes of the discussion below, interest (including OID) and gain on
the sale, exchange or other disposition of the notes will be considered to be
"U.S. trade or business income" if such income or gain is:
- effectively connected with the conduct of a U.S. trade or business; or
- in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, a fixed base) in the
United States.
87
91
Interest
The 30% U.S. federal withholding tax will not apply to any payment to you
of interest (including OID) on a note provided that:
- you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock that are entitled to
vote within the meaning of Section 871(h)(3) of the Code;
- you are not, for U.S. federal income tax purposes, a "controlled foreign
corporation" (as defined in section 957 of the Code) that is related,
directly or indirectly, to us through stock ownership;
- you are not a bank whose receipt of interest on a note is described in
Section 881(c)(3)(A) of the Code; and
- you provide your name and address, and certify, under penalties of
perjury, that you are not a United States Holder (which certification may
be made on an IRS Form W-8BEN) or a financial institution holding the
note on your behalf certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a
copy thereof. (If the information shown on Form W-8BEN changes, you must
file a new Form W-8BEN within 30 days of such change.)
If you cannot satisfy the requirements described above, payments of
interest (including OID) will be subject to the 30% U.S. federal withholding
tax, unless you provide us with a properly executed (1) IRS Form W-8BEN claiming
an exemption from or reduction in withholding under the benefit of an income tax
treaty or (2) IRS Form W-8ECI stating that interest paid on the note is not
subject to withholding tax because it is U.S. trade or business income. The
Forms W-8ECI and W-8BEN are valid for a period of three years beginning on the
date that the form is signed. (If the information shown on Form W-8BEN or Form
W-8ECI changes, you must file a new such form within 30 days of such change.) A
Non-United States Holder of notes that is eligible for a reduced rate of U.S.
withholding tax under an income tax treaty may obtain a refund or credit of any
excess amounts withheld by filing an appropriate claim for a refund with the
Internal Revenue Service.
Disposition of the Notes
A Non-United States Holder generally will not be subject to U.S. federal
income tax in respect of gain recognized on a disposition of the notes unless:
- the gain is U.S. trade or business income;
- the Non-United States Holder is an individual who is present in the
United States for 183 or more days in the taxable year of the disposition
and meets certain other requirements; or
- the Non-United States Holder is subject to U.S. tax under provisions
applicable to certain U.S. expatriates (including certain former citizens
or residents of the United States).
U.S. Federal Estate Tax
The U.S. federal estate tax will not apply to notes owned by you at the
time of your death, provided that (1) you do not own 10% or more of the total
combined voting power of all classes of our voting stock (within the meaning of
the Code and the Treasury regulations) and (2) interest on the notes would not
have been, if received at the time of your death, U.S. trade or business income.
U.S. Trade or Business Income
If interest on a note or gains from the disposition of a note are U.S.
trade or business income, you (although exempt from the 30% withholding tax)
will be subject to United States federal income tax on that interest on a net
income basis in the same manner as if you were a U.S. person as defined under
the Code. In addition, if you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lower applicable treaty rate) of your
earnings and profits for the taxable year, subject to adjustments, that are
effectively connected with your conduct of a trade or business in the United
States.
88
92
Backup Withholding and Information Reporting
In general, as a non-United States Holder you will not be subject to backup
withholding and information reporting with respect to payments that we make to
you on the notes, provided that we do not have actual knowledge that you are a
United States person and you have given us a Form W-8BEN.
In addition, you will not be subject to backup withholding or information
reporting with respect to the proceeds of the sale of a note either within the
United States or conducted through certain U.S.-related persons, if the payor
receives a Form W-8BEN and does not have actual knowledge that you are a United
States person, as defined under the Code, or if you otherwise establish an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your U.S. federal income tax liability, provided
the required information is furnished timely to the Internal Revenue Service.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR
SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN
APPLICABLE LAWS.
89
93
PLAN OF DISTRIBUTION
This prospectus has been prepared for use by the selling noteholder in
connection with sales of notes held by the selling noteholder. It is expected
that all or a substantial portion of the notes offered hereby may be sold by the
selling noteholder to purchasers in one or more transactions. The selling
noteholder may effect such transactions by selling the notes offered hereby to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the selling noteholder and/or the
purchasers of such notes for whom they may act as agents or to whom they may
sell as principal.
The selling noteholder served as initial purchaser in the original note
offering and received total discounts and commissions of $398,125 in connection
therewith. The selling noteholder has advised us that it currently intends to
make a market in the notes, including the notes offered hereby, but it is not
obligated to do so and may discontinue or suspend any such market-making
activities at any time without notice.
There can be no assurance as to the continuing existence of the market for
the notes, the liquidity of any market for the notes, the ability of holder of
the notes offered hereby to sell their notes or at the price at which holder of
the notes offered hereby would be able to sell their notes. Future trading
prices of the notes offered hereby will depend on many factors, including, among
other things, prevailing interest rates, our operating results, the market for
similar securities and general economic conditions. We do not currently intend
to list the notes on any securities exchange or the National Association of
Securities Dealers Automated Quotation System. Therefore, no assurance can be
given as to the liquidity of any trading market for the notes.
We entered into the registration rights agreement with the selling
noteholder with respect to the use by the selling noteholder of this prospectus.
Pursuant to the registration rights agreement, we agreed to bear all
registration expenses incurred under such agreement and we have agreed to
indemnify the selling noteholder against certain liabilities, including
liabilities under the Securities Act.
The selling noteholder and its affiliate have, from time to time, provided
other general financing and banking services to us and our affiliates, for which
services it has received customary fees.
An affiliate of the selling noteholder is the administrative agent and a
lender under the New Credit Agreement and the Existing Credit Agreement. An
affiliate of the selling noteholder is also acting as trustee under the
indenture governing the notes and the indentures governing our other Senior
Notes and as collateral agent under the collateral agent agreement and the
security agreement.
LEGAL MATTERS
The validity of the notes and the guarantees of the notes will be passed
upon for us by Weil, Gotshal & Manges LLP, New York, New York. Weil, Gotshal &
Manges LLP has from time to time represented, and may continue to represent, G-I
Holdings and its affiliates (including International Specialty Products Inc.) in
connection with various legal matters.
EXPERTS
The consolidated financial statements and schedule included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
90
94
BUILDING MATERIALS CORPORATION OF AMERICA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
PAGE
----
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations for the three years
ended December 31, 2000................................... F-3
Consolidated Balance Sheets as of December 31, 1999 and
2000...................................................... F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 2000................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended December 31, 2000............... F-7
Notes to Consolidated Financial Statements.................. F-8
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)................... F-37
SCHEDULES
Consolidated Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts....... S-1
F-1
95
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 99.9% owned
subsidiary of BMCA Holdings Corporation) and subsidiaries as of December 31,
1999 and 2000, 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, 2000. 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-3 to F-36 of this Form S-1, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1999 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, 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 S-1 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.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 28, 2001 (except with respect
to the matter discussed in Note 3,
as to which the date is March 21, 2001)
F-2
96
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1999 2000
---------- ----------- ----------
(THOUSANDS)
Net sales.............................................. $1,087,957 $1,140,039 $1,207,759
---------- ---------- ----------
Costs and expenses:
Cost of products sold................................ 774,339 812,697 893,776
Selling, general and administrative.................. 236,416 239,560 250,542
Goodwill amortization................................ 2,111 2,034 2,024
Gain on sale of assets............................... -- -- (17,505)
Warranty reserve adjustment.......................... -- -- 15,000
Nonrecurring charges................................. 27,563 2,650 --
---------- ---------- ----------
Total costs and expenses.......................... 1,040,429 1,056,941 1,143,837
---------- ---------- ----------
Operating income....................................... 47,528 83,098 63,922
Interest expense....................................... (49,954) (48,317) (53,468)
Other income (expense), net............................ 15,895 5,440 (27,640)
---------- ---------- ----------
Income (loss) before income taxes and extraordinary
losses............................................... 13,469 40,221 (17,186)
Income tax (provision) benefit......................... (5,118) (14,882) 6,359
---------- ---------- ----------
Income (loss) before extraordinary losses.............. 8,351 25,339 (10,827)
Extraordinary losses, net of income tax benefits of
$11,101, $761, and $194, respectively................ (18,113) (1,296) (330)
---------- ---------- ----------
Net income (loss)...................................... $ (9,762) $ 24,043 $ (11,157)
========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-3
97
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 55,952 $ 82,747
Investments in trading securities......................... 687 --
Investments in available-for-sale securities.............. 29,702 --
Other short-term investments.............................. 1,590 --
Accounts receivable, trade, less reserve of $4,019 and
$1,798, respectively.................................... 22,938 19,474
Accounts receivable, other................................ 62,892 51,843
Receivable from parent corporations....................... 59,132 --
Tax receivable from parent corporations................... -- 1,500
Inventories............................................... 108,615 101,702
Other current assets...................................... 4,239 3,925
-------- --------
Total Current Assets.................................... 345,747 261,191
Property, plant and equipment, net.......................... 410,703 362,464
Excess of cost over net assets of businesses acquired, net
of accumulated amortization of $12,925 and $14,346,
respectively.............................................. 70,408 65,317
Deferred income tax benefits................................ 45,561 42,897
Tax receivable from parent corporations..................... -- 7,500
Other assets................................................ 22,693 31,800
-------- --------
Total Assets................................................ $895,112 $771,169
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt...................... $ 6,149 $ 5,908
Accounts payable.......................................... 84,334 57,520
Payable to related parties................................ 15,024 10,052
Accrued liabilities....................................... 115,828 42,888
Reserve for product warranty claims....................... 14,500 14,900
-------- --------
Total Current Liabilities............................... 235,835 131,268
-------- --------
Long-term debt less current maturities...................... 600,745 674,698
-------- --------
Reserve for product warranty claims......................... 19,814 28,756
-------- --------
Other liabilities........................................... 17,029 14,312
-------- --------
