1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 0-25634
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 87-0365268
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3000 NORTHWEST 125TH ST.
MIAMI, FLORIDA 33167
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 681-0848
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days. Yes [ ] No [X]
Indicate by check mark, if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [ ] No [X]
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State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within sixty (60) days prior to the date of
filing. (See definition of affiliate in Rule 405, 17 CFR 230.405).
$97,470 as of August 31, 2001
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE (5) YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Not Applicable
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practicable date.
13,821,616 shares of Common Stock, $.001 par value, as of August 31, 2001. There
are no other classes of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933: No documents are incorporated by
reference.
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TABLE OF CONTENTS
PAGE
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Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
Item 5. Market for Registrant's Common Equity and Related Stockholders' Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 7A. Qualitative and Qualitative Disclosures Regarding Market Risk 15
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 44
Item 10. Directors and Executive Officers of the Registrant 44
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and Management 48
Item 13. Certain Relationships and Related Transactions 49
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50
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PART I
ITEM 1. BUSINESS
BACKGROUND
American Architectural Products Corporation (the "Company" or "AAPC")
is principally engaged in the business of manufacturing and distributing ___
residential and architectural windows and doors through its wholly-owned
subsidiaries Eagle & Taylor Company (ETC), Thermetic Glass, Inc. (Thermetic),
Binnings Building Products, Inc. (Binnings), Danvid Window Company (Danvid),
American Glassmith Corporation (American Glassmith), Denver Window Corporation
(Denver Window), American Weather-Seal Company (Weather-Seal) and TM Window &
Door (TMWD). Western Insulated Glass, Co. (Western) and VinylSource, Inc.
(VinylSource) were subsidiaries at December 31, 1999 and were sold on March 1,
2000 and May 19, 2000, respectively. Forte, Inc. (Forte), also a subsidiary at
the 1999 year end, was closed in May 2000. Forte was accounted for as
discontinued operations in the 2000 financial statements included in this Form
10-K.
BANKRUPTCY PROCEEDINGS
On December 18, 2000, American Architectural Products Corporation (the
"Company") and its subsidiaries filed for voluntary bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in the Northern District of Ohio (the "Bankruptcy Court"). The Company is
presently operating its businesses as a debtor-in-possession under Chapter 11
and is subject to the jurisdiction and supervision of the Bankruptcy Court. In
Chapter 11 cases, substantially all liabilities as of the date of the filing of
the petition for reorganization are subject to settlement under a plan of
reorganization to be voted upon by the Company's impaired creditors and
stockholders and confirmed by the Bankruptcy Court. The ultimate amount and
settlement terms for such liabilities are subject to a plan of reorganization
and, accordingly, are not presently determinable. In addition, on December 18,
2000, the Bankruptcy Court issued an order authorizing the Company to pay
certain pre-petition claims of essential vendors and suppliers. Accordingly,
these amounts have been paid or are included in the appropriate liability
captions in the consolidated balance sheets.
An unsecured creditors' committee has been appointed by the Bankruptcy
Court. The official committee and legal representatives are the primary entities
with which the Company is negotiating the terms of a plan of reorganization. The
Company has requested the Bankruptcy Court approve an extension to January 18,
2002 during which the Company has the exclusive right to file a reorganization
plan.
In the Chapter 11 proceedings (subject, in certain circumstances, to
Bankruptcy Court approval), the debtors may sell or otherwise dispose of assets,
and liquidate or settle liabilities, for amounts other than those reflected in
the consolidated financial statements. The amounts reported in the consolidated
financial statements do not give effect to any adjustments to the carrying value
of assets or amounts of liabilities that might result as a consequence of
actions taken pursuant to a plan of reorganization, which adjustments could be
material. The continuation of the Company as a going concern is contingent upon,
among other factors, the ability of the debtors to (1) formulate and file a plan
which will gain the approval of the creditors, shareholders and other parties in
interest and confirmation of the Bankruptcy Court; (2) maintain
debtor-in-possession financing; (3) achieve profitable operations; (4) obtain
adequate shipments of merchandise from suppliers at acceptable credit terms; and
(5) obtain post reorganization financing. There can be no assurances that the
above conditions can be met.
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ACQUISITIONS AND DIVESTITURES
The Company completed no acquisitions in 2000 and completed the
following acquisitions during 1998 and 1999:
COMPANY ACQUIRED DATE LOCATION PRODUCTS
------------------------------------------------------------------------------------------------------------
VinylSource January 23, 1998 Austintown, OH Extruded vinyl window and door profiles
Denver Window April 16, 1998 Denver, CO Residential specialty wood windows
Weather-Seal June 12, 1998 Barberton, OH Residential wood and vinyl windows and patio
Boardman, OH doors; aluminum extrusions
Norton, OH
Orrville, OH
Ottawa, OH
Winesburg, OH
TMWD October 1, 1999 Pompano Beach, FL Residential and architectural aluminum windows
and doors
In March 1998, the Company sold Mallyclad, a division of ETC, to a
related party for approximately $1.1 million. The Company sold this division at
its approximate book value, which was the approximate fair market value at the
time of sale and, therefore, recognized no gain or loss on the transaction.
In October 1999, a fire at the Kreidel Plastics Extrusion plant of
Weather-Seal destroyed a substantial portion of the assets, with an approximate
book value of $2.3 million. The assets destroyed were fully insured. The Company
did not continue operations at this location.
In December 1999, the Company sold Taylor, a subsidiary of ETC, for
approximately $9.2 million. In connection with the sale, a non-interest bearing
note receivable in the amount of $2.4 million and a gain on the sale of $0.6
million was recorded. Additionally, the Company is leasing to the buyer certain
real property. Under the terms of the sale agreement, the purchaser is obligated
to acquire the property for $2.5 million within a period not to exceed nineteen
months from the date of the sale. The obligation of the buyer to purchase the
real property is currently being contested.
In December 1999, the Company announced the discontinuance of its
commercial business segment activities carried out through its wholly-owned
subsidiary Forte. The Company completed its plan to cease manufacturing
operations in May 2000. Forte has been reflected as a discontinued operations
in the accompanying financial statements.
In March 2000, the Company sold substantially all of the assets of
Western for approximately $5.6 million, receiving $4.5 million in cash and
accepting a note receivable, at 8% interest, for $1.1 million. The Company
recorded a gain of approximately $3.3 million, net of a discount for prepayment
of the note.
In May 2000, the Company sold certain of the assets of VinylSource,
including inventories and property and equipment, for cash of approximately $5.9
million. The Company recorded a loss of approximately $1.3 million on the sale.
In January 2001, the Company closed Eagle Window and Door Center, Inc.
(EWDC), a regional distributor and installer of windows and doors. EWDC
recognized a net loss of $1.4 million during 2000.
In February 2001, the Company announced the shutdown of its wood
window manufacturing operation in Ottawa, Ohio, effective April 2001. In
addition to impairment losses (see Note 9 to the consolidated financial
statements), the Company recognized approximately $600,000 of shutdown costs in
2001.
In September 2001, the Company sold substantially all assets of Denver
Window and ETC's distribution network in the Denver, Colorado area for
approximate book value.
DESCRIPTION OF BUSINESS
American Architectural Products Corporation is a manufacturer and
distributor of a diversified line of windows, doors and related products
(collectively, "fenestration products") designed primarily for residential uses
in both the new construction and repair/remodel markets. The Company has been
formed through the consolidation of a number of fenestration companies, with
varying manufacturing histories dating back to 1946.
The Company distributes its products regionally throughout the United
States under a number of brand names including "Eagle", "Modern-View",
"Season-All Commercial", "Sumiglass", "Vinyline", "VinylView", "Arlington",
"Excel", "Binnings", "Danvid", "Encore" and "Weather-Seal".
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DISTRIBUTION AND MARKETING
The Company distributes its windows and doors through (i) one-step
distribution to major do-it-yourself home centers, lumberyards and specialty
window and door stores; (ii) two-step distribution to wholesalers who resell to
do-it-yourself home centers and lumberyards; and (iii) direct sales to
homebuilders, remodelers and contractors.
The Company markets its products through a sales force consisting of
salaried and commissioned sales representatives. Divisional sales managers
coordinate the marketing activities of the sales representatives. The sales
representatives concentrate on serving the Company's one-step, two-step and
direct sales functions with marketing, sales and service support.
PRODUCTS
The Company's multiple product lines can generally be separated into
the following product categories: (i) aluminum windows and doors; (ii) wood
windows and doors; (iii) vinyl windows and doors; (iv) aluminum and vinyl
extrusions and insulated glass; and (vi) other fenestration products.
Aluminum Windows and Doors. The Company produces aluminum windows,
including single/double hung, horizontal rolling, fixed light and specialty
windows, at its Binnings, Danvid and TMWD facilities.
Wood Windows and Doors. Eagle manufactures a full line of wood windows
and doors, including aluminum-clad windows and doors, its primary product line.
The Company's wood windows are preservative treated to withstand harsh weather
conditions and are targeted at the higher priced segment of the residential
window market. Eagle's products, which include casement and double hung windows,
picture windows and geometrically shaped windows, are generally purchased for
use in custom residential construction and renovation and for use in certain
light commercial applications. The customer has the option of selecting from
stained, primed, painted or unfinished interior surfaces and from a number of
pre-finished exterior surfaces, certain of which are resistant to ultraviolet
(UV) ray degradation and salt spray. Eagle also produces wood patio doors and
French doors for use in high-end custom residential new construction and
renovation.
Vinyl Windows and Doors. Thermetic manufactures vinyl replacement
windows sold under the trade name "Vinyline" and vinyl windows and doors for
use in new construction under the trade name "Modernview" and "VinylView."
Vinyl windows manufactured by Binnings are sold throughout the Southeast as
less expensive alternatives to wood windows. Danvid also manufactures vinyl
windows that are sold primarily in the Southern and Southwestern U.S.
Weather-Seal manufactures vinyl single-hung windows for the new construction
market as well as three lines of double-hung windows, two targeted for the
remodeling/replacement market under the trade names "Excel" and "Nu-Sash" and
one targeted for the new construction market under the trade name "Astoria
Pro". The Company's business strategy includes continued emphasis on expanding
its vinyl fenestration products business through acquisitions and through
internal growth.
Aluminum and Vinyl Extrusions and Insulated Glass. The Company produces
aluminum extrusions at the Miami, Florida location of Binnings and the Boardman
and Norton locations of Weather-Seal. The Company uses a significant portion of
its aluminum extrusion production to satisfy a portion of its manufacturing
needs. Weather-Seal produces insulated glass units under a licensing agreement,
using two fully automated "Intercept" insulated glass manufacturing lines. All
of the insulated glass produced is used in the manufacture of other products.
Other Fenestration Products. The Company's other fenestration products
include aluminum storm windows and storm doors and decorative glass lites.
American Glassmith designs, manufactures and assembles decorative glass lites
for a variety of residential applications, including windows, doors, transoms,
cabinets, and sidelites. The decorative glass lites are primarily distributed in
the northern United States. American Glassmith also manufactures laminated glass
which is sold under the Sumiglass trademark. Sumiglass products are distributed
nationally and are used in a variety of applications, including doors, windows,
sidelites, room partitions, office dividers, skylights and glass handrails.
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The Company's operating subsidiaries currently market their products
primarily in the continental United States. The Company as a consolidated unit
is not dependent on any single customer or small group of customers and does not
expect to derive a substantial portion of its sales from such customers.
SEGMENTS
The Company operates in two separate segments. Residential fenestration
products includes a variety of window and door products manufactured for uses in
homes and light commercial businesses. These products consist of aluminum,
vinyl, wood and aluminum-clad wood windows and doors. Extrusion products consist
of aluminum extrusions used primarily in the fenestration products industry.
In December 1999, the Company announced the discontinuance of its
commercial business. The Company initiated a plan to exit this business by May
2000. Accordingly, 1998 segment disclosures have been restated to eliminate the
commercial segment.
ITEM 2. PROPERTIES
The Company's principal manufacturing facilities and administrative
offices are located at the following sites as of August 31, 2001:
SIZE
LOCATION (SQ. FT.) OWNED/LEASED PRODUCTS MANUFACTURED/SERVICES PERFORMED
----------------------------------------------------------------------------------------------------------------
American Glassmith Decorative glass lites and laminated glass
Columbus, OH 60,000 Leased products; administration
Binnings Vinyl windows, aluminum windows and storm windows
Lexington, NC 268,000 Owned and doors; administration
Binnings Aluminum windows; patio doors; aluminum
Miami, FL 190,000 Leased extrusions; distribution; corporate administration
Danvid Aluminum windows and doors; vinyl windows;
Carrollton, TX 169,000 Leased administration
Eagle Wood windows and doors and aluminum-clad windows
Dubuque, IA 390,000 Leased and doors; administration
Thermetic
Toluca, IL 70,000 Owned Vinyl windows and doors; administration
TMWD
Pompano Beach, FL 84,000 Leased Aluminum windows and doors; administration
Weather-Seal
Barberton, OH 36,000 Owned Administration
Weather-Seal
Boardman, OH 110,000 Owned Aluminum extrusion; anodizing and fabrication
Weather-Seal
Norton, OH 150,000 Owned Aluminum extrusions; painting and fabrication
Weather-Seal
Orrville, OH 96,000 Owned Vinyl windows; administration
Weather-Seal
Orrville, OH 52,000 Owned Insulated glass manufacturing
Weather-Seal
Orrville, OH 5,200 Owned Truck repair
Weather-Seal
Winesburg, OH 110,000 Owned Vinyl windows and doors
Corporate Offices
Boardman, OH 1,600 Leased Corporate administration
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Corporate Offices
Wexford, PA 1,600 Leased Corporate administration
-------------
Total 1,793,400
=============
The Company also operates eleven distribution centers in Florida and
one each in Colorado, Iowa and Michigan.
In February 2001, the Company announced the shutdown of its Ottawa, OH
manufacturing facility, effective April 2001, including plans to return the
facility to the landlord and reject the underlying lease through the Bankruptcy
proceedings.
Management believes the Company's manufacturing, distribution and
administrative facilities are sufficient to meet its current needs.
ITEM 3. LEGAL PROCEEDINGS
On December 18, 2000, the Company and its subsidiaries filed for
voluntary protection under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court in the Northern District of Ohio (the
"Bankruptcy Court"). The Company is presently operating its business as a
debtor-in-possession under Chapter 11 and is subject to the jurisdiction and
supervision of the Bankruptcy Court.
The Company and its subsidiaries are engaged in various litigation and
have a number of unresolved claims. While the amounts claimed are substantial
and the ultimate liability with respect to such litigation and claims cannot be
determined at this time, management believes that such liability, to the extent
not provided for through insurance or otherwise, is not likely to have a
material impact on the financial condition or the results of operations of the
Company. However, all such claims arising prior to December 18, 2000 must be
resolved through confirmation of the Company's plan of reorganization as such
plan may be approved by the Bankruptcy Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of its security holders
during the fourth quarter of the fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS
The shares of common stock of the Company are not listed on any
exchange. The following table represents the range of high and low bid prices
for each quarter commencing January 1, 1999 through August 31, 2001 as reported
by the OTC Bulletin Board market. These quotations reflect interdealer prices,
without retail mark up, mark down or commission and may not necessarily
represent actual transactions.
PERIOD HIGH LOW
------ ---- ---
1999
1st Quarter $4.000 $2.063
2nd Quarter 4.750 2.130
3rd Quarter 3.125 1.688
4th Quarter 2.188 0.562
2000
1st Quarter $1.156 $.562
2nd Quarter .937 .015
3rd quarter .875 .015
4th quarter .625 .015
2001
1st quarter .140 .015
2nd quarter .093 .015
3rd quarter (through August 31, 2001) .093 .015
There were approximately 428 holders of record of the common stock of
the Company as of December 31, 2000. The Company has never paid dividends on its
outstanding common stock. The current Board of Directors of the Company does not
presently intend to implement a policy regarding the payment of regular cash
dividends on the common stock and it is unlikely that dividends will be paid on
the common stock in the immediate future. The Board of Directors will review
this policy from time to time depending on the financial condition of the
Company and other factors that the Board of Directors may consider appropriate
in the circumstances. In addition, the ability of the Company to pay dividends
is limited by the terms of the Company's bank credit facility and the Indenture
dated December 10, 1997 to which the Company and its subsidiaries are parties.
As of December 31, 2000, options to purchase a total of 737,000 shares of the
Company's common stock were outstanding.
During 1998, the Board of Directors agreed to extend the expiration
date of various options and warrants to acquire Common Stock which were
beneficially owned by certain directors and executive officers of the Company.
See "Item 13 - Certain Relationships and Related Transactions." Other than the
extended expiration date, all terms and conditions of these options and warrants
remained unchanged. The Company did not receive cash proceeds in connection with
any such extension. The beneficial owners of all such options and warrants were
executive officers or directors of the Company whom the Company believes
acquired such options and/or warrants for investment purposes and not with a
view to the distribution thereof or the distribution of the underlying
securities. These options and warrants expired, unexercised, on January 15,
2000. To the extent the extension of any such options or warrants constitutes an
issuance of new securities under the Securities Act of 1933, as amended (the
"Securities Act"), such issuance was deemed to be exempt from registration under
the Securities Act pursuant to the exemption from registration set forth in
Section 3(a)(9) and Section 4(2) thereof or pursuant to the provisions of
Regulation D promulgated thereunder.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data of
the Company and its predecessors for the five years ended December 31, 2000. The
selected financial data for the Company for 1998, 1999 and 2000 were derived
from the audited consolidated financial statements of the Company for the years
ended December 31, 1998, 1999 and 2000, included elsewhere in this filing. The
selected financial data for the Company for 1997 was derived from the audited
financial statements for the year ended December 31, 1997, not included in this
filing. The selected financial data for the Company for 1996 was derived from
the audited consolidated financial statements for the period from June 19, 1996
(inception) through December 31, 1996, not included in this filing. The
historical financial data for the Predecessors for 1996 were derived from the
audited combined financial statements of Eagle Window & Door, Inc. and
Subsidiaries and Taylor Building Products Company and the audited combined
financial statements of Mallyclad Corporation and Vyn-L Corporation that are not
included in this filing.
