-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WIPe8hFgqejpx1sLrBYPkevnFAz6/2QQrH3rmN8PjjW++pU1duaXPItooo2UMDvQ RguxnA2I6+WOR7D6TGkKFg== 0000950135-97-001578.txt : 19970401 0000950135-97-001578.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950135-97-001578 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIRD CORP CENTRAL INDEX KEY: 0000012245 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-LUMBER & OTHER CONSTRUCTION MATERIALS [5030] IRS NUMBER: 043082903 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-00828 FILM NUMBER: 97570959 BUSINESS ADDRESS: STREET 1: 1077 PLEASANT ST STREET 2: STE 120 CITY: NORWOOD STATE: MA ZIP: 02062 BUSINESS PHONE: 6175510656 MAIL ADDRESS: STREET 1: 980 WASHINGTON ST CITY: DEDHAM STATE: MA ZIP: 02026 FORMER COMPANY: FORMER CONFORMED NAME: BIRD INC DATE OF NAME CHANGE: 19900419 FORMER COMPANY: FORMER CONFORMED NAME: BIRD & SON INC DATE OF NAME CHANGE: 19830719 10-K 1 BIRD CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1996 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 0-828 BIRD CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-3082903 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1077 Pleasant Street, Norwood, MA 02062 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 551-0656 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange ------------------- on which registered ------------------- NONE NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $1 per share (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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 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.___ The aggregate market value of common stock, par value $1 per share, held by non-affiliates as of March 3, 1997 was $16,684,000. As of March 3, 1997 there were 4,144,800 shares of Bird Corporation common stock, par value $1 per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the Commission by April 30, 1997 are incorporated by reference into Parts I and III of this report. 2 PART I ITEM 1. DESCRIPTION OF BUSINESS Bird Corporation is engaged in the manufacture, sale and marketing of roofing products. Products currently manufactured at Bird Corporation's roofing facility include asphalt shingles and roll roofing for commercial and residential use. These products are marketed through independent wholesalers, including wholesalers whose primary customers are roofing contractors. All references herein to the "Company" or "Bird" refer to Bird Corporation and its subsidiaries unless otherwise indicated by the context. SIGNIFICANT BUSINESS DEVELOPMENT _ On March 14, 1996, the Company signed a definitive agreement with CertainTeed Corporation, a subsidiary of Saint-Gobain Corporation, providing for CertainTeed to acquire in a merger transaction all of the Company's outstanding common, preferred and preference shares. Subsequently, on May 10, 1996, the Company received a notice from CertainTeed that stated that CertainTeed terminated the merger agreement in accordance with its terms and allowed the related tender offer for the outstanding common and preference stock of the Company to expire without accepting any shares. HOUSING GROUP Asphalt roofing products are manufactured and sold at the Company's facilities in Norwood, Massachusetts. Asphalt shingles and roll roofing are produced by coating a fiberglass mat with a mixture of hot asphalt and crushed rock filler and covering the coated mat with Company-manufactured roofing granules. The Company's facilities include a roofing manufacturing facility, a granule plant, a quarry, an asphalt plant and a private landfill for the Company's use. The Company's Housing Group produced vinyl siding products at its plant in Bardstown, Kentucky prior to the sale of such facility in March 1995. Additionally, the Company sold its interest in Kensington, its joint venture in the replacement window fabrication business in June 1995. The Housing Group also carried on a distribution business through wholesale building materials distributors based in New England, New York, Kentucky, Texas, Louisiana, and Arizona until such businesses were sold in August and November 1994. 2 3 Net sales of the components of the Housing Group as a percentage of consolidated net sales of the Company were as follows: sales of asphalt roofing products, 100% in 1996, 80% in 1995 and 31% in 1994; sales of vinyl products, 20% in 1995 and 24% in 1994; and sales through building materials distribution centers (including roofing and vinyl products manufactured by the Company), 45% in 1994. One customer accounted for slightly more than 15% and 10% of the Company's sales during 1996 and 1995, respectively. The principal geographic markets for the Company's manufactured roofing products, due to limitations imposed by freight costs, are the northeastern United States. The building materials business is seasonal to the extent that outside repair and remodeling and new construction decline during the winter months. To reduce the impact of this seasonal factor, the Company generally employs what it believes to be an industry-wide practice of "winter dating", pursuant to which extended or discounted payment terms are offered to credit-worthy customers who order and accept delivery of roofing products during specified periods of time in the slow season. RAW MATERIALS The principal raw materials used in the manufacture of asphalt roofing products are fiberglass mat, asphalt saturants and coatings and crushed granules. The Company's requirements for fiberglass mat are met primarily with one vendor under an agreement which expires December 31, 1999 with an option to extend for an additional two years. Fiberglass mat is also generally available in adequate quantities from a number of outside suppliers. Asphalt saturants and coatings were, until recently, purchased from a major oil refinery. These materials are also available from other sources at a higher delivered cost. Since completion of construction of an asphalt plant in January 1995, the Company has been able to process asphalt at its roofing facility, thereby reducing its costs and decreasing the potential for temporary interruptions in its manufacturing operations. The Company can produce all of its current granule requirements at its granule plant. BACKLOG Order backlog is not a meaningful measure of the Company's building materials business because there are fewer sales during the last quarter of the fiscal year and the order-to-shipment cycle is relatively short. Additionally, it is very rare, at any time, to require more than 30 days from the receipt of a product order to delivery of the product. 3 4 COMPETITION The building materials business is, to a large degree, a commodities-type business and is highly competitive with respect to price, delivery terms and consistent product quality. Many of the Company's competitors are larger and financially stronger than the Company, but none is dominant in any of its markets. The strengths of the Company's asphalt roofing business arise, in part, from the unique marketing programs the Company directs toward its indirect customer base, professional roofing contractors, combined with an industry-wide reputation for providing quality products with a high level of service. The Company's comprehensive contractor marketing program is designed to support the position of the Company's contractors in the industry. Such marketing programs include a special system for in-home sales promotions. Pursuant to its exclusive certification program, the Company also certifies contractors who have recorded three (3) successful years in business, who provide the Company with names of customers for quality checks, sign a letter of ethics, have a good credit history, warrant their workmanship for two (2) years and attend annual training meetings. Contractors must be recertified every three years. Certified contractors are supplied with a wide array of marketing materials, including customized sample cases, special mailers and custom job site signs. INTELLECTUAL PROPERTY The Company owns a number of trademarks, as well as significant technology and know-how, which it utilizes in connection with its asphalt roofing business. The Company believes that its trademarks are strong and well recognized in the industry. COMPLIANCE WITH CERTAIN ENVIRONMENTAL LAWS The Company has expended, and expects to continue to expend, funds to comply with federal, state and local provisions and orders which relate to the environment. Based on the information available to the Company at this time, the Company believes that the effect of compliance with these provisions on the capital expenditures, earnings and competitive position of the Company is not material. Litigation and other proceedings involving environmental matters are described under the heading "Environmental Matters" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Item 3, "Legal Proceedings". FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS While the Company formerly operated in two major business segments, its housing segment and its environmental segment, the Company no longer operates its environmental segment. Financial information 4 5 about the industrial segments in which the Company operated, for the three years ended December 31, 1996, appear in Note 12 of the Notes to Consolidated Financial Statements which are included herein. EMPLOYEES At December 31, 1996, the Company employed 164 people. ITEM 2. PROPERTIES The Company's executive offices are located at its plant in Norwood, Massachusetts. The Company believes that its plant and facilities, as described below, are suitable and adequate for its current and anticipated business. Operating capacity can be increased by additional man hours, changing product mix, and/or minimal capital investment should the need arise. The Company's facilities are well maintained, in sound operating condition, and in regular use. ROOFING MANUFACTURING FACILITY The Company owns its asphalt roofing manufacturing facility in Norwood, Massachusetts. The Norwood plant includes the roofing manufacturing facility, a granule plant and an asphalt plant. The Company's quarry is located in Wrentham, Massachusetts, and its private landfill is located in Walpole, Massachusetts. The Company leases an industrial laminator and certain other equipment which were fabricated for use in its roofing plant. The laminator lease expires in 1998. The Company completed the construction of an asphalt oxidizer plant at the Norwood premises in January 1995 to ensure a continuous supply of asphalt. The Company also leases