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: 1,019,621 and 1,015,514 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
Additional paid-in capital................................ 40,632 --
Accumulated deficit....................................... -- (77,866)
Accumulated other comprehensive loss...................... (18,944) --
-------- --------
Total Stockholders' Equity (Deficit).................... 21,689 (77,865)
-------- --------
Total Liabilities and Stockholders' Equity (Deficit)........ $895,112 $771,169
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-4
98
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999 2000
--------- --------- ---------
(THOUSANDS)
Cash and cash equivalents, beginning of year................ $ 12,924 $ 24,989 $ 55,952
--------- --------- ---------
Cash provided by (used in) operating activities:
Net income (loss)......................................... (9,762) 24,043 (11,157)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary losses.................................... 18,113 1,296 330
Gain on sale of assets.................................. -- -- (17,505)
Depreciation............................................ 28,935 32,986 36,350
Goodwill and other amortization......................... 2,312 2,675 2,866
Deferred income taxes................................... 4,538 14,132 (7,475)
Noncash interest charges................................ 23,877 3,321 2,648
Increase in working capital items......................... (15,962) (26,200) (19,791)
Increase (decrease) in reserve for product warranty
claims.................................................. 11,651 (14,318) 9,342
Purchases of trading securities........................... (189,197) (139,522) (980)
Proceeds from sales of trading securities................. 124,931 243,097 2,172
(Increase) decrease in other assets....................... 282 (4,501) 1,264
Increase (decrease) in other liabilities.................. 3,267 (2,335) (2,676)
Change in net receivable from/payable to related
parties/parent corporations............................. 42,635 (48,793) 45,160
Other, net................................................ 11,272 (3,404) 517
--------- --------- ---------
Net cash provided by operating activities................... 56,892 82,477 41,065
--------- --------- ---------
Cash provided by (used in) investing activities:
Capital expenditures...................................... (75,334) (45,322) (61,543)
Acquisitions.............................................. (59,187) (515) --
Proceeds from sale of assets.............................. 29,019 -- 31,702
Purchases of available-for-sale securities................ (89,324) (76,048) (882)
Purchases of held-to-maturity securities.................. (6,357) (2,349) --
Proceeds from sales of available-for-sale securities...... 170,055 97,400 58,284
Proceeds from held-to-maturity securities................. 499 7,758 --
Proceeds from sales of other short-term investments....... -- 21,421 1,590
--------- --------- ---------
Net cash provided by (used in) investing activities......... (30,629) 2,345 29,151
--------- --------- ---------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable................. 30,578 5,640 925
Decrease in short-term debt............................... (26,944) -- --
Decrease in loan receivable from parent corporations...... 6,152 -- --
Proceeds from issuance of long-term debt.................. 304,019 37,943 41,046
Increase (decrease) in borrowings under revolving credit
facility................................................ (34,000) -- 70,000
Repayments of long-term debt.............................. (287,904) (35,954) (38,056)
Distributions to parent corporations...................... -- (60,000) (106,161)
Net issuance (repurchase) of common stock................. -- 870 (1,180)
Financing fees and expenses............................... (6,099) (2,358) (9,995)
--------- --------- ---------
Net cash used in financing activities....................... (14,198) (53,859) (43,421)
--------- --------- ---------
Net change in cash and cash equivalents..................... 12,065 30,963 26,795
--------- --------- ---------
Cash and cash equivalents, end of year...................... $ 24,989 $ 55,952 $ 82,747
========= ========= =========
F-5
99
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999 2000
--------- --------- ---------
(THOUSANDS)
Supplemental Cash Flow Information:
Effect on cash from (increase) decrease in working capital
items*:
Accounts receivable..................................... $ (40,467) $ (11,309) $ 13,140
Inventories............................................. (10,707) (14,912) 3,292
Other current assets.................................... 2,032 1,423 (653)
Accounts payable........................................ 10,062 9,917 (26,814)
Accrued liabilities..................................... 23,118 (11,319) (8,756)
--------- --------- ---------
Net effect on cash from increase in working capital
items................................................. $ (15,962) $ (26,200) $ (19,791)
========= ========= =========
Cash paid during the period for:
Interest (net of amount capitalized)...................... $ 19,994 $ 44,109 $ 49,105
Income taxes (including taxes paid pursuant to the Tax
Sharing Agreement)...................................... 1,174 1,250 10,121
Acquisition of LL Building Products Inc. business:
Fair market value of assets acquired...................... $ 59,318
Purchase price of acquisition............................. 43,468
---------
Liabilities assumed....................................... $ 15,850
=========
- ---------------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net receivable from/payable to related
parties/parent corporations. Working capital acquired in connection with
acquisitions is reflected in "Acquisitions". The effects of reclassifications
between noncurrent and current assets and liabilities are excluded from the
amounts shown above. 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 financing
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. See Note 10
for a description of non-cash leasing transactions.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-6
100
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED
CAPITAL STOCK OTHER
AND ADDITIONAL COMPREHENSIVE ACCUMULATED COMPREHENSIVE
PAID-IN CAPITAL INCOME (LOSS) DEFICIT INCOME (LOSS)
--------------- ------------- ----------- -------------
(THOUSANDS)
Balance, December 31, 1997.................................. $ 91,700 $ 10,171 $(12,327)
Comprehensive loss -- year ended December 31, 1998:
Net loss................................................ -- -- (9,762) $ (9,762)
--------
Other comprehensive income, net of tax:
Unrealized holding losses arising during the period, net
of income tax benefit of $10,409...................... -- (16,504) -- (16,504)
Less: Reclassification adjustment for gains included in
net loss, net of income tax effect of $7,064.......... -- 11,526 -- 11,526
-------- --------
Change in unrealized losses on available-for-sale
securities............................................ -- (28,030) -- (28,030)
Minimum pension liability adjustment.................... -- (2,025) -- (2,025)
--------
Comprehensive loss........................................ $(39,817)
========
Issuance of 30,000 shares of restricted common stock...... 2,490 -- --
-------- -------- --------
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 in
net 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)
======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-7
101
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 99.9%-owned subsidiary of BMCA Holdings Corporation
("BHC"), which, as of December 31, 2000, was a 98.5%-owned subsidiary of G-I
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 the parent of the Company
and of the Company's direct parent, BHC. References below 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.
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. G-I Holdings has agreed to indemnify
the Company from liabilities not assumed by the Company, including
asbestos-related and environmental liabilities not expressly assumed by the
Company. See Note 3.
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 for 1998 have been restated to include the results of
operations, cash flows and assets and liabilities of the Nashville facility. For
financial reporting purposes, the contribution of the Nashville facility was
recorded by the Company at the historical cost of $9.3 million. The increase in
net income resulting from the contribution of the Nashville facility for the
year ended December 31, 1998 was $0.8 million.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
All subsidiaries are consolidated and intercompany transactions have been
eliminated.
F-8
102
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and certain debt
securities purchased with original maturities of three months or less.
Short-term Investments
For securities classified as "trading" (including short positions),
unrealized gains and losses are reflected in income. For securities classified
as "available-for-sale," unrealized gains and losses, net of income tax effect,
are included in a separate component of stockholders' equity, "Accumulated other
comprehensive loss," and were $(17.6) and $0 million as of December 31, 1999 and
2000, respectively.
"Other income (expense), net" includes $21.5, $12.8 and $(18.1) million of
net realized and unrealized gains (losses) on securities in 1998, 1999 and 2000,
respectively. The determination of cost in computing realized and unrealized
gains and losses is based on the specific identification method.
As of December 31, 1999, the market value of the Company's equity
securities held long was $30.5 million, and the Company had $1.5 million of
short positions in common stocks, based on market value. As of December 31,
1999, the market value of equity-related long contracts was $0.9 million which
have been marked-to-market each month, with unrealized gains and losses included
in results of operations. The market values referred to above are based on
quotations as reported by various stock exchanges and major broker-dealers.
As of December 31, 1999, "other short-term investments" were investments in
limited partnerships which were accounted for by the equity method. Gains and
losses were reflected in "Other income (expense), net."
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 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.
F-9
103
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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.
Debt Issuance Costs
Debt issuance costs are amortized to expense over the life of the related
debt.
Software Development Costs
Included in other assets at December 31, 1999 and 2000 were $3.3 and $6.8
million, respectively, of capitalized purchased software development costs. Such
costs are amortized over a 5 year period. For 1998, 1999 and 2000, the Company
amortized $0.2, $0.6 and $0.8 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 $76.3, $79.1 and $84.6 million in 1998,
1999 and 2000, respectively.
Interest Rate Swaps
Gains (losses) on interest rate swap agreements ("swaps") are deferred and
amortized as a reduction (increase) of interest expense over the shorter of the
remaining life of the swaps or the remaining period to maturity of the debt
issue with respect to which the swaps were entered.
Research and Development
Research and development expenses are charged to operations as incurred and
were $6.0, $6.5 and $5.9 million in 1998, 1999 and 2000, 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
F-10
104
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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 ranging from 5 to 10 years. Income from warranty contracts related to
low slope roofing products is recognized over the life of the agreements. The
Company believes that the reserves established for estimated probable future
warranty claims are adequate.
The Company recorded a $15.0 million warranty reserve adjustment in the
fourth quarter of 2000 based on an evaluation of claims activity for 2000. As
this adjustment was recorded for a specific alleged product defect relating to
prior production processes, it has been separately presented in the Consolidated
Statements of Operations.
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, 2000, is $1.3 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
"Business -- 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 1998, 1999 and 2000 are as follows:
UNREALIZED GAINS
(LOSSES) ON MINIMUM ACCUMULATED
AVAILABLE-FOR-SALE PENSION LIABILITY OTHER COMPREHENSIVE
SECURITIES ADJUSTMENT INCOME (LOSS)
-------------------- ----------------- -------------------
(THOUSANDS)
Balance, December 31, 1997............ $ 11,102 $ (931) $ 10,171
Change for the year 1998.............. (28,030) (2,025) (30,055)
-------- ------- --------
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............ $ -- $ -- $ --
======== ======= ========
New Accounting Standard
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS No. 137
and 138, is effective for fiscal years beginning after June 15, 2000.
F-11
105
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
SFAS No. 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company adopted SFAS No. 133 on January
1, 2001. The impact of the initial adoption of SFAS No. 133 by the Company will
not be material to the Company's results of operations or financial position.
Reclassifications
Certain reclassifications have been made to conform to current year
presentation.