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The following selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements along with the notes thereto
of the Company, included elsewhere in this filing.
Predecessors (1) The Company (2), (3)
--------------- ----------------------------------------------------------------------------
1996 1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales $41,887 $25,249 $91,694 $253,831 $313,976 $269,258
Cost of sales 35,430 19,027 70,700 198,860 260,177 224,962
----------- ------------ ------------ ------------ ------------ ------------
Gross profit 6,457 6,222 20,994 54,971 53,799 44,296
Selling, general and administrative
expenses 7,440 4,060 16,670 44,286 66,870 63,203
----------- ------------ ------------ ------------ ------------ ------------
Income (loss) from operations (983) 2,162 4,324 10,685 (13,071) (18,907)
Interest expense, net 1,143 756 3,370 14,616 17,695 14,765
Other expense (income), net 480 5 66 1,426 4,400 (3,073)
----------- ------------ ------------ ------------ ------------ ------------
Income (loss) from continuing
operations before reorganization
costs, income taxes and (2,606) 1,401 888 (5,357) (35,166) (30,599)
extraordinary item
Reorganization costs -- -- -- -- -- 6,847
----------- ------------ ------------ ------------ ------------ ------------
Income (loss) from continuing
operations before income taxes and
extraordinary item (2,606) 1,401 888 (5,357) (35,166) (37,446)
Income tax provision (benefit) (908) 640 (390) -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Income (loss) from continuing
operations before discontinued
operations and extraordinary item (1,698) 761 1,278 (5,357) (35,166) (37,446)
Loss from discontinued operations (4) -- -- (2,053) (3,487) (11,977) (4,918)
Extraordinary item, net of income tax
benefit of $282 -- -- (484) -- -- --
----------- ------------ ------------ ------------ ------------ ------------
Net income (loss) $(1,698) $761 $(1,259) $(8,844) $(47,143) $(42,364)
Basic income (loss) per common share
from continuing operations $0.10 $0.10 $(0.39) $(2.49) $(2.63)
Discontinued operations (4) -- (0.16) (0.25) (0.85) (0.35)
Extraordinary item -- (0.04) -- -- --
------------ ------------ ------------ ------------ ------------
Basic income (loss) per common share $0.10 $(0.10) $(0.64) $(3.34) ($2.98)
Weighted average common shares
outstanding, basic 7,884,000 12,982,000 13,785,000 14,095,000 14,238,000
Diluted income (loss) per common
share from continuing operations $0.09 $0.10 $(0.39) $(2.49) $(2.63)
Discontinued operations (4) -- (0.16) (0.25) (0.85) (0.35)
Extraordinary item -- (0.04) -- -- --
------------ ------------ ------------ ------------ ------------
Diluted income (loss) per common share
$0.09 $(0.10) $(0.64) $(3.34) $(2.98)
Weighted average common shares
outstanding, diluted 8,160,000 12,982,000 13,785,000 14,095,000 14,238,000
OTHER DATA:
Depreciation & amortization $2,698 $442 $2,009 $8,723 $12,067 $8,538
Capital expenditures 1,683 429 1,522 6,764 6,648 3,628
BALANCE SHEET DATA:
Cash and cash equivalents $985 $40,152 $108 $56 $158
Total assets 42,744 158,324 186,512 157,072 113,617
Working capital (deficit) (6) 176 61,472 14,955 6,745 29,038
Long-term debt and capital leases (5) (6) 17,533 126,518 134,155 136,772 --
Liabilities subject to compromise (6) -- -- -- -- 167,990
Stockholders' equity (deficit) 4,277 5,581 (1,429) (47,574) (90,038)
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(1) Selected financial data for the predecessors for 1996 were derived
from the audited combined financial statements of Eagle and Taylor for
the period January 1, 1996 through August 29, 1996, and the audited
combined financial statements of Mallyclad and Vyn-L for the period
December 1, 1995 through June 30, 1996.
Mallyclad and Vyn-L reported net sales of $1.9 million for the period
December 1, 1995 through June 30, 1996, Mallyclad and Vyn-L reported net
loss of $12,000 for the same period. Because the operating results and
financial position of Mallyclad and Vyn-L do not materially impact the
financial data of the Predecessors on a combined basis, financial data of
Mallyclad and Vyn-L have not been presented separately in the above
table.
(2) For financial reporting purposes, the Company represents AAPC after
giving effect to the series of transactions described below.
ETC was formed in June 1996. Effective June 25, 1996, ETC's ultimate
controlling shareholder acquired Mallyclad and Vyn-L. Subsequently, on
December 18, 1996, Mallyclad and Vyn-L were merged into ETC. Based on the
control maintained by this shareholder, the merger was considered a
transaction among companies under common control and, accordingly,
accounted for at the shareholder's historical cost and included in the
accounts of ETC effective June 25, 1996.
Effective August 29, 1996, ETC acquired Eagle and Taylor. The acquisition
was accounted for as a purchase with the assets acquired and the
liabilities assumed recorded at estimated fair values and the results of
operations included in ETC's financial statements from the date of
acquisition.
Effective December 18, 1996, ETC acquired and combined with FCEI. The
acquisition was accounted for as a purchase and, accordingly, the assets
acquired and liabilities assumed by ETC were recorded at their estimated
fair values and the results of FCEI's operations and included in the
financial statements of ETC from the date of the acquisition. The merged
entity subsequently changed its name to American Architectural Products
Corporation (AAPC).
For the purposes of presenting the selected financial data, Eagle and
Taylor, and Mallyclad and Vyn-L are considered to be the Predecessors and
their financial data are presented on a combined basis. Because the
operating results and financial position of Mallyclad and Vyn-L do not
materially impact the financial data of the Predecessors on a combined
basis, financial data of Mallyclad and Vyn-L have not been presented
separately in the above table. The financial data for the period after
the acquisitions are presented on different cost bases than the financial
data before the acquisitions and, therefore, are not comparable.
(3) Selected financial data for the Company for 1996, 1997, 1998, 1999 and
2000 were derived from the audited financial statements of the Company
for the period from June 19, 1996 (inception) through December 31, 1996,
and the audited financial statements for the years ended December 31,
1997, 1998, 1999 and 2000. The 1996, 1997, 1998, 1999 and 2000 financial
statements include the operations of acquired businesses from the
respective dates of acquisition as detailed in Item 7. - Management's
Discussion and Analysis of Financial Condition and Results of Operations.
(4) Represents discontinuance of the Company's commercial business segment as
described in Note 18 to the consolidated financial statements.
(5) Includes current and long term portion of long term debt and capitalized
leases, excludes revolving lines of credit.
(6) On December 18, 2000, the Company and its subsidiaries filed for
voluntary bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code. As a result, the Company's consolidated financial
statements reflect "liabilities subject to compromise" which refers to
liabilities incurred prior to the commencement of the Chapter 11 case.
Liabilities subject to compromise consist of the following items at
December 31, 2000:
Accounts payable $ 15,469
Accrued interest payable 17,584
Accrued liabilities 1,205
Long-term debt and capital leases 133,732
---------------
Total liabilities subject to compromise $ 167,990
===============
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11
On December 18, 2000, American Architectural Products Corporation (the
"Company") and its subsidiaries filed for voluntary bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in the Northern District of Ohio (the "Bankruptcy Court"). The Company is
presently operating its businesses as a debtor-in-possession under Chapter 11
and is subject to the jurisdiction and supervision of the Bankruptcy Court. In
Chapter 11 cases, substantially all liabilities as of the date of the filing of
the petition for reorganization are subject to settlement under a plan of
reorganization to be voted upon by the Company's impaired creditors and
stockholders and confirmed by the Bankruptcy Court. The ultimate amount and
settlement terms for such liabilities are subject to a plan of reorganization
and, accordingly, are not presently determinable. In addition, on December 18,
2000, the Bankruptcy Court issued an order authorizing the Company to pay
certain pre-petition claims of essential vendors and suppliers. Accordingly,
these amounts have been paid or are included in the appropriate liability
captions on the consolidated balance sheets.
An unsecured creditors' committee has been appointed by the Bankruptcy
Court. The official committee and legal representatives are the primary entities
with which the Company is negotiating the terms of a plan of reorganization. The
Company has requested the Bankruptcy Court approve an extension to January 18,
2002 during which the Company has the exclusive right to file a reorganization
plan.
The consolidated financial statements of the Company and its
subsidiaries were prepared on a going concern basis, which contemplates
continuity of operations, realization of assets and liquidation of liabilities
in the ordinary course of business. However, as shown in the financial
statements, during the years ended December 31, 2000, 1999 and 1998, the Company
incurred losses of $42.4 million, $47.1 million and $8.8 million, respectively.
Further, the Company's ongoing debt service obligations included semi-annual
interest payments of approximately $7.3 million, due each June 1 and December 1
through December 31, 2007. The indenture governing the Notes provides that an
"Event of Default" includes the default in any payment of interest on the Notes
when due, continued for 30 days. The Company did not have sufficient liquidity
to make the June 1 or December 1, 2000 interest payments. Accordingly, the
Company was in default of the indenture. Furthermore, as described in Note 7,
the Company was in violation of certain of its covenants under the line of
credit facility at December 31, 1999 but obtained waivers for those violations.
These events, among other things, led to the Chapter 11 filings; therefore, the
realization of assets and liquidation of liabilities is subject to significant
uncertainty.
In the Chapter 11 proceedings (subject, in certain circumstances, to
Bankruptcy Court approval), the debtors may sell or otherwise dispose of assets,
and liquidate or settle liabilities, for amounts other than those reflected in
the consolidated financial statements. The amounts reported in the consolidated
financial statements do not give effect to any adjustments to the carrying value
of assets or amounts of liabilities that might result as a consequence of
actions taken pursuant to a plan of reorganization, which adjustments could be
material. The continuation of the Company as a going concern is contingent upon,
among other factors, the ability of the debtors to (1) formulate and file a plan
which will gain the approval of the creditors, shareholders and other parties in
interest and confirmation of the Bankruptcy Court; (2) maintain
debtor-in-possession financing; (3) achieve profitable operations; (4) obtain
adequate shipments of merchandise from suppliers at acceptable credit terms; and
(5) obtain post reorganization financing. There can be no assurances that the
above conditions can be met.
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BUSINESS OVERVIEW
Since December 1998, the Company has consummated the following
acquisitions:
COMPANY ACQUIRED DATE
VinylSource January 23, 1998
Denver Window April 16, 1998
Weather-Seal June 12, 1998
TMWD October 1, 1999
The Company accounted for the above acquisitions as purchases, with the
purchase prices allocated among the assets acquired and liabilities assumed
based on their estimated fair market values. The results of their operations are
included in the consolidated financial statements of the Company from the
respective dates of acquisition.
In 2000, the Company experienced declining sales levels, resulting from
current year divestitures and continued sales decreases in the Company's
extrusion businesses. The Company continued to incur net losses and began
implementing a series of responsive actions which included the bankruptcy
filing.
In December 1999, the Company announced the discontinuance of the
operations of its commercial business, Forte, Inc. The operating results of this
business had continually declined and the Company discontinued manufacturing
operations in May 2000. The Company is currently seeking a buyer for the
remaining assets of the business. The Company has accounted for Forte as a
discontinued operation in the accompanying financial statements for all years
presented. Therefore, the following discussion and analysis refer only to
continuing businesses of the Company.
In March 2000, the Company sold substantially all of the assets of
Western for approximately $5.6 million, receiving $4.5 million in cash and
accepting a note receivable, at 8% interest, for $1.1 million. The Company
recorded a $3.3 million gain on the sale, net of a discount for prepayment of
the note. Additionally, Western signed a distributorship agreement with the
Company for the right to distribute certain AAPC products.
In May 2000, the Company sold certain of the assets, including
inventories and all the property and equipment, of VinylSource for approximately
$5.9 million in cash. The sale of these assets is consistent with the Company's
plan to divest non-core assets and focus on core business and distribution
strategies. The Company recorded a loss of approximately $1.3 million on the
sale.
In January 2001, the Company closed Eagle Window and Door Center, Inc.
(EWDC), a regional distributor and installer of windows and doors. EWDC
recognized a net loss of $1.4 million during 2000.
In February 2001, the Company announced the shutdown of its wood window
manufacturing operation in Ottawa, Ohio, effective April 2001. In addition to
impairment losses (see Note 9 to the consolidated financial statements), the
Company recognized approximately $600,000 of shutdown costs in 2001.
In September 2001, the Company sold substantially all of the assets of
Denver Window and ETC's distribution network in the Denver, Colorado area
(Denver) for approximate book value. Denver recognized net losses of $224,000
during 2000.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO YEAR ENDED DECEMBER 31, 1999
Net Sales. Net sales decreased by $44.7 million to $269.3 million in
2000 as compared to $314 million in 1999. The decrease reflects $61.6 million of
sales in 1999 not included in 2000 relating to the divestitures of VinylSource,
Western and Taylor, partially offset by $9.7 million of sales in 2000 not
included for a comparable period in 1999 relating to the acquisition of TM in
October 1999. Internal growth of $7.2 million at the Company's other businesses
offset some of this decline. Excluding the impact of acquisitions and
divestitures, the Company's residential segment experienced $7.7 million of
growth, primarily in its aluminum clad wood and vinyl window lines as a result
of higher volumes generated by stronger customer relationships. The extrusion
segment experienced internal declines of $0.5 million from 1999 primarily as a
result of declines in aluminum business in the northern region of the country.
Cost of Sales. Cost of sales decreased to $225.0 million, representing
83.5% of net sales, from $260.2 million, or 82.9% of net sales, in 1999. The
decrease principally results from $51.2 million in costs associated with the
divestitures that were not included for a comparable period of 2000, net of $8.6
million of cost of sales from the TM acquisition included in 2000 but not for a
comparable period of 1999. The offsetting increase of $7.4 million resulted from
residential segment increases of $7.8 million offset by a $0.4 million decrease
in the extrusion segment. The residential segment cost of sales increases
resulted from the sales volume increases in the aluminum clad wood and vinyl
businesses while the extrusion declines relate to corresponding sales decreases
in the northern region of the United States.
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Gross Profit. Gross profit for the year ended December 31, 2000 was
$44.3 million, representing a decrease of $9.5 million from 1999. Gross profit
attributable to businesses divested and not included for a comparable period in
2000 but included in 1999, net of acquisitions not included for a comparable
period of 1999, amounted to $9.2 million. The Company's other businesses
recorded gross profit in 2000 consistent with 1999. Gross margins declined by
.6% from 17.1% in 1999 to 16.5% in 2000 reflecting little impact from
acquisition and divestiture activity.
Selling, General and Administrative Expenses. Selling, General and
Administrative Expenses, which include impairment charges, decreased $3.6
million from $66.8 million in 1999 to $63.2 million in 2000. $3.2 million of
this decrease is attributable to a decrease in Selling General and
Administrative expenses other than impairment charges. This decrease includes
$5.1 million of expenses in 1999 attributable to businesses divested and not
included for a comparable period in 2000. The remaining $1.9 million increase
resulted from a $2.9 million increase in the residential window segment,
primarily in the southeastern businesses, a $0.5 million increase in the
aluminum extrusion business, and a $1.5 million decrease in corporate costs
resulting from the Company's cost reduction initiatives. Additionally, the
Company recognized $13.5 million in non-cash impairment charges in 2000. $12.8
million was recorded by the Company's residential window segment, while the
remaining $0.7 million was recorded by the Company's northern aluminum
extrusion businesses. 1999 impairment charges of $13.9 million included $7.9
million of charges taken by businesses divested in 2000.
Operating Income (Loss) from Continuing Operations. The Company
recorded an operating loss from continuing operations of $18.9 million in 2000
as compared with a loss of $13.1 million in 1999. This $5.8 million increase in
operating losses consists largely of the $7.5 million special non cash asset
impairment charges over the impairment charges taken last year in remaining
businesses as discussed above. The remaining decrease of $1.7 million reflects
losses from the Company's aluminum and vinyl residential window businesses in
the south and southwest and its extrusion businesses, offset in part by higher
operating income in its aluminum-clad wood business coupled with lower corporate
costs.
Interest Expense. Interest expense for the years ended December 31,
2000 and 1999 was $14.8 million and $17.7 million, respectively. The decreased
interest expense results primarily from lower average borrowings in 2000 than in
1999. Further, an increased line-of-credit to $35 million for a period of ninety
days in 1999 resulted in additional interest costs of $1.0 million. Finally, the
Company did not recognize approximately $0.5 million of interest expense in 2000
as a result of the bankruptcy filing (see Note 2 to the consolidated financial
statements).