an asphalt storage tank and terminal facilities in Providence, Rhode Island. ITEM 3. LEGAL PROCEEDINGS The Company monitors its compliance with environmental regulations on an ongoing basis. The Company's general counsel receives environmental site assessments from the operating managers responsible for site environmental compliance. Appropriate action is undertaken where needed. When environmental claims are asserted against the Company, the claims are evaluated by the Company's general counsel and operating management in conjunction with external legal counsel and environmental engineers as necessary, and action is taken with respect to all known sites, as appropriate. The Company is currently engaged in proceedings relating to or has received notice of the following environmental matters: On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ") issued a notice of violation ("NV") to Southwest Roofing Supply, a previously owned division of the Company ("Southwest"), which directed Southwest to conduct a site investigation of property formerly leased by Southwest. The consent order between the ADEQ and 5 6 the Company was issued on September 23, 1994. Pursuant to the order, the Company agreed to submit a work plan with a view to remediating the soil and groundwater that may have been contaminated by leaks from an underground storage tank previously removed by the Company. On December 23, 1996, the consent order was satisfactorily closed between the ADEQ and the Company; however, the remediation work must still be completed. The Company's management believes that the remediation cost to the Company will be in the range of $200,000 to $300,000. As of December 31, 1996, the Company has provided a reserve of $300,000 for the estimated cost of clean-up. The Company anticipates that $250,000 will be reimbursed to the Company by the ADEQ in accordance with Arizona law and regulation. In 1986, the Company, along with numerous other companies, was named by the EPA and other governmental agencies responsible for regulation of the environment as a Potentially Responsible Person ("PRP") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA") in connection with hazardous substances at a site known as the Fulton Terminal Superfund site located in Fulton, Oswego County, New York. On September 28, 1990, the Company and a number of other PRPs reached a negotiated settlement with the EPA pursuant to which the settling PRPs agreed to pay the costs of certain expenses in connection with the proceedings and to pay certain other expenses, including the costs and expenses of administering a trust fund to be established by the settling PRPs. The settlement agreement is embodied in a consent decree lodged with the United States District Court for the Western District of New York and fixed the Company's proportionate share of the total expenses. The soil has been cleaned- up and the groundwater is now being treated. The remaining cost to the Company of the remedial work and other expenses covered by the settlement agreement is estimated to be approximately $350,000 payable during 1997. At December 31, 1996, the Company has a reserve of $350,000 to cover the estimated cost of the Company's remaining proportionate share (i.e., 17%) of the cost to clean-up the groundwater. Under a cost-sharing arrangement set forth in a consent decree with the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of remediation of this site. The Company has been named as a PRP with respect to certain other sites which are being investigated by federal or state agencies responsible for regulation of the environment. As a consequence of its status as a PRP, the Company may be jointly and severally liable for all of the potential monetary sanctions and remediation costs applicable to each site. In assessing the potential liability of the Company at each site, management has considered, among other things, the aggregate potential clean-up costs of each site; the apparent involvement of the Company at each site and its prospective share of the remediation costs attributable thereto; the number of PRPs identified with respect to each site and their financial ability to contribute their proportionate shares of the remediation costs for such site; the availability of insurance coverage for the Company's involvement at each site and the likelihood that such coverage may be contested; and whether and to what extent potential sources of contribution from other PRPs or indemnification by insurance companies 6 7 constitute reliable sources of recovery for the Company. Similar consideration has been given in determining the exposure and potential liability of the Company in connection with other significant legal proceedings to which the Company is a party. On the basis of such consideration, management has determined that such environmental matters will not have a material adverse effect on the Company's financial position or results of operations. The Company has provided an aggregate reserve amounting to approximately $250,000 for its estimated share of the ultimate cost of clean-up for claims arising from other such sites (without taking into account any potential indemnification or recovery from third parties). Since 1981 Bird has been named as a defendant in approximately 650 product liability cases throughout the United States by persons claiming to have suffered asbestos-related diseases as a result of alleged exposure to asbestos used in products manufactured and sold by Bird. Approximately 200 of these cases are currently pending and costs of approximately $2 million in the aggregate have been incurred in the defense of these claims since 1981. Employers Insurance of Wausau ("Wausau") has accepted the defense of these cases under an agreement for sharing of the costs of defense, settlements and judgments, if any. At December 31, 1996, the Company has recorded a reserve of $950,000 to cover the estimated cost of these claims. In light of the nature and merits of the claims alleged, in the opinion of management, the resolution of these remaining claims will not have a material adverse effect on the results of operations or financial condition of the Company. In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly Atlantic Building Products Corporation ("ABPCO"), commenced an action against a former vendor, alleging violation of an exclusive distributorship without adequate and fair compensation to ABPCO. A jury trial was held in November 1995 in the Superior Court of Plymouth County, Massachusetts. The jury found in favor of ABPCO and judgement was entered on January 26, 1996 in the principal amount of approximately $1.8 million. The award, with interest accruing at 12% per annum, is expected to be in excess of $3 million and will not be reported as income until collected. The defendant has appealed the judgement. On April 16, 1996, a class action suit was filed in the Superior Court of the Commonwealth of Massachusetts against Bird Incorporated, a wholly owned subsidiary of the Company. The complaint alleges that Bird Incorporated has knowingly manufactured, distributed and falsely advertised defectively designed fiber glass based roofing shingles. The complaint sets forth claims of fraud, negligent misrepresentation, negligence and breach of express and implied warranty. The Company is currently in the process of evaluating the complaint. The Company has tendered the defense of the action to its insurance carriers. Two of its insurance carriers have assumed its defense. 7 8 INSURANCE AND PRODUCT LIABILITY CLAIMS On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk County, Massachusetts, against Bird seeking a declaratory judgment that certain built-up roofing and glass shingle claims made against Bird were not covered by liability insurance policies issued by Wausau. Bird asserts that the claims are covered and has answered the complaint. A trial is scheduled for 1998. In the opinion of management, the above matter will not have a material adverse effect on the Company's financial position or results of operations. The Company is also exposed to a number of other asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management, the resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. The Company is a defendant in a number of suits alleging product defects, the outcome of which management believes will not in the aggregate have a material impact on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the quarter ended December 31, 1996. EXECUTIVE OFFICERS OF THE REGISTRANT The names and ages of the executive officers of the Company as of March 7, 1997, the date from which they have served as officers and their present positions with the Company are as follows: Richard C. Maloof 51 January 1985 President and Chief Operating Officer Frank S. Anthony 50 May 1984 Vice President, General Counsel and Corporate Secretary
Mr. Maloof joined the Company in October 1971. He has held various positions such as Senior Roofing Engineer, Manufacturing Manager - Pacific Division, Vice President of Manufacturing and President of the Roofing Division. Mr. Maloof holds an engineering degree. He was elected President and COO in May 1995 and was also elected to the Board of Directors in 1995. Mr. Anthony is an attorney and joined the Company in 1983. These officers are appointed annually at an organizational meeting of the Board of Directors immediately following the annual meeting of stockholders. There are no family relationships among any of the 8 9 officers of the Company nor are any of the officers related to any member of the Board of Directors. The Company has entered into employment agreements with its two executive officers. Mr. Maloof's agreement provides severance benefits to him after a change in control of the Company. Mr. Anthony's agreement provided that severance benefits would be payable to him on March 31, 1996. The agreement automatically converted to an oral agreement on the same terms and conditions terminable by either party on 60 days notice. These agreements are described in the Company's definitive proxy statement for its 1997 Annual Meeting which is to be filed with the Commission by April 30, 1997 and is incorporated herein by reference. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS COMMON STOCK INFORMATION The Company had 2,041 common shareholders of record at December 31, 1996. The common stock is quoted in the National Market System under the NASDAQ symbol BIRD. The range of high and low prices for the common stock as reported by NASDAQ for the periods indicated is set forth below.