NOTE 3. RESERVE FOR 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. See Note 1. G-I Holdings has
agreed to indemnify the Company against any other existing or future claims
related to asbestos-related liabilities if asserted against the Company. In
January 2001, G-I Holdings filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos Claims. This
proceeding is in a preliminary stage. In light of G-I Holdings' recent
bankruptcy filing, G-I Holdings may not have sufficient assets to satisfy these
indemnification obligations to the Company.
Claimants in the G-I Holdings bankruptcy, including judgment creditors,
might seek to satisfy their claims by asking the bankruptcy court to require the
sale of G-I Holdings' assets, including its holdings of BHC's common stock and
its indirect holdings of the Company's common stock. Such action could result in
a change of control of the Company. See Notes 11 and 16. In addition, those
claimants may seek to file Asbestos Claims against the Company (with 2,147
Asbestos Claims having been filed against the Company as of December 31, 2000).
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. The temporary restraining order
expires on April 23, 2001. 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. In addition, G-I Holdings has indemnified the Company
with respect to Asbestos Claims. In light of G-I Holdings' recent bankruptcy
filing, G-I Holdings may not have sufficient assets to satisfy these
indemnification obligations to the Company.
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
F-12
106
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS -- (CONTINUED)
court to grant the relief requested. The plaintiffs also filed for interim
relief absent the granting of their requested relief described above. On
February 21, 2001, G-I Holdings moved to dismiss the complaint. 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 "Business -- Legal Proceedings,"
which is incorporated herein by reference, and Notes 11 and 16.
NOTE 4. ACQUISITIONS AND DISPOSITIONS
Effective June 1, 1998, the Company purchased for approximately $43.5
million substantially all of the assets of Leslie-Locke Inc. ("LL Building
Products Inc."), a wholly-owned subsidiary of Leslie Building Products Inc.,
which manufactured and marketed a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries from manufacturing facilities in Burgaw, North Carolina
and Compton, California. The acquisition was accounted for under the purchase
method of accounting. Accordingly, the purchase price was allocated to the
estimated fair values of the identifiable net assets acquired, and the excess
was recorded as goodwill. The results of the LL Building Products Inc. business,
including net sales of $53.3 million for 1998, are included from the date of
acquisition. The net effects of this acquisition were not material to 1998
results of operations.
Effective December 1, 1998, the Company sold its perlite insulation
manufacturing assets to Johns Manville Corporation for net cash proceeds of
approximately $29.0 million. The pre-tax gain as a result of this sale was not
significant to the Company's results of operations. In addition, as part of the
transaction, Johns Manville and the Company entered into a long-term agreement
to supply the Company with perlite insulation products, which will enable the
Company to continue to serve its low slope roofing customers. As a result, the
sale did not have a material impact on the Company's results of operations.
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.
NOTE 5. NONRECURRING CHARGES
The Company recorded pre-tax nonrecurring charges in the third quarter of
1998 aggregating $27.6 million, of which $20.0 million related to the settlement
of a national class action lawsuit involving 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 September 1998 settlement, the Company 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. Three of the four
separate class actions that had been brought against G-I Holdings and stayed
pending the outcome of the fairness hearing have been dismissed in light of the
final approval of the settlement agreement described above, and the Company
expects that the remaining action also will be dismissed.
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
F-13
107
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. NONRECURRING CHARGES -- (CONTINUED)
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, the agreement between the Company and such
former officer and the trusts relating to the restricted common stock 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 during 2000 four
manufacturing facilities located in Monroe, Georgia; Port Arthur, Texas;
Corvallis, Oregon; and Albuquerque, New Mexico. As of December 31, 2000, the net
book value of the assets at these facilities was $31.2 million. 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.
NOTE 7. INCOME TAX (PROVISION) BENEFIT
Income tax (provision) benefit, which has been computed on a separate
return basis, consists of the following:
YEAR ENDED DECEMBER 31,
------------------------------
1998 1999 2000
------- -------- -------
(THOUSANDS)
Federal -- deferred.................................. $(4,513) $(13,682) $ 5,423
------- -------- -------
State and local:
Current............................................ (580) (750) (1,116)
Deferred........................................... (25) (450) 2,052
------- -------- -------
Total state and local........................... (605) (1,200) 936
------- -------- -------
Income tax (provision) benefit....................... $(5,118) $(14,882) $ 6,359
======= ======== =======
F-14
108
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAX (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,
-----------------------------
1998 1999 2000
------- -------- ------
(THOUSANDS)
Statutory (provision) benefit......................... $(4,714) $(14,077) $6,015
Impact of:
State and local taxes, net of Federal benefits...... (393) (780) 608
Nondeductible goodwill amortization................. (641) (275) (185)
Other, net.......................................... 630 250 (79)
------- -------- ------
Income tax (provision) benefit........................ $(5,118) $(14,882) $6,359
======= ======== ======
The components of the net deferred tax assets are as follows:
DECEMBER 31,
-------------------
1999 2000
-------- -------
(THOUSANDS)
Deferred tax liabilities related to property, plant and
equipment................................................. $(15,475) $(9,449)
-------- -------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes................ 43,335 42,154
Net operating losses not yet utilized under the Tax
Sharing Agreement...................................... 17,701 10,192
-------- -------
Total deferred tax assets................................. 61,036 52,346
-------- -------
Net deferred tax assets..................................... $ 45,561 $42,897
======== =======
As of December 31, 2000, the Company had $27.5 million of net operating
loss carryforwards available to offset future taxable income, as follows:
YEAR OF
EXPIRATION (THOUSANDS)
- ---------- -----------
2011................................................... $27,545
=======
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, included in current assets is a tax receivable
from parent corporations of $1.5 million and included in long-term assets is a
tax receivable from parent corporations of $7.5 million 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 two years based on
current income estimates.
The Company 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 certain 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 consolidated group that has included G-I Holdings as a member
(the "G-I Holdings Group"), the Company is obligated to pay G-I Holdings an
amount equal to those federal income taxes it
F-15
109
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAX (PROVISION) BENEFIT -- (CONTINUED)
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 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 certain
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 Group, the Company is
severally liable for certain federal income tax liabilities of the G-I Holdings
Group, including tax liabilities not related to its business, G-I Holdings has
agreed to indemnify the Company and its subsidiaries for all tax liabilities of
the G-I Holdings Group other than tax 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 its domestic
subsidiaries. In light of G-I Holdings' recent bankruptcy filing, G-I Holdings
may be not have sufficient assets to satisfy these indemnification obligations.
For the possible consequences of the failure of G-I Holdings to satisfy these
indemnification obligations, see Note 3. 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
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 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. The claim of the IRS for interest and penalties, after taking into
account the effect on the use of net operating losses and foreign tax credits,
could result in G-I Holdings incurring liabilities significantly in excess of
the deferred tax liability of $131.4 million that it recorded in 1990 in
connection with this matter. G-I Holdings has advised the Company that it
believes that it will prevail in this matter, although there can be no assurance
in this regard. The Company believes that the ultimate disposition of this
matter will not have a material adverse effect on its business, financial
position or results of operations. G-I Holdings has agreed to indemnify the
Company against any tax liability associated with the surfactants partnership.
In light of G-I Holdings' recent bankruptcy filing, G-I Holdings may not have
sufficient assets to satisfy its indemnification obligation to the Company. For
the possible consequences to the Company of the failure of G-I Holdings to
satisfy this liability and other information relating to G-I Holdings, see Note
3.
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 million in cash to be made
F-16
110
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. SALE OF ACCOUNTS RECEIVABLE -- (CONTINUED)
available to the Company based on eligible receivables outstanding from time to
time. In November 1996, the Company entered into new agreements, 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 to a new
trust, without recourse. The new agreements provide for a maximum of $115
million in cash to be made available to the Company based on eligible
receivables outstanding from time to time. This facility expires in December
2001. 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 $5.1, $5.5 and $6.9 million in 1998, 1999 and
2000, respectively.
NOTE 9. INVENTORIES
At December 31, 1999 and 2000, $8.9 and $11.2 million, respectively, of
inventories were valued using the LIFO method. Inventories consist of the
following:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Finished goods......................................... $ 68,878 $ 61,606
Work-in process........................................ 13,974 16,938
Raw materials and supplies............................. 27,462 27,743
-------- --------
Total............................................. 110,314 106,287
Less LIFO reserve...................................... (1,699) (4,585)
-------- --------
Inventories............................................ $108,615 $101,702
======== ========
NOTE 10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
DECEMBER 31,
----------------------
1999 2000
--------- ---------
(THOUSANDS)
Land and land improvements........................... $ 29,005 $ 32,603
Buildings and building equipment:.................... 67,220 75,299
Machinery and equipment.............................. 300,846 369,102
Construction in progress............................. 115,458 20,776
--------- ---------
Total........................................... 512,529 497,780
Less accumulated depreciation and amortization....... (101,826) (135,316)
--------- ---------
Property, plant and equipment, net................... $ 410,703 $ 362,464
========= =========
Included in the net book value of machinery and equipment at December 31,
1999 and 2000 was $10,508 and $8,863, respectively, for assets under capital
leases.
During 1999, in connection with the construction of two new manufacturing
facilities, the Company entered into two leases for certain machinery and
equipment, which leases meet the criteria of operating leases under SFAS No. 13
"Accounting for Leases." In connection therewith, at December 31, 1999,
property, plant, and equipment, net, and accrued liabilities included $65.6
million of assets under such
F-17
111
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. PROPERTY, PLANT AND EQUIPMENT -- (CONTINUED)
leases. Such amounts were reversed during 2000 when the manufacturing facilities
became fully operational. These leases require quarterly rental payments and are
for a ten-year period expiring in December 2009.
