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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 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)
860 BOARDMAN - CANFIELD ROAD
BOCA BUILDING, SUITE 107
BOARDMAN, OHIO 44512
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 965-9910
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]
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).
$97,633 as of April 30, 2002
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 April 30, 2002. 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.
TABLE OF CONTENTS
PAGE
----
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 45
Item 10. Directors and Executive Officers of the Registrant 45
Item 11. Executive Compensation 46
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Relationships and Related Transactions 50
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 51
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) and
American Weather-Seal Company (Weather-Seal). Denver Window Corporation (Denver)
was a subsidiary at December 31, 2000 and was sold on September 4, 2001. TM
Window and Door (TMWD) was a subsidiary of Binnings at December 31, 2001 and,
together with the Binnings Pan American division of Binnings (Pan Am) was sold
in February 2002. American Glassmith Corporation (American Glassmith), also a
subsidiary at December 31, 2001, was sold in March 2002. Forte, Inc. (Forte), a
subsidiary at December 31, 1999, was closed in May 2000.
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
Bankruptcy Court approved an extension to July 19, 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.
ACQUISITIONS AND DIVESTITURES
The Company completed no acquisitions in 2001 or 2000.
In October 1999, the Company acquired TMWD located in Pompano Beach,
Florida. TMWD manufactures residential and architectural aluminum windows and
doors. In February 2002, the Company sold TMWD and Pan Am for $.5 million cash,
a $1.7 million note receivable and the assumption by the buyer of certain
liabilities. The Company recorded a loss of approximately $1.8 million on the
sale. This transaction followed the Company's disposition plan initiated in
2001. TMWD and Pan Am are reflected as discontinued operations in the
accompanying financial statements.
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 leased real 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 operation 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 has been
reflected as a discontinued operation in the accompanying financial statements.
In February 2001, the Company announced the shutdown of its wood window
manufacturing operation in Ottawa, Ohio, effective April 2001. In addition to
the impairment losses recognized in 2000 (see Note 7 to the consolidated
financial statements), the Company recognized approximately $1.4 million of
shutdown costs in 2001.
In September 2001, the Company sold substantially all assets of Denver
and ETC's distribution network in the Denver, Colorado area for approximate book
value.
As part of its plan to dispose of certain of its underperforming
business components, in January 2002, the Company sold certain of the assets of
Weather-Seal's aluminum extrusion group (AEG), including accounts receivable,
inventory and certain equipment for $1.5 million in cash and the assumption by
the buyer of certain liabilities. The Company recognized a loss of approximately
$2.3 million on the sale. AEG is reflected as discontinued operations in the
accompanying financial statements.
In March 2002, the Company sold certain assets of American Glassmith
for $350 thousand plus the assumption by the buyer of certain liabilities. The
Company recorded a loss of $1.1 million on the sale. American Glassmith is also
reflected as a discontinued operation in the accompanying financial statements.
In April 2002, the Bankruptcy Court approved the sale of ETC's Eagle
Window and Door, Inc. division and its subsidiary, Eagle Service Company,
(collectively "Eagle") for approximately $64.7 million. The transaction closed
on May 6, 2002. Eagle is also reflected as a discontinued operation in the
accompanying financial statements.
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".
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 and Danvid 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 Extrusions and Insulated Glass. The Company produced vinyl
extrusions at VinylSource and aluminum extrusions at Pan Am and AEG. VinylSource
was sold in May 2000. The Company exited the extrusion segment of its business
effective with the disposal of AEG and Pan Am which were finalized in January
and February 2002, respectively. 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.
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 previously operated in two separate segments: residential
fenestration products and extrusion products. 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. The Company
exited the extrusion segment of its business effective with the disposal of AEG
and Pan Am, finalized in January 2002 and February 2002, respectively.
In December 1999, the Company announced the discontinuance of its
commercial business. The Company initiated a plan to exit this business by May
2000.
ITEM 2. PROPERTIES
The Company's principal manufacturing facilities and administrative
offices are located at the following sites as of April 30, 2002:
SIZE
LOCATION (SQ. FT.) OWNED/LEASED PRODUCTS MANUFACTURED/SERVICES PERFORMED
- --------------------------------------------------------------------------------------------------------------------
(In Thousands)
Binnings Vinyl windows, aluminum windows and storm windows
Lexington, NC 268 Owned and doors; administration
Danvid Aluminum windows and doors; vinyl windows;
Carrollton, TX 169 Leased administration
Eagle Wood windows and doors and aluminum-clad windows
Dubuque, IA 390 Leased and doors; administration
Thermetic
Toluca, IL 70 Owned Vinyl windows and doors; administration
Weather-Seal
Orrville, OH 96 Owned Vinyl windows; administration
Weather-Seal
Orrville, OH 52 Owned Insulated glass manufacturing
Weather-Seal
Orrville, OH 5 Owned Truck repair
Weather-Seal
Winesburg, OH 110 Owned Vinyl windows and doors
Corporate Offices
Boardman, OH 2 Leased Corporate administration
Corporate Offices
Wexford, PA 2 Leased Corporate administration
-----
Total 1,164
-----
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.
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, 2000 through April 30, 2002 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
------ ---- ---
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 .093 .015
4th quarter .203 .015
2002
1st quarter $ .015 $ .015
2nd quarter (through April 30, 2002) .093 .015
There were approximately 428 holders of record of the common stock of
the Company as of December 31, 2001. 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, 2001, options to purchase a total of 642,000 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, 2001. The
selected financial data for the Company for 1999, 2000 and 2001 were derived
from the audited consolidated financial statements of the Company for the years
ended December 31, 1999, 2000 and 2001, included elsewhere in this filing. The
selected financial data for the Company for 1997 and 1998 were derived from the
audited financial statements for the years ended December 31, 1997 and 1998, not
included in this filing.
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.
1997 1998 1999 2000 2001
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales $ 37,227 $ 142,589 $ 171,657 $ 117,756 $ 100,748
Cost of sales 28,798 114,694 145,478 101,022 84,657
--------- --------- --------- --------- ---------
Gross profit 8,429 27,895 26,179 16,734 16,091
Selling, general and administrative expenses 8,542 26,499 44,373 33,470 18,983
--------- --------- --------- --------- ---------
Income (loss) from operations (113) 1,396 (18,194) (16,736) (2,892)
Interest expense, net 2,471 9,628 17,557 14,666 2,011
Other expense (income), net 58 1,249 2,378 (3,248) 3,245
--------- --------- --------- --------- ---------
Loss from continuing operations before
reorganization costs, income taxes and
extraordinary item (2,642) (9,481) (38,129) (28,154) (8,148)
Reorganization costs -- -- -- 6,847 4,212
--------- --------- --------- --------- ---------
Loss from continuing operations before
income taxes and extraordinary item (2,642) (9,481) (38,129) (35,001) (12,360)
Income tax provision (benefit) (1,850) -- -- -- --
--------- --------- --------- --------- ---------
Loss from continuing operations before
discontinued operations and extraordinary item (792) (9,481) (38,129) (35,001) (12,360)
Income (loss) from discontinued operations (1) 17 637 (9,014) (7,363) (12,327)
Extraordinary item, net of income tax benefit of $282 (484) -- -- -- --
--------- --------- --------- --------- ---------
Net loss $ (1,259) $ (8,844) $ (47,143) $ (42,364) $ (24,687)
========= ========= ========= ========= =========
Basic and diluted loss per common share
from continuing operations $ (0.06) $ (0.69) $ (2.71) $ (2.46) $ (0.89)
Discontinued operations (1) -- 0.05 (0.64) (0.52) (0.89)
Extraordinary item (0.04) -- -- -- --
--------- --------- --------- --------- ---------
Basic and diluted loss per common share $ (0.10) $ (0.64) $ (3.35) $ (2.98) $ (1.78)
========= ========= ========= ========= =========
Weighted average common shares outstanding,
basic and diluted 12,982 13,785 14,095 14,238 13,822
OTHER DATA:
Depreciation & amortization $ 1,088 $ 6,469 $ 9,451 $ 6,029 $ 4,751
Capital expenditures 1,522 6,764 4,619 1,434 568
BALANCE SHEET DATA:
Cash and cash equivalents $ 40,152 $ 108 $ 56 $ 158 $ 2,762
Total assets 158,324 186,512 157,072 113,617 88,038
Working capital (3) 61,472 14,955 6,745 41,957 16,965
Long-term debt and capital leases (2) (3) 126,518 134,155 136,772 -- --
Liabilities subject to compromise (3) -- -- -- 167,932 159,360
Stockholders' equity (deficit) 5,581 (1,429) (47,574) (90,038) (114,725)
(1) Represents discontinuance of AEG, Pan Am, TMWD, AGI, Eagle, EWDC and Forte
as described in Note 15 to the consolidated financial statements.