Other Income (Expense). Other income (expense) decreased from a net
expense of $4.4 million in 1999 to $3.1 million in 2000 primarily due to 1999
write-offs of abandoned acquisition and financing costs and a $1.2 million loss
to reduce property held for sale to its net realizable value based on a contract
in place at the end of 1999. These higher costs in 1999 were offset in part by a
gain of approximately $0.6 million on the sale of Taylor. In 2000, the Company
recognized a $3.3 million gain on the sale of Western offset by a $1.3 million
loss on the sale of VinylSource. This net gain was offset by other miscellaneous
expenses in 2000.
Reorganization Costs. In conjunction with the filing, the Company
recognized reorganization costs of $6.8 million in 2000. This amount represents
$4.8 of accelerated amortization of debt issue costs previously deferred and
$2.0 million in professional fees and other expenses directly related to the
filing.
Income Taxes. The Company established a full valuation allowance on its
tax benefit in 2000.
Loss from Discontinued Operations. Loss from discontinued operations
was $4.9 million in 2000 as compared with $12.0 million in the prior year. The
Company recorded no tax benefit on the losses. The manufacturing operations
were ceased in May 2000 and the Company is actively seeking a purchaser for
the remaining property and equipment of this business.
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998
Net Sales. Net sales increased by $60.2 million to $314.0 million in
1999 as compared to $253.8 million in 1998. The increase reflects $33.5 million
of sales volume relating to the acquisitions of VinylSource, Weather-Seal and
TMWD which were not included for a comparable period in 1998, partially offset
by $1.5 million of sales in 1998 not included for a comparable period in 1999
relating to Taylor, which was sold in December 1999. Internal growth at the
Company's other businesses accounted for $28.2 million of the sales increase.
Excluding the impact of acquisitions and divestitures, the Company's residential
segment experienced $24.2 million of growth, primarily in its aluminum clad wood
and vinyl window lines as a result of higher volumes generated by stronger
customer relationships, new customer additions and an improved product offering
mix. The extrusion segment experienced internal growth of $4.0 million over 1998
primarily as a result of expansion in its aluminum business in the southern part
of the country.
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Cost of Sales. Cost of sales increased to $260.2 million, representing
82.9% of net sales, from $198.9 million, or 78.3% of net sales, in 1998. The
increase principally results from $28.6 million in additional costs associated
with the acquisitions that were not included for a comparable period of 1998,
net of the Taylor divestiture included in 1998 but not for a comparable period
of 1999. The remaining increase of $32.7 million resulted from residential and
extrusion segment increases of $25.3 million and $7.4 million, respectively. The
residential segment cost of sales increases resulted from the sales volume
increases in the aluminum clad wood and vinyl businesses, as well as from higher
material and labor costs in the Company's aluminum businesses in the south and
southwestern part of the United States. Additionally, in these aluminum
businesses, the Company incurred incremental costs for the move and setup of a
large manufacturing facility and experienced inefficiencies with the initial
production in the new facility. The extrusion segment increases reflect a shift
in product mix to higher cost content products and an impairment charge of $1.3
million for inventory at its vinyl extrusion facility. Both of these segments
also incurred significant costs associated with training, inefficiencies and
consulting on a new computer system.
Gross Profit. Gross profit for the year ended December 31, 1999 was
$53.8 million, representing a decrease of $1.2 million from 1998. Gross profit
attributable to the inclusion of the acquisitions not included for a comparable
period of 1998, net of the Taylor divestiture not included for a comparable
period of 1999, amounted to $3.3 million. The Company's other businesses
recorded a $4.5 million decline in gross profit, reflecting higher material and
labor costs at the Company's southern and southwestern aluminum fabrication and
vinyl extrusion businesses and incremental costs associated with the
manufacturing move discussed above, offset in part by growth in its other
businesses. The Company's gross margin declined from 21.7% in 1998 to 17.1% in
1999. This decline reflects the lower margins resulting from the 1998
acquisitions being included for the entire period in 1999 and higher costs in
the Company's southern and southwestern businesses. Although the Company has
achieved improved margins for certain of the 1998 acquisitions in
post-acquisition operations, their margins have not yet reached the margins of
the Company's core businesses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $66.9 million in 1999 from $44.4 in 1998.
Included in this increase is $13.9 million relating to non cash asset impairment
charges recorded in 1999 (see Note 9 to the consolidated financial statements).
Additionally, acquisitions not included for a comparable period of 1998, net of
the Taylor divestiture not included for a comparable period of 1999, contributed
$3.0 million of the increase. The remaining $5.6 million of the increase results
from $5.6 million and $0.7 million of increases in the residential and extrusion
segments, respectively, related primarily to their sales growth and increased
costs in the southern and southwestern aluminum businesses, offset in part by a
$0.7 million decrease in corporate costs resulting from the Company's cost
reduction initiatives.
Operating Income (Loss) from Continuing Operations. The Company
recorded an operating loss from continuing operations of $13.1 million in 1999
as compared with income of $10.7 million in 1998. This $23.8 million decrease
consists largely of the $15.2 million special non cash asset impairment charges
discussed above. The remaining decrease of $8.6 million reflects lower income
from the Company's aluminum and vinyl residential window businesses in the south
and southwest and its extrusion businesses, offset in part by higher operating
income in its aluminum-clad wood business coupled with lower corporate costs.
Interest Expense. Interest expense for the years ended December 31,
1999 and 1998 was $17.7 million and $15.3 million, respectively. The increased
interest expense reflects higher levels of debt required to support operations,
as well as the 1998 acquisitions for a full year. Additionally, the Company
increased its line-of-credit facility to $35 million for a period of ninety days
in 1999 and incurred additional costs of $1.0 million in connection with this
increase.
Other Income (Expense). Other income (expense) increased from a net
expense of $0.8 million in 1998 to $4.4 million in 1999 as a result of the
write-off of a higher amount of abandoned acquisition and financing costs and a
$1.2 million loss to reduce property held for sale to its net realizable value
based on a contract in place and expected to close in the second quarter of
2000. These higher costs were offset in part by a gain of approximately $0.6
million on the sale of Taylor.
Income Taxes. The Company established a full valuation allowance on its
tax benefit in 1999.
Loss from Discontinued Operations. Loss from discontinued operations
was $12.0 million in 1999 as compared with $3.5 million in the prior year. The
Company recorded no tax benefit on the losses. This business continued to
struggle with sales volumes and manufacturing problems and inefficiencies. The
loss in 1999 included $5.0 million loss from operations, a $6.0 million
estimated loss on disposal to reduce fixed assets and inventories to their
estimated net realizable values and a $1.0 million provision for losses incurred
from the measurement date to date of abandonment. The Company is actively
seeking a purchaser for the assets of this business.
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LIQUIDITY AND CAPITAL RESOURCES
During the years ended December 31, 2000, 1999 and 1998, the Company's
principal sources of funds consisted of cash generated from operations, sale of
assets and various financings.
In June 1998, the Company secured a revolving credit facility of $25
million to complete the acquisition of Weather-Seal, fund working capital needs
and finance future acquisitions. During 1999, the Company increased its
revolving credit facility from $25 million to $35 million for a period of ninety
days to support working capital needs during its peak season. At December 31,
1999, the Company had $1.7 available under this facility. On December 18, 2000,
in connection with the bankruptcy filing, the Company obtained an aggregate $35
million debtor-in-possession credit facility from a group of lenders (the "DIP
Financing") which expires upon either the effective date of the plan of
reorganization or forty-five days after the filing date if the final financing
order has not been duly entered on or prior to such date, but no later than two
years from entry date of the interim financing order entered on docket of
bankruptcy case. Proceeds from this financing were used to pay off the previous
revolver at the date of the bankruptcy filing. This facility consists of up to a
$29 million line of credit, including a $5 million subfacility for issuance of
letters of credit, and a multiple draw term loan in an aggregate principal
amount not to exceed $10 million. At December 31, 2000, the interest rate was
10.25% on the line of credit and 11.0% on the term loan, with aggregate
availability of $9.9 million under the facility. This facility has priority in
the bankruptcy proceeding.
The Company's principal liquidity requirements have been for debt
service under the 1997 $125 million, 11 3/4% Senior Notes (the Notes), the note
issued in connection with the Weather-Seal acquisition (Weather-Seal note) and
revolving credit facility and for working capital needs and capital
expenditures. The Company's annual principal and interest debt service
requirements, including capital lease obligations, remain uncertain until a plan
of reorganization is filed and approved by the Bankruptcy Court.
Cash provided by operating activities was $2.6 million and $10.8
million for the years ended December 31, 2000 and 1998, respectively. Cash used
by operating activities amounted to $4.8 million in 1999. The increase in cash
from operations from 1999 to 2000 results primarily from the nonpayment of
interest on the Notes and the Weather-Seal note, net of cash used for
reorganization costs in connection with the filing. The Company's working
capital requirements for inventory and accounts receivable are impacted by
changes in raw material costs, the availability of raw materials, growth of the
Company's business and seasonality. As a result, such requirements may
fluctuate significantly.
Capital expenditures for the years ended December 31, 2000, 1999 and
1998 were $3.6 million, $6.6 million and $6.8 million, respectively. Capital
outlays included manufacturing equipment and computer software and hardware.
The Company generated $0.2 million, $3.4 million and $0.9 million from the
sale of property and equipment in 2000, 1999 and 1998, respectively, including
$2.2 million from the sale and leaseback of the Ottawa, Ohio production
facility in 1999. While the bankruptcy filing and liquidity constraints have
substantively curtailed capital expenditures, management expects that such
spending will continue at a level consistent with the operating needs and
available financial resources of the Company. Future capital expenditures are
expected to be funded from internally generated funds, leasing programs and the
Company's current and future credit facilities.
The Company made no acquisitions in 2000. This compares to aggregate
purchase prices paid for acquisitions of $2.6 and $49.8 million in 1999 and
1998, respectively. In March 2000, the Company sold its Western division for
$5.6 million (including $4.5 million in cash) and in May 2000, the Company sold
VinylSource for $5.9 million in cash. In December 1999, the Company sold its
Taylor division for $9.2 million (including $6.8 million in cash). In March
1998, the Company sold its Mallyclad division to a related party for $1.1
million in cash
Cash payments on long term debt and capital lease obligations were $1.4
million for the year ended December 31, 2000 compared to $1.3 million for the
year ended December 31, 1999 and $1.0 million for the year ended December 31,
1998. Net activity on the Company's lines of credit and DIP Facility resulted
in the use of cash of $6.6 million in 2000 and sources of cash of 10.8 and $6.7
million in 1999 and 1998, respectively. The Company paid approximately $1.0,
$1.7 million, and $2.1 million in fees and expenses associated with debt
financing in the years ended December 31, 2000, 1999 and 1998, respectively.
The Company performed an impairment analysis for certain of its
long-lived assets, including goodwill, on a unit-by-unit basis by assessing
cash flows for those assets on the same basis. Assumptions used in this
analysis included an extensive review of each unit's forecast in the years
subsequent to 2000, based in part on current business and industry conditions,
and applied moderate inflation rates to all costs and revenue figures in future
years. Based on this analysis, the Company recorded impairment charges of $13.5
million in 2000 relating to its several residential window manufacturing
operations and its northern aluminum extrusion operations.
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SEASONALITY
The Company's business is seasonal since its primary revenues are
driven by residential construction. Inclement weather during the winter months,
particularly in the northeast and midwest regions of the United States, usually
reduces the level of building and remodeling activity in both the home
improvement and new construction markets and, accordingly, ___ has an adverse
impact on the demand for fenestration products. Traditionally, the Company's
lowest sales levels usually occur during the first and fourth quarters. The
Company believes that its acquisitions in the southwestern and southeastern
United States offset the risk to the Company for potentially unusual inclement
weather conditions in the midwest and the northeast. Because a high percentage
of the Company's manufacturing overhead and operating expenses are relatively
fixed throughout the year, operating income has historically been lower in
quarters with lower sales. Working capital requirements are usually at their
highest level during the second and third quarters.
CYCLICALITY
Demand in the fenestration industry is influenced by new home
construction activity and the demand for replacement products. Trends in the
housing sector directly impact the financial performance of the Company.
Accordingly, the strength of the U.S. economy, the age of existing home stock,
job growth, consumer confidence, consumer credit, interest rates and migration
of the inter/intra U.S. population have a direct impact on the Company. Any
declines in new housing starts and/or demand for replacement products may
adversely impact the Company and there can be no assurance that any such adverse
effects would not be material.
INFLATION AND RAW MATERIAL COSTS
During the past several years, the general rate of inflation has been
relatively low and has not had a significant impact on the Company's operations.
However, the Company purchases raw materials, such as aluminum, wood, vinyl and
glass, that are subject to fluctuations in price that may not reflect the
general rate of inflation, and are more closely tied to the supply of and demand
for the particular commodity. Specifically, there have been periods of
significant and rapid changes in aluminum prices, with a concurrent short-term
impact on the Company's operating margins. In some cases, generally where the
increases have been modest, the Company has been able to mitigate the effect of
these price increases over the long-term by passing them on to customers.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in the Annual Report on Form 10-K are made
pursuant to the safe harbor provisions of Section 21E of the Securities Exchange
Act of 1934. Investors are cautioned that statements in the Annual Report on
Form 10-K that are not strictly historical statements, including (without
limitation) statements regarding current or future financial performance,
management's plans and objectives for future operations, financing
opportunities, product plans and performance, management's assessment of market
factors and statements regarding the strategy and plans of the Company,
constitute forward-looking statements. These forward-looking statements are not
guarantees of the Company's future performance and are subject to a number of
risks and uncertainties that could cause the Company's actual results in the
future to materially differ from the forward-looking statements. These risks and
uncertainties include, without limitation, the risks described herein and in the
Company's other filings with the Securities and Exchange Commission, copies of
which may be accessed through the SEC's web site at http://www.sec.gov.
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ITEM 7(a). QUALITATIVE AND QUANTITATIVE DISCLOSURES REGARDING MARKET RISK
The Company's earnings are affected by changes in short term interest
rates related to its line of credit facility and promissory note to the former
Weather-Seal parent. If the market rates for short-term borrowings increased by
1%, the impact would be an interest expense increase of $0.2 million with the
corresponding decrease of income before taxes of the same amount. The amount was
determined by considering the impact of hypothetical interest rates on the
Company's borrowing cost and year-end variable rate debt balances by category.
The Company is not subject to interest rate risk on its $125 million 11 3/4%
Senior Notes since these notes bear interest at fixed rates.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
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CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
Reports of Independent Auditors 17
Consolidated Balance Sheets at December 31, 2000 and 1999 19
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 21
Consolidated Statements of Stockholders' Deficit for the years ended December 31, 2000, 1999 and 1998 22
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 23
Notes to Consolidated Financial Statements 24
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts 43
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Report of Independent Auditors
The Board of Directors and Shareholders
American Architectural Products Corporation
We have audited the accompanying consolidated balance sheet of American
Architectural Products Corporation and subsidiaries (Company) (a
Debtor-in-Possession as of December 18, 2000) as of December 31, 2000, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the year then ended. Our audit also included the financial statement
schedule listed in the index at Item 14(a)(2) for the year ended December 31,
2000. These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit. The consolidated financial
statements of American Architectural Products Corporation and subsidiaries for
the years ended December 31, 1999 and 1998 were audited by other auditors whose
report, dated June 2, 2000, on those statements included an explanatory
paragraph describing conditions that raised substantial doubt about the
Company's ability to continue as a going concern.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Architectural Products Corporation and subsidiaries as of December 31,
2000, and the consolidated results of their operations and their cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the related financial
statement schedule for the year ended December 31, 2000, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2, on
December 18, 2000, the Company filed a voluntary petition seeking to reorganize
under Chapter 11 of the United States Bankruptcy Code. The Chapter 11 filing was
the result of violation of certain debt covenants, recurring operating losses,
deterioration of vendor support and cash flow deficiencies. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Although the Company is currently operating as a Debtor-in-Possession
under the jurisdiction of the Bankruptcy Court, the continuation of the business
as a going concern is contingent upon the approval of the plan of
reorganization, the success of future operations, and the ability to recover the
carrying amount of assets and/or the amount and classification of liabilities.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
BEARD MILLER COMPANY LLP
Pittsburgh, Pennsylvania
June 6, 2001
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Report of Independent Auditors
The Board of Directors and Shareholders
American Architectural Products Corporation
We have audited the accompanying consolidated balance sheet of American
Architectural Products Corporation as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the years ended December 31, 1999 and 1998. Our audits also included
the financial statement schedule listed in the index at Item 14(a) for the years
ended December 31, 1999 and 1998. These financial statements and schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American
Architectural Products Corporation at December 31, 1999, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1999 and 1998, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule for the years ended December 31, 1999 and 1998, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
The accompanying consolidated financial statements for 1999 have been prepared
assuming that the Company will continue as a going concern. As more fully
described in Note 3 to the 1999 financial statements, the Company has incurred
recurring operating losses, is highly leveraged and has deficit in stockholders'
equity. These conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3 to the 1999 financial statements. The 1999 financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
ERNST & YOUNG LLP
June 2, 2000
Akron, Ohio
18
22
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
DECEMBER 31
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 158 $ 56
Accounts receivable, less allowance
for doubtful accounts of $1,764 and $1,299 25,517 30,278
Accounts receivable - related parties -- 452
Inventories 25,121 28,659
Prepaid expenses and other current assets 4,703 2,756
Assets of discontinued operations, net 1,734 3,384
Assets held for sale 1,421 5,984
------------ ------------
TOTAL CURRENT ASSETS 58,654 71,569
------------ ------------
PROPERTY AND EQUIPMENT
Land and improvements 1,538 1,538
Buildings and improvements 13,529 17,473
Machinery, tools and equipment 29,244 41,183
Computers and office equipment 7,437 8,326
------------ ------------
51,748 68,520
Less accumulated depreciation (13,825) (14,719)
------------ ------------
NET PROPERTY AND EQUIPMENT 37,923 53,801
------------ ------------
OTHER
Cost in excess of net assets acquired, net
of accumulated amortization of $2,987
and $2,587 13,939 22,902
Deferred financing costs, net of accumulated
amortization of $6 and $2,601 947 5,598
Other, net of accumulated amortization of $717 and $480 2,154 3,202
------------ ------------
TOTAL OTHER ASSETS 17,040 31,702
------------ ------------
$ 113,617 $ 157,072
============ ============
19
23
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
DECEMBER 31
2000 1999
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Debtor-in-possession revolving credit and term loan $ 16,743 $ --
Revolving line of credit -- 23,260
Accounts payable - trade 3,654 22,277
Payable to seller for purchase price adjustment 850 1,463
Accrued Expenses
Compensation and related benefits 3,068 5,010
Current portion of warranty obligations 1,692 2,370
Other 3,609 8,770
Current portion of capital lease
obligations -- 1,239
Current maturities of long-term debt -- 435
------------ ------------
TOTAL CURRENT LIABILITIES 29,616 64,824
Long-term debt, less current maturities -- 132,519
Long-term capital lease obligations,
less current portion -- 2,579
Accrued warranty obligations, less current portion 3,305 2,177
Other 2,744 2,547
Liabilities subject to compromise 167,990 --
------------ ------------
TOTAL LIABILITIES 203,655 204,646
------------ ------------
STOCKHOLDERS' DEFICIT
Preferred stock, Series A convertible, $.001 par,
20,000,000 shares authorized; no shares
outstanding -- --
Preferred stock, Series B convertible, $.01
par, 30,000 shares authorized; no shares
outstanding -- --
Common stock, $.001 par, 100,000,000 shares
authorized; 14,321,616 shares issued;
13,821,616 and 14,321,616 shares outstanding 14 14
Additional paid-in capital 9,142 9,142
Treasury stock, at cost (100) --
Accumulated deficit (99,094) (56,730)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (90,038) (47,574)
------------ ------------
$ 113,617 $ 157,072
============ ============
See accompanying notes to consolidated financial statements.