NOTE 11. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
10 1/2% Senior Notes due 2003.......................... $ -- $ 34,235
7 3/4% Senior Notes due 2005........................... 149,493 149,584
8 5/8% Senior Notes due 2006........................... 99,654 99,704
8% Senior Notes due 2007............................... 99,418 99,492
8% Senior Notes due 2008............................... 154,249 154,334
Borrowings under Existing Credit Agreement............. -- 70,000
Term Loan due 2004..................................... 31,850 --
Industrial revenue bonds with various interest rates
and maturity dates to 2029........................... 23,125 23,060
Obligations on equipment loans......................... 2,225 28
Precious Metal Note due 2003........................... -- 7,002
Obligations under capital leases (Note 16)............. 43,787 39,966
Other notes payable.................................... 3,093 3,201
-------- --------
Total............................................. 606,894 680,606
Less current maturities................................ (6,149) (5,908)
-------- --------
Long-term debt less current maturities................. $600,745 $674,698
======== ========
On July 5, 2000, the Company issued $35 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 the 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 such 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 "Deferred Coupon Notes"). 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"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $147.1 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary loss of $8.8 million.
F-18
112
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
On July 17, 1998, the Company issued $150 million in aggregate principal
amount of 7 3/4% Senior Notes due 2005 (the "2005 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $132.6 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary loss of $9.3 million.
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 2003 Notes, the 2005 Notes, the 2006 Notes, the 2007 Notes and the
2008 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).
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 (9.39% on December 31, 2000) based
on the lenders' base rate, the federal funds rate or the Eurodollar rate. As of
December 31, 2000, $70 million of borrowings and $38.8 million of letters of
credit were outstanding under the Existing Credit Agreement.
In December 2000, the Company entered into a the New Credit Agreement,
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, 2000,
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 obligations under the Precious Metal Note (defined below)
and approximately $3.5 million of obligations under a standby letter of credit
(collectively, the "Other Indebtedness"), aggregating $77.0 million of
borrowings and $42.3 million of letters of credit outstanding at December 31,
2000, 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 Senior Notes are secured by a second-priority lien on the
Collateral for so long as the first-priority lien remains in effect, subject to
certain limited exceptions.
Under the terms of the New Credit Agreement, the Existing Credit Agreement
and the Senior Notes, the Company is subject to certain financial covenants,
including, among others, interest coverage, minimum consolidated EBITDA
(earnings before income taxes and extraordinary items increased by interest
expenses, 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, except for demand loans of specified amounts, made to any parent
corporation are prohibited in 2001 and are subject to limitations, as described
in those agreements, in future periods. As of December 31, 2000, 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 of $2 million. In addition, if a change of control as defined in
the New Credit Agreement and the Existing Credit Agreement occurs, those
agreements could be terminated and the loans thereunder accelerated by the
holders of that indebtedness, an event that would cause the Company's
outstanding Senior Notes to be
F-19
113
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
accelerated. As of December 31, 2000, the Company was in compliance with all
covenants under the New Credit Agreement, the Existing Credit Agreement and the
Senior Notes.
In connection with entering into the New Credit Agreement, the Company
issued a $7.0 million note (the "Precious Metal Note") due August 2003 to
finance precious metals used in certain of the Company's manufacturing
processes.
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 New Credit Agreement, the
Existing Credit Agreement and the Other Indebtedness with a new
debtor-in-possession facility (the "DIP Facility") on terms and conditions
substantially identical to the New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness, as applicable, 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 connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ("swaps") with banks, with an aggregate ending
notional principal amount of $142.0 million and a final maturity of July 1,
1999, all of which were terminated as of June 28, 1998. In June 1998, the
Company terminated swaps with an aggregate ending notional principal amount of
$60.0 million, resulting in gains of $0.7 million. The gains were deferred and
were amortized as a reduction of interest expense over the remaining original
life of the swaps. As a result of the swaps, the effective interest cost to the
Company of the portion of the Deferred Coupon Notes covered by the swaps varied
at a fixed spread over LIBOR.
In December 1995, the Company consummated a $40 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. 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. 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 4.20% and 4.75% as of December 31, 2000.
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. 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, 1999 and 2000 are as follows:
DECEMBER 31,
-------------------
1999 2000
-------- -------
(THOUSANDS)
2005 Notes.............................................. $136,039 $47,867
2006 Notes.............................................. 94,671 31,905
2007 Notes.............................................. 89,973 31,837
2008 Notes.............................................. 139,210 49,387
F-20
114
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
The aggregate maturities of long-term debt as of December 31, 2000 for the
next five years are as follows:
(THOUSANDS)
-----------
2001..................................................... $ 5,908
2002..................................................... 15,009
2003..................................................... 125,244
2004..................................................... --
2005..................................................... 150,000
In the above table, maturities for the year 2002 include $11.7 million
related to the Baltimore manufacturing facility capital lease. Maturities for
the year 2003 include $35 million related to the 2003 Notes, $70 million related
to the Existing Credit Agreement and $20.2 million related to the Chester glass
mat manufacturing facility capital lease. Maturities for the year 2005 include
$150 million related to the 2005 Notes.
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 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 $4.2, $4.4 and $4.9 million for 1998, 1999 and 2000, respectively.
U.S. Intec, Inc., a wholly-owned subsidiary of the Company as of December
31, 2000, provided a defined contribution plan for eligible employees. U.S.
Intec, Inc. contributed a discretionary matching contribution equal to 100% of
each participant's eligible contributions each year up to a maximum of $750 for
each participant. Such contributions by U.S. Intec, Inc. were $0.1, $0.2 and
$0.1 million for 1998, 1999 and 2000, 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. In 1998, the
Company acquired LL Building Products Inc. which has pension plans for its
hourly and salaried employees. The LL Building Products Inc. plans were
curtailed in 1998. The Company's funding policy is consistent with the minimum
funding requirements of ERISA.
F-21
115
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
The Company's net periodic pension cost for the Retirement Plans included
the following components:
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1999 2000
------- ------- -------
(THOUSANDS)
Service cost.......................................... $ 754 $ 804 $ 751
Interest cost......................................... 842 949 1,066
Expected return on plan assets........................ (1,296) (1,270) (1,583)
Amortization of unrecognized prior service cost....... 31 31 33
Amortization of net losses from earlier periods....... -- 107 14
------- ------- -------
Net periodic pension cost............................. $ 331 $ 621 $ 281
======= ======= =======
The following tables set forth, for the years 1999 and 2000,
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,
------------------
1999 2000
------- -------
(THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $17,865 $17,601
Service cost.............................................. 804 751
Interest cost............................................. 1,243 1,379
Amendments................................................ -- 50
Actuarial losses (gains).................................. (1,739) 1,073
Benefits paid............................................. (572) (638)
------- -------
Benefit obligation at end of year......................... $17,601 $20,216
======= =======
Change in plan assets:
Fair value of plan assets at beginning of year............ $16,248 $18,348
Actual return on plan assets.............................. 1,920 3,100
Employer contributions.................................... 752 2,625
Benefits paid............................................. (572) (638)
------- -------
Fair value of plan assets at end of year.................. $18,348 $23,435
======= =======
Reconciliation of funded status:
Funded status............................................. $ 746 $ 3,219
Unrecognized prior service cost........................... 247 264
Unrecognized actuarial losses............................. 1,351 473
------- -------
Net amount recognized in Consolidated Balance Sheets...... $ 2,344 $ 3,956
======= =======
F-22
116
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
DECEMBER 31,
------------------
1999 2000
------- -------
(THOUSANDS)
Amounts recognized in Consolidated Balance Sheets:
Prepaid benefit cost...................................... $ 746 $ 3,956
Intangible asset.......................................... 247 --
Accumulated other comprehensive loss...................... 1,351 --
------- -------
Net amount recognized..................................... $ 2,344 $ 3,956
======= =======
Change for the year in accumulated other comprehensive
(income) loss:
Change in intangible asset................................ $ 30 $ 247
Change in additional minimum liability.................... (1,635) (1,598)
------- -------
Total..................................................... $(1,605) $(1,351)
======= =======
In determining the projected benefit obligation, the weighted average
assumed discount rate was 7.75% and 7.50% for 1999 and 2000, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 1999 and 2000.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1998, 1999 and 2000.
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 vest 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 $1.3 and $1.2 million for 1998 and
1999, respectively.
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,
-----------------------
1998 1999 2000
----- ----- -----
(THOUSANDS)
Service cost............................................... $ 104 $ 114 $ 92
Interest cost.............................................. 467 476 354
Amortization of unrecognized prior service cost............ (88) (88) (94)
Amortization of net gains from earlier periods............. (240) (209) (271)
----- ----- -----
Net periodic postretirement benefit cost................... $ 243 $ 293 $ 81
===== ===== =====
F-23
117
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
The following table sets forth, for the years 1999 and 2000,
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,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 7,135 $ 6,023
Service cost.............................................. 114 92
Interest cost............................................. 476 354
Amendments................................................ -- (122)
Actuarial gains........................................... (1,179) (1,098)
Benefits paid............................................. (523) (404)
-------- --------
Benefit obligation at end of year......................... $ 6,023 $ 4,845
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year............ $ -- $ --
Employer contributions.................................... 523 404
Participant contributions................................. -- 104
Benefits paid............................................. (523) (508)
-------- --------
Fair value of plan assets at end of year.................. $ -- $ --
======== ========
Reconciliation of funded status:
Funded status............................................. $ (6,023) (4,845)
Unrecognized prior service cost........................... (614) (642)
Unrecognized actuarial gains.............................. (4,400) (5,227)
-------- --------
Net amount recognized in Consolidated Balance Sheets as
accrued benefit cost................................... $(11,037) $(10,714)
======== ========
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
2000 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 2000
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 4.5% 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 7.75% and 7.50% for 1999 and 2000, 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, 1999 and 2000 by $76,000 and $33,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic
F-24
118
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
postretirement benefit cost for the years 1999 and 2000 by $5,000 and $2,400,
respectively. A decrease of one percentage point in each year would decrease the
accumulated postretirement benefit obligation as of December 31, 1999 and 2000
by $68,000 and $31,000, respectively, and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for the
years 1999 and 2000 by $5,000 and $2,400, respectively.
NOTE 13. 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 1998 and 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,
-----------------------------
1998 1999 2000
------- ------- -------
(NUMBER OF SHARES)
Outstanding, January 1................................ 102,595 140,052 167,811
Granted............................................... 57,073 81,405 61,700
Exercised............................................. -- (8,704) (3,653)
Forfeited............................................. (19,616) (44,942) (27,749)
------- ------- -------
Outstanding, December 31.............................. 140,052 167,811 198,109
------- ------- -------
Options exercisable, December 31...................... 20,663 45,337 66,405
======= ======= =======
Effective December 31, 2000, the Company adopted the 2001 Long-Term
Incentive Plan which allows certain employees participating in the preferred
stock option program to also participate in the 2001 Long-Term Incentive Plan.