(2) Includes current and long-term portion of long-term debt and capitalized
leases, excludes revolving lines of credit.
(3) 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, 2001 and 2000:
December 31,
2001 2000
-------- --------
Accounts payable $ 8,340 $ 15,469
Accrued interest payable 17,299 17,299
Accrued liabilities 1,164 2,151
Long-term debt and capital lease obligations 132,557 133,013
-------- --------
Total liabilities subject to compromise $159,360 $167,932
======== ========
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
Bankruptcy Court approved an extension to July 19, 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, 2001, 2000 and 1999, the Company
incurred losses of $24.7 million, $42.4 million and $47.1 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, 2000 through December 1, 2001 interest payments.
Accordingly, the Company was in default of the indenture. Furthermore, 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.
CRITICAL ACCOUNTING POLICIES
In preparing our financial statements in conformity with accounting principles
generally accepted in the United States, we make judgments and estimates about
the amounts reflected in our financial statements. As part of our financial
reporting process, our management collaborates to determine the necessary
information on which to base our judgments and develop estimates used to prepare
the financial statements. We use historical experience and available information
to make these judgments and estimates. However, different amounts could be
reported using different assumptions and in light of different facts and
circumstances. Therefore, actual amounts could differ from the estimates
reflected in our financial statements.
Our significant accounting policies are described in Note 1 of the Consolidated
Financial Statements included in our 2001 Annual Report. We believe that the
following discussion addresses our critical accounting policies.
ACCOUNTING FOR CONTINGENCIES
We accrue for contingencies in accordance with SFAS No. 5, "Accounting for
Contingencies," or when it is probable that a liability or loss has been
incurred and the amount can be reasonably estimated. Contingencies by their
nature relate to uncertainties that require our exercise of judgment both in
assessing whether or not a liability or loss has been incurred and estimating
any amount of potential loss. The most important contingencies affecting our
financial statements include accounts receivable collectibility, inventory
valuation, pending litigation and the realization of deferred tax assets.
LONG-LIVED ASSETS
As required under SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", we evaluate the recoverability of property, plant and
equipment and intangible assets other than goodwill that are amortized whenever
events of changes in circumstances indicate the carrying amount of any such
assets may not be fully recoverable. Changes in circumstances include decreases
in market prices, adverse change in use or physical condition, technological
advances, a determination that it is more likely than not that long-lived assets
will be sold or otherwise disposed of significantly before the end of its useful
life, changes in our business model, capital structure, economic conditions or
operating performance. Our evaluation is based upon, among other things, our
assumptions about the estimated future undiscounted cash flows these assets are
expected to generate. When the sum of the undiscounted cash flows is less than
the carrying value, we will recognize an impairment loss. We continually apply
our best judgment when performing these evaluations to determine the timing of
the testing, the undiscounted cash flows used to assess recoverability and the
fair value of the asset.
RESTRUCTURING ACTIVITIES
We accrue the cost of our restructuring activities in accordance with Emerging
Issues Task Force Issue 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)," depending upon the facts and circumstances
surrounding the situation. We exercise our judgment in estimating the total
costs of each of these activities. As we implement these activities, the actual
costs may differ from the estimated costs due to changes in the facts and
circumstances that were not foreseen at the time of our initial cost accrual.
COMMITMENTS AND CONTINGENCIES
We are not aware of factors that are reasonably likely to adversely affect
liquidity trends or increase our risk beyond the risk factors outlined herein
and in other filings with the SEC.
OPERATING LEASES
We have entered into operating leases for certain of our facilities and
equipment. The effect of these operating leases is not considered significant in
relation to our annual cash flow from operations and total outstanding debt.
OTHER CONTRACTUAL OBLIGATIONS
We do not have material financial guarantees or other contractual commitments
that are reasonably likely to adversely affect our liquidity.
RELATED PARTY TRANSACTIONS
We do not have any related party transactions that affect our operations,
results of operations, cash flow or financial condition except as described in
the Company's consolidated financial statements.
NEW ACCOUNTING STANDARDS
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections," was issued. The
Statement updates, clarifies and simplifies existing accounting pronouncements.
While the technical corrections to existing pronouncements are not substantive
in nature, in some instances, they may change accounting practice. The
provisions of this standard must be applied for financial statements issued on
or after May 15, 2002, with early application encouraged. We are currently
evaluating the effects of SFAS No. 145 and are preparing a plan for
implementation.
BUSINESS OVERVIEW
In October 1999, the Company acquired TMWD located in Pompano Beach,
Florida. TMWD manufactures residential and architectural aluminum window and
doors. In December 2001, the Company signed an agreement to sell TMWD and Pan Am
for $500 thousand in cash, a $1.7 million note receivable and the assumption by
the buyer of certain liabilities. This transaction followed the Company's
disposition plan initiated in 2001 and closed in February 2002.
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 resume operations at this facility.
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.
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 leased real 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 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 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 Company recorded a loss of approximately $1.3 million
on the sale.
In January 2001, the Company closed EWDC, a regional distributor and
installer of windows and doors, and substantially completed its plan to exit
this business in December 2001.
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 recognized in 2001 (see Note 7 to the consolidated financial
statements), the Company recognized shutdown costs of approximately $1.4 million
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.
In December 2001, the Company agreed to sell certain assets of AEG. The
Company completed this sale on January 31, 2001. AEG and a portion of Pan Am
comprised the Company's extrusion segment. Extrusion products consist of
aluminum extrusions used primarily in the fenestration products industry. These
businesses supplied a portion of the raw materials used in manufacture of
windows by the Company. The closing of the AEG and Pan Am transactions completes
the Company's exit from the extrusion segment.
In February 2002, the Company signed an agreement to sell certain
assets of American Glassmith. This sale closed March 22, 2002.
In April 2002, the Bankruptcy Court approved the sale of ETC's Eagle
Window and Door, Inc. division and its subsidiary, Eagle Service Company,
(collectively "Eagle") for approximately $64.7 million. The transaction closed
on May 6, 2002. Eagle is also reflected as a discontinued operation in the
accompanying financial statements.
The results of operations for Forte, EWDC, AEG, Pan Am, TMWD, American
Glassmith and Eagle, have been presented as discontinued operations in the
accompanying financial statements for all periods presented. Therefore, the
following discussion and analysis refer only to continuing businesses of the
Company.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 2001 TO YEAR ENDED DECEMBER 31, 2000
Net Sales. Net sales decreased $17.1 million from $117.8 million in
2000 to $100.7 million in 2001. $7.0 million of this decrease results from sales
of divested businesses included in 2000 results and not included for a
comparable period in 2001. The remaining $10.1 million decline resulted
primarily from the shutdown of the Ottawa residential window manufacturing
facility which was substantially completed in April 2001.
Cost of Sales. Cost of sales decreased $16.4 million from $101 million
in 2000 to $84.6 million in 2001. $6.3 million of this decrease is due to 2000
divestitures not included in 2001. The remaining $10.1 million decline is
primarily due to the Ottawa facility shutdown and lower product costs at the
Company's southwest aluminum window facility.
Gross Profit. Gross profit decreased $.6 million to $16.1 million in
2001 from $16.7 million in 2000. The decrease in Gross profit results almost
exclusively from businesses divested in 2000. Gross margin increased 1.8% from
14.2% in 2000 to 16% in 2001 primarily due to the 2000 divestitures.