1996 1995 ---- ---- QUARTER HIGH LOW HIGH LOW ------- ---- --- ---- --- FIRST 7 5/8 4 l/8 9 7 3/4 SECOND 7 1/2 3 1/4 8 5/8 6 1/4 THIRD 4 3/4 2 3/4 8 1/2 5 7/8 FOURTH 6 4 l/2 6 5/8 4 1/2
The Company paid no cash dividends on its common stock during 1996 or 1995. Under the terms of the Loan Agreement between the Company and Fleet Capital, the Company has agreed that it will refrain from paying cash dividends on its common stock or its $1.85 cumulative preference stock, without prior approval from the Bank. The Company is in arrears in the payment of five dividends on its preference stock. The Articles of Organization of the Company provide that as long as any arrearage on the payment of dividends on the Company's 5% preferred stock exists, no dividends may be declared or paid on any other class of stock of the Company and further provides that in the event that full cumulative dividends on the preference stock have not been declared and paid, the Company may not declare or pay any dividends or make any distributions on, or purchase, redeem, 9 10 or otherwise acquire, its common stock until full cumulative dividends on the preference stock have been declared and paid or set aside for payment. 10 11 ITEM 6. SELECTED FINANCIAL DATA The following tables set forth certain financial data and are qualified in their entirety by the more detailed Consolidated Financial Statements and information included elsewhere herein: SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- -------- -------- (In thousands, except per share amounts) Net sales $51,956 $54,180 $167,886 $187,745 $164,202 ------- ------- ------- -------- -------- Costs and expenses: Cost of sales 43,840 48,007 136,878 151,664 128,371 Selling, general and administrative expenses 5,764 11,817 28,786 32,716 27,811 Other expense, net 667 372 4,680 5,903 (197) Interest expense 435 927 4,782 2,472 1,506 Loss (gain) on disposal of businesses (919) (17,570) (1,313) 268 178 ------- ------- -------- -------- -------- Earnings (loss) from continuing operations before income taxes 2,169 10,627 (5,927) (5,278) 6,533 Provision (benefit) for income taxes 0 11,424 (7,010) (637) 869 ------- ------- -------- -------- -------- Earnings (loss) from continuing operations before cumulative effect of accounting change 2,169 (797) 1,083 (4,641) 5,664 ------- ------- ------- -------- -------- Discontinued operations: Gain (loss) from operations of discontinued businesses, net of taxes 0 0 1,245 (15,414) (2,573) Income (loss) on disposal of businesses, net of taxes 134 (11,252) (6,011) (11,000) 0 ------- ------- -------- -------- -------- Net earnings (loss) from discontinued operations 134 (11,252) (4,766) (26,414) (2,573) ------- ------- -------- -------- -------- Cumulative effect of accounting change 0 0 0 2,733 0 ------- ------- -------- -------- -------- Net earnings (loss) $ 2,303 $(12,049) $ (3,683) $(28,322) $ 3,091 ======= ======== ======== ======== ======== Primary earnings (loss) per common share: Continuing operations $ 0.15 $ (0.57) $ (0.11) $ (1.51) $ 1.00 Discontinued operations 0.03 (2.74) (1.20) (6.45) (0.62) Cumulative effect of accounting change 0.00 0.00 0.00 0.67 0.00 ------- ------- -------- -------- -------- Net earnings (loss) per common share $ 0.18 $ (3.31) $ (1.31) $ (7.29) $ 0.38 ======= ======= ======== ======== ======== Cash dividend per common share $ 0.00 $ 0.00 $ 0.00 $ 0.15 $ 0.20 ======= ======= ======== ======== ======== Book value per common share $ 1.56 $ 1.45 $ 5.07 $ 5.75 $ 12.83 ======= ======= ======== ======== ========
SELECTED CONSOLIDATED BALANCE SHEET DATA
DECEMBER 31, --------------------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- -------- -------- (In thousands) Total assets $39,669 $43,703 $85,705 $123,229 $119,075 Working capital $ 3,375 $ 5,978 $ 5,627 $ 30,090 $ 43,782 Long-term debt, excluding current portion $ 255 $ 4,869 $12,504 $ 43,127 $ 30,374 Stockholders' equity $25,270 $24,416 $37,718 $ 40,561 $ 69,101
11 12 BIRD CORPORATION AND SUBSIDIARIES ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION As of December 31, 1996, the Company had cash and equivalents on hand totaling $2,310,000 and total debt of approximately $2.4 million. The Company plans to continue its aggressive efforts of managing working capital as a means of generating funds. The Company's external financing needs are augmented by the ability of its wholly owned subsidiary, Bird Incorporated, to borrow under the three year Loan and Security Agreement (the "Loan Agreement") dated November 30, 1994 between Bird and Fleet Capital Corporation ("Fleet Capital"). At the end of the three year period, the Loan Agreement will be automatically renewed for successive one year periods unless terminated specifically in writing. On March 8, 1995, Fleet Capital executed the First Amendment to the Loan Agreement amending the amount of the facility to $20 million consisting of a $15 million revolving credit commitment and a $5 million term loan. Up to $5 million of the revolving credit facility can be used for letters of credit. At December 31, 1996, $1,804,000 of debt was outstanding under this agreement and letters of credit totaled $1,401,000 compared to $2,233,000 as of December 31, 1995. Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by the Company and the Company's other subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The revolving credit line availability is determined with reference to a percentage of accounts receivable and inventory which are pledged to the lender. During the period January 1 through April 30, the Loan Agreement provides a $2 million over advance on accounts receivable and inventories in order to assist the Company in assuring adequate funding of any seasonal build up of accounts receivable which may occur under sales programs offered during the winter months. Currently, the availability calculation does not allow borrowings to the full extent of the revolving credit commitment, due to the seasonality of the building materials manufacturing business. As of March 20, 1997, an aggregate of $7,654,000 was available to Bird under the terms of the revolving credit facility under the Loan Agreement of which $5,243,000 remains available, net of current borrowings and letter of credit utilization. The Loan Agreement contains financial and operating covenants which, among other things, (i) require the Company to maintain prescribed levels of tangible net worth, net cash flow and working capital and (ii) place limits on the Company's capital expenditures. The Loan Agreement also contains restrictions on indebtedness, liens, investments, distributions (including payment of common and preference dividends), mergers, acquisitions and disposition of assets. As of December 31, 1996, the Company was in compliance with each of the 12 13 prescribed financial and operating covenants as outlined in the Loan Agreement. Interest on the revolving credit commitment under the First Amended Loan Agreement accrues at the Fleet Capital base rate (as specified in such Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the Company's election on all borrowings plus the greater of $25,000 per annum or 1/4% on any unused portion of the commitment payable monthly in arrears. The interest on the term loan accrues at the base rate or the LIBOR rate plus 2 3/4% at the Company's election. The interest rate on outstanding borrowings at December 31, 1996 was 8.125%. The repayment of the principal on the term loan is at the rate of $71,417 per month with a final principal payment of $1,018,000 due on November 30, 1997. Proceeds in excess of $100,000 from the sale of fixed assets may, at Fleet Capital's discretion, be applied to the outstanding principal payments of the term loan. Net cash and equivalents decreased during fiscal 1996 by approximately $1.4 million primarily due to repayments of debt. The Company generated cash of $4.4 million from operating activities, including $2.3 million from net earnings, $2,8 million from depreciation and amortization, $1.3 million from decreased prepaid expenses, primarily offset by $1.6 million in increased liabilities unrelated to financing activities. The Company used $1.1 million in investing activities for the period ended December 31, 1996 as compared to $47.3 million of net cash provided from investing activities for the same period in the prior year. The change is the result of approximately $50.7 million of cash proceeds from the sale of assets of the vinyl and window businesses, offset by cash used for capital expenditures and additional investments in discontinued operations aggregating approximately $4 million for the period ended December 31, 1995 compared to capital expenditures of $1.1 million for the same period in 1996. The net cash used in financing activities changed by approximately $21.1 million from the same period in the prior year. Cash used in financing activities during 1996 was primarily due to approximately $4 million of net debt repayments as compared to 1995 when the Company had net debt repayments of approximately $24 million. The Company believes that cash flow generated from operations and funds available as a result of its borrowing capacity will be adequate to meet its working capital obligations, projected capital expenditures and other financing needs. ENVIRONMENTAL MATTERS The Company monitors its compliance with environmental regulations on an ongoing basis. The Company's general counsel receives environmental site assessments from the operating managers responsible for site environmental compliance. Appropriate action is undertaken where needed. When environmental claims are asserted against the Company, 13 14 the claims are evaluated by the Company's general counsel and operating management in conjunction with external legal counsel and environmental engineers as necessary, and action is taken with respect to all known sites, as appropriate. The Company is currently engaged in proceedings relating to or has received notice of the following environmental matters: On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ") issued a notice of violation ("NV") to Southwest Roofing Supply, a previously owned division of the Company ("Southwest"), which directed Southwest to conduct a site investigation of property formerly leased by Southwest. The consent order between the ADEQ and the Company was issued on September 23, 1994. Pursuant to the order, the Company agreed to submit a work plan with a view to remediating the soil and groundwater that may have been contaminated by leaks from an underground storage tank previously removed by the Company. On December 23, 1996, the consent order was satisfactorily closed between the ADEQ and the Company; however, the remediation work must still be completed. The Company's management believes that the remediation cost to the Company will be in the range of $200,000 to $300,000. As of December 31, 1996, the Company has a reserve of $300,000 for the estimated