Under the provisions of the 2001 Long-Term Incentive Plan, a $1.4 million charge
was recorded in 2000.
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 manufactures 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 principally for regional markets. Sales of steep slope
roofing products represented approximately 67% of the Company's net sales in
2000. The Company's low slope roofing product line includes a full line of
modified bitumen products, asphalt built-
F-25
119
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. BUSINESS SEGMENT INFORMATION -- (CONTINUED)
up roofing, liquid applied membrane, and roofing accessories. Sales of low slope
roofing products and accessories represented approximately 26% of the Company's
net sales in 2000. Sales of the specialty building products and accessories
product line represented approximately 7% of the Company's net sales in 2000.
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 2000 to be
considered as a reportable segment.
Net revenues in 1999 and 2000, respectively, included sales to The Home
Depot, Inc. and American Builders & Contractors Supply Co., of approximately
11%, 13%, and 10% and 11%, respectively, of the Company's net sales. No other
customer accounted for as much as 10% of net sales in 1999 or 2000.
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,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Receivable from G-I Holdings........................... $ 59,132 $ --
======== ========
Tax receivable from parent corporations................ -- $ 9,000
======== ========
Payable to ISP......................................... $(15,024) $(10,052)
======== ========
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates (between 5.82% and 5.96% during 1998);
however, no loans to G-I Holdings were made during 1999 and 2000. In addition,
no loans were made to the Company by G-I Holdings and its subsidiaries during
1999 and 2000. Loans to any parent corporation are subject to limitations as
outlined in the New Credit Agreement, the Existing Credit Agreement and the
Senior Notes. The Company advances funds on a non-interest bearing basis to G-I
Holdings and its subsidiaries. The net balance of such advances as of December
31, 1999 and 2000 was $59.1 and $0 million, respectively. During 1999 and 2000,
the Company made distributions of $60.0 and $106.2 million, respectively, 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
1999 and 2000 that the Company determined were uncollectible. Included in
current assets is a tax receivable from parent corporations of $1.5 million and
included in long-term assets is a tax receivable from parent corporations of
$7.5 million representing amounts paid to G-I Holdings under the Tax Sharing
Agreement. See Note 7.
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 certain of their roofing plants which are
supplied by third parties. Effective January 1, 2001, this contract was amended
F-26
120
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. RELATED PARTY TRANSACTIONS -- (CONTINUED)
and restated to provide, among other things, that the contract will expire on
December 31, 2001, unless extended by the parties. Such purchases by the Company
and its subsidiaries totaled $62.6, $57.3 and $59.3 million for 1998, 1999 and
2000, respectively. The amount payable to ISP at December 31, 1999 and 2000 for
such purchases was $2.9 and $7.6 million, respectively.
Management Agreement: The Company is a party to a Management Agreement
with ISP (the "Management Agreement") pursuant to which 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 for providing
such services aggregated $4.3, $5.3 and $6.0 million for 1998, 1999 and 2000,
respectively. Such charges consist of management fees and other reimbursable
expenses attributable to, or incurred by ISP for the benefit of the Company. The
payable to ISP for management fees as of December 31, 1999 and 2000 was $4.1 and
$1.0 million, respectively. Effective January 1, 2001, the Management Agreement
was amended to extend the term of the agreement through March 31, 2001, to
provide for the automatic extension of the agreement for successive quarterly
periods unless the agreement is terminated by a party, and to adjust the
management fees payable thereunder. In addition, the Management Agreement was
amended to provide that the Company rather than ISP be 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 such services. Based on the
services provided to G-I Holdings in 2000 under the Management Agreement, the
aggregate amount payable by G-I Holdings to the Company for services to be
rendered under the Management Agreement in 2001 is expected to be approximately
$0.6 million. The Company and ISP also allocate 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 by ISP
to the Company and G-I Holdings in 2000 under the Management Agreement, the
aggregate amount payable by the Company to ISP under the Management Agreement
for 2001, is expected to be approximately $6.6 million. Certain of the Company's
executive officers receive their compensation from ISP. ISP 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
"Business -- 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
obligations, including various tax and other claims and liabilities (net of
certain insurance receivables) including tax liabilities relating to the
surfactants partnership (discussed in 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, 2001, the Company expects to
make distributions and/or advances to its parents to satisfy the obligations
discussed above only to the extent permitted by
F-27
121
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
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.
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 $11.0, $15.5 and
$18.7 million for 1998, 1999 and 2000, respectively. Future minimum lease
payments for properties which were held under long-term noncancellable leases as
of December 31, 2000 were as follows:
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS)
2001.................................................... $ 8,108 $ 15,665
2002.................................................... 17,558 14,733
2003.................................................... 21,406 14,196
2004.................................................... -- 13,900
2005.................................................... -- 13,636
Thereafter.............................................. -- 43,361
------- --------
Total minimum payments.................................. 47,072 $115,491
========
Less interest included above............................ 7,106
-------
Present value of net minimum lease payments............. $39,966
=======
NOTE 17. GUARANTOR FINANCIAL INFORMATION
In connection with the Company entering into the New Credit Agreement, all
of the Company's subsidiaries, other than BMCA Receivables Corporation (see Note
8), became guarantors under the New Credit Agreement, the Existing Credit
Agreement and 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
Corporation, a wholly-owned subsidiary of the Company, for a license fee stated
as a percentage of net sales. The license agreements are for a period of one
year and are subject to automatic renewal unless either party terminates with 60
days written notice. Also, effective January 1, 1999, BMMC sells all finished
goods to the Company at a manufacturing profit.
In January 2001, certain subsidiaries of the Company were merged into BMMC.
Presented below is condensed consolidating financial information for the
Company, the guarantor subsidiaries and the non-guarantor subsidiary prepared on
a basis which retroactively reflects the formation of such companies for all
periods presented. This financial information should be read in conjunction with
the Consolidated Financial Statements and other notes related thereto. Separate
financial information for the Company's guarantor subsidiaries and non-guarantor
subsidiary is not included herein because management has determined that such
information is not material to investors.
F-28
122
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
Net sales......................................... $885,364 $202,593 $ -- $1,087,957
Intercompany net sales............................ 3,413 641,657 (645,070) --
-------- -------- --------- ----------
Total net sales.............................. 888,777 844,250 (645,070) 1,087,957
-------- -------- --------- ----------
Costs and expenses:
Cost of products sold........................... 657,018 762,391 (645,070) 774,339
Selling, general and administrative............. 155,184 81,232 236,416
Goodwill amortization........................... 641 1,470 2,111
Nonrecurring charges............................ 27,563 27,563
-------- -------- --------- ----------
Total costs and expenses..................... 840,406 845,093 (645,070) 1,040,429
-------- -------- --------- ----------
Operating income (loss)........................... 48,371 (843) -- 47,528
Equity in loss of subsidiaries.................... (755) 755 --
Interest expense, net............................. (26,535) (23,419) (49,954)
Other income (expense), net....................... (7,150) 23,045 15,895
-------- -------- --------- ----------
Income (loss) before income taxes and
extraordinary losses............................ 13,931 (1,217) 755 13,469
Income tax (provision) benefit.................... (5,580) 462 (5,118)
-------- -------- --------- ----------
Income (loss) before extraordinary losses......... 8,351 (755) 755 8,351
-------- -------- --------- ----------
Extraordinary losses, net of income tax benefits
of $11,101...................................... (18,113) (18,113)
-------- -------- --------- ----------
Net income (loss)................................. $ (9,762) $ (755) $ 755 $ (9,762)
======== ======== ========= ==========
F-29
123
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
Net sales......................................... $920,692 $219,347 $ -- $1,140,039
Intercompany net sales............................ 7,230 731,312 (738,542) --
-------- -------- --------- ----------
Total net sales.............................. 927,922 950,659 (738,542) 1,140,039
-------- -------- --------- ----------
Costs and expenses:
Cost of products sold........................... 702,957 848,282 (738,542) 812,697
Selling, general and administrative............. 157,372 82,188 239,560
Goodwill amortization........................... 641 1,393 2,034
Transition service agreement (income) expense... (500) 500 --
Nonrecurring charges............................ 2,650 2,650
-------- -------- --------- ----------
Total costs and expenses..................... 863,120 932,363 (738,542) 1,056,941
-------- -------- --------- ----------
Operating income.................................. 64,802 18,296 -- 83,098
Equity in earnings of subsidiaries................ 23,370 (23,370) --
Intercompany licensing income (expense), net...... (27,622) 27,622 --
Interest expense, net............................. (26,565) (21,752) (48,317)
Other income (expense), net....................... (7,489) 12,929 5,440
-------- -------- --------- ----------
Income (loss) before income taxes and
extraordinary losses............................ 26,496 37,095 (23,370) 40,221
Income tax (provision) benefit.................... (1,157) (13,725) (14,882)
-------- -------- --------- ----------
Income (loss) before extraordinary losses......... 25,339 23,370 (23,370) 25,339
Extraordinary losses, net of income tax benefits
of $761......................................... (1,296) (1,296)
-------- -------- --------- ----------
Net income (loss)................................. $ 24,043 $ 23,370 $ (23,370) $ 24,043
======== ======== ========= ==========
F-30
124
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------
Net sales....................................... $ 999,809 $ 207,950 $ -- $1,207,759
Intercompany net sales.......................... 11,111 817,219 (828,330) --
---------- ---------- --------- ----------
Total net sales............................ 1,010,920 1,025,169 (828,330) 1,207,759
---------- ---------- --------- ----------
Costs and expenses:
Cost of products sold......................... 798,142 923,964 (828,330) 893,776
Selling, general and administrative........... 165,231 85,311 250,542
Goodwill amortization......................... 641 1,383 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................... 978,914 993,253 (828,330) 1,143,837
---------- ---------- --------- ----------
Operating income................................ 32,006 31,916 -- 63,922
Equity in earnings of subsidiaries.............. 12,189 (12,189) --
Intercompany licensing income (expense), net.... (29,994) 29,994
Interest expense, net........................... (27,728) (25,740) (53,468)
Other expense, net.............................. (10,818) (16,822) (27,640)
---------- ---------- --------- ----------
Income (loss) before income taxes and
extraordinary losses.......................... (24,345) 19,348 (12,189) (17,186)
Income tax (provision) benefit.................. 13,518 (7,159) 6,359
---------- ---------- --------- ----------
Income (loss) before extraordinary losses....... (10,827) 12,189 (12,189) (10,827)
Extraordinary losses, net of income tax benefits
of $194....................................... (330) (330)
---------- ---------- --------- ----------
Net income (loss)............................... $ (11,157) $ 12,189 $ (12,189) $ (11,157)
========== ========== ========= ==========
F-31
125
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 81 $ 55,871 $ -- $ -- $ 55,952
Investments in trading securities...... 687 687
Investments in available-for-sale