20
24
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
Net Sales $ 269,258 $ 313,976 $ 253,831
Cost of Sales 224,962 260,177 198,860
------------ ------------ ------------
GROSS PROFIT 44,296 53,799 54,971
Selling Expense 24,598 27,330 22,306
Non-cash Stock Compensation -- -- 1,833
Asset Impairment 13,469 13,930 --
General and Administrative Expenses 25,136 25,610 20,147
------------ ------------ ------------
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS (18,907) (13,071) 10,685
------------ ------------ ------------
Other Income (Expense)
Interest Expense (14,765) (17,695) (15,285)
Interest Income -- -- 669
Acquisition and Financing Costs -- (2,325) (1,087)
Miscellaneous 3,073 (2,075) (339)
------------ ------------ ------------
Total Other Expense (11,692) (22,095) (16,042)
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
REORGANIZATION COSTS AND INCOME TAX BENEFIT (30,599) (35,166) (5,357)
Reorganization Costs 6,847 -- --
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAX BENEFIT (37,446) (35,166) (5,357)
Income Tax Benefit -- -- --
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (37,446) (35,166) (5,357)
Loss From Discontinued Operations (4,918) (11,977) (3,487)
------------ ------------ ------------
NET LOSS $ (42,364) $ (47,143) $ (8,844)
============ ============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE
Continuing Operations $ (2.63) $ (2.49) $ (.39)
Discontinued Operations (.35) (.85) (.25)
------------ ------------ ------------
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (2.98) $ (3.34) $ (.64)
============ ============ ============
See accompanying notes to consolidated financial statements.
21
25
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL TOTAL
-------------------------- PAID-IN TREASURY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT DEFICIT
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 13,458,479 $ 13 $ 6,311 $ -- $ (743) $ 5,581
Non-cash stock compensation -- -- 1,833 -- -- 1,833
Conversion of options and warrants to
common stock 74,525 1 -- -- -- 1
Net loss for the year -- -- -- -- (8,844) (8,844)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 13,533,004 14 8,144 -- (9,587) (1,429)
Issuance of shares in connection with
acquisitions 789,044 -- 998 -- -- 998
Cancellation of shares (432) -- -- -- -- --
Net loss for the year -- -- -- -- (47,143) (47,143)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 14,321,616 14 9,142 -- (56,730) (47,574)
PURCHASE OF TREASURY STOCK -- -- -- (100) -- (100)
NET LOSS FOR THE YEAR -- -- -- -- (42,364) (42,364)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 2000 14,321,616 $ 14 $ 9,142 $ (100) $ (99,094) $ (90,038)
=========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
22
26
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
2000 1999 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $ (37,446) $ (35,166) $ (5,357)
Adjustments to reconcile loss from continuing operations to net cash
provided by (used in) operating activities before reorganization costs:
Depreciation 6,954 8,545 6,379
Amortization 1,584 3,522 2,344
Loss on sale of property and equipment and assets held for sale 699 1,247 308
Gain on sale of business (2,047) (589) --
Loss on acquisition and financing costs -- 2,325 1,087
Non-cash stock compensation -- -- 1,833
Asset impairment 13,469 15,213 --
Reorganization costs 6,847 -- --
Changes in assets and liabilities, net of effects of business acquisitions
and divestitures and discontinued operations:
Accounts receivable 2,685 (4,760) (4,205)
Accounts receivable - related parties 452 -- 135
Inventories 1,088 (676) 1,578
Prepaid expenses and other current assets (262) (1,156) 548
Other assets 615 (2,225) (861)
Accounts payable (2,122) 6,192 6,870
Accrued expenses and other liabilities 12,151 2,686 104
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
BEFORE REORGANIZATION COSTS 4,667 (4,842) 10,763
NET CASH USED FOR REORGANIZATION COSTS (2,069) -- --
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,598 (4,842) 10,763
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 190 3,400 853
Proceeds from the sale of assets held for sale 2,750 -- --
Purchase of property and equipment (3,628) (6,648) (6,764)
Proceeds from the sale of business 10,407 6,699 1,084
Acquisitions of businesses, net of cash acquired -- (2,585) (49,831)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 9,719 866 (54,658)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) borrowings on revolving line of credit (23,260) 10,813 6,685
Net borrowings on debtor-in-possession financing 16,743 -- --
Payments for deferred financing costs (953) (1,707) (2,069)
Payments on long-term debt and capital lease obligations (1,377) (1,326) (689)
Purchase of treasury stock (100) -- --
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (8,947) 7,780 3,927
------------ ------------ ------------
CASH FLOWS PROVIDED BY (USED IN) CONTINUING OPERATIONS 3,370 3,804 (39,968)
CASH FLOWS USED IN DISCONTINUED OPERATIONS (3,268) (3,856) (76)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 102 (52) (40,044)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 56 108 40,152
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 158 $ 56 $ 108
============ ============ ============
See accompanying notes to consolidated financial statements.
23
27
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business and Basis of Presentation
American Architectural Products Corporation (AAPC or the Company) is
principally engaged in the business of manufacturing residential and
architectural windows and doors through its wholly-owned subsidiaries, Eagle &
Taylor Company (ETC - formerly known as American Architectural Products, Inc.,
AAP), Thermetic Glass, Inc. (Thermetic), Binnings Building Products, Inc.
(Binnings), Danvid Window Company (Danvid), American Glassmith Corporation
(American Glassmith), Denver Window Corporation (Denver), Eagle Window and Door
Center, Inc. (EWDC) and American Weather-Seal Company (Weather-Seal). Western
Insulated Glass Co. (now known as WIG Liquidation Company) (Western) and
VinylSource, Inc. (VinylSource) were subsidiaries at December 31, 1999 and were
sold in March 2000 and May 2000, respectively.
In December 1999, the Company announced the discontinuance of its
commercial business segment activities carried out through its wholly-owned
subsidiary Forte, Inc. (Forte). The Company completed its plan to exit this
business in May 2000. Forte has been reflected as a discontinued operation in
the accompanying financial statements and, accordingly, unless otherwise stated,
the accompanying notes for all years presented exclude amounts related to this
discontinued operation.
Bankruptcy
On December 18, 2000, the Company filed for voluntary protection under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in the Northern District of Ohio (the Bankruptcy Court). The Company is
presently operating its business as a debtor-in-possession under Chapter 11 and
is subject to the jurisdiction and supervision of the Bankruptcy Court.
The accompanying consolidated financial statements have been prepared
in accordance with AICPA Statement of Position 90-7 (SOP 90-7), "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code" as more fully
described in Note 2.
Principles of Consolidation
The consolidated financial statements include the accounts of AAPC and
its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles, generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these
estimates.
24
28
Fair Values of Financial Instruments
The carrying amounts of accounts receivable and accounts payable
approximate fair value because of the short maturity of these items. The
carrying amounts of the revolving credit facility and the subordinated seller
note approximate fair value as both bear interest at variable rates. The fair
value of the senior notes approximated $33 million at December 31, 2000 and $36
million at December 31, 1999, which were estimated based on quoted market
prices.
Revenue Recognition
The Company operates in two industry segments: residential fenestration
products and extrusion products. Revenues from the residential and extrusion
businesses are recorded upon the shipment of product to the customer.
Cash Equivalents
Cash equivalents are highly liquid investments with original maturity
of three months or less when purchased.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist principally of trade accounts
receivable.
The Company is principally engaged in the business of manufacturing
residential windows and doors. Therefore, its customer base is concentrated in
the construction business. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of customers and their
dispersion across many geographic areas. The Company grants credit to customers
based on an evaluation of their financial condition and generally does not
require collateral. Provisions for losses from credit sales have been recognized
in the financial statements.
Collective Bargaining Agreements
At December 31, 2000, approximately 118 of the Company's 2,498
employees were covered under collective bargaining agreements. Ninety-two of
these employees were covered under an agreement which was terminated in April
2001, in conjunction with the shutdown of the Company's Ottawa, Ohio facility
(see Note 21). The remaining employees are covered under an agreement set to
expire in October 2002.
Inventories
Inventories are stated at the lower of cost, determined by the
first-in, first-out method, or market.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the following estimated useful
lives in years:
Buildings and improvements 20-25
Machinery and equipment 7-10
Computers and office equipment 3-7
Tools, dies and fixtures 3-7
Expenditures for renewals and betterments are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred. Leased property
meeting certain criteria is capitalized and the present value of the related
lease payments is recorded as a liability. Amortization of capitalized leased
assets is computed on the straight-line method over the term of the lease, which
approximates the useful life of the underlying asset, and is included with
depreciation expense.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is being amortized over periods
ranging from 20 to 25 years using the straight-line method and is periodically
reviewed for impairment.
25
29
Long-Lived Assets
The Company continually evaluates whether events and circumstances have
occurred that indicate that the carrying amount of certain long-lived assets is
recoverable. When factors indicate that a long-lived asset should be evaluated
for possible impairment, the Company uses an estimate of the expected
undiscounted cash flows to be generated by the asset to determine if impairment
exists. When it is determined that an impairment exists, the Company uses the
fair market value of the asset, usually measured by the discounted cash flows to
be generated by the asset, to determine the amount of the impairment to be
recorded in the financial statements (see Note 9).
Deferred Financing Costs
Costs to obtain financing have been capitalized and are being amortized
using the straight-line method over the expected term of the underlying debt
(see Note 2).
Warranty Obligations
Certain of the Company's subsidiaries sell their products with limited
warranties generally ranging from one to ten years. Accrued warranty obligations
are estimated based on claims experience and levels of production. Warranty
obligations estimated to be satisfied within one year are classified as current
liabilities in the accompanying consolidated balance sheets.
Income Taxes
The income tax provision is computed using the liability method.
Deferred taxes are recorded for the expected future tax consequences of
temporary differences between the financial reporting and the tax basis of the
Company's assets and liabilities.
Advertising
The cost of advertising is charged against income as incurred.
Advertising expense was $2.7 million, $2.5 million, and $1.9 million for the
years ended December 31, 2000, 1999 and 1998, respectively.
New Accounting Standards
In July 2001, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations",
which requires that all business combinations be accounted for under a single
method, the purchase method. Use of the pooling-of-interests method is no longer
permitted. SFAS 141 requires that the purchase method be used for business
combinations initiated after June 30, 2001. It will have no effect on the
Company's financial statements unless the Company enters into a business
combination.
In July 2001, the FASB also issued SFAS 142, "Goodwill and Other
Intangible Assets", which requires that goodwill no longer be amortized to
earnings, but instead be reviewed for impairment. The amortization of goodwill
ceases upon adoption of the Statement which, for most companies, will be January
1, 2002.
2. BANKRUPTCY PROCEEDINGS AND GOING CONCERN CONSIDERATIONS:
On December 18, 2000, American Architectural Products Corporation (the
Company) and its subsidiaries filed for voluntary bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court in the Northern District of Ohio (the Bankruptcy Court). The Company is
presently operating its businesses as a debtor-in-possession under Chapter 11
and is subject to the jurisdiction and supervision of the Bankruptcy Court. In
Chapter 11 cases, substantially all liabilities as of the date of the filing of
the petition for reorganization are subject to the treatment set forth under a
plan of reorganization to be voted upon by the Company's impaired creditors and
stockholders and confirmed by the Bankruptcy Court. The ultimate amount and
treatment terms for such liabilities are subject to a plan of reorganization
and, accordingly, are not presently determinable. In addition, on December 18,
2000, the Bankruptcy Court issued an order authorizing the Company to pay
certain pre-petition claims of essential vendors and suppliers. Accordingly,
these amounts have been paid or are included in the appropriate liability
captions on the consolidated balance sheets.
26
30
An unsecured creditors' committee has been appointed by the Bankruptcy
Court. The official committee and legal representatives are the primary entities
with which the Company is negotiating the terms of a plan of reorganization. The
Company has requested the Bankruptcy Court approve an extension to January 18,
2002 during which the Company has the exclusive right to file a reorganization
plan.
The consolidated financial statements of the Company and its
subsidiaries were prepared on the going concern basis, which contemplates
continuity of operations, realization of assets and liquidation of liabilities
in the ordinary course of business. However, as shown in the financial
statements, during the years ended December 31, 2000, 1999 and 1998, the Company
incurred losses of $42.4 million, $47.1 million and $8.8 million, respectively.
Further, the Company's ongoing debt service obligations included semi-annual
interest payments of approximately $7.3 million, due each June 1 and December 1
through December 1, 2007. The indenture governing the Notes provides that an
"Event of Default" includes the default in any payment of interest on the Notes
when due, continued for 30 days. The Company did not have sufficient liquidity
to make the June 1, 2000 or December 1, 2000 interest payments. Accordingly, the
Company was in default of the indenture. Furthermore, as described in Note 6,
the Company was in violation of certain of its covenants under the line of
credit facility at December 31, 1999 but obtained waivers for those violations.
These events, among other things, led to the Chapter 11 filings; therefore, the
realization of assets and liquidation of liabilities is subject to significant
uncertainty.
In the Chapter 11 proceedings (subject, in certain circumstances, to
Bankruptcy Court approval), the debtors may sell or otherwise dispose of assets,
and liquidate or settle liabilities, for amounts other than those reflected in
the consolidated financial statements. The amounts reported in the consolidated
financial statements do not give effect to any adjustments to the carrying value
of assets or amounts of liabilities that might result as a consequence of
actions taken pursuant to a plan of reorganization, which adjustments could be
material. The continuation of the Company as a going concern is contingent upon,
among other factors, the ability of the debtors to (1) formulate and file a plan
which will gain the approval of the creditors and other parties in interest and
confirmation by the Bankruptcy Court; (2) maintain debtor-in-possession
financing; (3) achieve profitable operations; (4) obtain adequate shipments of
merchandise from suppliers at acceptable credit terms; and (5) obtain post
reorganization financing. There can be no assurances that the above conditions
can be met.
Liabilities Subject to Compromise
As reflected in the consolidated financial statements, "liabilities
subject to compromise" refers to liabilities incurred prior to the commencement
of the Chapter 11 case. The amounts of the various liabilities that are subject
to compromise are set forth below. These amounts represent the Company's
estimate of known or potential pre-petition claims to be resolved in connection
with the Chapter 11 case. Such claims remain subject to future adjustments.
Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy
Court; (3) rejection of executory contracts and unexpired leases; (4) the
determination as to the value of any collateral securing claims; (5) proofs of
claim; or (6) other events. Payment terms for these amounts will be established
in connection with the Chapter 11 case.
Liabilities subject to compromise in the consolidated balance sheet
consist of the following items at December 31, 2000 (in thousands):
Accounts payable $ 15,469
Accrued interest payable 17,584
Accrued liabilities 1,205
Debt (Notes 7 and 8) 133,732
----------
Total liabilities subject to compromise $ 167,990
==========
27
31
Interest on certain pre-petition debt is not accrued after the
bankruptcy filing. Such contractual interest expense not recorded totaled
$542,000 for 2000.