cost of clean-up. The Company anticipates that $250,000 will be reimbursed to the Company from the Arizona State Assurance Fund administered by the ADEQ in accordance with Arizona law and regulation. In 1986, the Company, along with numerous other companies, was named by the EPA and other governmental agencies responsible for regulation of the environment as a Potentially Responsible Person ("PRP") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA") in connection with hazardous substances at a site known as the Fulton Terminal Superfund site located in Fulton, Oswego County, New York. On September 28, 1990, the Company and a number of other PRPs reached a negotiated settlement with the EPA pursuant to which the settling PRPs agreed to pay the costs of certain expenses in connection with the proceedings and to pay certain other expenses, including the costs and expenses of administering a trust fund to be established by the settling PRPs. The settlement agreement is embodied in a consent decree lodged with the United States District Court for the Western District of New York and fixed the Company's proportionate share of the total expenses. The soil has been cleaned-up and the groundwater is now being treated. The remaining cost to the Company of the remedial work and other expenses covered by the settlement agreement is estimated to be approximately $350,000 payable during 1997. At December 31, 1996, the Company has provided a reserve of $350,000 to cover the estimated cost of the Company's remaining proportionate share (i.e., 17%) of the cost to clean-up the groundwater. Under a cost-sharing arrangement set forth in a consent decree with the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of remediation of this site. The Company has been named as a PRP with respect to certain other sites which are being investigated by federal or state agencies responsible for regulation of the environment. As a consequence of its status as a PRP, the Company may be jointly and severally liable for all of the 14 15 potential monetary sanctions and remediation costs applicable to each site. In assessing the potential liability of the Company at each site, management has considered, among other things, the aggregate potential clean-up costs of each site; the apparent involvement of the Company at each site and its prospective share of the remediation costs attributable thereto; the number of PRPs identified with respect to each site and their financial ability to contribute their proportionate shares of the remediation costs for such site; the availability of insurance coverage for the Company's involvement at each site and the likelihood that such coverage may be contested; and whether and to what extent potential sources of contribution from other PRPs or indemnification by insurance companies constitute reliable sources of recovery for the Company. Similar consideration has been given in determining the exposure and potential liability of the Company in connection with other significant legal proceedings to which the Company is a party. On the basis of such consideration, management has determined that such environmental matters will not have a material adverse effect on the Company's financial position or results of operations. The Company has provided an aggregate reserve amounting to approximately $250,000 for its estimated share of the ultimate cost of clean-up for claims arising from other such sites (without taking into account any potential indemnification or recovery from third parties). Since 1981 Bird has been named as a defendant in approximately 650 product liability cases throughout the United States by persons claiming to have suffered asbestos-related diseases as a result of alleged exposure to asbestos used in products manufactured and sold by Bird. Approximately 200 of these cases are currently pending and costs of approximately $2 million in the aggregate have been incurred in the defense of these claims since 1981. Employers Insurance of Wausau ("Wausau") has accepted the defense of these cases under an agreement for sharing of the costs of defense, settlements and judgments, if any. At December 31, 1996, the Company has recorded a reserve of $950,000 to cover the estimated cost of these claims. In light of the nature and merits of the claims alleged, in the opinion of management, the resolution of these remaining claims will not have a material adverse effect on the results of operations or financial condition of the Company. INSURANCE AND PRODUCT LIABILITY CLAIMS On April 16, 1996, a class action suit was filed in the Superior Court of the Commonwealth of Massachusetts against Bird Incorporated, a wholly owned subsidiary of the Company. The complaint alleges that Bird Incorporated has knowingly manufactured, distributed and falsely advertised defectively designed fiber glass based roofing shingles. The complaint sets forth claims of fraud, negligent misrepresentation, negligence and breach of express and implied warranty. The Company is currently in the process of defending against the complaint. The Company has tendered the defense of the action to its insurance carriers. Several of its insurance carriers have assumed its defense. In the opinion of management, the above matter will not have a material adverse effect on the Company's financial position or results of operations. 15 16 On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk County, Massachusetts, against Bird seeking a declaratory judgment that certain built-up roofing and glass shingle claims made against Bird were not covered by liability insurance policies issued by Wausau. Bird asserts that the claims are covered and has answered the complaint. A trial is scheduled for 1998. In the opinion of management, the above matter will not have a material adverse effect on the Company's financial position or results of operations. The Company is also exposed to a number of other asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management, the resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. The Company is a defendant in a number of suits alleging product defects, the outcome of which management believes will not in the aggregate have a material impact on the Company's financial position or results of operations. LEGAL MATTERS In 1992, a subsidiary of the company, Bird Atlantic Corporation, formerly Atlantic Building Products Corporation ("ABPCO"), commenced an action against a former vendor, alleging violation of an exclusive distributorship without adequate and fair compensation to ABPCO. A jury trial was held in November 1995 in the Superior Court of Plymouth County, Massachusetts. The jury found in favor of ABPCO and judgement was entered on January 26, 1996 in the principal amount of approximately $1.8 million. The award, with interest accruing at 12% per annum, is expected to be in excess of $3 million and will not be reported as income until collected. The defendant has appealed the judgement. In April 1996, the Company received a grand jury subpoena issued upon application of the United States Department of Justice, Antitrust Division, for the production of certain documents for its investigation of restraint of trade by manufacturers in the roofing industry. In addition, an executive officer and a senior manager of Bird received grand jury subpoenas to provide testimony before the grand jury. On October 9, 1996, the United States Department of Justice, Antitrust Division advised the Company that on September 27, 1996 the Department closed its investigation without taking any action against any companies or individuals. As a result of complying with the subpoenas and otherwise cooperating with the Justice Department, the Company incurred costs of approximately $300,000. TERMINATED MERGER AGREEMENT On March 14, 1996, the Company signed a definitive agreement with CertainTeed Corporation ("CertainTeed"), a subsidiary of Saint-Gobain Corporation, providing for CertainTeed to acquire in a merger 16 17 transaction all of the Company's outstanding common, preferred and preference shares. Subsequently, on May 10, 1996, the Company received a notice from CertainTeed that stated that CertainTeed terminated the merger agreement in accordance with its terms and allowed the related tender offer for the outstanding common and preference stock of the Company to expire without accepting any shares. The approximate cost associated with the termination of this merger agreement was $800,000. RESULTS OF OPERATIONS The Company's future prospects and sales are tied solely to one line of business (roofing manufacturing) which is dependent upon the economy in the northeastern United States. The Company produces all of its output at a single plant which relies on one major supplier for glass mat, a critical raw material. Nevertheless, the Company believes it has significant competitive advantages in this business. These advantages stem from, and are expected to continue in light of the Company's leading market share, its low cost production abilities resulting from a state-of-the-art plant, its internal supply of granules from its own quarry and granule plant and its asphalt oxidizing plant. 1996 COMPARED WITH 1995 Earnings from continuing operations before income taxes in 1996 were $2,169,000 compared to earnings of $10,627,000 in 1995. Net sales decreased 4.1% from $54,180,000 to $51,956,000 as compared to 1995, a consequence of the sale of the Company's window fabrication and vinyl products business units which had aggregate sales of $10,575,000. Cost of sales in 1996 as compared to 1995 decreased 8.7% from $48,007,000 to $43,840,000, primarily the result of the sale of the Company's window fabrication and vinyl products business units. Cost of sales, stated as a percentage of net sales, was 84.4% in fiscal 1996 as compared to 88.6% in fiscal 1995. Improvements in manufacturing efficiency contributed to the percentage decrease. Selling, general and administrative ("SG&A") expenses for fiscal 1996 decreased 51.2% from $11,817,000 to $5,764,000. SG&A expenses, as stated as a percentage of sales, decreased approximately 11% from year to year. The decrease was attributable to the sale of the Company's window fabrication and vinyl products business units, reduction in corporate staffing and operating expenses and reduction in roofing plant expenses. Other expenses in 1996 were primarily due to $806,000 of costs associated with the terminated merger agreement with CertainTeed. Interest expense in 1996 decreased approximately 53% or $492,000 as compared to 1995. The decrease reflects a reduction of debt by use of proceeds from the sale of the Company's vinyl products and window fabrication business units. 