Selling, General and Administrative Expenses. Selling, General and
Administrative expenses for the year ended 2001 were $19.0 million representing
a $14.5 million decrease from 2000 Selling, General and Administrative expenses
of $33.5 million. Businesses divested in 2000 not reflected in 2001 operating
results represented $1.1 million of this decrease. $9.8 million of the decrease
is due to 2000 impairment charges taken by the Company's southwest aluminum
window manufacturer and the Ottawa operation due to the pending shutdown in
April 2001. The residential window operations further realized a $1.3 million
decrease in Selling, General and Administrative expenses resulting from the
Ottawa shutdown and overall cost reduction efforts. Finally, Corporate costs
decreased $2.3 million due to a significant reduction of Corporate personnel and
general cost reduction initiatives.
Operating Loss from Continuing Operations. Operating losses from
continuing operations decreased $13.8 million from an operating loss of $16.7
million in 2000 to a $2.9 million operating loss from continuing operations in
2001. This improvement results directly from the significant decrease in
selling, general and administrative expenses experienced in 2001.
Interest Expense. Interest expense decreased $12.7 million from $14.7
million during the year ended December 31, 2000 to $2 million in 2001. As a
result of the filing in December 2000, the Company has not accrued interest on
certain pre-petition debt since December 18, 2000. Such contractual interest
expense not recorded in 2001 totaled $15.3 million.
Other Income (Expense). Other income, excluding interest expense,
decreased $6.5 million from $3.2 of miscellaneous income in 2000 to $3.3 million
of miscellaneous expense in 2001. The company recognized net gains on the sales
of Western and Vinylsource of approximately $2.1 million in 2000 and $1 million
in net gains on the sale of property and equipment. During 2001, the company
realized losses on the sale of property and equipment of $.3 million. The
Company also recognized $.9 million in amortization of financing costs deferred
in 2000 and provided a $2.2 million reserve against a note receivable resulting
from a previous business divestiture.
Reorganization Costs. Reorganization costs of $4.2 million for the year
ended December 31, 2001 included $1.5 million in losses, including severance,
related to the Ottawa facility shutdown. Additional reorganization costs
incurred in 2001 consisted primarily of professional fees totaling $2.7 million.
Income Taxes. The Company established a full valuation allowance on its
tax benefit in 2001.
Loss from Discontinued Operations. Losses from discontinued operations
in 2001 totaled $12.5 million and included $5.2 million in impairment charges
resulting from the expected losses on the disposal of these businesses. The loss
from discontinued operations for the year ended December 31, 2000 was $7.4
million. The Company recognized no tax benefit on the losses in 2001.
COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO YEAR ENDED DECEMBER 31, 1999
Net Sales. Net sales decreased by $53.9 million to $117.8 million in
2000 as compared to $171.7 million in 1999. The decrease reflects $44.1 million
of sales in 1999 not included in 2000 relating to the divestitures of
VinylSource, Western and Taylor. Sales declines of $9.8 million at the Company's
other businesses include $6.4 million in the residential segment primarily
related to a decrease in aluminum window demand in the Southwest region offset
slightly by improved volumes at the Company's North Carolina vinyl and aluminum
window operation. Extrusion segment sales for the period included only the
northern vinyl extrusion business which was sold in May 2000. Sales for this
business declined $3.4 million during the first five months of 2000 as compared
to the same period in 1999, $1.6 million of which was due to the fire at the
Company's Kreidel Plastics Extrusion plant in October 1999. The Company did not
resume operations of this facility after the fire.
Cost of Sales. Cost of sales decreased $44.5 million to $101 million
from $145.5 million in 1999. The decrease principally results from $37.4 million
in costs associated with the divestitures that were not included for a
comparable period of 2000. Additionally, residential segment cost of sales
decreased $4.6 million primarily as a result of the demand decline at the
Southwest aluminum window business. Extrusion cost of sales decreased $2.5
million due to sales declines in the northern vinyl extrusion business including
the fire at the Company's Kreidel Plastics Extrusion plant in October 1999.
Gross Profit. Gross profit for the year ended December 31, 2000 was
$16.7 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 amounted to $6.7 million. The Company's other
residential segment businesses recorded gross profit declines of $1.8 million
due to volume declines at the southwest aluminum window business. The northern
vinyl extrusion businesses experienced a $1.0 million decrease in gross profit
due to volume declines and the loss of the Kreidel facility. Gross margins
declined by .9% from 15.5% in 1999 to 14.6% 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 $10.9
million from $44.4 million in 1999 to $33.5 million in 2000. $6.7 million of
this decrease is attributable to a decrease in selling, general and
administrative expenses other than impairment charges. This decrease includes
$5.7 million of expenses in 1999 attributable to businesses divested and not
included for a comparable period in 2000. The remaining $1.0 million decrease
resulted from a $.4 million increase in the residential window segment, a $0.2
million decrease in the vinyl extrusion business for the first five months of
the year, and a $1.2 million decrease in corporate costs resulting from the
Company's cost reduction initiatives. Additionally, the Company recognized $9.7
million in non-cash impairment charges in 2000 all of which was recorded by the
Company's residential window segment. 1999 impairment charges of $13.9 million
included $7.9 million of charges taken by businesses divested in 2000.
Operating Loss from Continuing Operations. The Company recorded an
operating loss from continuing operations of $16.7 million in 2000 as compared
with a loss of $18.2 million in 1999. This $1.5 million decrease in operating
losses includes the $4.2 million special non cash asset impairment charges taken
in 1999 over the impairment charges taken in 2000 in remaining businesses as
discussed above. The remaining increase in operating losses of $2.7 million
primarily reflects losses from the Company's aluminum residential window
businesses in the southwest as a result of volume declines in 2000.
Interest Expense. Interest expense for the years ended December 31,
2000 and 1999 was $14.7 million and $17.6 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), excluding interest
expense, increased from a net expense of $2.4 million in 1999 to $3.2 million
net income in 2000 primarily due to 1999 write-offs of abandoned acquisition and
financing costs and a $3.3 million gain on the sale of Western offset by a $1.3
million loss on the sale of VinylSource 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 million 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 and 1999.
Loss from Discontinued Operations. Losses from discontinued operations
were $7.4 million in 2000 as compared with $9.0 million in the prior year. The
Company recognized no tax benefit on the losses.
LIQUIDITY AND CAPITAL RESOURCES
During the years ended December 31, 2001, 2000 and 1999, the Company's
principal sources of funds consisted of cash generated from operations, sale of
assets and various financings.
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 (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. The
credit is secured by certain accounts receivable, inventories and property and
equipment of the Company. 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, 2001, the interest
rate was 5.5% on the line of credit and 6.25% on the term loan, with aggregate
collateral availability of $6.3 million under the facility. This facility was
liquidated in May 2002 with the proceeds from the sale of Eagle.
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 facilities 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 used by operating activities of continuing operations was $1.3
million, $.7 million and $9.4 million for the years ended December 31, 2001,
2000 and 1999, respectively. 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.
Additionally, cash used for operating activities in 2001 and 2000 included cash
used for reorganization costs of $3.4 million and $2.1 million, respectively.
Capital expenditures for the years ended December 31, 2001, 2000 and
1999 were $0.6 million, $1.4 million and $4.6 million, respectively. Capital
outlays included manufacturing equipment and computer software and hardware. The
Company generated $1.3 million, $0.2 million and $3.4 million from the sale of
property and equipment in 2001, 2000 and 1999, 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 2001 or 2000. This compares to
aggregate purchase prices paid for acquisitions of $2.6 million in 1999. 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 $6.7 million in cash).
The Company made no cash payments on long-term debt and capital lease
obligations in 2001. Such payments totaled $0.5 million for the year ended
December 31, 2000 and $1.4 million for the year ended December 31, 1999. Net
activity on the Company's lines of credit and DIP Financing resulted in cash
generated of $1.8 million and $10.8 million in 2001 and 1999, respectively. Such
activity used $6.5 million in cash in 2000. The Company paid no debt financing
fees in 2001 and paid approximately $1.0 million and $1.7 million in debt
financing fees and expenses in the years ended December 31, 2000 and 1999,
respectively.
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 operations 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.
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. 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 currently not subject to interest rate risk
on its long-term debt as this debt is classified as subject to compromise and is
not accruing interest.