Debtor-In-Possession Financing
In connection with the bankruptcy filing, the Company obtained an
aggregate $35 million debtor-in-possession credit facility, subject to an
available collateral base, from a lender (the "DIP Facility") which expires upon
either the effective date of the plan of reorganization or forty-five days after
the filing date if the final financing order has not been duly entered on or
prior to such date, but no later than two years from entry date of the interim
financing order entered on docket of bankruptcy case. The credit is secured by
certain accounts receivable, inventories and property and equipment of the
Company. This facility consists of up to a $29 million line of credit, including
a $5 million subfacility for issuance of letters of credit, and a multiple draw
term loan in an aggregate principal amount not to exceed $10 million. Interest
is payable on a monthly basis based upon the interest rate applicable to the
line of credit and the term loan of the prime rate plus .75% and 1.5%
respectively. By agreement, the facility has a commitment fee on unused portions
of .5% at December 31, 2000. At December 31, 2000, the interest rate was 10.25%
on the line of credit and 11.0% on the term loan, with aggregate availability of
$9.9 million under the facility. The DIP Facility has priority in the bankruptcy
proceeding.
The DIP Facility requires the Company to meet a number of covenants
which include minimum quarterly earnings before interest, taxes, depreciation,
amortization and certain non-cash gains and losses as defined in the credit
agreement (EBITDA) and minimum fixed charge coverage ratios. The Company was in
violation of both covenants as outlined in the facility on March 31, and June
30, 2001. The Company obtained a waiver releasing it from its requirement to
meet that threshold for the first and second quarters of 2001.
At December 31, 2000, outstanding balances (in thousands) and interest
rates are as follows:
Interest
Balance Rate
----------------------------
Line of credit $ 8,743 10.25 %
Term loan 8,000 11.00 %
-------------
$ 16,743
=============
Reorganization Costs
The amounts reflected as reorganization costs in the consolidated
statement of operations consist of the following for the year ended December 31,
2000 (in thousands):
Accelerated amortization of debt issue costs $ 4,778
Professional fees and other expenses 2,069
--------
Total reorganization costs $ 6,847
========
3. ACQUISITIONS AND DIVESTITURES:
Acquisition and Divestiture of VinylSource
In January 1998, the Company acquired, for cash, substantially all of
the assets of the vinyl division of Easco Corporation, an Austintown, Ohio
manufacturer of vinyl extrusions for the fenestration industry. The Company
operated the facility through its wholly-owned subsidiary, VinylSource. The
purchase price approximated $13.4 million and was allocated to net assets
acquired based on estimated fair market values including current assets of $4.7
million, property and equipment of $9.7 million, other assets of $111,000 and
current liabilities of $1.1 million. The accounts of VinylSource are included in
the Company's consolidated financial statements from the acquisition date. In
May 2000, the Company sold the inventories, leasehold improvements and equipment
of VinylSource for approximately $5.9 million in cash. The Company recorded a
loss of approximately $1.3 million on the sale.
28
32
Divestiture of Mallyclad
In March 1998, the Company sold Mallyclad, a division of ETC, to a
related party for approximately $1.1 million. The Company sold this division, a
manufacturer of vinyl laminates for steel and aluminum consumer and commercial
customers, at its approximate basis and, therefore, recognized no gain or loss
on the transaction.
Acquisitions of Blackhawk & Denver
In January and April 1998, respectively, the Company acquired, for
cash, substantially all of the assets of Blackhawk Architectural Products
(Blackhawk) and Denver. The acquisitions were accounted for as purchases. The
purchase prices approximated $621,000 and were allocated to net assets acquired
based on estimated fair values including current assets of $355,000, property
and equipment of $211,000 and current liabilities of $242,000. Cost in excess of
net assets acquired of $297,000 was recorded and is being amortized over 25
years. The accounts of Blackhawk and Denver are included in the Company's
consolidated financial statements from the acquisition dates.
Acquisition of American Weather-Seal
In June 1998, the Company acquired substantially all of the assets of
the Weather-Seal division of Louisiana-Pacific Corporation. The acquisition was
accounted for as a purchase with the purchase price of $40.8 million allocated
to net assets acquired based on estimated fair market values including current
assets of $13.8 million, property and equipment of $31.4 million, current
liabilities of $3.5 million and long-term liabilities of $900,000. The
acquisition was financed with $16.6 million in borrowings from the Company's
line-of-credit facility, $7.5 million in a subordinated seller note and the
remainder with cash. The accounts of Weather-Seal are included in the Company's
consolidated financial statements from the acquisition date.
Acquisition of TM Window & Door
In October 1999, the Company acquired, through its wholly-owned
subsidiary Binnings, substantially all of the assets of TMWD. The acquisition
was accounted for as a purchase with the purchase price of $4.8 million
allocated to the net assets acquired based on estimated fair market values
including current assets of $2.5 million, property and equipment of $1.5 million
and current liabilities of $1.2 million. Cost in excess of net assets acquired
of $2.0 million were recorded and the unamortized balance was written off in
2000 as a result of the Company's impairment analysis discussed in Note 9. The
accounts of TMWD are included in the Company's consolidated financial statements
from the acquisition date.
Divestiture of Taylor
In December 1999, the Company sold Taylor Building Products, Inc.
(Taylor), a subsidiary of ETC, for approximately $9.2 million. Taylor is a
manufacturer of steel entry doors and garage door panels. In connection with the
sale, a non-interest bearing note receivable in the amount of $2.4 million and a
gain on the sale of $0.6 million was recorded. The Company retained the real
property and is leasing this property to the buyer (see Note 5).
Divestiture of Western
In March 2000, the Company sold substantially all of the assets of
Western, a Phoenix, Arizona based manufacturer of aluminum windows and doors for
approximately $5.6 million consisting of $4.5 million in cash and a note
receivable for $1.1 million. Interest on the note is payable monthly at the
annual rate of 8%. The note was scheduled to mature in February 2002 but was
prepaid at a discount in 2001. The Company recorded a gain of approximately $3.3
million, net of discount, on the sale. Additionally, the buyer signed a
distributorship agreement with the Company for the right to distribute certain
AAPC products.
29
33
Pro Forma Financial Information
The following unaudited pro forma information has been prepared
assuming that the acquisition of TMWD and the divestitures of Taylor, Western
and VinylSource had occurred on January 1, 2000 and January 1, 1999,
respectively. The pro forma information includes adjustments for selling,
general and administrative expenses for changes in compensation expense for
certain managers of the completed acquisitions, adjustments to depreciation
expense based on the estimated fair market value of the property and equipment
acquired, amortization of cost in excess of net assets acquired arising from the
acquisitions, and adjustments for income taxes. The pro forma results of
operations are not indicative of the actual results of operations that would
have occurred had the acquisitions or divestitures been made on the dates
indicated or the results that may be obtained in the future.
YEAR ENDED DECEMBER 31,
2000 1999
---------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Net sales $ 262,337 $ 265,404
Operating loss from continuing operations (18,459) (7,395)
Loss from continuing operations (30,093) (28,533)
Basic and diluted net loss per common share - continuing operations $ (2.11) $ (2.02)
4. INVENTORIES:
Inventories consisted of the following:
DECEMBER 31,
2000 1999
----------------- ---------------
(IN THOUSANDS)
Finished goods $ 6,793 $ 8,004
Work-in-process 3,177 4,372
Raw materials 15,151 16,283
----------------- ---------------
$ 25,121 $ 28,659
================= ===============
5. ASSETS HELD FOR SALE:
In 1999, the Company moved its Binnings extrusion and manufacturing
operations from Aventura, Florida into a newly leased 190,000 square foot
facility in Miami, Florida. The Company sold the Aventura property in November
2000 and recognized a loss on the sale of $416,000.
As part of the agreement of the sale of Taylor, the Company retained
the real property which has a book value of $1.4 million, however, the buyer is
required to purchase it within a period not to exceed nineteen months from the
closing date provided certain conditions are met. The obligation of the buyer to
purchase the real property is currently being contested.
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34
6. REVOLVING LINE-OF-CREDIT:
In June 1998, the Company secured a revolving credit facility of up to
$25 million. The facility had a three year term, was secured by substantially
all of the assets of the Company and bore interest based on the Company's
election of either a LIBOR based rate or an alternative rate based on the bank's
rate in effect. In addition, the bank charged a 3/8% commitment fee on the
unused portion of the revolving credit facility. The level of revolving loans
was limited by the provisions of the agreement to a percentage of eligible
accounts receivable and inventories. At December 31, 1999, the interest rate
being charged was 8.4% and the Company had $1.7 million available under the
facility. In May 1999, the Company, with the consent of the Notes bondholders,
amended its revolving credit facility to increase the loan commitment from $25
million to $35 million for a 90 day period, through August 1999, to assist the
Company with seasonal working capital needs. Fees of approximately $1.0 million
were incurred related to the consent and amendment which were capitalized and
amortized over the term of the amendment.
The revolving credit facility required the Company to meet a number of
covenants which included a minimum amount of availability at certain stated
times, minimum quarterly fixed charge coverage ratios, minimum quarterly
earnings before interest, taxes, depreciation and amortization (EBITDA) figures
and maximum quarterly capital expenditure outlays. At December 31, 1999, the
Company was in violation of meeting the fixed charge coverage ratio and the
minimum EBITDA, as outlined in the facility for the fourth quarter of 1999. The
Company obtained waivers from its lender releasing it from its requirement to
meet those thresholds for the fourth quarter of 1999. Subsequent to 1999, and
through the termination of the facility, the Company was only required to meet
the minimum availability threshold and quarterly fixed charge coverage covenant
of 1.10 to 1. The Company obtained a waiver for the minimum availability
covenant for the fixed charge coverage ratio from the lender.
The revolving credit facility was paid in full from the proceeds of the
debtor-in-possession financing (see Note 2).
7. LONG-TERM DEBT:
Due to the bankruptcy filing, pre-petition long-term debt balances at
December 31, 2000 have been reclassified to the caption "liabilities subject to
compromise" in the consolidated balance sheet (see Note 2). Amounts reflected as
long-term debt in 1999 did not become subject to compromise until the bankruptcy
filing.
DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS)
11-3/4% Senior Notes, due 2007 $ 125,000 $ 125,000
Subordinated unsecured promissory note to
former parent of acquired business, due January 1, 2001
with interest payable semi-annually at LIBOR
plus 4.5% to 4.75% 7,500 7,500
Other 47 454
------------ ------------
132,547 132,954
Less current portion -- 435
------------ ------------
$ 132,547 $ 132,519
============ ============
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35
In December 1997, the Company issued $125 million of 11 3/4% Senior
Notes (the "Notes"). The Notes are senior unsecured obligations of the Company
and are scheduled to mature on December 1, 2007. Interest on the Notes is
payable semi-annually on June 1 and December 1 of each year, commencing June 1,
1998. The Notes are unconditionally guaranteed by each of the Company's
subsidiaries and by each subsidiary acquired thereafter.
Except as set forth below, the Company may not redeem the Notes prior
to December 1, 2002. On or after December 1, 2002, the Company may redeem the
Notes, in whole or in part, at any time, at redemption prices declining from
105% of the principal amount in 2002 to 100% of the principal amount in 2005 and
thereafter, together with accrued and unpaid interest, if any, to the date of
redemption.
The provisions of the Notes limit the amounts of additional
indebtedness the Company and its subsidiaries can incur unless the Company meets
certain consolidated coverage ratios as defined in the Notes. Notwithstanding
this restriction, the Company was permitted to incur secured indebtedness of $25
million (see Note 6). Other covenants of the Notes include, but are not limited
to, limitations on restricted payments, as defined, such as payment of
dividends, repurchase of the Company's capital stock, redemption of subordinated
obligations, certain investments, in addition to limitations on sale/leaseback
transactions, affiliate transactions and mergers or consolidations.
The Company's ongoing debt service obligations include semi-annual
interest payments of approximately $7.3 million, due each June 1 and December 1
through December 1, 2007. The indenture governing the Notes provides that an
"Event of Default" includes the default in any payment of interest on the Notes
when due, continued for 30 days. The Company did not make the June 1, 2000 or
December 1, 2000 interest payments. Accordingly, the failure to make the June 1,
2000 and December 1, 2000 interest payments within 30 days of the due date would
constitute an Event of Default under the indenture. A default in the Company's
obligations to pay interest on the Notes triggered defaults under other
indebtedness of the Company.
In connection with its acquisition of TMWD, the Company assumed various
notes with vendors. The terms of these notes include interest rates at 8.0% and
maturity dates ranging from May 2000 to March 2001.
The approximate maturities of long-term debt, without regard to any
bankruptcy action, are as follows: 2001 -- $7.55 million; 2002 -- $0; 2003 --
$0; 2004 -- $0; 2005 -- $0 thereafter - $125 million.
8. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
Certain leased assets are capitalized and consist of computer and
delivery equipment with a cost of $2.1 million and $5.2 million at December 31,
2000 and 1999, respectively. Accumulated amortization related to these leased
assets was $1.8 million and $1.7 million at December 31, 2000 and 1999,
respectively.
The Company also leases buildings and equipment under operating leases.
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36
At December 31, 2000, the future minimum lease payments under operating
and capital leases are as follows (in thousands):
OPERATING CAPITAL
LEASES LEASES
------------------ --------------
2001 $ 3,980 $ 1,182
2002 3,487 16
2003 3,085 10
2004 2,685 10
2005 1,631 9
Thereafter 2,346 --
--------------
------------------
Total $ 17,214 1,227
==================
Less amount representing interest 42
--------------
Net present value (included in "liabilities subject to compromise") $ 1,185
==============
Rental expense incurred for operating leases was $5.6 million, $4.2
million and $2.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Pursuant to the Bankruptcy Code, the Company may elect to reject or
accept unexpired pre-petition leases. The Company is currently reviewing the
leases for which such an election is available to determine whether they should
be rejected or accepted. An election by the Company to reject certain leases may
impact the future minimum lease commitments.
Litigation
The Company and its subsidiaries are engaged in various litigation and
have a number of unresolved claims. While the amounts claimed are substantial
and the ultimate liability with respect to such litigation and claims cannot be
determined at this time, management believes that such liability, to the extent
not provided for through insurance or otherwise, is not likely to have a
material impact on the financial condition or the results of operations of the
Company. However, all such claims arising prior to December 18, 2000 must be
resolved through confirmation of the Company's plan of reorganization as such
plan may be approved by the Bankruptcy Court.
9. IMPAIRMENT LOSSES:
As discussed in Note 2, the Company filed for protection under Chapter
11 of the U.S. Bankruptcy Code. While the Company continually evaluates whether
the recorded values of its long-lived assets have been impaired, circumstances
resulting from the bankruptcy filing caused the Company to re-evaluate the
results of future operations and their impact on the recorded value of its
long-lived assets. Because some of the operations evaluated were experiencing
negative cash flows, and are projecting negative cash flow, an appraised orderly
liquidation value was used to determine the fair value of some of the assets
being evaluated. As a result of these analyses, the Company recorded an
impairment charge of $13.5 million, including goodwill write-downs of $8.4
million and property and equipment write-downs of $5.1 million, of which $3.5
million is in respect to the shutdown of the Ottawa facility (see Note 21).
$12.8 million of this adjustment was recorded by the Company's residential
window segment, while the remaining $740,000 was recorded by the Company's
extrusion segment.
In December 1999, as a result of continuing operating losses,
underperformance at several of its operating divisions and the discontinuance of
restructuring plans for its northern vinyl window operations, the Company
evaluated estimated undiscounted future cash flows for one of its northern
residential vinyl window manufacturing facilities and its vinyl extrusion
facility. As a result of these analyses, impairment losses of $5.3 million and
$9.2 million, respectively, were recorded to reduce the carrying value of those
assets to their estimated fair values. These non-cash charges included
write-downs of $5.1 million to goodwill, $1.3 million to inventory (included in
cost of goods sold) and $8.1 million to property and equipment.
33
37
Additionally, in December 1999, the Company abandoned its plans to
implement new software at two of its facilities. Accordingly, approximately $0.7
million of capitalized project costs related to this project were charged to
expense.
10. BENEFIT PLANS:
All eligible nonunion employees of the Company participate in 401(k)
plans which include provisions for Company matching contributions. Expenses
incurred relating to these plans were $768,000, $4,377,000 and $2,263,000 for
the years ended December 31, 2000, 1999 and 1998, respectively.
11. STOCKHOLDERS' DEFICIT:
Series A Preferred Stock
The Series A Preferred is voting preferred stock and has the same
number of votes as the number of shares of common stock into which the Series A
Preferred would be convertible if converted in full on the record date.
No dividends may be paid with respect to the common stock unless a
dividend is paid to the holders of the Series A Preferred. Any dividends paid
are required to be allocated pro rata among the holders of the common stock and
Series A Preferred as though the Series A Preferred has been converted in full
to common stock on the dividend payment date. During 1997, all of the Series A
preferred shares were converted to common stock.
Series B Preferred Stock
In 1997, the Company received proceeds of $425,000 from the private
placement of 4,250 shares of Series B Cumulative Redeemable Convertible
Preferred Stock (the Series B Preferred). The Series B Preferred accrues
cumulative dividends at the annual rate of $8.00 per share commencing July 1,
1998, payable either in cash or common stock at the election of the Company.