17 18 1995 COMPARED WITH 1994 Earnings from continuing operations before income taxes in fiscal 1995 were $10,627,000 compared to losses of $5,927,000 in fiscal 1994. Net sales from continuing operations decreased 67.7% from $167,886,000 to $54,180,000 as compared to 1994, primarily due to the sale of the Company's distribution and vinyl products business units. Sales from the roofing manufacturing business decreased $10,857,000 or 19.9% due to price weakness and a decline in volume. The decreased volume was attributable to a weak re-roofing market in the northeast caused by a mild 1994/1995 winter followed by a hot, dry summer. The Company is expanding its sales territories to include areas bordering the northeastern United States in an effort to replace lost volume. Cost of sales in 1995 was $48,007,000 as compared to $136,878,000 in 1994, constituting a decrease of 64.9%. The decline was primarily a result of the sale of the Company's distribution and vinyl products business units. Cost of sales for the roofing business decreased 18.4% or $8,662,000 due primarily to decreased manufacturing costs related to a decrease in sales volume. Although the Company experienced raw material price increases in glass mat and dry felt, the cost of asphalt, along with related freight, was reduced significantly as a result of the newly constructed asphalt oxidizer, which produces asphalt saturant and coatings. The oxidizer became operational in February 1995. From November 1995 through mid-February 1996, the oxidizer was temporarily shut down for repairs as a result of a fire in the plant. Cost of sales, stated as a percentage of net sales, was 88.6% in fiscal 1995 as compared to 81.5% in fiscal 1994. Roofing manufacturing cost of sales, as a percentage of sales, increased 1.6% from 86.2% to 87.8% in 1995. Increases in raw material costs and decreases in sales prices contributed to the percentage increase. Selling, general and administrative ("SG&A") expenses for fiscal 1995 decreased 59% from $28,786,000 to $11,817,000. The decrease was primarily attributable to the sale of the Company's distribution and vinyl products business units. However, SG&A expenses, as a percentage of sales, increased approximately 5% from year-to-year. The increase was due primarily to amortized costs associated with the 1994 refinancing of an earlier credit agreement, additional charges related to environmental remediation and costs associated with closing the Company's corporate office. The decrease in sales in the roofing business without a corresponding decline in certain fixed costs also contributed to the increase as a percentage of sales. Interest expense was $927,000 in 1995 as compared to $4,782,000 in 1994, an 80.6% decrease. The decrease resulted from the reduction of debt which occurred through the use of proceeds from the sale of the vinyl products and distribution business units. The gain on disposal of businesses in 1995 reflects the gain of $20,579,000 on the sale of the vinyl manufacturing business offset by the loss of $1,959,000 on the sale of the window fabrication business and a charge of $1,500,000 for costs associated with the Company's 18 19 employee benefit plans and future product liability claims, both related to former roofing operations. The fiscal 1994 gain on disposal of businesses reflects primarily the gain of $2,727,000 on the sale of all of the Company's building materials distribution businesses reduced by the loss of $1,261,000 on the sale of the Company's 40% interest in Mid-South Building Supply, Inc. Equity losses from the Company's partnership in the Kensington window fabrication business amounted to $372,000 for the period January 1, through February 28, 1995 as compared to $4,680,000 for the twelve month period ended December 31, 1994. A provision for income taxes from continuing operations amounting to $11,424,000 was recorded in 1995 compared to a benefit of $7,010,000 in 1994. The Company's decision to reverse $4 million of the valuation reserve in 1994 and subsequent decision to increase the reserve to $15.1 million in 1995 is the primary reason the effective tax rates differ from the statutory rate. At December 31, 1995 the Company's net deferred tax asset is approximately $19.1 million less a valuation reserve of $15.1 million. As required under FAS 109, this valuation reserve was determined based upon the Company's review of all available evidence including projections of future taxable income. During 1995, the Company disposed of Bird-Kensington Holding Corporation and Bird Environmental Gulf Coast, Inc. resulting in losses not anticipated at the end of the previous year. In addition, the lower overall demand and price weakness in the northeast caused by a mild 1994/1995 winter followed by a hot, dry summer negatively impacted profits of the roofing operations. During the second quarter of 1995, the Company's remaining investment in BEGCI of $8.6 million was written-off to discontinued operations and a $3 million reserve was established for additional costs associated with the closure and disposition of the facility (see Note 9 to Consolidated Financial Statements). In November 1995, the Company caused the sale of all the outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of $1.00. Of the $3 million reserve established in the second quarter of 1995, $2,050,000 was utilized, while $650,000 remained at December 31, 1995 for future claims against discontinued operations. In connection with the Board of Director's 1994 decision to withdraw from the "off-site" environmental business and the Company's agreement on June 18, 1994 to cause the sale of its shares in BEGCI to the minority stockholders on or before February 28, 1995, subject to financing, the Company reclassified the environmental business results as discontinued operations as of June 30, 1994 and adjusted the book value associated with BEGCI, resulting in an aggregate charge for the twelve months ended December 31, 1994 of $11,586,000. In 1993, in connection with its decision to withdraw from the "on-site" environmental remediation business, the Company charged the results of operations for the write-down of assets, the expected loss from operations and general expenses related to closing of such "on-site" remediation business (see notes to Consolidated Financial Statements). Based upon the actual outcome of the sale of assets and results of 19 20 operations, excess costs of $3,861,000 charged in 1993 were reversed and recorded as discontinued operations in the consolidated statement of operations for the year ending December 31, 1994. INFLATION The Company is continually seeking ways to deal with raw material cost increases by productivity improvements and cost reduction programs. In recent years, the Company has not always been able to pass on increased raw material costs to customers by increasing selling prices because of intense competitive pressures. The Company has an ongoing program of updating productive capacity to take advantage of improved technology, and although the cumulative impact of inflation has resulted in higher costs for replacement of plant and equipment, these costs have been offset, in part, by productivity savings. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and schedules of the Company are included in a separate section of this report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 20 21 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Items 10, 11, 12 and 13 (except the information on executive officers) is included in the Company's definitive proxy statement for its 1997 Annual Meeting of Stockholders which will be filed with the Commission by April 30, 1997 and which is incorporated herein by reference. Information on executive officers, required by Item 10, is included in PART I of this report under the heading "Executive Officers of the Registrant". PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) An Index of Financial Statements and Schedules is on page F1 of this report. The Exhibit Index is on pages 22 through 27 of this report. (b) Reports on Form 8-K - No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1996. (d) Financial Statements of Kensington Partners are on Page F30 through F52 of this report. 21 22 Items 14 (a) (3) and (c) Exhibits Bird Corporation Norwood, Massachusetts EXHIBIT INDEX
Sequential Exhibit No. Page No. - ----------- ---------- 3(a) Articles of Organization (Filed as Appendix B to the Company's Registration Statement on Form S-4, Registration No 33-34440 and incorporated herein by reference.) 3(b) By-laws of the Company as amended to date. (Filed as Exhibit 3(b) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 4(a)(1) Forbearance Agreement dated as of February 14, 1994 with regard to the Revolving Credit Agreement dated as of December 17, 1990, as amended. (Filed as Exhibit 4 (a)(3) to the Company's Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 4(a)(2) Third Amended and Restated Revolving Credit and Term Loan Agreement dated as of March 4, 1994 (Filed as Exhibit 4(a)(1) to the Company's Form 8-K dated March 14, 1994 and incorporated herein by reference.) 4(a)(3) Loan and Security Agreement dated as of November 30, 1994 (the "Loan Agreement") between Barclays Business Credit, Inc. (now known as Fleet Capital Corporation) and Bird Incorporated. (Filed as Exhibit 4(a)(3) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.) 4(a)(4) First Amendment dated as of March 8, 1995 to the Loan Agreement between Shawmut Capital Corporation (now known as Fleet Capital Corporation) and Bird Incorporated. (Filed as Exhibit 4(a)(4) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.)
22 23
Sequential Exhibit No. Page No. - ----------- ---------- 4(a)(5) Rights Agreement dated as of November 25, 1986 between the Company and the First National Bank of Boston, as Rights Agent. (Filed as Exhibit 1 to Registration Statement on Form 8-A dated December 5, 1986 and incorporated herein by reference.) 4(a)(6) First Amendment dated May 24, 1990 to Rights Agreement dated as of November 25, 1986. (Filed as Exhibit 4(b)(2) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(a)* Plan for Assistance to Key Employees in Financing Purchases of Company Stock (Filed as Exhibit 10(b) to the Company's report on Form 10-K for the year ended December 31, 1980 and incorporated herein by reference.) 10(b)* Plan for Deferring Payment of Senior Officer's Compensation (Adopted December 22, 1975). (Filed as Exhibit 10(c) to the Company's report on Form 10-K for the year ended December 31, 1980 and incorporated herein by reference.) 10(c)* 1975 Plan for Deferring Payment of Director's Compensation (Adopted June 23, 1975). (Filed as Exhibit 10(d) to the Company's report on Form 10-K for the year ended December 31, 1980 and incorporated herein by reference.) 10(d)* Settlement Agreement dated as of July 7, 1994 between Bird Corporation and George J. Haufler. (Filed as Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.) 10(e)* Management Incentive Compensation Program adopted January 25, 1983. (Filed as Exhibit 10(m) to the Company's report on Form 10-K for the year ended December 31, 1982 and incorporated herein by reference.)