securities.......................... 29,702 29,702
Other short-term investments........... 1,590 1,590
Accounts receivable, trade, net........ 1,590 21,348 22,938
Accounts receivable, other............. 4,992 5,692 52,208 62,892
Receivable from parent corporations.... 59,132 59,132
Inventories............................ 52,903 55,712 108,615
Other current assets................... 1,208 3,031 4,239
-------- -------- -------- --------- --------
Total Current Assets................ 119,906 173,633 52,208 -- 345,747
Investment in subsidiaries............... 325,211 (325,211) --
Intercompany loans including accrued
interest............................... 171,176 (166,762) (4,414) --
Due from (to) subsidiaries, net.......... (151,164) 146,942 4,222 --
Property, plant and equipment, net....... 32,821 377,882 410,703
Excess of cost over net assets of
businesses acquired, net............... 18,739 51,669 70,408
Deferred income tax benefits............. 45,561 45,561
Other assets............................. 15,454 7,239 22,693
-------- -------- -------- --------- --------
Total Assets............................. $577,704 $590,603 $ 52,016 $(325,211) $895,112
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt... $ 2,333 $ 3,816 $ -- $ -- $ 6,149
Accounts payable....................... 41,799 42,535 84,334
Payable to related party............... 12,382 2,642 15,024
Accrued liabilities.................... 19,695 96,133 115,828
Reserve for product warranty claims.... 13,400 1,100 14,500
-------- -------- -------- --------- --------
Total Current Liabilities........... 89,609 146,226 -- -- 235,835
Long-term debt less current maturities... 435,398 165,347 600,745
Reserve for product warranty claims...... 16,127 3,687 19,814
Other liabilities........................ 14,881 2,148 17,029
-------- -------- -------- --------- --------
Total Liabilities................... 556,015 317,408 -- -- 873,423
-------- -------- -------- --------- --------
Total Stockholders' Equity, net.......... 21,689 273,195 52,016 (325,211) 21,689
-------- -------- -------- --------- --------
Total Liabilities and Stockholders'
Equity................................. $577,704 $590,603 $ 52,016 $(325,211) $895,112
======== ======== ======== ========= ========
F-32
126
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
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...... 19,474 19,474
Accounts receivable, other........... 5,027 2,947 43,869 51,843
Tax receivable from parent
corporations...................... 1,500 1,500
Inventories.......................... 52,041 49,661 101,702
Other current assets................. 1,022 2,903 3,925
--------- --------- --------- --------- --------
Total Current Assets.............. 69,331 147,991 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........ (190,285) 186,322 3,963 --
Property, plant and equipment, net..... 28,425 334,039 362,464
Excess of cost over net assets of
businesses acquired, net............. 18,099 47,218 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........................... $ 537,664 $ 546,813 $ 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..................... 19,600 37,920 57,520
Payable to related party............. 7,522 2,530 10,052
Accrued liabilities.................. 21,627 21,261 42,888
Reserve for product warranty
claims................................. 13,400 1,500 14,900
--------- --------- --------- --------- --------
Total Current Liabilities......... 62,302 68,966 -- -- 131,268
Long-term debt less current
maturities........................... 514,880 159,818 674,698
Reserve for product warranty claims.... 24,248 4,508 28,756
Other liabilities...................... 14,099 213 14,312
--------- --------- --------- --------- --------
Total Liabilities................. 615,529 233,505 -- -- 849,034
--------- --------- --------- --------- --------
Total Stockholders' Equity (Deficit),
net.................................. (77,865) 313,308 43,418 (356,726) (77,865)
--------- --------- --------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit).................. $ 537,664 $ 546,813 $ 43,418 $(356,726) $771,169
========= ========= ========= ========= ========
F-33
127
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
--------- ------------ ---------- ------------
Cash and cash equivalents, beginning of year....... $ 35 $ 12,889 $ -- $ 12,924
--------- --------- ------ ---------
Cash provided by (used in) operating activities:
Net loss......................................... (9,007) (755) (9,762)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary losses.......................... 18,113 18,113
Depreciation.................................. 3,383 25,552 28,935
Goodwill and other amortization............... 641 1,671 2,312
Deferred income taxes......................... 4,538 4,538
Noncash interest charges...................... 23,877 23,877
(Increase) decrease in working capital items..... (34,741) 21,926 (3,147) (15,962)
Increase (decrease) in product warranty claims... 13,220 (1,569) 11,651
Purchases of trading securities.................. (189,197) (189,197)
Proceeds from sales of trading securities........ 124,931 124,931
(Increase) decrease in other assets.............. (482) 764 282
Increase in other liabilities.................... 1,487 1,780 3,267
Change in net receivable from/payable to related
parties....................................... 23,681 15,807 3,147 42,635
Other, net....................................... 3,702 7,570 11,272
--------- --------- ------ ---------
Net cash provided by operating activities.......... 48,412 8,480 -- 56,892
--------- --------- ------ ---------
Cash provided by (used in) investing activities:
Capital expenditures............................. (4,799) (70,535) (75,334)
Acquisitions..................................... (59,187) (59,187)
Proceeds from sale of assets..................... 29,019 29,019
Purchases of available-for-sale securities....... (89,324) (89,324)
Purchases of held-to-maturity securities......... (6,357) (6,357)
Proceeds from sales of available-for-sale
securities.................................... 170,055 170,055
Proceeds from held-to-maturity securities........ 499 499
--------- --------- ------ ---------
Net cash provided by (used in) investing
activities....................................... (63,986) 33,357 -- (30,629)
--------- --------- ------ ---------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable...... 30,578 30,578
Decrease in short-term debt...................... (26,944) (26,944)
Decrease in loan receivable from parent
corporations.................................. 6,152 6,152
Proceeds from issuance of long-term debt......... 304,019 304,019
Decrease in borrowings under revolving credit
facility...................................... (34,000) (34,000)
Repayments of long-term debt..................... (285,108) (2,796) (287,904)
Financing fees and expenses...................... (6,099) (6,099)
--------- --------- ------ ---------
Net cash provided by (used in) financing
activities....................................... 15,542 (29,740) -- (14,198)
--------- --------- ------ ---------
Net change in cash and cash equivalents............ (32) 12,097 -- 12,065
--------- --------- ------ ---------
Cash and cash equivalents, end of year............. $ 3 $ 24,986 $ -- $ 24,989
========= ========= ====== =========
F-34
128
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
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...... $ 3 $ 24,986 $ -- $ 24,989
-------- --------- ------- ---------
Cash provided by (used in) operating activities:
Net income...................................... 673 23,370 24,043
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Extraordinary losses......................... 1,296 1,296
Depreciation................................. 2,628 30,358 32,986
Goodwill and other amortization.............. 1,282 1,393 2,675
Deferred income taxes........................ 14,132 14,132
Noncash interest charges..................... 3,321 3,321
Decrease in working capital items............... (921) (23,952) (1,327) (26,200)
Decrease in product warranty claims............. (13,771) (547) -- (14,318)
Purchases of trading securities................. (139,522) (139,522)
Proceeds from sales of trading securities....... 243,097 243,097
Increase in other assets........................ (828) (3,673) (4,501)
Increase (decrease) in other liabilities........ (2,358) 23 (2,335)
Change in net receivable from/payable to related
parties...................................... 52,388 (102,508) 1,327 (48,793)
Other, net...................................... (3,404) (3,404)
-------- --------- ------- ---------
Net cash provided by operating activities......... 57,842 24,635 -- 82,477
-------- --------- ------- ---------
Cash provided by (used in) investing activities:
Capital expenditures............................ (829) (44,493) (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...................................... (829) 3,174 -- 2,345
-------- --------- ------- ---------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable..... 5,640 5,640
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...................................... (56,935) 3,076 -- (53,859)
-------- --------- ------- ---------
Net change in cash and cash equivalents........... 78 30,885 -- 30,963
-------- --------- ------- ---------
Cash and cash equivalents, end of year............ $ 81 $ 55,871 $ -- $ 55,952
======== ========= ======= =========
F-35
129
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
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..... $ 81 $ 55,871 $ -- $ 55,952
--------- --------- ------ ---------
Cash provided by (used in) operating activities:
Net income (loss).............................. (23,346) 12,189 -- (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................................ 2,878 33,472 36,350
Goodwill and other amortization............. 1,480 1,386 2,866
Deferred income taxes....................... (7,475) (7,475)
Noncash interest charges.................... 1,922 726 2,648
(Increase) decrease in working capital items... (20,947) (7,183) 8,339 (19,791)
Increase in product warranty claims............ 8,121 1,221 9,342
Purchases of trading securities................ (980) (980)
Proceeds from sales of trading securities...... 2,172 2,172
(Increase) decrease in other assets............ 3,025 (1,761) 1,264
Decrease in other liabilities.................. (741) (1,935) (2,676)
Change in net receivable from/payable to
related parties/parent corporations......... 75,226 (21,727) (8,339) 45,160
Other, net..................................... 2,565 (2,048) 517
--------- --------- ------ ---------
Net cash provided by (used in) operating
activities..................................... 43,038 (1,973) -- 41,065
--------- --------- ------ ---------
Cash provided by (used in) investing activities:
Capital expenditures........................... (1,047) (60,496) (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
--------- --------- ------ ---------
Net cash provided by (used in) investing
activities..................................... (1,047) 30,198 -- 29,151
--------- --------- ------ ---------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable.... 925 925
Proceeds from issuance of long-term debt....... 41,046 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........... (106,161) (106,161)
Net repurchase of common stock................. (1,180) (1,180)
Financing fees and expenses.................... (2,763) (7,232) (9,995)
--------- --------- ------ ---------
Net cash used in financing activities............ (32,331) (11,090) -- (43,421)
--------- --------- ------ ---------
Net change in cash and cash equivalents.......... 9,660 17,135 -- 26,795
--------- --------- ------ ---------
Cash and cash equivalents, end of year........... $ 9,741 $ 73,006 $ -- $ 82,747
========= ========= ====== =========
F-36
130
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
1999 BY QUARTER 2000 BY QUARTER
--------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS)
Net sales........................ $262.9 $310.5 $312.8 $253.8 $289.8 $325.8 $330.9 $261.3
Cost of products sold............ 190.2 216.8 219.2 186.4 214.4 230.3 242.5 206.7
------ ------ ------ ------ ------ ------ ------ ------
Gross profit..................... $ 72.7 $ 93.7 $ 93.6 $ 67.4 $ 75.4 $ 95.5 $ 88.4 $ 54.6
====== ====== ====== ====== ====== ====== ====== ======
Operating income (loss)*......... $ 15.7 $ 30.4 $ 25.5 $ 11.5 $ 14.8 $ 28.6 $ 39.6 $(19.1)
====== ====== ====== ====== ====== ====== ====== ======
Interest expense................. $ 11.9 $ 12.9 $ 12.3 $ 11.2 $ 12.4 $ 12.5 $ 13.4 $ 15.1
====== ====== ====== ====== ====== ====== ====== ======
Income (loss) before income taxes
and extraordinary losses....... $ 3.3 $ 24.6 $ 13.7 $ (1.4) $ 1.2 $ 13.8 $ 23.5 $(55.7)
Income tax (provision) benefit... (1.2) (9.1) (5.0) 0.4 (0.5) (5.1) (8.7) 20.6
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
extraordinary losses........... 2.1 15.5 8.7 (1.0) 0.7 8.7 14.8 (35.1)
Extraordinary losses............. -- -- (1.3) -- -- -- (0.3) --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)................ $ 2.1 $ 15.5 $ 7.4 $ (1.0) $ 0.7 $ 8.7 $ 14.5 $(35.1)
====== ====== ====== ====== ====== ====== ====== ======
- ---------------
* The operating income for the third quarter of 1999 and 2000 reflect a $2.7
million non-recurring charge and a $17.5 million gain on sale of assets,
respectively. The operating income in the fourth quarter of 2000 reflects a
$15.0 million one-time charge related to a provision for warranty claims. See
Notes 2, 4 and 5 to Consolidated Financial Statements.