Each share of Series B Preferred is convertible, at the option of the holder,
into shares of common stock. The redemption price of $100 per share of Series B
Preferred plus any cumulative unpaid dividends can be used to purchase shares of
common stock at market value. However, a discount from the quoted market price
of common stock was applicable for holders exercising conversion rights prior to
August 31, 1997 and the discounts were accounted for as dividends to the
holders. During 1997, all of the Series B preferred shares issued were converted
to common stock.
In connection with a series of financing transactions in 1997, the
Company issued warrants to purchase 156,497 shares of common stock at an
exercise price of $3.50 per share, expiring in 1998. In 1998, the expiration
date of those warrants not yet exercised was extended until January 15, 2000.
Non-cash stock compensation expense of $128,000 was recorded by the Company in
1998 relating to the extension of these warrants. Warrants to purchase 71,428
shares of common stock were exercised in 1998. At December 31, 1999, warrants to
purchase 85,069 shares of common stock remained exercisable and expired
unexercised in January 2000.
12. STOCK OPTIONS:
As part of the consideration paid in the acquisition of Forte Computer
Easy, Inc. (FCEI now known as American Architectural Products Corporation) in
December 1996, the Company is deemed to have issued to certain FCEI stockholders
options to purchase an aggregate of 586,556 shares of the Company's common stock
at prices ranging from $2.50 to $5.00 per share (FCEI Options). The FCEI Options
were deemed to have been issued in exchange for previously outstanding options
granted under the FCEI Employee Incentive Stock Option Plan.
As part of the recapitalization of ETC that occurred in connection with
the acquisition of FCEI, AAP Holdings, Inc. received options to purchase 879,834
shares of common stock of the Company (AAPH Options). The AAPH Options were
equivalent to 1.5 times the number of shares of the Company's common stock
subject to the 586,556 FCEI Options. The AAPH Options were identical in price
and exercise terms to the FCEI Options and were exercisable only to the extent
that the FCEI Options were exercised.
34
38
At December 31, 1999, 471,770 FCEI Options and 707,655 AAPH Options
were outstanding. These exercisable options had an option price of $3.75. In
1998, the expiration date of these options was extended until January 2000 at
which time they expired, unexercised. Non-cash stock compensation expense of
$1,474,000 was recorded by the Company in 1998 relating to the extension of
these options.
In 1996, the Company adopted the American Architectural Products
Corporation Stock Option Plan (the Plan) whereby 10,000,000 shares of the
Company's common stock have been authorized for issuance under the Plan. Shares
of common stock have been made available for grant to directors, officers and
key employees at the discretion of the Board of Directors. In 1998, the Plan was
amended to increase the number of shares issued under the Plan to 15% of the
common stock issued and outstanding. The exercise price of stock options granted
under the Plan may not be less than the market price of the Company's common
stock at the date of grant. Options granted to persons who have voting control
over 10% or more of the Company's stock are granted at 110% of the fair market
value of the underlying shares at the grant date and expire five years after the
grant date. The stock options issued to employees have a ten year term and vest
in 20% increments over five years. Stock options issued to non-employee
directors have a ten year term and vest within one year.
Certain options have been granted to non-employees based on negotiated
terms. Stock options issued to non-employees are recorded at fair value with a
related charge against income.
A summary of activity related to stock options for the Plan for the
years ended December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
----------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
-------- -------- -------- -------- -------- --------
(OPTIONS IN THOUSANDS)
Outstanding, beginning of the period 1,210 $ 3.98 1,405 $ 3.99 540 $ 4.08
Granted 40 0.69 45 2.73 1,013 3.78
Forfeited (513) 3.78 (240) 3.78 (148) 2.86
-------- -------- -------- -------- -------- --------
Outstanding, end of the period 737 $ 3.95 1,210 $ 3.98 1,405 $ 3.99
======== ======== ======== ======== ======== ========
The weighted-average remaining contractual life on options outstanding
is 5.5 years. Options to purchase 399,000 shares are currently exercisable with
a weighted-average exercise price of $4.46 per share.
35
39
The Company applies the intrinsic value method in accounting for its
stock options issued to employees. Accordingly, no compensation cost has been
recognized for stock options issued to employees. The following table sets forth
the Company's loss from continuing operations and loss from continuing
operations available per common share on a pro forma basis had compensation
expense for the Company's stock options issued to employees been determined
based on the fair value using the Black-Scholes model at the grant dates:
YEAR ENDED DECEMBER 31,
2000 1999 1998
-------------- -------------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
LOSS FROM CONTINUING OPERATIONS
As reported $ (37,446) $ (35,166) $ (5,357)
Pro forma $ (37,471) $ (35,457) $ (5,614)
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER
COMMON SHARE
As reported $ (2.63) $ (2.49) $ (.39)
Pro forma $ (2.63) $ (2.52) $ (.41)
The fair value for these stock options was estimated at the dates of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: a risk-free interest rate of 5.2% in 2000 and 6.5%
in 1999 and 1998, a dividend yield percentage of 0% in 2000, 1999 and 1998,
common stock volatility of 1.78 in 2000 and 0.35 in 1999 and 1998, and an
expected life of the options of 10 years in 2000 and 5 years in 1999 and 1998.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
36
40
The weighted-average fair value of the options granted during the
periods ended December 31, 2000, 1999 and 1998 were $0.62, $1.14 and $1.57
respectively.
13. TREASURY STOCK:
In 2000, the Company signed a Separation Agreement and Release with its
former President and Chief Executive Officer, which included, among other
things, an agreement by the Company to repurchase 500,000 shares of the
Company's common stock and the release of the Company from any obligations
arising from former employment. The cost of the shares ($100,000) was recorded
as treasury stock.
14. INCOME TAXES:
Significant components of deferred tax assets and liabilities as of
December 31, 2000 and 1999 are as follows:
DECEMBER 31,
2000 1999
------------- -------------
(IN THOUSANDS)
DEFERRED TAX ASSETS
Net operating loss carryforwards $ 30,160 $ 12,775
Allowance for doubtful accounts 600 447
Accrued warranty obligations 1,699 2,256
Asset impairment 6,825 4,649
Write-off of debt issuance costs 1,442 --
Other accruals 1,400 1,043
Other 347 153
------------- -------------
42,473 21,323
------------- -------------
DEFERRED TAX LIABILITIES
Depreciation 4,127 4,479
Other -- 655
------------- -------------
4,127 5,134
------------- -------------
NET DEFERRED TAX ASSETS 38,346 16,189
VALUATION ALLOWANCE FOR NET DEFERRED TAX ASSETS (38,346) (16,189)
------------- -------------
NET DEFERRED TAXES $ -- $ --
============= =============
In recording certain acquisitions, the Company established a valuation
allowance against the entire net deferred tax assets acquired, based on
uncertainties surrounding the expected realization of these assets.
The actual income tax expense (income tax benefit) attributable to the
loss for the years ended December 31, 2000, 1999 and 1998 differed from the
amounts computed by applying the U.S. federal tax rate of 34 percent to pretax
losses as a result of the following:
YEAR ENDED DECEMBER 31
2000 1999 1998
------------- -------------- --------------
(IN THOUSANDS)
Tax benefit at U.S. federal statutory rate $ (12,564) $ (13,640) $ (3,418)
Expenses not deductible for tax purposes 60 843 836
Valuation allowance adjustment 22,157 12,797 2,582
State income taxes, net of federal income tax benefit -- -- --
Other (9,653) -- --
------------- -------------- --------------
BENEFIT FOR INCOME TAXES $ -- $ -- $ --
============= ============== ==============
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At December 31, 2000, the Company and its subsidiaries had net
operating loss carryforwards of approximately $88.7 million for income tax
purposes which expire between 2001 and 2020. Due to changes in ownership,
utilization of approximately $9.3 million of the net operating loss
carryforwards is limited to approximately $550,000 per year. The remaining $79.4
million may be utilized without limitation. A valuation allowance has been
established against the Company's net deferred tax assets due to uncertainty
relating to their realization.
Subject to the outcome of the bankruptcy proceedings, tax attributes
such as net operating loss carryforwards, and depreciable asset bases may be
reduced or potentially eliminated.
15. RELATED PARTY TRANSACTIONS:
The Company paid management fees to its majority stockholder of
approximately $0, $21,000 and $85,000 for the years ended December 31, 2000,
1999 and 1998, respectively. Additionally, the Company paid its majority
stockholder $0, $0 and $590,000 for acquisition services and $0, $147,000 and
$260,000 for other transaction services in 2000, 1999 and 1998, respectively. In
2000, 1999 and 1998, the Company paid $10,000, $375,000 and $530,000,
respectively, to a Company affiliated with its majority shareholder for air
charter services.
In January 1998, the Company purchased for approximately $400,000
substantially all of the assets of Blackhawk (See Note 3), which was owned in
part, by an officer of the Company.
In March 1998, the Company sold Mallyclad, a division of ETC, to a
company controlled by its majority shareholder for approximately $1.1 million.
The Company sold this division at its net book value, therefore, no gain or loss
was recognized on this transaction.
In October 1998, the Company entered into an operating lease with a
company controlled by its majority shareholder. Amounts paid under this lease
were $0, $150,000 and $75,000 for the years ended December 31, 2000, 1999 and
1998, respectively.
In November 1999, the Company loaned $77,000 to its Chief Executive
Officer. This amount was liquidated and retired in November 2000.
In December 1999, the Company recorded a receivable from its majority
stockholder of $375,000 for insurance proceeds it held related to a fire at the
Weather-Seal, Kreidel plant. The amount was remitted to the Company in January
2000.
At December 31, 1999, the Company had a receivable recorded in the
amount of $55,000 related to product sales to a company owned by the wife of the
former Chief Executive Officer. This amount was written off in December 2000.
16. NET LOSS PER COMMON SHARE:
Net loss per common share amounts have been computed in accordance with
Statement of Financial Accounting Standard No. 128, Earnings Per Share. Basic
net loss per common share amounts were computed by dividing the net loss by the
weighted-average number of common shares outstanding. The effect of common stock
equivalents outstanding were not dilutive.
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42
The weighted-average number of common shares outstanding for 1998
includes approximately 300,000 additional common shares issued in January 1999
in connection with the Thermetic acquisition based on the average market price.
YEAR ENDED DECEMBER 31,
2000 1999 1998
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
LOSS FROM:
Continuing operations $(37,446) $(35,166) $ (5,357)
Discontinued operations (4,918) (11,977) (3,487)
--------------------------------
$(42,364) $(47,143) $ (8,844)
================================
SHARES
Weighted-average shares - basic and diluted 14,238 14,095 13,785
================================
PER COMMON SHARE - BASIC AND DILUTED
Continuing operations $ (2.63) $ (2.49) $ (.39)
Discontinued operations (.35) (.85) (.25)
--------------------------------
$ (2.98) $ (3.34) $ (.64)
================================
17. SEGMENT INFORMATION:
The Company manufactures a broadly diversified line of windows, doors
and related products designed to meet a variety of consumer demands in both the
new construction and remodeling and replacement markets. The Company is
generally managed through two principal businesses: residential fenestration
products and extrusion products. Though the Company has defined its reportable
segments primarily based on the nature of its products, it has also considered
the type of customers, and production processes related to each of its
businesses.
Residential fenestration products consist of a variety of window and
door products manufactured for uses in homes and light commercial businesses.
These products consist of a full line of aluminum, vinyl, wood and aluminum-clad
wood windows and doors. This business manufactures single hung, double hung,
sliding, casement, picture and geometrically shaped windows and french, patio,
screened storm, sliding doors and steel entry doors. These fenestration products
are sold throughout the United States and are sold one of three ways: directly
to an end user (remodeler, contractor or homeowner); to a retailer who then
sells to the end user; or to a wholesaler who sells to a retailer. These
products are produced and shipped on a by order basis in relatively small
quantities.
Extrusion products consist of aluminum and vinyl extrusions used
primarily in the fenestration products industry. This business supplies a
portion of the raw materials used in the manufacture of windows by the Company.
These products are sold throughout the United States and are marketed directly
to manufacturers primarily in the window and door industry.
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43
The Company generally measures its businesses based on operating
income, which includes the effects of incentive compensation for each business.
Intersegment transfers are not material. The following represents certain
financial data of the Company by segment of continuing operations as of and for
the years ended December 31, 2000, 1999 and 1998 (in thousands):
YEAR ENDED DECEMBER 31, 2000
CORPORATE AND
RESIDENTIAL EXTRUSION ELIMINATIONS TOTAL
---------------- ----------------- ----------------- -----------------
NET SALES - OUTSIDE $ 248,238 $ 21,020 $ -- $ 269,258
NET SALES - INTERCOMPANY 4,024 3,195 (7,219) --
DEPRECIATION 5,390 1,360 204 6,954
AMORTIZATION 1,248 -- 336 1,584
ASSET IMPAIRMENT 12,728 741 -- 13,469
OPERATING LOSS FROM
CONTINUING OPERATIONS (10,635) (2,542) (5,730) (18,907)
INTEREST EXPENSE 12,426 2,310 29 14,765
INCOME TAX EXPENSE (BENEFIT) 5,218 -- (5,218) --
TOTAL ASSETS 97,953 7,040 6,908 111,901
CAPITAL EXPENDITURES 3,363 203 62 3,628
YEAR ENDED DECEMBER 31, 1999
Corporate And
Residential Extrusion Eliminations Total
---------------- ----------------- ----------------- -----------------
Net sales - outside $ 268,714 $ 45,262 $ -- $ 313,976
Net sales - intercompany 4,565 2,832 (7,397) --
Depreciation 5,769 2,570 206 8,545
Amortization 1,550 100 1,872 3,522
Asset impairment 5,640 9,247 326 15,213
Operating income (loss) from
continuing operations 4,962 (10,769) (7,264) (13,071)
Interest expense 11,617 4,845 1,233 17,695
Income tax expense (benefit) 5,245 18 (5,263) --
Total assets 112,493 31,616 9,579 153,688
Capital expenditures 3,778 2,554 316 6,648
YEAR ENDED DECEMBER 31, 1998
Corporate And
Residential Extrusion Eliminations Total
---------------- ----------------- ----------------- ----------------
Net sales - outside $ 226,054 $ 27,777 $ - $ 253,831
Net sales - intercompany 2,916 838 (3,754) -
Depreciation 4,601 1,721 57 6,379
Amortization 1,606 9 729 2,344
Operating income (loss)
from continuing operations 17,840 834 (7,989) 10,685
Interest expense 11,917 2,818 550 15,285
Income tax expense (benefit) 3,023 (414) (2,609) -
Total assets 138,222 28,684 7,639 174,545
Capital expenditures 3,657 2,650 457 6,764
The operating loss in corporate & eliminations as reported pertains to the
operation of a Corporate function and includes general and administration
expenses. In 2000, the corporate operating loss includes $6.8 million in
reorganization costs (see Note 2). In 1998, the Corporate operating loss
includes charges totaling $2.9 million relating to non-cash stock compensation
(see notes 11 and 12) and the write-off of deferred costs relating to terminated
acquisitions and financing transactions.
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44
No one customer constituted more than ten percent of the Company's consolidated
net sales for the years ended December 31, 2000, 1999 and 1998.
18. DISCONTINUED OPERATIONS:
As previously noted, on December 16, 1999, the Board of Directors of the Company
approved a plan to abandon its commercial business segment, conducted through
its wholly-owned subsidiary, Forte, which manufactures aluminum windows used in
commercial applications such as schools, dormitories, hospitals, institutions,
municipal buildings and military buildings. The Company discontinued
manufacturing operations at Forte in May 2000 and is actively seeking a buyer
for its remaining assets. The results of operations for Forte have been
presented as discontinued operations in the accompanying financial statements
for all periods. Net revenues generated by Forte for the years ended December
31, 2000, 1999 and 1998 were $3.0 million, $4.3 million and $3.4 million,
respectively. The Company allocates interest expense to its subsidiaries,
including Forte, based on average monthly intercompany loan balances, and
accordingly, allocated interest of $2.5 million, $1.9 million and $1.4 million
for the years ended December 31, 2000, 1999 and 1998, respectively. The Company
did not recognize income tax benefits on the losses from discontinued
operations. The loss from discontinued operations for each period consists of
the following:
YEAR ENDED DECEMBER 31,
2000 1999 1998
----------------------------------------------------
(IN THOUSANDS)
Loss from operations $ (3,808) $ (4,952) $ (3,487)
Accrued loss after measurement date -- (1,039) --
Estimated loss on disposal (1,110) (5,986) --
----------------------------------------------------
Loss from discontinued operations $ (4,918) $ (11,977) $ (3,487)
====================================================
The net assets of Forte have been reported in the accompanying consolidated
balance sheet as assets of discontinued operations, net and are classified as
current and non-current based on the expected timing of recoverability. A
summary of the net assets of this discontinued business is as follows:
DECEMBER 31,
2000 1999
---------------------------------
(IN THOUSANDS)
Accounts receivable $ 204 $ 1,983
Inventory -- 1,552
Property and equipment 1,530 1,630
Other assets -- 135
---------------------------------
Assets 1,734 5,300
Accounts payable -- 678
Other liabilities -- 1,238
---------------------------------
Liabilities -- 1,916
---------------------------------
Net assets $ 1,734 $ 3,384
=================================
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19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
YEAR ENDED DECEMBER 31,
2000 1999 1998
----------- ------------- -------------
(IN THOUSANDS)
CASH PAID DURING THE PERIOD FOR
Interest $ 1,979 $ 16,591 $ 14,994
NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock and debt issued and liabilities assumed in acquisitions -- 1,211 13,251
Capital lease obligations -- 3,160 1,044
Notes received from sale of assets 1,120 -- --
As discussed in Note 3, the Company sold substantially all of the
assets of Western and VinylSource in 2000. Cash proceeds of $10.4 million were
received in exchange for assets with a fair value of $12.1 million and
liabilities of $1.7 million.