23 24
Sequential Exhibit No. Page No. - ----------- ---------- 10(f)* Bird Corporation 1982 Stock Option Plan as amended through January 29, 1992. (Filed as Exhibit 10(f) to the Company's report on Form 10-K for the year ended December 31, 1991 and incorporated herein by reference.) 10(g)* Bird Corporation 1992 Stock Option Plan. (Filed as Exhibit 10(g) to the Company's report on Form 10-K for the year ended December 31, 1992 incorporated herein by reference.) 10(h)* Bird Corporation Non-Employee Director Stock Option Plan. (Filed as Exhibit 10(h) to the Company's report on Form 10-K for the year ended December 31, 1992 incorporated herein by reference.) 10(i)(1)* Form of severance agreement with eight key executive employees of the Company. (Filed as Exhibit 10(n) to the Company's report on Form 10-K for the year ended December 31, 1984 and incorporated herein by reference.) 10(i)(2)* Form of Amendment dated May 24, 1990 to form of severance agreement. (Filed as Exhibit 10(g)(2) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(k) Glass Mat Supply Agreement dated as of February 20, 1985 between the Company, The Flintkote Company and Genstar Roofing Company, Inc. (Filed as Exhibit 10(s) to Amendment No. 1 to the Company's report on Form 10-K for the year ended December 31, 1984 and incorporated herein by reference.) 10(l) Equipment Acquisition Agreement dated May 25, 1990 between BancBoston Leasing Inc. and Bird Incorporated. (Filed as Exhibit 10(j) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.)
24 25
Sequential Exhibit No. Page No. - ----------- ---------- 10(m) Equipment Acquisition Agreement dated July 23, 1986 between BancBoston Leasing Inc. and Bird Incorporated. (Filed as Exhibit 10(s) to the Company's report on Form 10-K for the year ended December 31, 1986 and incorporated herein by reference.) 10(n)(1)* Long Term Incentive Compensation Plan dated June 28, 1988. (Filed as Exhibit 10(v) to the Company's report on Form 10-Q for the quarter ended September 30, 1988 and incorporated herein by reference.) 10(n)(2)* Amendment dated May 24, 1990 to Long Term Incentive Compensation Plan. (Filed as Exhibit 10(o)(2) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(o) Amendment dated February 1, 1994 to the First Amended and Restated Partnership Agreement between Bird Vinyl Products, Inc. and Kensington Manufacturing Company. (Filed as Exhibit 10(o)(2) to the Company's report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 10(p)* Employment Agreement dated as of December 1, 1993 between the Company and Joseph D. Vecchiolla. (Filed as Exhibit 10(p) to the Company's report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 10(q)* Severance Agreement dated as of December 21, 1993 between the Company and Joseph D. Vecchiolla. (Filed as Exhibit 10(q) to the Company's report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 10(r)* Settlement Agreement dated as of November 25, 1994 between Bird Corporation and William A. Krivsky. (Filed as Exhibit 10(r) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.)
25 26
Sequential Exhibit No. Page No. - ----------- ---------- 10(s) Asset Purchase Agreement dated as of August 19, 1994 between Bird Incorporated, Atlantic Building Products Corporation, Greater Louisville Aluminum, Inc., Southwest Roofing Supply, Inc., Southwest Express, Inc., New York Building Products, Inc., and Wm. Cameron & Co. (Filed as Exhibit (1) to the Company's Form 8-K dated August 31, 1994 and incorporated herein by reference.) 10(t) Asset Purchase Agreement dated as of September 23, 1994 among Bird Corporation, Bird Incorporated, and Jannock, Inc. (as amended by amendments dated as of January 27, 1995 and January 31, 1995). (Filed as Exhibit B to the Company's proxy statement dated February 10, 1995 for the special meeting of the stockholders to be held on March 7, 1995 and incorporated herein by reference.) 10(u)* Employment Agreement dated as of July 31, 1995 between the Company and Frank S. Anthony. (Filed as Exhibit 10(u) to the Company's Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 10(v)* Amended Employment Agreement dated August 21, 1995 between the Company and Richard C. Maloof. (Filed as Exhibit 10(v) to the Company's Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 10(w) Stock Purchase Agreement dated as of November 29, 1995 by and among Bird Environmental Gulf Coast, Inc., Bird Environmental Technologies, Inc., Bird Corporation, GTS Duratek,Inc. and GTSD Sub II, Inc. (Filed as Exhibit 10(w) to the Company's report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference.) 10(x) Amended Glass Mat Supply Agreement dated as of December 1, 1995 between the Company, Flintkote Company and Genstar Roofing Company, Inc. (Filed as Exhibit 10(x) to the Company's report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference.) 10(y) Agreement and Plan of Merger by and among CertainTeed Corporation, BI Expansion Corporation and Bird Corporation dated as of March 14, 1996. (Filed as Exhibit 10(y) to the Company's report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference.)
26 27
Sequential Exhibit No. Page No. - ----------- ---------- 11 Statement regarding computation of per share earnings(loss). 22 Significant subsidiaries. 23(a) Consent of Price Waterhouse LLP. 23(b) Consent of Alpern, Rosenthal and Company, independent accountants for Kensington Partners. 24 Power of Attorney. (Immediately preceding the signature page hereof.) 28 Annual report on Form 11-K of the Bird Employees' Savings and Profit Sharing Plan for the fiscal year ended December 31, 1996. (To be filed by amendment.)
* Indicates management contract or compensatory plan or arrangement 27 28 POWER OF ATTORNEY We, the undersigned officers and Directors of Bird Corporation, hereby severally constitute and appoint Richard C. Maloof and Frank S. Anthony, and each of them severally, our true and lawful attorneys or attorney, with full power to them and each of them to execute for us, and in our names in the capacities indicated below, and to file with the Securities and Exchange Commission the Annual Report on Form 10-K of Bird Corporation, for the fiscal year ended December 31, 1996, and any and all amendments thereto. IN WITNESS WHEREOF, we have signed this Power of Attorney in the capacities indicated on February 25, 1997. Principal Executive Officer: /s/ Richard C. Maloof President, Director and - ----------------------------- Chief Operating Officer Richard C. Maloof Principal Accounting Officer: /s/ Donald L. Sloper, Jr. Corporate Controller - ----------------------------- Donald L. Sloper, Jr. Directors /s/ Robert P. Bass, Jr. /s/ Francis J. Dunleavy - ----------------------------- --------------------------- Robert P. Bass, Jr. Francis J. Dunleavy /s/ Charles S. Bird, Jr. /s/ R. Keith Long - ----------------------------- --------------------------- Charles S. Bird, Jr. R. Keith Long /s/ Antonio J. Lorusso, Jr. /s/ Joseph D. Vecchiolla - ----------------------------- --------------------------- Antonio J. Lorusso, Jr. Joseph D. Vecchiolla /s/ Loren R. Watts - ----------------------------- Loren R. Watts 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BIRD CORPORATION (Registrant) By /s/ Richard C.Maloof ----------------------------- Richard C. Maloof President, COO March 27, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report 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/ Richard C. Maloof President, Director, March 27, 1997 - -------------------------- and COO (Principal RICHARD C. MALOOF Executive Officer) /s/ Donald L. Sloper, Jr. Corporate Controller March 27,1997 - -------------------------- (Principal Accounting DONALD L. SLOPER, JR. Officer) * - -------------------------- Director March 27, 1997 JOSEPH D. VECCHIOLLA
30 SIGNATURES (continued) * - -------------------------- Director March 27, 1997 ROBERT P. BASS, JR. * - -------------------------- Director March 27, 1997 CHARLES S. BIRD, JR. * - -------------------------- Director March 27, 1997 FRANCIS J. DUNLEAVY * - -------------------------- Director March 27, 1997 ANTONIO J. LORUSSO, JR. * - -------------------------- Director March 27, 1997 R. KEITH LONG * - -------------------------- Director March 27, 1997 LOREN R. WATTS
* By /s/ Frank S. Anthony ----------------------------------- Frank S. Anthony as Attorney-in-fact 31 ANNUAL REPORT ON FORM 10-K ITEM 14 (a) (1) AND (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1996 BIRD CORPORATION NORWOOD, MASSACHUSETTS 32 Bird Corporation and Subsidiaries Form 10-K Items 14(a)(1) and (2) INDEX OF FINANCIAL STATEMENTS AND SCHEDULES The following consolidated financial statements of the registrant and its subsidiaries required to be included in Item 8 are listed below. Consolidated Financial Statements: Page Reports of independent accountants........................ F2 Balance sheets at December 31, 1996 and 1995.............. F4 Statements of operations for each of the three years in the period ended December 31, 1996....................... F6 Statements of stockholders' equity for each of the three years in the period ended December 31, 1996.............. F7 Statements of cash flows for each of the three years in the period ended December 31, 1996........ F8 Notes to consolidated financial statements................ F9