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, 2001 and 2000 19
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 21
Consolidated Statements of Stockholders' Deficit for the years ended December 31, 2001, 2000 and 1999 22
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 23
Notes to Consolidated Financial Statements 24
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts 43
Report of Independent Auditors
The Board of Directors and Shareholders
American Architectural Products Corporation
We have audited the accompanying consolidated balance sheets of American
Architectural Products Corporation and subsidiaries (Company) (a
Debtor-in-Possession as of December 18, 2000) as of December 31, 2001 and 2000,
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for the years then ended. Our audit also included the financial
statement schedule listed in the index at Item 14(a)(2) for the years ended
December 31, 2001 and 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 year ended December 31, 1999 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 audits 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 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 consolidated financial position of
American Architectural Products Corporation and subsidiaries as of December 31,
2001 and 2000, and the consolidated results of their operations, and their cash
flows for the years 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 years ended December 31, 2001 and
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.
/s/ BEARD MILLER COMPANY LLP
Pittsburgh, Pennsylvania
March 19, 2002, except for Notes 15 and 18 as to which the date is April 16,
2002
Report of Independent Auditors
The Board of Directors and Shareholders
American Architectural Products Corporation
We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit), and cash flows of American Architectural
Products Corporation for the year ended December 31, 1999. Our audit also
included the financial statement schedule listed in the index at Item 14(a) for
the year ended December 31, 1999. 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 consolidated results of their operations
and cash flows of American Architectural Products Corporation for the year ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule for the year ended December 31, 1999, 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 statements of operations, stockholders' equity
(deficit), and cash flows of American Architectural Products Corporation for the
year ended December 31, 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 a 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.
/s/ ERNST & YOUNG LLP
June 2, 2000
Akron, Ohio
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
DECEMBER 31,
2001 2000
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,762 $ 158
Accounts receivable, less allowance for
doubtful accounts of $983 and $1,322 12,904 16,174
Inventories 6,913 9,108
Prepaid expenses and other current assets 1,329 3,269
Assets held for sale 32,982 44,827
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TOTAL CURRENT ASSETS 56,890 73,536
--------- ---------
PROPERTY AND EQUIPMENT
Land and improvements 1,114 1,317
Buildings and improvements 10,176 10,979
Machinery, tools and equipment 17,652 17,629
Computers and office equipment 1,917 2,953
--------- ---------
30,859 32,878
Less accumulated depreciation (10,248) (7,680)
--------- ---------
NET PROPERTY AND EQUIPMENT 20,611 25,198
--------- ---------
OTHER
Cost in excess of net assets acquired, net of
accumulated amortization of $2,484 and $2,458 8,670 11,800
Deferred financing costs, net of accumulated
amortization of $953 and $6 -- 947
Other, net of accumulated amortization of $955 and $717 1,867 2,136
--------- ---------
TOTAL OTHER ASSETS 10,537 14,883
--------- ---------
$ 88,038 $ 113,617
========= =========
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
DECEMBER 31,
2001 2000
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Debtor-in-possession revolving credit and term loan $ 18,583 $ 16,743
Accounts payable - trade 3,446 1,236
Accrued Expenses
Compensation and related benefits 1,269 1,425
Current portion of accrued warranty obligations 973 662
Other 1,574 1,217
Liabilities held for sale 14,080 10,296
--------- ---------
TOTAL CURRENT LIABILITIES 39,925 31,579
Accrued warranty obligations, less current portion 1,214 1,400
Other 2,264 2,744
Liabilities subject to compromise 159,360 167,932
--------- ---------
TOTAL LIABILITIES 202,763 203,655
--------- ---------
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 shares outstanding 14 14
Additional paid-in capital 9,142 9,142
Treasury stock, at cost (100) (100)
Accumulated deficit (123,781) (99,094)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (114,725) (90,038)
--------- ---------
$ 88,038 $ 113,617
========= =========
See accompanying notes to consolidated financial statements.
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
2001 2000 1999
--------- --------- ---------
Net Sales $ 100,748 $ 117,756 $ 171,657
Cost of Sales 84,657 101,022 145,478
--------- --------- ---------
GROSS PROFIT 16,091 16,734 26,179
Selling Expense 9,851 11,468 13,681
Asset Impairment -- 9,765 13,930
General and Administrative Expenses 9,132 12,237 16,762
--------- --------- ---------
OPERATING LOSS FROM CONTINUING OPERATIONS (2,892) (16,736) (18,194)
--------- --------- ---------
Other Income (Expense)
Interest Expense (2,011) (14,666) (17,557)
Acquisition and Financing Costs -- -- (2,325)
Miscellaneous (3,245) 3,248 (53)
--------- --------- ---------
Total Other Expense (5,256) (11,418) (19,935)
--------- --------- ---------
LOSS FROM CONTINUING OPERATIONS BEFORE
REORGANIZATION COSTS AND INCOME TAX BENEFIT (8,148) (28,154) (38,129)
Reorganization Costs 4,212 6,847 --
--------- --------- ---------
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAX BENEFIT (12,360) (35,001) (38,129)
Income Tax Benefit -- -- --
--------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (12,360) (35,001) (38,129)
Loss From Discontinued Operations (12,327) (7,363) (9,014)
--------- --------- ---------
NET LOSS $ (24,687) $ (42,364) $ (47,143)
========= ========= =========
BASIC AND DILUTED NET LOSS PER COMMON SHARE
Continuing Operations $ (.89) $ (2.46) $ (2.71)
Discontinued Operations (.89) (.52) (.64)
--------- --------- ---------
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (1.78) $ (2.98) $ (3.35)
========= ========= =========
See accompanying notes to consolidated financial statements.
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
ADDITIONAL TOTAL
COMMON STOCK PAID-IN TREASURY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK DEFICIT DEFICIT
------ ------ ------- ----- ------- -------
Balance, December 31, 1998 13,533,004 $ 14 $ 8,144 $ -- $ (9,587) $ (1,429)
Issuance of shares in connection with 789,044 -- 998 -- -- 998
acquisitions
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)
NET LOSS FOR THE YEAR -- -- -- -- (24,687) (24,687)
----------- ------ ----------- ------- ----------- -----------
BALANCE, DECEMBER 31, 2001 14,321,616 $ 14 $ 9,142 $ (100) $ (123,781) $ (114,725)
=========== ====== =========== ======= =========== ===========
See accompanying notes to consolidated financial statements.
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
2001 2000 1999
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $(12,360) $(35,001) $(38,129)
Adjustments to reconcile loss from continuing operations to net cash
provided by (used in) operating activities before reorganization costs
and discontinued operations:
Depreciation 3,161 4,765 6,274
Amortization 1,590 1,264 3,177
Loss (gain) on sale of property and equipment and assets held for 254 (1,045) 1,247
sale
Gain on sale of business -- (2,047) (589)
Loss on acquisition and financing costs -- -- 2,325
Asset impairment 177 9,765 15,213
Reorganization costs 4,212 6,847 --
Changes in assets and liabilities, net of effects of business acquisitions and
divestitures and discontinued operations:
Accounts receivable 990 2,809 871
Accounts receivable - related parties -- 452 --
Advances to affiliates classified as discontinued operations 892 1,200 (4,786)
Inventories 1,145 594 801
Prepaid expenses and other current assets 2,321 (216) (1,006)
Other assets 328 599 (1,345)
Accounts payable - trade 2,746 (4,310) 4,585
Accrued expenses and other liabilities 171 15,690 1,944
Liabilities subject to compromise (3,573) -- --
-------- -------- --------
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS
BEFORE REORGANIZATION COSTS AND DISCONTINUED OPERATIONS 2,054 1,366 (9,418)
NET CASH USED FOR REORGANIZATION COSTS (3,365) (2,069) --
-------- -------- --------
NET CASH USED FOR CONTINUING OPERATIONS (1,311) (703) (9,418)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 4,125 33 885
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,814 (670) (8,533)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 1,253 169 3,400
Purchase of property and equipment (568) (1,434) (4,619)
Proceeds from the sale of business -- 10,407 6,699
Acquisitions of businesses, net of cash acquired -- -- (2,585)
-------- -------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES OF CONTINUING OPERATIONS 685 9,142 2,895
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF
DISCONTINUED OPERATIONS (2,735) 577 (2,194)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,050) 9,719 701
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) borrowings on revolving line of credit -- (23,260) 10,813
Net borrowings on debtor-in-possession financing 1,840 16,743 --
Payments for deferred financing costs -- (953) (1,707)
Payments on long-term debt and capital lease obligations -- (475) (1,442)
Purchase of treasury stock -- (100) --
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES OF
CONTINUING OPERATIONS 1,840 (8,045) 7,664
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES OF
DISCONTINUED OPERATIONS -- (902) 116
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,840 (8,947) 7,780
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,604 102 (52)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 158 56 108
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,762 $ 158 $ 56
======== ======== ========
See accompanying notes to consolidated financial statements.