20. SELECTED QUARTERLY DATA OF THE COMPANY (UNAUDITED):
2000 1999
-------------------------------------------- ---------------------------------------------
1ST 2ND 3RD 4TH 1st 2nd 3rd 4th
---------- ---------- ----------- ---------- ----------- ----------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $ 68,999 $71,265 $ 69,836 $ 59,158 $ 71,297 $ 80,997 $ 85,408 $ 76,274
Gross profit 11,592 13,868 12,874 5,962 13,352 16,251 17,575 6,621
Loss from
continuing operations (1,857) (2,551) (4,182) (28,856) (3,404) (2,425) (333) (29,004)
Net loss from continuing
operations per share:
Basic and diluted $ (0.13) $ (0.18) $ (0.29) $ (2.03) $ (0.25) $ (0.18) $(0.03) $ (2.03)
21. SUBSEQUENT EVENTS
In January 2001, the Company closed EWDC, a regional distributor and installer
of windows and doors. EWDC recognized net losses of $1.4 million, $860,000 and
$94,000 during the years ended December 31, 2000, 1999 and 1998, respectively.
In February 2001, the Company announced the shutdown of its wood window
manufacturing operation in Ottawa, Ohio, effective April 2001. In addition to
impairment losses of $3.5 million (see Note 9), the Company recognized
approximately $600,000 of shutdown costs in 2001.
In September 2001, the Company sold substantially all of the assets of Denver
and ETC's distribution network in the Denver, Colorado area for approximate book
value. Denver reported $224,000 of net losses in 2000.
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AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
Additions
------------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
----------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS (1)
Year ended December 31, 2000 1,299,317 1,419,473 15,000 940,118 1,763,672
Year ended December 31, 1999 886,525 817,084 98,750 (4) 503,042 (3) 1,299,317
Year ended December 31, 1998 839,141 635,230 59,516 647,362 (3) 886,525
WARRANTY OBLIGATIONS (1)
Year ended December 31, 2000 4,547,013 2,813,188 -- 2,362,352 4,997,849
Year ended December 31, 1999 6,115,702 1,965,639 (1,474,196) (4) 2,060,132 4,547,013
Year ended December 31, 1998 4,825,727 1,649,116 1,574,172 (2) 1,933,313 6,115,702
(1) Progression of account has been restated to exclude accounts associated with
the discontinued operation
(2) Purchased in business acquisitions
(3) Accounts deemed to be uncollectible
(4) Includes amounts purchased in business acquisition and sold in business
divestiture
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As reported on Form 8-K, dated July 21, 2000, Ernst & Young ("E&Y")
resigned as independent auditors of the Company. As reported on Form 8-K, dated
January 17, 2001, the Company engaged Beard Miller Company LLP (formerly Beard &
Company, Inc.) ("Beard"). The change in accountants was approved by the Board of
Directors of the Company. The reports of E&Y on the Company's financial
statements for the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion. E&Y's report on the Company's 1999 consolidated financial
statements was modified as to uncertainty by inclusion of an explanatory "going
concern" paragraph resulting from the Company's recurring operating losses,
highly leveraged position and deficiency in shareholders' equity.
The Company requested E&Y to furnish it a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the above
statement. E&Y furnished the Company with a copy of a letter dated July 27, 2000
containing such a statement, which was filed as Exhibit 1 to the Company's
current report on Form 8-K dated July 21, 2000.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of
directors and executive officers of the Company at June 30, 2001. The Board of
Directors of the Company consisted of two (2) members at August 31, 2001.
Directors hold office until the earlier of their resignation or their successors
have been duly elected and qualified. Officers are chosen by and serve at the
discretion of the Board of Directors. A summary of the background and experience
of each of these individuals is set forth after the table.
NAME AGE POSITION
---- --- --------
George S. Hofmeister 49 Chairman of the Board
Joseph Dominijanni 44 President, Chief Executive Officer, Treasurer and Director
J. Larry Powell 58 Chief Operating Officer and Vice President -- Sales and
Marketing
Jonathan K. Schoenike 41 Secretary and General Counsel
George S. Hofmeister has served as Chairman of the Board since December
1996. Mr. Hofmeister has served as Chief Executive Officer and Chairman of the
Board of American Commercial Holdings, Inc. ("ACH"), the parent company of AAPH,
since January 1996 and continues to serve in such roles. Mr. Hofmeister also
continues to serve as Vice Chairman of Tube Products, Inc., a manufacturer of
automobile exhaust systems. Mr. Hofmeister has held that position since February
1996. From June 1991 until December 1995, Mr. Hofmeister served as Chief
Executive Officer and Chairman of the Board of EWI, Inc., a manufacturer of
automotive metal stampings.
Joseph Dominijanni has served as the Company's President and Chief
Executive Officer since May 1, 2000 and as its Treasurer since December 1996.
Mr. Dominijanni also currently serves as President of ACH, the parent
corporation of AAPH, and Vice President-Finance of American Commercial
Industries, Inc., ("ACI"), which is principally engaged in the manufacturing of
automotive components. Mr. Dominijanni joined ACH and ACI in May 1996. Mr.
Dominijanni served as Vice President -- Finance of EWI, Inc. a manufacturer of
automotive metal stampings, from June 1990 until April 1996. Prior to 1990, Mr.
Dominijanni was with the accounting firm of Price Waterhouse.
J. Larry Powell, the Company's Chief Operating Officer and Vice
President - Sales and Marketing, joined the Company in October 1996. Mr. Powell
co-founded Blackhawk Architectural Products, a manufacturer of steel security
screen and storm door products, in 1992 and served on its Board of Directors and
as its Vice President until 1996. From 1987 to 1991, Mr. Powell served as Vice
President -- Marketing and Sales for Sugarcreek Window & Door. Mr. Powell has
been employed in the fenestration industry since the early 1970s, principally in
the marketing of residential and commercial steel and aluminum window products
and doors. In addition, Mr. Powell founded and developed a nationwide marketing
representative group that sells a full range of fenestration products.
Jonathan K. Schoenike joined the Company in August 1997 as General
Counsel and served as Secretary since November 1997. Prior to joining the
Company, Mr. Schoenike served for over 5 years as Assistant Counsel for The
Cafaro Company.
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On May 1, 2000, Frank J. Amedia resigned his positions as Director,
President and Chief Executive Officer of the Company. Mr. Joseph Dominijanni was
named Interim President and Chief Executive Officer. Additionally, on May 1,
2000, all of the Company's directors, other than Messrs. Hofmeister and
Dominijanni, resigned their positions and the Board of Directors voted to amend
the Company's By-laws to reduce the required number of Board members to between
2 and 10, inclusive. Such action was implemented by written consent of a
majority of the outstanding voting shares.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all annual and long-term compensation
paid to the Company's Chief Executive Officer and the other most highly
compensated executive officers of the Company whose total annual salary and
bonus exceeded $100,000 during the fiscal year ended December 31, 2000
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company and its subsidiaries during the fiscal years ended
December 31, 2000, 1999 and 1998.
Long Term
Compensation
---------------------
Annual Compensation (1) Awards (2)
--------------------------------------- --------------------- All
Securities Other
Name and Underlying Compensation
Principal Position Year Salary Bonus Options/SARs (#) ($) (3)
------------------------------------ -------- ----------- ------------ --------------------- --------------
Joseph Dominijanni 2000 -- -- -- --
President, Chief Executive 1999 -- -- -- --
Officer and
Treasurer 1998 -- -- -- --
J. Larry Powell 2000 208,157 -- -- 7,146(3)
Chief Operating Officer and Vice 1999 164,000 14,000 -- 7,092(3)
President-Sales and Marketing 1998 141,125 15,000 30,000 5,000(3)
Jonathan K. Schoenike 2000 209,756 -- -- 5,817(3)
Secretary and 1999 163,375 14,000 -- 5,335(3)
General Counsel 1998 131,250 20,000 30,000 5,000(3)
(1) Other annual compensation to the Named Executive Officers did not
exceed $50,000 or 10% of total annual salary and bonus during any
fiscal year.
(2) Represents awards of options to purchase shares of common stock under
the 1996 Stock Option Plan.
(3) Amounts include Company matching contribution under the 401(k) plan (in
an amount equal to 50% of the officers contribution) and insurance
premiums paid by the Company for the benefit of the officer.
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OPTION GRANTS
The Company issued options to purchase up to 40,000, 45,000 and 857,500
shares of common stock to various officers, directors and employees of the
Company or its subsidiaries during the fiscal years ended December 31, 2000,
1999 and 1998, respectively. There were no individual grants of stock options to
any Named Executive Officers during the year ended December 31, 2000.
The following table sets forth certain information concerning each
exercise of stock options during the year ended December 31, 2000 by each of the
Named Executive Officers and the aggregated fiscal year-end value of the
unexercised options of each Named Executive Officer.
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND
OPTION VALUE AS OF DECEMBER 31, 2000
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
SHARES AT FISCAL YEAR END(#) FISCAL YEAR END($)(1)
ACQUIRED ON VALUE --------------------- ---------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Joseph Dominijanni 0 0 25,000 0 0 0
J. Larry Powell 0 0 13,000 42,000 0 0
Jonathan K. Schoenike 0 0 13,000 42,000 0 0
(1) Based on the average of reported bid and asked prices for the Common
Stock on December 31, 2000.
EMPLOYMENT AGREEMENTS
In 1998, the Company entered into employment agreements with Jonathan
K. Schoenike and J. Larry Powell for services as General Counsel and Vice
President-Sales and Marketing, respectively. The agreements require Messrs.
Schoenike and Powell to devote their full time to the Company in exchange for
annual base salaries of $160,000 and $199,375, respectively, subject to annual
increases. In addition, Messrs. Schoenike and Powell are entitled to receive
bonuses at the discretion of the Board of Directors in accordance with the
Company's bonus plan in effect from time to time, and the Company will pay
certain life insurance premiums and other benefits. The agreements have an
initial three-year term and Mr. Powell's agreement has been extended to December
2002. The Company has also entered into employment agreements with certain other
officers and key employees.
EMPLOYEE STOCK OPTION PLANS
1992 Incentive Stock Option Plan. In May 1992, the Board of Directors
of the Company adopted an Employee Incentive Stock Option Plan (the "Option
Plan"). Options to purchase an aggregate of up to 500,000 shares of the
Company's common stock are authorized under the Option Plan. Options granted
under the Option Plan have a maximum duration of ten years from the date of
grant.
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996
Plan"), which was approved by the shareholders of the Company, authorizes the
Board to grant options to Directors and employees of the Company to purchase in
the aggregate an amount of shares of common stock equal to 10% of the shares of
common stock issued and outstanding from time to time, but which aggregate
amount shall in no event exceed 10,000,000 shares of common stock. On July 23,
1998, the Board of Directors approved an increase in the number of shares
issuable under the 1996 Plan to 15% of the shares of Common Stock issued and
outstanding, which is being submitted for shareholder approval at the Company's
1999 Annual Meeting. Directors, officers and other employees of the Company who,
in the opinion of the Board of Directors, are responsible for the continued
growth and development and the financial success of the Company are eligible to
be granted options under the 1996 Plan. Options may be nonqualified options,
incentive stock options, or any combination of the foregoing. In general,
options granted under the 1996 Plan are not transferable and expire ten (10)
years after the date of grant. The per share exercise price of an incentive
stock option granted under the 1996 Plan may not be less than the fair market
value of the common stock on the date of grant. Incentive stock options granted
to persons who have voting control over 10% or more of the Company's common
stock are granted at 110% of the fair market value of the underlying shares on
the date of grant and expire five years after the date of grant. No option may
be granted after December 19, 2006.
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50
The 1996 Plan provides the Board of Directors with the discretion to
determine when options granted thereunder will become exercisable. Generally,
such options may be exercised after a period of time specified by the Board of
Directors at any time prior to expiration, so long as the optionee remains
employed by the Company. No option granted under the 1996 Plan is transferable
by the optionee other than by will or the laws of descent and distribution, and
each option is exercisable during the lifetime of the optionee only by the
optionee.
As of December 31, 2000, options to purchase a total of 737,000 shares
of the Company's common stock were outstanding, including options issued
pursuant to the Company's stock option plans described above and other options
issued outside of the described stock option plans.
EMPLOYEE STOCK PURCHASE PLAN
On February 26, 1998, the Board of Directors adopted the 1998 Employee
Stock Purchase Plan (the "1998 Purchase Plan") and reserved 1,200,000 shares of
common stock for issuance thereunder. At the Company's annual meeting, the 1998
Purchase Plan was approved by the stockholders. In general, the 1998 Purchase
Plan is designed to encourage common stock ownership by the Company's employees
through payroll deductions. If qualified in accordance with Section 423 of the
Code, the 1998 Purchase Plan will enable the Company to sell shares of common
stock to its employees at a price discount of up to 15% of market price, applied
to the lower of the price of the common stock at the beginning or end of the
option period. This plan has not yet been implemented.
401(k) PLAN
Eligible employees of the Company may direct that a portion of their
compensation, up to a legally established maximum, be withheld by the Company
and contributed to a 401(k) plan. All 401(k) plan contributions are placed in a
trust fund to be invested by the 401(k) plan's trustee, except that the 401(k)
plan permits participants to direct the investment of their account balances
among mutual or investment funds available under the Plan. The 401(k) plan
provides a matching contribution of 50% of a participant's contributions up to a
maximum of seven percent of the participant's annual salary. Amounts contributed
to participant accounts under the 401(k) plan and any earnings or interest
accrued on the participant accounts are generally not subject to federal income
tax until distributed to the participant and may not be withdrawn until death,
retirement or termination of employment.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Audit Committee, which was comprised of Joseph
Dominijanni at December 31, 2000, is responsible for reviewing and making
recommendations regarding the Company's employment of independent auditors, the
annual audit of the Company's financial statements and the Company's internal
accounting controls, practices and policies.
The Compensation Committee was dissolved on May 1, 2000. Since that
time, George S. Hofmeister and Joseph Dominijanni are responsible for
determining compensation arrangements for executive officers of the Company,
including annual bonus compensation, and consults with management of the Company
regarding compensation policies and practices. Messrs. Hofmeister and
Dominijanni also determine adoption of any compensation plans in which
management is eligible to participate, including the granting of stock options
and other benefits under such plans.
DIRECTORS' TERMS AND COMPENSATION
The Company's Board of Directors is currently comprised of two members.
Each Director is elected for a period of one year at the Company's annual
meeting of shareholders and serves until the earlier of his or her resignation
or until his or her successor is duly elected and qualified. During the fiscal
year ended December 31, 2000, the Board of Directors of the Company met four
times. All other actions taken by the Board of Directors during the fiscal year
ended December 31, 2000 were accomplished by means of unanimous written consent.
All current Directors attended 75% or more of the meetings of the Board of
Directors and of the meetings held by committees of the Board on which they
served.
During the fiscal year ended December 31, 2000, members of the Board
received a fee of $1,000 for each meeting of the Board of Directors attended in
person and were reimbursed for expenses incurred in connection with their
attendance at meetings of the Board.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of August 31,
2001, concerning the beneficial ownership of the Company's common stock by (i)
each beneficial owner of more than 5% of the Company's common stock, (ii) each
Director and Named Executive Officer of the Company, and (iii) all Directors and
Named Executive Officers of the Company as a group. To the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares, except to the extent that authority is shared by their
respective spouses under applicable law.
SHARES
BENEFICIALLY OWNED
------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
--------------------------- ------ -------
AAP Holdings, Inc. 7,548,633 54.61%
George S. Hofmeister 7,551,133(2) 54.63%
Frank J. Amedia 2,474,282(3) 17.90%
Amedia Family Limited Partnership 1,500,000 10.47%
Joseph Dominijanni 27,000(4) *
J. Larry Powell 42,412(5) *
Jonathan K. Schoenike 47,000(6) *
All directors and executive officers
of the Company as a group (4 persons) 7,583,545(7) 55.14%
* Less than 1%
(1) The address of AAP Holdings, Inc. and George S. Hofmeister is 6500
Brooktree Road, Suite 102, Wexford, Pennsylvania 15090. The address of
Frank J. Amedia and Amedia Family Limited Partnership is 13836 SW 67th
Place, Miami, Florida 33158. The address of all other beneficial owners
is c/o American Architectural Products Corporation, 3000 Northwest
125th Street, Miami, Florida 33167.
(2) Includes shares of common stock held by AAP Holdings, Inc. George S.
Hofmeister, the Chairman of the Board of Directors of the Company, is
the controlling shareholder of the corporate parent of AAP Holdings,
Inc.
(3) Includes 1,500,000 shares of common stock owned by the Amedia Family
Limited Partnership, in which Mr. Amedia and his spouse are the general
partners and each holds 48% of the partnership interests.
(4) Includes 25,000 shares of common stock which are subject to unexercised
options that were exercisable on June 30, 2001 or within sixty days
thereafter.
(5) Includes 32,000 shares of common stock which are subject to unexercised
options that were exercisable on June 30, 2001 or within sixty days
thereafter.