F-37
131
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALES REPRESENTATIVE, OR ANY OTHER
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS. THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SECURITIES IN
ANY JURISDICTION WHERE IT IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
PAGE
----
Summary............................... 1
Risk Factors.......................... 11
Where You Can Find More Information... 15
Forward-Looking Statements............ 15
Capitalization........................ 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
The Transactions...................... 24
Business.............................. 30
Management............................ 42
Executive Compensation................ 45
Security Ownership of Certain
Beneficial Owners and Management.... 48
Certain Relationships................. 49
Selling Noteholder.................... 51
Description of the Notes.............. 52
Summary of Registration Rights of
Selling Noteholder.................. 83
Material U.S. Federal Income Tax
Considerations...................... 84
Plan of Distribution.................. 90
Legal Matters......................... 90
Experts............................... 90
Index to Consolidated Financial
Statements and Schedules............ F-1
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$35,000,000
BUILDING MATERIALS
CORPORATION OF AMERICA
10 1/2% SENIOR NOTES
DUE 2003
------------------------
PROSPECTUS
------------------------
, 2001
------------------------------------------------------
------------------------------------------------------
132
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the registrant in connection with the sale
of the securities being registered. All amounts shown are estimates except for
the SEC registration fee.
SEC registration fee........................................ $
Blue Sky qualification fees and expenses....................
Printing and engraving expenses.............................
Accountant's fees and expenses..............................
Legal fees and expenses.....................................
Registrar and Transfer Agent fees...........................
Miscellaneous...............................................
Total............................................. $
========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Each registrant is a Delaware corporation. Subsection (b)(7) of Section 102
of the Delaware General Corporation Law enables a corporation in its original
certificate of incorporation or an amendment to its certificate of incorporation
to eliminate or limit the personal liability of a director to the corporation or
its stockholders for monetary damages for violations of the director's fiduciary
duty, except (1) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) pursuant
to Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (4) for any
transactions from which a director derived an improper personal benefit. The
Certificate of Incorporation of each registrant has eliminated the personal
liability of directors to the fullest extent permitted by Subsection (b)(7) of
Section 102 of the DGCL.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding provided that such
director or officer acted in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action or proceeding, provided further that such director or
officer has no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with such action, suit or proceeding provided that such director or officer
acted in good faith in a manner reasonably believed to be in, or not opposed to,
the best interests of the
II-1
133
corporation, and, with respect to any criminal action or proceeding, except that
no indemnification may be made in respect of any claim, issue or matter as to
which such director or officer shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such director or officer is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification and advancement of expenses provided for, by, or granted
pursuant to, Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture trust or other enterprise against any liability
asserted against him or incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Article VIII of each registrant's By-Laws states that the registrant shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by reason of the fact
that he is or was a director, officer or employee of the corporation, or is or
was serving at the request of the corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise
against judgments, fines and amounts paid in settlement actually incurred by him
in connection with such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of BMCA.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On July 5, 2000, the registrant issued $35,000,000 aggregate principal
amount at maturity of its 10 1/2% Senior Notes due 2003 in a private placement
pursuant to an exemption from the registration requirements of the Securities
Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
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 (the "1999 Form
10-K")).
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).
II-2
134
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
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).
*3.7 -- Certificate of Incorporation of BMCA Insulation Products
Inc.
*3.8 -- Bylaws of BMCA Insulation Products Inc.
*3.9 -- Certificate of Incorporation of Ductwork Manufacturing
Corporation.
*3.10 -- Bylaws of Ductwork Manufacturing Corporation.
*3.11 -- Certificate of Incorporation of GAF Leatherback Corp.
*3.12 -- Bylaws of GAF Leatherback Corp.
*3.13 -- Certificate of Incorporation of GAF Premium Products Inc.
*3.14 -- Bylaws of GAF Premium Products Inc.
*3.15 -- Certificate of Incorporation of GAF Materials Corporation
(Canada).
*3.16 -- Bylaws of GAF Materials Corporation (Canada).
*3.17 -- Certificate of Incorporation of GAFTECH Corporation.
*3.18 -- Bylaws of GAFTECH Corporation.
*3.19 -- Certificate of Incorporation of LL Building Products Inc.
*3.20 -- Bylaws of LL Building Products Inc.
*3.21 -- Certificate of Incorporation of Wind Gap Real Property
Acquisition Corp.
*3.22 -- Bylaws of Wind Gap Real Property Acquisition Corp.
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 -- Form of Notes (included in Exhibit 4.1).
4.4 -- 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).
4.5 -- 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).
4.6 -- 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)).
4.7 -- 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)).
4.8 -- 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)).
II-3
135
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.9 -- 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).
4.10 -- 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).
4.11 -- 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).
4.12 -- 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 original
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).
4.13 -- 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).
4.14 -- 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).
4.15 -- 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).
4.16 -- First Supplemental Indenture dated as of January 1, 1999 to
Indenture dated as of December 3, 1998 among BMCA, as
issuer, Building Materials ManufacturingCorporation 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).
4.17 -- 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).
**5 -- Opinion of Weil, Gotshal & Manges LLP re: legality.
**8 -- Opinion of Weil, Gotshal & Manges LLP re: tax matters.
10.1 -- Amended and Restated Management Agreement, dated as of
January 1, 1999, among GAF, G-I Holdings, G Industries,
Merick Inc., GAF Fiberglass, 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 (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).
II-4
136
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.4 -- 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).
10.5 -- 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")).
10.6 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Preferred Stock (incorporated by reference to
Exhibit 10.13 to the 1997 Form 10-K).
10.7 -- 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)).
10.8 -- BMCA 2001 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.8 to the 2000 10-K).
10.9 -- Tax Sharing Agreement, dated as of January 31, 1994, among
GAF, G-l Holdings Inc. and BMCA (incorporated by reference
to Exhibit 10.6 to the Deferred Coupon Note Registration
Statement).
10.10 -- 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).
10.11 -- Reorganization Agreement, dated as of January 31, 1994,
among GAF Building Materials Corporation, G-I Holdings and
BMCA (incorporated by reference to Exhibit 10.9 to the
Deferred Coupon Note Registration Statement).
10.12 -- 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).
10.13 -- 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).
10.14 -- 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).
10.15 -- 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 by
reference to Exhibit 10.15 to the 2000 10-K).
10.16 -- 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).
10.17 -- 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).
10.18 -- 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 by reference to
Exhibit 10.18 to the 2000 10-K).
10.19 -- 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).
10.20 -- Separation and General Release Agreement between BMCA and
William C. Lang (incorporated by reference to Exhibit 10.20
to the 2000 10-K).
**12 -- Computation of Ratio of Earnings to Fixed Charges.
II-5
137
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
21 -- Subsidiaries of BMCA (incorporated by reference to Exhibit
21 to the 2000 10-K).
*23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (to be included in
Exhibits 5 and 8).
*24 -- Power of Attorney (included on the signature pages).
**25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as Trustee
under the Indenture.
- ---------------
* Filed herewith.
** To be filed by amendment.
(b) Schedules
Consolidated Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts............ S-1
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution no previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the
II-6
138
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(c) Each undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(d) Each undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the Township of Wayne, State of New
Jersey, on the 6th day of April, 2001.
BUILDING MATERIALS CORPORATION OF
AMERICA
BUILDING MATERIALS MANUFACTURING
CORPORATION
GAF LEATHERBACK CORP.
WIND GAP REAL PROPERTY ACQUISITION
CORP.