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 (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) and
American Weather-Seal Company (Weather-Seal). Denver Window Corporation (Denver)
was a subsidiary at December 31, 2000 and was sold on September 4, 2001. Eagle
Window and Door Center, Inc. (EWDC) was a subsidiary at December 31, 2001 and
was closed in January 2002. TM Window and Door (TMWD) was also a subsidiary at
December 31, 2001 and, together with the Binnings Pan American division of
Binnings (Pan Am) was sold in February 2002. American Glassmith Corporation
(American Glassmith), also a subsidiary at December 31, 2001, was sold in March
2002. Forte, Inc. (Forte), also a subsidiary at the 1999 year end, was closed in
May 2000.
The Company elected to adopt the provisions of the Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No.
144, Accounting for the Impairment of or Disposal of Long-Lived Assets issued in
August 2001. This Statement supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and
the accounting and reporting provisions of Accounting Principles Board (APB)
Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. SFAS No. 144 also amends Accounting Research
Bulletin (ARB) No. 51, Consolidated Financial Statements. In conjunction with
the adoption of SFAS No. 144, the Company has classified all of the operations
discussed in Note 15 as discontinued operations in the accompanying financial
statements and, accordingly, unless otherwise stated, the accompanying notes for
all years presented exclude the amounts related to these discontinued
operations.
As a result of its discontinuance of its commercial business segment in
1999 and its extrusion segment in 2001, the Company now operates in one business
segment, residential fenestration products. The products include a variety of
window and door products manufactured for uses in homes and light commercial
businesses and consist primarily of aluminum, vinyl, wood and aluminum-clad wood
windows and doors.
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.
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 $19 million at December 31, 2001 and $33
million at December 31, 2000, which were estimated based on quoted market
prices.
Revenue Recognition
Revenues are recognized upon the shipment of product to the customer.
Until February 2002, the Company operated in two industry segments:
residential fenestration products and extrusion products. As previously
discussed, the sale of Pan Am in February 2002 completed the Company's exit from
the extrusion products segment.
Shipping and Handling Costs
Costs related to shipping and handling of products are included in cost
of sales.
Cash Equivalents
Cash equivalents are highly liquid investments with original maturities
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, 2001, approximately 19 of the Company's 2,403 employees
were covered under a collective bargaining agreement set to expire in October
2002. This agreement was terminated by mutual consent in January 2002 in
conjunction with the sale of AEG.
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 ("goodwill") is being amortized
over periods ranging from 20 to 25 years using the straight-line method and is
periodically reviewed for impairment. In July 2001, the FASB issued SFAS No.
142, Goodwill and Other Intangible Assets which requires that goodwill no longer
be amortized to earnings, but instead be reviewed for impairment. The Company
has adopted this Statement as of January 1, 2002 and has ceased amortization as
of that date. Amortization expense related to cost in excess of net assets
acquired was $406,000, $760,000 and $1,067,000 in 2001, 2000 and 1999,
respectively. Other than the elimination of goodwill amortization, the Company
has not yet determined the effect that the adoption of SFAS No. 142 will have on
its financial statements.
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 7).
Deferred Financing Costs
Costs to obtain financing have been capitalized and were 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 from continuing operations was $468,000, $733,000, and
$877,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
New Accounting Standards
In July 2001, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 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 No. 141 requires that the purchase method be
used for business combinations initiated after June 30, 2001. Adoption of this
statement will have no effect on the Company's financial statements unless the
Company enters into a business combination.
In June of 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. This Statement will become effective on January 1, 2003.
Management is currently assessing the impact of this pronouncement on its
financial statements.
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.
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 July 17,
2002, until which time 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, 2001, 2000 and 1999, the Company
incurred losses of $24.7 million, $42.4 million and $47.1 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 through December 1, 2001 interest payments.
Accordingly, the Company was in default of the indenture. Furthermore, the
Company was in violation of certain of its covenants under its 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, 2001 and 2000:
DECEMBER 31,
2001 2000
-------- --------
(IN THOUSANDS)
Accounts payable $ 8,340 $ 15,469
Accrued interest payable 17,299 17,299
Accrued liabilities 1,164 2,151
Long-term debt and capital lease obligations (Notes 5 and 6) 132,557 133,013
-------- --------
Total liabilities subject to compromise $159,360 $167,932
======== ========
Interest on certain pre-petition debt is not accrued after the
bankruptcy filing. Such contractual interest expense not recorded totaled $15.3
million and $542,000 for 2001 and 2000, respectively.
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, 2001. At December 31, 2001, the interest rate was 5.5% on
the line of credit and 6.25% on the term loan, with aggregate availability of
$6.3 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 December 31, 2001.
The Company obtained a waiver releasing it from its requirement to meet that
threshold for the fourth quarter of 2001.
At December 31, 2001 and 2000, outstanding balances are as follows:
DECEMBER 31,
2001 2000
------- -------
(IN THOUSANDS)
Line of credit $12,199 $ 8,743
Term loan 6,384 8,000
------- -------
$18,583 $16,743
======= =======
Reorganization Costs
The amounts reflected as reorganization costs in the consolidated
statement of operations consist of the following:
YEAR ENDED DECEMBER 31,
2001 2000
------ ------
(IN THOUSANDS)
Accelerated amortization of debt issue costs $ -- $4,778
Plant closing 1,466 --
Professional fees 2,651 1,215
Other expenses 95 854
------ ------
Total reorganization costs $4,212 $6,847
====== ======
In April 2001, the Bankruptcy Court approved transactions associated
with the shutdown of the Company's wood window manufacturing operation in
Ottawa, Ohio, which was substantially completed by the end of April 2001. The
plant closing charges reflected above are associated with this restructuring
effort and include severance costs of $619,000, a loss on the liquidation of
assets of $1.14 million, and a $293,000 gain on the Bankruptcy Court's rejection
of a portion of the associated liability (included in Liabilities Subject to
Compromise).
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, the
results of which are included in continuing operations. 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.
Acquisition of Blackhawk and Acquisition and Divestiture of 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 was amortized over a 25 year
life. The accounts of Blackhawk and Denver are included in the Company's
consolidated financial statements from the acquisition dates, the results of
which are included in discontinued operations. In September 2001, the Company
sold substantially all of the assets of Denver for an amount that approximated
book value.
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. The results of
operations of the Aluminum Extrusion Group are included in discontinued
operations. On January 31, 2002, the Company completed the sale of certain
assets of Weather-Seal's Aluminum Extrusion Group for $1.5 million in cash and
the assumption of certain liabilities (see Note 15).
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 was recorded and the unamortized balance was written off in 2000
as a result of the Company's impairment analysis discussed in Note 7. The
accounts of TMWD are included in the Company's consolidated financial statements
from the acquisition date, the results of which are included in discontinued
operations. In February 2002, the Company completed the sale of certain TMWD
assets (see Note 15).
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 15).
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.
4. INVENTORIES:
Inventories consisted of the following:
DECEMBER 31,
2001 2000
(IN THOUSANDS)
Finished goods $ 930 $1,378
Work-in-process 910 1,295
Raw materials 5,073 6,435
------ ------
$6,913 $9,108
====== ======
5. LONG-TERM DEBT:
Due to the bankruptcy filing, pre-petition long-term debt balances at
December 31, 2001 and 2000 have been reclassified to the caption "liabilities
subject to compromise" in the consolidated balance sheets (see Note 2).
DECEMBER 31,
2001 2000
-------- --------
(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
-------- --------
$132,500 $132,547
======== ========
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. 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
through December 1, 2001 interest payments. Accordingly, the failure to make the
June 1, 2000 through December 1, 2001 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.
6. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
Certain leased assets are capitalized and consist of computer and
delivery equipment with a cost of $82,000 and $91,000 at December 31, 2001 and
2000, respectively. Accumulated amortization related to these leased assets was
$13,000 and $42,000 at December 31, 2001 and 2000, respectively.
The Company also leases buildings and equipment under operating leases.
At December 31, 2001, the future minimum lease payments under operating
and capital leases are as follows (in thousands):
OPERATING CAPITAL
LEASES LEASES
2002 $ 1,350 $ 39
2003 931 10
2004 829 10
2005 534 9
2006 223 --
Thereafter 72 --
--------- ------
Total $ 3,939 68
=========
Less amount representing interest 11
------
Net present value (included in "liabilities subject to compromise") $ 57
======
Rental expense from continuing operations incurred for operating leases
was $2.5 million, $2.3 million and $2.7 million for the years ended December 31,
2001, 2000 and 1999, 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.
7. IMPAIRMENT LOSSES:
In February 2002, Weather-Seal sold its administrative office building
for $156,000. As a result, at December 31, 2001, the Company recorded an
impairment charge of $177,000 to adjust the recorded value of the property to
fair value (see Note 15).
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, the Company
re-evaluated the results of future operations and their impact on the recorded
value of its long-lived assets resulting from the bankruptcy filing and the
uncertainty concerning the related reorganization of the Company. As a result of
these analyses, the Company recorded an impairment charge from continuing
operations of $9.8 million at December 31, 2000, including goodwill write-downs
of $6.3 million and property and equipment write-downs of $3.5 million, which is
related to the shutdown of the Ottawa facility (see Note 2).
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 sales) and $8.1 million to property and equipment.
Additionally, in December 1999, the Company abandoned its plans to
implement new software at two of its facilities. Accordingly, approximately
$700,000 of capitalized project costs related to this project were charged to
expense.
8. BENEFIT PLANS:
All eligible nonunion employees of the Company may participate in
401(k) plans which include provisions for Company matching contributions.
Expenses incurred relating to these plans from continuing operations were
$276,000, $280,000 and $2.0 million for the years ended December 31, 2001, 2000
and 1999, respectively.
9. 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.
Warrants
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.
10. 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.
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, 2001, 2000 and 1999 is as follows:
2001 2000 1999
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
(OPTIONS IN THOUSANDS)
Outstanding, beginning of the period 737 $ 3.95 1,210 $ 3.98 1,405 $ 3.99
Granted -- -- 40 0.69 45 2.73
Forfeited (95) 3.68 (513) 3.78 (240) 3.78
------- ----- ------- ----- ------- -----
Outstanding, end of the period 642 $ 3.99 737 $ 3.95 1,210 $ 3.98
======= ======== ======= ======== ====== ========
The weighted-average remaining contractual life on options outstanding
is 4.4 years. Options to purchase 439,000 shares are currently exercisable with
a weighted-average exercise price of $4.34 per share.
The Company applies the intrinsic value method in accounting for its
stock options issued to employees and non-employee directors. Accordingly, no
compensation cost has been recognized for stock options issued to employees and
non-employee directors. 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 been determined based on the fair value using the Black-Scholes
model at the grant dates:
YEAR ENDED DECEMBER 31,
2001 2000 1999
-------------- -------------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
LOSS FROM CONTINUING OPERATIONS
As reported $ (12,360) $ (35,001) $ (38,129)
Pro forma $ (12,360) $ (35,026) $ (38,420)
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER
COMMON SHARE
As reported $ (.89) $ (2.46) $ (2.71)
Pro forma $ (.89) $ (2.46) $ (2.73)
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, a dividend yield percentage of 0% in 2000 and 1999, common stock
volatility of 1.78 in 2000 and 0.35 in 1999, and an expected life of the options
of 10 years in 2000 and 5 years in 1999.
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 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 stock options.
The weighted-average fair value of the options granted during the years
ended December 31, 2000 and 1999 was $0.62 and $1.14 respectively. No options
were granted during the year ended December 31, 2001.
11. 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.
12. INCOME TAXES:
Significant components of deferred tax assets and liabilities as of
December 31, 2001 and 2000 are as follows:
DECEMBER 31,
2001 2000
-------- --------
(IN THOUSANDS)
DEFERRED TAX ASSETS
Net operating loss carryforwards $ 33,229 $ 30,160
Allowance for doubtful accounts 1,505 600
Accrued warranty obligations 1,799 1,699
Goodwill impairment 4,122 4,193
Other impairment 601 1,283
Write-off of debt issuance costs 1,442 1,442
Other accruals 1,630 1,400
Other 392 347
-------- --------
44,720 41,124
DEFERRED TAX LIABILITY
Depreciation 849 2,778
-------- --------
NET DEFERRED TAX ASSETS 43,871 38,346
VALUATION ALLOWANCE FOR NET DEFERRED TAX ASSETS (43,871) (38,346)
-------- --------
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 from continuing operations for the years ended December 31, 2001, 2000 and
1999 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,
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)
Tax benefit at U.S. federal statutory rate $ (4,202) $(11,900) $(12,964)
Expenses not deductible for tax purposes 43 36 79
Reorganization costs 934 464 --
Valuation allowance adjustment 5,525 22,157 12,885
Other (2,300) (10,757) --
-------- -------- --------
BENEFIT FOR INCOME TAXES $ -- $ -- $ --
======== ======== ========
At December 31, 2001, the Company and its subsidiaries had net
operating loss carryforwards of approximately $97.8 million for income tax
purposes which expire between 2002 and 2021. 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 $88.5
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.
13. RELATED PARTY TRANSACTIONS:
The Company paid management fees to its majority stockholder of
approximately $21,000 for the year ended December 31, 1999. Additionally, the
Company paid its majority stockholder $147,000 for other transaction services in
1999. The Company paid no management or other transaction service fees to its
majority shareholder in 2001 or 2000. In 2001, 2000 and 1999, the Company paid
$0, $10,000 and $375,000, respectively, to a Company affiliated with its
majority shareholder for air charter services.
In October 1998, the Company entered into an operating lease with a
company controlled by its majority shareholder and paid $150,000 under this
lease during the year ended December 31, 1999.
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 in the amount 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.
At December 31, 2001, the Company had a receivable recorded in the
amount of $220,000 from its Chairman of the Board related to product sales. The
amount was remitted to the Company in April 2002.
14. 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 was not dilutive.
YEAR ENDED DECEMBER 31,
2001 2000 1999
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
LOSS FROM:
Continuing operations $(12,360) $(35,001) $(38,129)
Discontinued operations (12,327) (7,363) (9,014)
-------- -------- --------
$(24,687) $(42,364) $(47,143)
======== ======== ========
SHARES
Weighted-average shares - basic and diluted 13,822 14,238 14,095
======== ======== ========
PER COMMON SHARE - BASIC AND DILUTED
Continuing operations $ (.89) $ (2.46) $ (2.71)
Discontinued operations (.89) (.52) (.64)
-------- -------- --------
$ (1.78) $ (2.98) $ (3.35)
======== ======== ========
15. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE:
In January 2001, the Company announced the discontinuance of its EWDC
operations. The Company substantially completed its plan to exit this business
in December 2001.
In December 2001, the Company agreed to sell certain assets of
Weather-Seal's aluminum extrusion operations (the Aluminum Extrusion Group or
AEG) for $1.5 million cash. The Company completed this sale on January 31, 2002.
Also, in December 2001, the Company entered into an agreement to sell certain
assets of the Binnings Pan American (Pan Am) and TM Window and Door (TM)
divisions of Binnings for $500,000 cash, a $1.7 million note receivable and the
assumption of certain liabilities. This transaction closed February 15, 2002.
AEG and a portion of Pan Am comprised the Company's extrusion segment. Extrusion
products consist of aluminum extrusions used primarily in the fenestration
products industry. These businesses supplied a portion of the raw materials used
in the manufacture of windows by the Company. The consummation of these
transactions completes the Company's exit from the extrusion segment.
In February 2002, the Company signed an agreement to sell substantially
all of the assets of American Glassmith (AGI) for $350,000 cash and the
assumption of post-petition liabilities. This sale was completed on March 22,
2002.