The following consolidated financial statement schedules of Bird Corporation and its subsidiaries are included in Item 14(a)(2) and should be read in conjunction with the financial statements included herein: Schedule II - Valuation and qualifying accounts.......... F29 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto. F1 33 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Bird Corporation We have audited the consolidated balance sheets of Bird Corporation and its subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, of stockholders' equity and of cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Kensington Partners, which statements reflect total net sales of $24.2 million and net losses of $5.3 million for the year ended December 31, 1994. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Kensington Partners, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. 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 and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements listed in the index appearing under Item 14(a) and (2) on Page F-1 present fairly, in all material respects, the financial position of Bird Corporation and its subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. /s/Price Waterhouse LLP Boston, Massachusetts February 20, 1997 F2 34 INDEPENDENT AUDITORS' REPORT To the Partners Kensington Partners and Affiliate Leechburg, Pennsylvania We have audited the combined balance sheet (presented elsewhere herein) of Kensington Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and the related combined statements of operations and partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Kensington Partners and Affiliate as of December 31, 1994, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Kensington partners and Affiliate will continue as going concerns. As discussed in Note 2 to the financial statements, the Companies have incurred significant operating losses and current liabilities exceed current assets. Those conditions, among others, raise substantial doubt about the Companies' ability to continue as going concerns. Management's plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania February 10, 1995 F3 35 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
DECEMBER 31, 1996 1995 ------- ------- ASSETS Current Assets: Cash and equivalents $ 2,310 $ 3,679 Accounts and notes receivable, less allowances - $150 in 1996 and $153 in 1995 5,191 5,461 Inventories 5,273 4,701 Refundable income taxes 0 1,021 Prepaid expenses and other assets 784 1,157 Deferred income taxes 435 435 ------- ------- Total current assets 13,993 16,454 ------- ------- Property, Plant and Equipment: Land and land improvements 3,099 2,810 Buildings 6,936 7,184 Machinery and equipment 30,455 28,980 Construction in progress 255 672 ------- ------- 40,745 39,646 Less - Depreciation and amortization 18,805 16,127 ------- ------- 21,940 23,519 ------- ------- Deferred income taxes 3,631 3,631 Other assets 105 99 ------- ------- $39,669 $43,703 ======= =======
See accompanying notes to consolidated financial statements. F4 36 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
DECEMBER 31, 1996 1995 -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 2,144 $ 3,394 Accrued expenses 6,214 5,881 Long-term debt, portion due within one year 2,177 1,113 Retirement plan contributions payable 83 88 -------- -------- Total current liabilities 10,618 10,476 Long-term debt, portion due after one year 255 4,869 Other liabilities 3,526 3,942 -------- -------- Total liabilities 14,399 19,287 -------- -------- STOCKHOLDERS' EQUITY 5% cumulative preferred stock, par value $100. Authorized 15,000 shares; issued 5,820 shares in 1996 and 1995 (liquidating preference $110 per share, aggregating $640,000) 582 582 Preference stock, par value $1. Authorized 1,500,000 shares; issued 814,300 shares of $1.85 cumulative convertible preference stock in 1996 and 1995(liquidating value $20 per share, aggregating $16,286,000) 814 814 Common stock, par value $1. Authorized 15,000,000 shares; 4,414,991 shares issued in 1996 and 4,395,162 shares issued in 1995 4,415 4,395 Other capital 27,436 27,362 Retained earnings (deficit) (4,986) (5,746) -------- -------- 28,261 27,407 Less - Treasury stock, at cost, Common stock: 275,102 shares in 1996 and 275,100 shares in 1995 (2,991) (2,991) -------- -------- 25,270 24,416 -------- -------- COMMITMENTS AND CONTINGENCIES (NOTE 11) $ 39,669 $ 43,703 ======== ========
See accompanying notes to consolidated financial statements. F5 37 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Year Ended December 31, 1996 1995 1994 ----------- ----------- ----------- Net sales $ 51,956 $ 54,180 $ 167,886 ----------- ----------- ----------- Costs and expenses: Cost of sales 43,840 48,007 136,878 Selling, general and administrative expense 5,764 11,817 28,786 Equity losses from partnership 0 372 4,680 Other expense, net 667 0 0 Interest expense 435 927 4,782 Gain on disposal of businesses (919) (17,570) (1,313) ----------- ----------- ----------- Total costs and expenses 49,787 43,553 173,813 ----------- ----------- ----------- Earnings (loss) from continuing operations before income taxes 2,169 10,627 (5,927) Provision (benefit) for income taxes 0 11,424 (7,010) ----------- ----------- ----------- Earnings (loss) from continuing operations 2,169 (797) 1,083 ----------- ----------- ----------- Discontinued operations (Note 9): Income from operations of discontinued businesses, net of taxes 0 0 1,245 Income (loss) on disposal of environmental business, net of taxes 134 (11,252) (6,011) ----------- ----------- ----------- Net income (loss) from discontinued operations 134 (11,252) (4,766) ----------- ----------- ----------- Net earnings (loss) before dividends 2,303 (12,049) (3,683) Preferred and preference stock cumulative dividends 1,536 1,536 1,536 Net earnings (loss) applicable to common =========== =========== =========== stockholders $ 767 $ (13,585) $ (5,219) =========== =========== =========== Primary earnings (loss) per common share: Continuing operations $ 0.15 $ (0.57) $ (0.11) Discontinued operations 0.03 (2.74) (1.20) =========== =========== =========== Net earnings (loss) after dividends $ 0.18 $ (3.31) $ (1.31) =========== =========== =========== Fully diluted earnings (loss) per common share: Continuing operations $ 0.15 $ (0.57) $ (0.11) Discontinued operations 0.03 (2.74) (1.20) =========== =========== =========== Net earnings (loss) after dividends $ 0.18 $ (3.31) $ (1.31) =========== =========== =========== Average number of shares used in earnings per share computations 4,146,888 4,104,965 3,992,251 =========== =========== ===========
See accompanying notes to consolidated financial statements. F6 38 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
$1.85 5% CUMULATIVE CUMULATIVE CONVERTIBLE PREFERRED PREFERENCE COMMON OTHER STOCK STOCK STOCK CAPITAL ----- ----- ------ -------- Balance December 31, 1993 $ 582 $ 814 $4,291 $ 26,456 Net loss Cash dividends declared: 5% cumulative preferred stock - $1.25 per share Common stock issued as compensation - 1,426 shares 1 14 Common stock issued for contributions to employees' saving plan - 12,439 shares 13 110 Common stock issued upon exercise of stock options - 69,750 shares common and 15,000 shares treasury 70 609 Purchase of 248 shares of common stock L.T.Incentive forfeitures - 125,145 shares Common stock from distribution business - 916 shares (6) Amortization of unearned compensation Cumulative foreign currency translation 52 ----- ----- ------ -------- Balance December 31, 1994 582 814 4,375 27,235 Net loss Cash dividends declared: 5% cumulative preferred stock - $1.25 per share $1.85 cumulative convertible preference stock - $1.85 per share Common stock issued as compensation - 200 shares 1 Common stock issued for contributions to employees' saving plan - 17,783 shares 18 112 Common stock issued upon exercise of stock options - 2,000 shares common 2 14 Amortization of unearned compensation ----- ----- ------ -------- Balance December 31, 1995 582 814 4,395 27,362 Net earnings Cash dividends declared: 5% cumulative preferred stock - $1.25 per share $1.85 cumulative convertible preference stock - $1.85 per share Common stock issued for contributions to employees' saving plan - 19,829 shares 20 74 ----- ----- ------ -------- Balance December 31, 1996 $ 582 $ 814 $4,415 $ 27,436 ===== ===== ====== ========