Date: April 6, 2001 By: /s/ WILLIAM W. COLLINS
------------------------------------
Name: William W. Collins
Title: Chief Executive Officer
and President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of Messrs. Collins, Harrison,
Tafaro, Walton and Esposito hereby constitutes Mr. John F. Rebele such person's
true and lawful attorney, with full power of substitution to sign for such
person and in such person's name and capacity indicated below, any and all
amendments to this Registration Statement, and to file the same with the
Securities and Exchange Commission, hereby ratifying and confirming such
person's signature as it may be signed by said attorney to any and all
amendments.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer April 6, 2001
- --------------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ JOHN F. REBELE Vice President and Chief Financial April 6, 2001
- --------------------------------------------------- Officer and Director (Principal
John F. Rebele Financial Officer)
/s/ DAVID A. HARRISON Director April 6, 2001
- ---------------------------------------------------
David A. Harrison
/s/ ROBERT B. TAFARO Director April 6, 2001
- ---------------------------------------------------
Robert B. Tafaro
/s/ KENNETH E. WALTON Director April 6, 2001
- ---------------------------------------------------
Kenneth E. Walton
/s/ JAMES T. ESPOSITO Vice President and Controller April 6, 2001
- --------------------------------------------------- (Principal Accounting Officer)
James T. Esposito
II-8
140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the Township of Wayne, State of New
Jersey, on the 6th day of April, 2001.
BUILDING MATERIALS INVESTMENT
CORPORATION
Date: April 6, 2001 By: /s/ WILLIAM W. COLLINS
------------------------------------
Name: William W. Collins
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of Messrs. Collins, Crozier and
Clark hereby constitutes Mr. John F. Rebele such person's true and lawful
attorney, with full power of substitution to sign for such person and in such
person's name and capacity indicated below, any and all amendments to this
Registration Statement, and to file the same with the Securities and Exchange
Commission, hereby ratifying and confirming such person's signature as it may be
signed by said attorney to any and all amendments.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer April 6, 2001
- --------------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ BARRY A. CROZIER Director April 6, 2001
- ---------------------------------------------------
Barry A. Crozier
/s/ ARTHUR W. CLARK Director April 6, 2001
- ---------------------------------------------------
Arthur W. Clark
/s/ JOHN F. REBELE Vice President and Chief Financial April 6, 2001
- --------------------------------------------------- Officer (Principal Financial and
John F. Rebele Accounting Officer)
II-9
141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the Township of Wayne, State of New
Jersey, on the 6th day of April, 2001.
BMCA INSULATION PRODUCTS INC.
DUCTWORK MANUFACTURING CORPORATION
GAF PREMIUM PRODUCTS INC.
GAFTECH CORPORATION
LL BUILDING PRODUCTS INC.
Date: April 6, 2001 By: /s/ WILLIAM W. COLLINS
------------------------------------
Name: William W. Collins
Title: Chief Executive Officer
and President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of Messrs. Collins, Harrison, Tafaro
and Walton hereby constitutes Mr. John F. Rebele such person's true and lawful
attorney, with full power of substitution to sign for such person and in such
person's name and capacity indicated below, any and all amendments to this
Registration Statement, and to file the same with the Securities and Exchange
Commission, hereby ratifying and confirming such person's signature as it may be
signed by said attorney to any and all amendments.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer April 6, 2001
- --------------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ JOHN F. REBELE Vice President and Chief Financial April 6, 2001
- --------------------------------------------------- Officer and Director (Principal
John F. Rebele Financial and Accounting Officer)
/s/ DAVID A. HARRISON Director April 6, 2001
- ---------------------------------------------------
David A. Harrison
/s/ ROBERT B. TAFARO Director April 6, 2001
- ---------------------------------------------------
Robert B. Tafaro
/s/ KENNETH E. WALTON Director April 6, 2001
- ---------------------------------------------------
Kenneth E. Walton
II-10
142
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the Township of Wayne, State of New
Jersey, on the 6th day of April, 2001.
GAF MATERIALS CORPORATION (CANADA)
Date: April 6, 2001 By: /s/ WILLIAM W. COLLINS
-------------------------------------
Name: William W. Collins
Title: Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of Messrs. Collins, Harrison,
Tafaro, Walton and Esposito hereby constitutes Mr. John F. Rebele such person's
true and lawful attorney, with full power of substitution to sign for such
person and in such person's name and capacity indicated below, any and all
amendments to this Registration Statement, and to file the same with the
Securities and Exchange Commission, hereby ratifying and confirming such
person's signature as it may be signed by said attorney to any and all
amendments.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM W. COLLINS Chief Executive Officer and April 6, 2001
- --------------------------------------------------- Director (Principal Executive
William W. Collins Officer)
/s/ JOHN F. REBELE Chief Financial Officer and April 6, 2001
- --------------------------------------------------- Director (Principal Financial
John F. Rebele Officer)
/s/ DAVID A. HARRISON President and Director April 6, 2001
- ---------------------------------------------------
David A. Harrison
/s/ ROBERT B. TAFARO Director April 6, 2001
- ---------------------------------------------------
Robert B. Tafaro
/s/ KENNETH E. WALTON Director April 6, 2001
- ---------------------------------------------------
Kenneth E. Walton
/s/ JAMES T. ESPOSITO Vice President and Controller April 6, 2001
- --------------------------------------------------- (Principal Accounting Officer)
James T. Esposito
II-11
143
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1998 EXPENSES DEDUCTIONS OTHER 1998
- ----------- ---------- ---------- ---------- ----- ------------
Valuation and Qualifying Accounts Deducted
from Assets To Which They Apply:
Allowance for doubtful accounts........... $ 2,752 $ 1,419 $ 486(a) $ 350(c) $ 4,035(b)
Allowance for discounts................... 19,403 91,569 87,109 -- 23,863
Reserve for inventory market valuation.... 1,506 1,458 918 500(c) 2,546
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1999 EXPENSES DEDUCTIONS OTHER 1999
- ----------- ---------- ---------- ---------- ----- ------------
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
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 2000 EXPENSES DEDUCTIONS OTHER 2000
- ----------- ---------- ---------- ---------- ----- ------------
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
- ---------------
Notes:
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balances at December 31, 1998, 1999 and 2000 primarily reflect a reserve
for receivables sold to a trust (see Note 8 to Consolidated Financial
Statements).
(c) Represents balance acquired through acquisitions.
S-1
144
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
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 (the "1999 Form
10-K")).
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).
*3.7 -- Certificate of Incorporation of BMCA Insulation Products
Inc.
*3.8 -- Bylaws of BMCA Insulation Products Inc.
*3.9 -- Certificate of Incorporation of Ductwork Manufacturing
Corporation.
*3.10 -- Bylaws of Ductwork Manufacturing Corporation.
*3.11 -- Certificate of Incorporation of GAF Leatherback Corp.
*3.12 -- Bylaws of GAF Leatherback Corp.
*3.13 -- Certificate of Incorporation of GAF Premium Products Inc.
*3.14 -- Bylaws of GAF Premium Products Inc.
*3.15 -- Certificate of Incorporation of GAF Materials Corporation
(Canada).
*3.16 -- Bylaws of GAF Materials Corporation (Canada).
*3.17 -- Certificate of Incorporation of GAFTECH Corporation.
*3.18 -- Bylaws of GAFTECH Corporation.
*3.19 -- Certificate of Incorporation of LL Building Products Inc.
145
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
*3.20 -- Bylaws of LL Building Products Inc.
*3.21 -- Certificate of Incorporation of Wind Gap Real Property
Acquisition Corp.
*3.22 -- Bylaws of Wind Gap Real Property Acquisition Corp.
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 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 -- Form of Notes (included in Exhibit 4.1).
4.4 -- 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).
4.5 -- 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).
4.6 -- 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)).
4.7 -- 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)).
4.8 -- 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)).
4.9 -- 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).
4.10 -- 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).
4.11 -- 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).
4.12 -- 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 original
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).
146
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.13 -- 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).
4.14 -- 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).
4.15 -- 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).
4.16 -- First Supplemental Indenture dated as of January 1, 1999 to
Indenture dated as of December 3, 1998 among BMCA, as
issuer, Building Materials ManufacturingCorporation 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).
4.17 -- 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).
**5 -- Opinion of Weil, Gotshal & Manges LLP re: legality.
**8 -- Opinion of Weil, Gotshal & Manges LLP re: tax matters.
10.1 -- Amended and Restated Management Agreement, dated as of
January 1, 1999, among GAF, G-I Holdings, G Industries,
Merick Inc., GAF Fiberglass, 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 (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 -- 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).
10.5 -- 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")).
10.6 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Preferred Stock (incorporated by reference to
Exhibit 10.13 to the 1997 Form 10-K).
10.7 -- 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)).
10.8 -- BMCA 2001 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.8 to the 2000 10-K).
10.9 -- Tax Sharing Agreement, dated as of January 31, 1994, among
GAF, G-l Holdings Inc. and BMCA (incorporated by reference
to Exhibit 10.6 to the Deferred Coupon Note Registration
Statement).
10.10 -- 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).
147
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.11 -- Reorganization Agreement, dated as of January 31, 1994,
among GAF Building Materials Corporation, G-I Holdings and
BMCA (incorporated by reference to Exhibit 10.9 to the
Deferred Coupon Note Registration Statement).
10.12 -- 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).
10.13 -- 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).
10.14 -- 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).
10.15 -- 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 by
reference to Exhibit 10.15 to the 2000 10-K).
10.16 -- 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).
10.17 -- 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).
10.18 -- 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 by reference to
Exhibit 10.18 to the 2000 10-K).
10.19 -- 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).
10.20 -- Separation and General Release Agreement between BMCA and
William C. Lang (incorporated by reference to Exhibit 10.20
to the 2000 10-K).
**12 -- Computation of Ratio of Earnings to Fixed Charges.
21 -- Subsidiaries of BMCA (incorporated by reference to Exhibit
21 to the 2000 10-K).
*23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (to be included in
Exhibits 5 and 8).
*24 -- Power of Attorney (included on the signature pages).
**25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as Trustee
under the Indenture.
- ---------------
* Filed herewith.
** To be filed by amendment.