On April 16, 2002, the Bankruptcy Court approved the sale of ETC's
Eagle Window and Door, Inc. division and its subsidiary, Eagle Service Company
(collectively, "Eagle"), for approximately $64.7 million. This transaction is
expected to close in May 2002.
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 AEG, Pan Am, TM, AGI, Eagle, EWDC and
Forte have been presented as discontinued operations in the accompanying
financial statements for all periods. The Company did not recognize income tax
benefits on the losses from discontinued operations. Net sales and net losses
from discontinued operations before inter-company eliminations by segment for
each period consist of the following (in thousands):
YEAR ENDED DECEMBER 31, 2001
------------------------------------------------------------------------------------------------------
EXTRUSION
BPA SEGMENT BPA
AEG EXTRUSION SUB-TOTAL RESIDENTIAL TM AGI EAGLE EWDC FORTE TOTAL
------- ------- ------- -------- ------- ------- ------- ----- ----- --------
Net Sales $11,149 $ 4,609 $15,758 $31,095 $10,448 $ 6,558 $80,046 $ 287 $ 113 $144,305
------- ------- ------- -------- ------- ------- ------- ----- ----- --------
Income (loss) from
operations $(2,079) $(1,329) $(3,408) $(8,968) $(2,682) $(1,285) $ 9,296 $(565) $(250) $ (7,862)
Accrued loss after
measurement date -- -- -- -- -- -- -- -- -- --
Estimated loss on
disposal (2,275) -- (2,275) (1,769) (421) -- -- -- -- (4,465)
------- ------- ------- -------- ------- ------- ------- ----- ----- --------
Income (loss) from
discontinued
operations $(4,354) $(1,329) $(5,683) $(10,737) $(3,103) $(1,285) $ 9,296 $(565) $(250) $(12,327)
======= ======= ======= ======== ======= ======= ======= ===== ===== ========
YEAR ENDED DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------
EXTRUSION
BPA SEGMENT BPA
AEG EXTRUSION SUB-TOTAL RESIDENTIAL TM AGI EAGLE EWDC FORTE TOTAL
------- ------- ------- -------- ------- ------- ------- ----- ----- --------
Net Sales $15,387 $3,643 $19,030 $30,604 $11,280 $ 8,848 $81,435 $ 3,805 $ 3,000 $158,002
------- ------ ------- -------- ------- ------- ------- ----- ----- --------
Income (loss) from
operations $(1,768) $(327) $(2,095) $(4,970) $(4,908) $(1,138) $12,101 $(1,435) $(3,808) $ (6,253)
Accrued loss after
measurement date -- -- -- -- -- -- -- -- -- --
Estimated loss on
disposal -- -- -- -- -- -- -- -- (1,110) (1,110)
------- ------ ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
discontinued
operations $(1,768) $(327) $(2,095) $(4,970) $(4,908) $(1,138) $12,101 $(1,435) $(4,918) $(7,363)
======= ====== ======= ======= ======= ======= ======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1999
----------------------------------------------------------------------------------
AEG BPA TM AGI EAGLE EWDC FORTE TOTAL
----- ------- ----- ----- ------- ----- -------- -------
Net Sales $27,950 $30,212 $2,528 $8,270 $75,196 $ 963 $ 4,300 $149,419
------- ------- ----- ----- ------- ----- -------- --------
Income (loss) from operations $ (826) $(5,523) $ (34) $ (81) $10,287 $(860) $ (4,952) $(1,989)
Accrued loss after measurement date -- -- -- -- -- -- (1,039) (1,039)
Estimated loss on disposal -- -- -- -- -- -- (5,986) (5,986)
------- ------- ----- ----- ------- ----- -------- --------
Income (loss) from discontinued
operations $(826) $(5,523) $ (34) $ (81) $10,287 $(860) $(11,977) $(9,014)
====== ======== ====== ====== ======= ====== ========= ========
The assets and liabilities of AEG, BPA, TM, AGI, Eagle, EWDC, and Forte
which were sold or are being sold are classified as assets held for sale and
liabilities held for sale, respectively in the accompanying consolidated balance
sheets. A summary of the assets and liabilities held for sale of the
discontinued businesses is as follows:
DECEMBER 31, 2001
------------------------------------------------------------------
AEG BPA TM AGI EAGLE FORTE TOTAL
------- ------- ------- ------- ------- ------- -------
Accounts receivable - net $ 718 $ 200 $ 300 $ -- $ 8,057 $ -- $ 9,275
Inventories 1,141 3,391 39 128 6,730 11,429
Property and equipment 80 211 813 456 5,614 823 7,997
Cost in excess of net assets acquired -- -- -- -- 2,036 -- 2,036
Other -- 55 -- 29 648 -- 732
------- ------- ------- ------- ------- ------- -------
ASSETS HELD FOR SALE $ 1,939 $ 3,857 $ 1,152 $ 613 $23,085 $ 823 $31,469
======= ======= ======= ======= ======= ======= =======
Accounts payable - trade $ 203 $ 1,625 $ 430 $ 191 $ 2,017 $ -- $ 4,466
Accrued expenses 182 1,781 687 119 6,562 -- 9,331
Capital lease obligations -- -- -- -- 283 -- 283
------- ------- ------- ------- ------- ------- -------
LIABILITIES HELD FOR SALE $ 385 $ 3,406 $ 1,117 $ 310 $ 8,862 $ -- $14,080
======= ======= ======= ======= ======= ======= =======
DECEMBER 31, 2000
-------------------------------------------------------------------
AEG BPA TM AGI EAGLE FORTE TOTAL
------- ------- ------- ------- ------- ------- -------
Accounts receivable - net $ 933 $ -- $ -- $ -- $ 8,410 $ 204 $ 9,547
Inventories 1,494 4,761 1,121 1,620 7,016 -- 16,012
Property and equipment 1,777 4,434 1,282 547 4,351 1,530 13,921
Cost in excess of net assets acquired -- -- -- -- 2,139 -- 2,139
Other -- 534 6 86 826 -- 1,452
------- ------- ------- ------- ------- ------- -------
ASSETS HELD FOR SALE $ 4,204 $ 9,729 $ 2,409 $ 2,253 $22,742 $ 1,734 $43,071
======= ======= ======= ======= ======= ======= =======
Accounts payable - trade $ 203 $ 744 $ 330 $ 237 $ 904 $ -- $ 2,418
Accrued expenses 225 1,793 242 125 5,493 -- 7,878
------- ------- ------- ------- ------- ------- -------
LIABILITIES HELD FOR SALE $ 428 $ 2,537 $ 572 $ 362 $ 6,397 $ -- $10,296
======= ======= ======= ======= ======= ======= =======
As discussed in Note 7, Weather-Seal sold its administrative office
building in February 2002. The net book value of this property of $156,000 and
$333,000 is classified as assets held for sale at December 31, 2001 and 2000,
respectively.
As part of the agreement of the sale of Taylor, the Company retained
the real property which has a book value of approximately $1.4 million at
December 31, 2001 and 2000; however, the buyer was required to purchase it
within a period not to exceed nineteen months from the closing date provided
certain conditions were met. This property is classified as assets held for sale
in the accompanying balance sheets. The obligation of the buyer to purchase the
real property for $2.6 million is currently being contested.
16. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
YEAR ENDED DECEMBER 31,
2001 2000 1999
------- ------- --------
(IN THOUSANDS)
CASH PAID DURING THE PERIOD FOR
Interest $ 2,011 $ 1,979 $ 16,591
NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock and debt issued and liabilities assumed in acquisitions -- -- 1,211
Capital lease obligations -- -- 3,160
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.
17. SELECTED QUARTERLY DATA OF THE COMPANY (UNAUDITED):
2001 2000
---------------------------------------------------------------------------------------------
1ST 2ND 3RD 4TH 1st 2nd 3rd 4th
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $ 20,919 $ 27,689 $ 26,204 $ 25,936 $ 31,327 $ 32,273 $ 27,335 $ 26,821
Gross profit 2,209 4,770 4,653 4,459 4,648 5,846 4,091 2,149
Loss from
continuing operations (3,289) (2,462) (2,663) (3,946) (1,835) (3,392) (6,011) (23,763)
Net loss from continuing
operations per share:
Basic and diluted $ (0.24) $ (0.18) $ (0.19) $ (0.28) $ (0.13) $ (0.24) $ (0.42) $ (1.67)
18. SUBSEQUENT EVENTS
During the first quarter of 2002, the Company consummated the sale of
certain assets of AEG, Pan Am, TMWD and AGI as more thoroughly discussed in Note
15.