(6) Includes 27,000 shares of common stock which are subject to unexercised
options that were exercisable on June 30, 2001 or within sixty days
thereafter.
(7) Includes 84,000 shares of common stock which are subject to unexercised
options that were exercisable on June 30, 2001 or within sixty days
thereafter as described above.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. George S. Hofmeister, Chairman of the Board of Directors of the
Company, is the controlling shareholder of the corporate parent of AAP Holdings,
Inc., a Delaware corporation ("AAPH"). The Company agreed to pay AAPH an
acquisition consulting fee of 1.0% for 1998, increased to 1.44% for 1999 and
discontinued for 2000, of the transaction price of each acquisition transaction
consummated by the Company with respect to which AAPH or its affiliates provides
acquisition consulting services. For purposes of calculating the acquisition
fee, the transaction price means the aggregate amount of consideration paid by
the Company or its affiliates for the acquisition in the form of cash, stock,
stock options, warrants, debt instruments and other assumed liabilities.
Acquisition consulting fees in 1998 and 1999 approximated $590,000 and $0,
respectively. In addition, the Company paid AAPH fees of $345,000 and $200,000
for management fees and other transaction services provided in 1998 and 1999,
respectively. No such fees were paid to AAPH in 2000.
The Company contracts for air charter services at market rates with a
company affiliated with AAPH and Mr. Amedia. The Company paid approximately
$530,000, $375,000 and $10,000, respectively, to this company for air charter
services in 1998, 1999 and 2000.
In January 1998, the Company purchased substantially all of the assets
of Blackhawk Architectural Products (Blackhawk). J. Larry Powell, an officer of
the Company, co-founded and owned a 20% equity interest in Blackhawk at the time
of this transaction.
In March, 1998, the Company sold Mallyclad, a division of Eagle &
Taylor Company, to a company controlled by one of its shareholders for
approximately $1.1 million. The Company sold this division at its book value,
which approximated fair market value, therefore, no gain or loss was recognized
on this transaction.
In July 1998, the Company sold windows in the amount of $160,000 to
Hughes O'Neill, a company owned by the wife of J. Larry Powell.
In October 1998, the Company entered into an operating lease at market
rates with a company controlled by its majority shareholder. Amounts paid under
this lease were $75,000 and $150,000 for the years ended December 31, 1998 and
1999.
During the last quarter of 1998 and first quarter of 1999, the Company
sold, at cost, approximately $100,000 of windows to Mr. Hofmeister.
In November 1999, the Company loaned $77,000 to its Chief Executive
Officer. This amount was liquidated and retired in November 2000.
In December 1999, the Company recorded a receivable from its majority
stockholder of $375,000 for insurance proceeds held by such stockholder related
to the Kreidel fire. The amount was remitted to the Company in January 2000.
At December 31, 1999, the Company had a receivable recorded in the
amount of $55,000 related to product sales to a company owned by the wife of the
Chief Executive Officer. This amount was written-off in December 2000.
In 2000, the Company signed a Separation Agreement and Release with its
former President and Chief Executive Officer which included, among other things,
an agreement by the Company to repurchase 500,000 shares of the Company's common
stock and the release of the Company from any obligations arising from former
employment. The cost of the shares ($100,000) was recorded as treasury stock.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
See Item 8 for Consolidated Financial Statements of American
Architectural Products Corporation
(a)(2) FINANCIAL STATEMENT SCHEDULE
See Item 8 for Financial Statement Schedule of American Architectural
Products Corporation. All schedules, other than the above listed, are omitted as
the information is not required, is not material or is otherwise furnished.
(a)(3) EXHIBITS
The exhibits are set forth on the Exhibit Index included in Item 14(c).
(b) REPORTS ON FORM 8-K
During the fourth quarter of 2000, the Company filed the following
current reports on Form 8-K:
December 18, 2000 under Item 3. Bankruptcy or Receivership
(c ) EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of November 10, 1997, by and
among American Architectural Products Corporation, BBPI Acquisition
Corporation and Binnings Building Products, Inc. D
2.2 Asset Purchase Agreement, dated as of November 10, 1997, by and among
DCI/DWC Acquisition Corporation, Danvid Company, Inc. and Danvid
Window Company. D
2.3 Shareholders Agreement in Support of Asset Purchase Agreement, dated
as of November 10, 1997, by and among Daniel Crawford, Karen
Crawford, David Crawford, Paul Comer and DCI/DWC Acquisition
Corporation. D
2.4 Asset Purchase Agreement, dated as of December 10, 1997, by and among
American Architectural Products Corporation, American Glassmith
Acquisition Corporation and American Glassmith, Inc. D
2.5 Agreement, dated as of December 10, 1997, by and among American
Architectural Products Corporation, Modern Window Acquisition
Corporation and Modern Window Corporation. D
2.6 Agreement and Plan of Reorganization, dated October 25, 1996, between
Forte Computer Easy, Inc. and AAP Holdings, Inc. B
2.7 Asset Purchase Agreement, dated June 5, 1998, by and among,
Weather-Seal Acquisition Corporation and Louisiana-Pacific
Corporation. I
3.1 Certificate of Incorporation of American Architectural Products
Corporation. C
3.2 Bylaws of American Architectural Products Corporation. C
3.3 Certificate of Incorporation of American Glassmith Acquisition
Corporation. F
3.4 Bylaws of American Glassmith Acquisition Corporation. F
3.5 Amended and Restated Certificate of Incorporation of Binnings
Building Products, Inc. F
3.6 Bylaws of Binnings Building Products, Inc. F
3.7 Certificate of Incorporation of Danvid Window Company, as amended F
3.8 Bylaws of Danvid Window Company. F
3.9 Certificate of Incorporation of Eagle & Taylor Company, as amended. F
3.10 Bylaws of Eagle & Taylor Company. F
3.11 Articles of Incorporation of Forte, Inc. F
3.12 Code of Regulations of Forte, Inc. F
3.13 Certificate of Incorporation of Modern Window Acquisition
Corporation. F
3.14 Bylaws of Modern Window Acquisition Corporation. F
3.15 Certificate of Incorporation of Thermetic Glass, Inc., as amended. F
3.16 Bylaws of Thermetic Glass, Inc. F
3.17 Certificate of Incorporation of AAPC One Acquisition Corporation. G
3.18 Bylaws of AAPC One Acquisition Corporation. G
3.19 Certificate of Incorporation of AAPC Two Acquisition Corporation. G
3.20 Bylaws of AAPC Two Acquisition Corporation. G
3.21 Certificate of Incorporation of Denver Window Acquisition Corporation G
3.22 Bylaws of Denver Window Acquisition Corporation G
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3.23 Certificate of Incorporation of Eagle Window & Door Center, Inc, as
amended. G
3.24 Bylaws of Eagle Window & Door Center, Inc. G
3.25 Certificate of Incorporation of Weather-Seal Acquisition Corporation. G
3.26 Bylaws of Weather-Seal Acquisition Corporation G
4.1 Form of American Architectural Products Corporation Common Stock
Certificate E
4.2 Indenture dated as of December 10, 1997 with respect to11 3/4% Senior
Notes due 2007 among American Architectural Products Corporation, as
issuer, American Glassmith Acquisition Corporation, BBPI Acquisition
Corporation, DCI/DWC Acquisition Corporation, Eagle & Taylor Company,
Forte, Inc., Modern Window Acquisition Corporation, Thermetic Glass,
Inc., and Western Insulated Glass, Co., as subsidiary guarantors, and
United States Trust Company of New York, as trustee. D
4.3 Amendment No. 1, dated as of April 15, 1998, to the Indenture dated
as of December 10, 1997 with respect to 113/4% Senior Notes due 2007. H
4.4 First Supplemental Indenture, dated as of April 15, 1998, by and
among American Architectural Products Corporation, Eagle & Taylor
Company. Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Buildings Products, Inc., Danvid Window Company,
American Glassmith Acquisition Corporation, Modern Window Acquisition
Corporation, VinylSource, Inc., AAPC One Acquisitions Corporation,
AAPC Two Acquisition Corporation, Eagle Window & Door Center, Inc.,
Weather-Seal Acquisition Corporation and United States Trust
Company of New York. H
10.1 1992 Incentive Stock Option Plan. A
10.2 1996 Stock Option Plan. C
10.3 Employment Agreement, dated September 30, 1998, between J. Larry
Powell and American Architectural Products Corporation. +
10.3a Employment Agreement, dated September 30, 1998, between Jonathan K.
Schoenike and American Architectural Products Corporation. +
10.4a Lease Agreement, dated December 1989, between Centre Consolidated
Properties, Ltd. and Danvid Company, Inc. F
10.4b Lease Extension Agreement to Industrial Lease Agreement between
Beltline Business Center Limited Partnership and Danvid Company, Inc. F
10.6a Lease Agreement, dated November 28, 1990, between J.M.J. Partnership
and The New Edgehill Co, Inc. F
10.6b Lease Modification No. 1, dated October 19, 1992, between J.M.J.
Partnership and The American Glassmith, Inc., f/k/a The New Edgehill
Co., Inc. F
10.6c Lease Modification No. 2, dated June 8, 1993, between J.M.J.
Partnership and American Glassmith, Inc. F
10.6d Lease Modification No. 3, dated January 31, 1995, between J.M.J.
Partnership and American Glassmith, Inc. F
10.6e Lease Modification No. 4, dated as of March 31, 1995, between J.M.J.
Partnership and American Glassmith, Inc. F
10.6f Lease Modification No. 5, dated as of August 31, 1995, between J.M.J.
Partnership and American Glassmith, Inc. F
10.6g Lease Modification No. 6, dated June 19, 1996, between J.M.J.
Partnership and American Glassmith, Inc. F
10.7 Purchase Agreement, dated as of December 4, 1997, by and among
American Architectural Products Corporation, NatWest Capital Markets
Limited and McDonald & Company Securities, Inc. D
10.8 Exchange and Registration Rights Agreement, dated as of December 10,
1997, by and among American Architectural Products Corporation,
American Glassmith Acquisition Corporation, BBPI Acquisition
Corporation, DCI/DWC Acquisition Corporation, Eagle & Taylor Company,
Forte, Inc., Modern Window Acquisition Corporation, Thermetic Glass,
Inc., Western Insulated Glass, Co., NatWest Capital Markets Limited
and McDonald & Company Securities, Inc. D
10.9 Registration Rights Agreement, dated as of July 31, 1998, by and
between American Architectural Products Corporation and Frank J.
Amedia +
10.10 Registration Rights Agreement, dated as of July 31, 1998 by and
between American Architectural Products Corporation and Miller
Capital Group +
10.11 Credit Agreement, dated as of June 12, 1998, by and among American
Architectural Products Corporation, Eagle & Taylor Company, Forte,
Inc., Western Insulated Glass, Co., Thermetic Glass, Inc., Binnings
Building Products, Inc. Danvid Window Company, Modern Window
Acquisition Corporation, American Glassmith Acquisition Corporation,
VinylSource, Inc., Weather-Seal Acquisition Corporation, Eagle Window
& Door Center, Inc., Denver Window Acquisition Corporation, AAPC One
Acquisition Corporation, AAPC Two Acquisition Corporation and the
Institutions from time to time party hereto as Lenders and
BankBoston, N.A. as Agent. J
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10.11a Amendment No. 1 to Credit Agreement, dated as of September 15, 1998,
by and among American Architectural Products Corporation, Eagle &
Taylor Company, Forte, Inc., Western Insulated Glass, Co., Thermetic
Glass, Inc., Binnings Building Products, Inc. Danvid Window Company,
Modern Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. +
10.11b Amendment No. 2 to Credit Agreement, dated as of September 30, 1998,
by and among American Architectural Products Corporation, Eagle &
Taylor Company, Forte, Inc., Western Insulated Glass, Co., Thermetic
Glass, Inc., Binnings Building Products, Inc. Danvid Window Company,
Modern Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. K
10.11c Amendment No. 3 to Credit Agreement, dated as of December 31, 1998,
by and among American Architectural Products Corporation, Eagle &
Taylor Company, Forte, Inc., Western Insulated Glass, Co., Thermetic
Glass, Inc., Binnings Building Products, Inc. Danvid Window Company,
Modern Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. +
10.11d Amendment No. 4 to Credit Agreement, dated as of April 14, 1999, by
and among American Architectural Products Corporation, Eagle & Taylor
Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Building Products, Inc. Danvid Window Company, Modern
Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. L
10.11e Amendment No. 5 to Credit Agreement, dated as of May 13, 1999, by and
among American Architectural Products Corporation, Eagle & Taylor
Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Building Products, Inc. Danvid Window Company, Modern
Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. L
10.11f Amendment No. 6 to Credit Agreement, dated as of May 31, 1999, by and
among American Architectural Products Corporation, Eagle & Taylor
Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Building Products, Inc. Danvid Window Company, Modern
Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. M
10.11g Amendment No. 7 to Credit Agreement, dated as of June 29, 1999, by
and among American Architectural Products Corporation, Eagle & Taylor
Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Building Products, Inc. Danvid Window Company, Modern
Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. M
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10.11h Amendment No. 8 to Credit Agreement, dated as of October 15, 1999, by
and among American Architectural Products Corporation, Eagle & Taylor
Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Building Products, Inc. Danvid Window Company, Modern
Window Acquisition Corporation, American Glassmith Acquisition
Corporation, VinylSource, Inc., Weather-Seal Acquisition Corporation,
Eagle Window & Door Center, Inc., Denver Window Acquisition
Corporation, AAPC One Acquisition Corporation, AAPC Two Acquisition
Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent. N
10.11i Waiver and Amendment No. 9 to Credit Agreement, dated as of June 1,
2000, is entered into by and among American Architectural Products
Corporation, Eagle & Taylor Company, Forte, Inc., Western Insulated
Glass, Co., Thermetic Glass, Inc., Binnings Building Products, Inc.
Danvid Window Company, Modern Window Acquisition Corporation,
American Glassmith, Inc., VinylSource, Inc., American Weather-Seal
Company, Eagle Window & Door Center, Inc., Denver Window Company,
AAPC One Acquisition Corporation, AAPC Two Acquisition Corporation
and the Institutions from time to time party hereto as Lenders and
BankBoston, N.A. as Agent. +
10.12 Revolving Credit and Term Loan Agreement, dated as of December 14,
2000, by and among American Architectural Products Corporation, AAPC
One Acquisition Corporation, AAPC Two Acquisition Corporation, AAPC
Three Acquisition Corporation, AAPC Four Acquisition Corporation,
AAPC Five Acquisition Corporation, AAPC Six Acquisition Corporation,
American Glassmith Inc., American Weather-Seal Company, Binnings
Building Products, Inc., Danvid Window Company, Denver Window
Company, Eagle and Taylor Company, Eagle Window and Door Center,
Inc., Forte, Inc., Modern Window Corporation, Thermetic Glass, Inc.,
VinylSource, Inc., and WIG Liquidation Company and the financial
institutions from time to time party hereto including the CIT
Group/Business Credit and CIT as agent for the lenders. *
10.12a Amendment No. 1 and Waiver to Revolving Credit and Term Loan
Agreement dated as of September 16, 2001 among American Architectural
Products Corporation, Fortified Window and Door Company f.k.a. AAPC
One Acquisition Corporation, AAPC Two Acquisition Corporation, AAPC
Three Acquisition Corporation, AAPC Four Acquisition Corporation,
AAPC Five Acquisition Corporation, AAPC Six Acquisition Corporation,
American Glassmith, Inc., American Weather-Seal Company, Binnings
Building Products, Inc., Danvid Window Company, Denver Window
Company, Eagle and Taylor Company, Eagle Window and Door Center,
Inc., Forte, Inc., Modern Window Corporation, Thermetic Glass, Inc.,
VinylSource, Inc., WIG Liquidation Company, each as debtor and
debtor-in-possession and certain of the financial institutions
parties to the Existing Credit Agreement and the CIT Group Business
Credit, Inc. as agent. *
10.13 Lease agreement dated December 10, 1999 between Otto A, LLC and Eagle
Window and Door, Inc.
21 Subsidiaries of American Architectural Products Corporation *
23.1 Consent of Ernst & Young LLP *
23.2 Consent of Beard Miller Company LLP
* Filed herewith.
+ Previously filed.
A Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form 10-SB filed November 22, 1996.
B Incorporated by reference to the Company's Current Report on Form 8-K
dated October 25, 1996.
C Incorporated by reference to the Company's definitive Information
Statement relating to the special meeting of shareholders held on
April 1, 1997.
D Incorporated by reference to the Company's Current Report on Form 8-K
dated December 10, 1997.
E Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form 10-SB filed April 17, 1997.
F Incorporated by reference to the Company's Registration Statement on
Form S-4 filed January 15, 1998.
G Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed April 7, 1998. H
Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998 filed May 15,
1998.
I Incorporated by reference to the Company's Current Report on Form 8-K
dated June 29, 1998.
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57
J Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1998, filed August 14,
1998.
K Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1998, filed
November 16, 1998.
L Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999, filed May 14,
1999.
M Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999, filed August 13,
1999.
N Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1999, filed
November 15, 1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN ARCHITECTURAL PRODUCTS CORP.
October 9, 2001 By: /s/ Joseph Dominijanni
--------------------------------
Joseph Dominijanni
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ George S. Hofmeister Chairman of the Board of Directors October 9, 2001
------------------------------------
George S. Hofmeister
/s/ Joseph Dominijanni President, Chief Executive Officer and Director October 9, 2001
------------------------------------ (Principal Executive Officer)
Joseph Dominijanni
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