On April 16, 2002, the Company agreed to sell substantially all of the
assets of Eagle as discussed in Note 15.
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2001, 2000 and 1999
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands)
ALLOWANCE FOR DOUBTFUL
ACCOUNTS (a)
Year ended December 31, 2001 $1,322 $ 668 $ -- $1,007 $ 983
Year ended December 31, 2000 959 1,175 (15) 797 1,322
Year ended December 31, 1999 671 671 99(c) 482(b) 959
WARRANTY OBLIGATIONS (a)
Year ended December 31, 2001 2,062 531 -- 406 2,187
Year ended December 31, 2000 2,045 745 -- 728 2,062
Year ended December 31, 1999 3,713 341 (1,525)(c) 484(b) 2,045
(a) Progression of account has been restated to exclude accounts associated with
the discontinued operation
(b) Accounts deemed to be uncollectible
(c) Includes amounts purchased in business acquisition and sold in business
divestiture
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 1999 fiscal year 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 March 31, 2002. The Board of
Directors of the Company consisted of two (2) members at March 31, 2002.
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 50 Chairman of the Board
Joseph Dominijanni 45 President, Chief Executive Officer, Treasurer and Director
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.
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.
On February 15, 2002, J. Larry Powell resigned his position as Chief
Operating Officer and Vice President - Sales and Marketing.
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 $100,000 during the fiscal year ended December 31, 2001
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company and its subsidiaries during the fiscal years ended
December 31, 2001, 2000 and 1999.
Long Term
Compensation
------------
Annual Compensation ($)(1) Awards (2)
----------------------------------- ------------ All
Securities Other
Name and Underlying Compensation
Principal Position Year Salary Bonus Options/SARs(#) ($) (3)
------------------ ---- ------ ----- --------------- ------------
Joseph Dominijanni 2001 250,000 -- -- 4,046(3)
President, Chief Executive 2000 -- -- -- --
Officer and
Treasurer 1999 -- -- -- --
J. Larry Powell 2001 207,173 -- -- 8,111(3)
Chief Operating Officer and Vice 2000 208,157 -- -- 7,146(3)
President-Sales and Marketing 1999 164,000 14,000 -- 7,092(3)
Jonathan K. Schoenike 2001 165,400 -- -- 6,082(3)
Secretary and 2000 209,756 -- -- 5,817(3)
General Counsel 1999 163,375 14,000 -- 5,333(3)
(1) Other annual compensation to the Named Executive Officers did not
exceed $50,000 or 10% of total annual salary and bonus during any
fiscal year.
(2) Represents awards of options to purchase shares of common stock under
the 1996 Stock Option Plan.
(3) Amounts include Company matching contribution under the 401(k) plan (in
an amount equal to 50% of the officers contribution) and insurance
premiums paid by the Company for the benefit of the officer.
OPTION GRANTS
The Company issued options to purchase up to 40,000 and 45,000 shares
of common stock to various officers, directors and employees of the Company or
its subsidiaries during the fiscal years ended December 31, 2000 and 1999,
respectively. The Company granted no stock options during the year ended
December 31, 2001.
The following table sets forth certain information concerning each
exercise of stock options during the year ended December 31, 2001 by each of the
Named Executive Officers and the aggregated fiscal year-end value of the
unexercised options of each Named Executive Officer.
AGGREGATED OPTION EXERCISES IN FISCAL 2001 AND
OPTION VALUE AS OF DECEMBER 31, 2001
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS AT
ACQUIRED ON VALUE AT FISCAL YEAR END(#) FISCAL YEAR END($)(1)
--------------------- ---------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Joseph Dominijanni 0 0 25,000 0 0 0
J. Larry Powell 0 0 38,000 17,000 0 0
Jonathan K. Schoenike 0 0 38,000 17,000 0 0
(1) Based on the average of reported bid and asked prices for the Common
Stock on December 31, 2001.
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 expired in
2001. 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.
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, 2001, options to purchase a total of 642,000 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, 2001, 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. The Board of
Directors did not meet during fiscal year ended December 31, 2001; however, all
actions taken by the Board of Directors during the year were accomplished by
means of unanimous written consent.
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 March 31,
2002, 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 2,453,626(3) 17.75%
Amedia Family Limited Partnership 1,500,000 10.85%
Joseph Dominijanni 27,000(4) *
Jonathan K. Schoenike 61,000(5) *
All directors and executive officers
of the Company as a group (3 persons) 7,639,133(6) 55.01%
* 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, 860 Boardman -
Canfield Road, Boca Building, Suite 107, Boardman, Ohio 44512.
(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 March 31, 2002 or within sixty days
thereafter.
(5) Includes 41,000 shares of common stock which are subject to unexercised
options that were exercisable on March 31, 2002 or within sixty days
thereafter.
(6) Includes 66,000 shares of common stock which are subject to unexercised
options that were exercisable on March 31, 2002 or within sixty days
thereafter as described above.
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"). In 1999, the Company agreed to pay AAPH
an acquisition consulting fee of 1.44% of the transaction price of each
acquisition transaction consummated by the Company with respect to which AAPH or
its affiliates provides acquisition consulting services. This agreement was
discontinued in 2000. 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. No
acquisition consulting fees were paid in 1999. The Company paid AAPH fees of
$200,000 for management fees and other transaction services provided in 1999. No
such fees were paid to AAPH in 2000 or 2001.
The Company contracts for air charter services at market rates with a
company affiliated with AAPH and Mr. Amedia. The Company paid approximately
$375,000 and $10,000 to this company for air charter services in 1999 and 2000,
respectively. No air charter services were contracted in 2001.
In October 1998, the Company entered into an operating lease at market
rates with a company controlled by its majority shareholder and paid $150,000
under this lease during the year ended December 31, 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. The Company
sold approximately $238,000 in windows to Mr. Hofmeister in 2001. Approximately
$220,000 related to the 2001 sales was remitted to the Company in 2002.
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.
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
The Company filed no current reports on Form 8-K during the fourth
quarter of 2001.
(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 D
American Glassmith, Inc.
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
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 to 11 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 11 -3/4% 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 H
Corporation and United States Trust Company of New York.
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 & D
Company Securities, Inc.
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 J
Two Acquisition Corporation and the Institutions from time to time party hereto as
Lenders and BankBoston, N.A. as Agent.
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 K
time to time party hereto as Lenders and BankBoston, N.A. as Agent.
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 L
party hereto as Lenders and BankBoston, N.A. as Agent.
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 L
party hereto as Lenders and BankBoston, N.A. as Agent.
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 M
party hereto as Lenders and BankBoston, N.A. as Agent.
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 M
party hereto as Lenders and BankBoston, N.A. as Agent.
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 N
time to time party hereto as Lenders and BankBoston, N.A. as Agent.
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.
10.12b Amendment No. 2 and Waiver to Revolving Credit and Term Loan Agreement dated as of O
April 5, 2002, 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.
10.14 Asset Purchase Agreement dated December 31, 2001 among American Architectural Products *
Corporation, American Weather-Seal Co. and Profile Group, LLC.
10.15 Asset Sale Agreement between Binnings Acquisition Corporation and American Architectural *
Products Corporation and Binnings Building Products, Inc. dated as of December 19, 2001.
10.16 Asset Purchase Agreement between and among American Glassmith, Inc., American Architectural *
Products Corporation, Arch Ohio, Inc. and Arch Aluminum and Glass Company, Inc. dated
February 8, 2002.
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. 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.
O Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30,
2001, filed May 21, 2002.
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.
May 22, 2002 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 May 22, 2002
George S. Hofmeister
/s/ Joseph Dominijanni
- ------------------------------------ President, Chief Executive Officer and Director May 22, 2002
Joseph Dominijanni (Principal Executive Officer)