RETAINED COMMON TOTAL EARNINGS STOCK IN UNEARNED STOCKHOLDERS' (DEFICIT) TREASURY COMPENSATION EQUITY --------- -------- ------------ ------ Balance December 31, 1993 $ 11,551 ($2,179) ($954) $ 40,561 Net loss (3,683) (3,683) Cash dividends declared: 5% cumulative preferred stock - $1.25 per share (8) (8) Common stock issued as compensation - 1,426 shares 15 Common stock issued for contributions to employees' saving plan - 12,439 shares 123 Common stock issued upon exercise of stock options - 69,750 shares common and 15,000 shares treasury 109 788 Purchase of 248 shares of common stock (3) (3) L.T.Incentive forfeitures - 125,145 shares (910) 910 0 Common stock from distribution business - 916 shares (8) (14) Amortization of unearned compensation (113) (113) Cumulative foreign currency translation 52 -------- ------- ----- -------- Balance December 31, 1994 7,860 (2,991) (157) 37,718 Net loss (12,049) (12,049) Cash dividends declared: 5% cumulative preferred stock - $1.25 per share (51) (51) $1.85 cumulative convertible preference stock - $1.85 per share (1,506) (1,506) Common stock issued as compensation - 200 shares 1 Common stock issued for contributions to employees' saving plan - 17,783 shares 130 Common stock issued upon exercise of stock options - 2,000 shares common 16 Amortization of unearned compensation 157 157 -------- ------- ----- -------- Balance December 31, 1995 (5,746) (2,991) 0 24,416 Net earnings 2,303 2,303 Cash dividends declared: 5% cumulative preferred stock - $1.25 per share (37) (37) $1.85 cumulative convertible preference stock - $1.85 per share (1,506) (1,506) Common stock issued for contributions to employees' saving plan - 19,829 shares 94 -------- ------- ----- -------- Balance December 31, 1996 ($ 4,986) ($2,991) $ 0 $ 25,270 ======== ======= ===== ========
See accompanying notes to consolidated financial statements. F7 39 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Year Ended December 31, (Brackets denote cash outflows) 1996 1995 1994 -------- -------- --------- Cash flow provided (used) by operations: Net earnings (loss) $ 2,303 ($12,049) ($ 3,683) Adjustments to reconcile to net cash provided by operations: Depreciation and amortization 2,817 2,861 4,317 Provision for losses on accounts receivable 0 26 905 Deferred income taxes 0 11,304 (10,172) Gain on sale of vinyl business 0 (20,579) 0 Loss on sale of window business 0 1,959 0 Gain on sale of distribution business 0 0 (1,466) Loss (gain) on disposal of environmental business (134) 11,252 9,747 Changes in balance sheet items: Accounts receivable 270 3,120 (2,841) Inventories (572) (2,664) 1,423 Prepaid expenses 1,286 712 203 Liabilities not related to financing activities (1,587) (14,325) (6,867) Liquidation reserve 0 0 (5,398) Other assets (6) 128 2,230 -------- -------- --------- Cash flow provided (used) by operations: 4,377 (18,255) (11,602) -------- -------- --------- Cash flows from investing activities: Acquisition of property, plant and equipment (1,130) (1,590) (10,614) Proceeds from disposal of assets 0 50,680 31,296 Additional investments in discontinued operations 0 (2,402) 0 Other investments 0 651 (1,277) -------- -------- --------- Net cash provided (used) in investing activities (1,130) 47,339 19,405 -------- -------- --------- Cash flows from financing activities: Debt proceeds 9,445 16,627 159,139 Debt repayments (12,996) (40,942) (175,091) Dividends paid (1,159) (1,558) (8) Other equity changes 94 147 960 -------- -------- --------- Net cash used by financing activities (4,616) (25,726) (15,000) -------- -------- --------- Net increase (decrease) in cash and equivalents (1,369) 3,358 (7,197) Cash and equivalents at beginning of year 3,679 321 7,518 -------- -------- --------- Cash and equivalents at end of year $ 2,310 $ 3,679 $ 321 ======== ======== ========= Supplemental Disclosures: Cash paid during the year for: Interest $ 498 $ 1,501 $ 4,811 Income taxes $ 0 $ 1,170 $ 363
See accompanying notes to consolidated financial statements. F8 40 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES NATURE OF OPERATIONS Bird Corporation is a manufacturer of asphalt roofing products. Currently, asphalt shingles and roll roofing are produced at the Company's plant in Norwood, Massachusetts for commercial and residential use. These products are marketed in the northeastern United States through independent wholesalers and building material retailers whose primary customers are roofing contractors. BASIS OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of Bird Corporation and its majority-owned subsidiaries (the "Company"). All material intercompany activity has been eliminated from the financial statements. Investments in less than majority-owned companies are accounted for by the equity method. Certain prior year amounts have been reclassified to conform with the 1996 presentation. PERVASIVENESS OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 those estimates. CONCENTRATION OF RISK AND MAJOR CUSTOMERS The Company is dependent upon the economy in the northeastern United States and sells its products primarily to independent wholesalers and building material retailers for resale primarily to roofing contractors. One customer accounted for slightly more than 15% and 10% of the Company's gross sales during 1996 and 1995, respectively. The principal raw materials used in the manufacture of asphalt roofing products are fiberglass mat, asphalt saturants and coatings and crushed granules. The Company's requirements for fiberglass mat are met primarily with one vendor under an agreement which expires December 31, 1999 with an option to extend for an additional two years. Fiberglass mat is also generally available in adequate quantities from a number of outside suppliers. The Company has a raw material processing agreement with a company whose President is also a F9 41 Director of Bird Corporation. The Company's purchases from this related party amounted to $1,817,000 in 1996, $1,619,000 in 1995, and $2,191,000 in 1994. Management believes that amounts paid were equivalent to those that would be paid under an arm's length transaction. At December 31, 1996 and 1995 amounts due to this Company totaled $268,000 and $194,000, respectively. REVENUE RECOGNITION The Company recognizes revenue when products are shipped or services are performed. CASH AND EQUIVALENTS The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company invests its excess cash in a money market account that is subject to minimal credit and market risk. At December 31, 1996, cash and equivalents include $2,004,000 in a money market investment recorded at cost which approximates fair market value. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined for a large portion of the inventories by the last-in, first-out (LIFO) method computed using the dollar value method for natural business unit pools. The cost of the remaining inventories is determined on a first-in, first-out (FIFO) basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost. Depreciation has been provided in the financial statements primarily on the straight-line method at rates, based on reasonable estimates of useful lives, which fall within the following ranges for major asset classifications: - -------------------------------------------------------------------------------- Land improvements 10 to 20 years Buildings 20 to 25 years Machinery and equipment 5 to 13 years - --------------------------------------------------------------------------------
Deprecation expense for continuing operations for 1996, 1995 and 1994 amounted to $2,709,000, $2,831,000 and $3,644,000, respectively. Maintenance, repairs and minor renewals are charged to earnings in the year in which the expense is incurred. Additions, improvements and major renewals are capitalized. The cost of assets retired or sold, together with the related accumulated depreciation, are removed from the accounts, and any gain or loss on disposition is credited or charged to earnings. F10 42 RETIREMENT PLANS The Company has a defined contribution plan covering substantially all eligible non-union salaried and non-union hourly employees. Annual contributions are made to the plan based on rates identified in the plan agreement. ADVERTISING Advertising costs are charged to operations when incurred. The Company did not incur any costs associated with direct response advertising in 1996, 1995 and 1994, and there were no capitalized advertising costs at December 31, 1996 and 1995. Advertising expense for 1996, 1995 and 1994 was $485,000, $503,000 and $1,023,000, respectively. EARNINGS(LOSS) PER COMMON SHARE Primary earnings(loss) per common share is determined after deducting the dividend requirements of the preferred and preference shares and is based on the weighted average number of common shares outstanding during each period increased by the effect of dilutive stock options. Fully diluted earnings(loss) per common share also give effect to the reduction in earnings per share, if any, which would result from the conversion of the $1.85 cumulative convertible preference stock at the beginning of each period if the effect is dilutive. ENVIRONMENTAL MATTERS The Company records a liability for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on the available evidence and site assessments. If an amount is likely to fall within a range and no single amount within that range can be determined to be a better estimate, the minimum amount of the range is recorded. If there are other participants and the liability is joint and several, the financial stability of the other participants is considered in determining the Company's accrual. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. In addition, the liability excludes claims for recoveries from insurance companies and other third parties until such claims for recoveries are probable of realization at which point they would be classified separately as a receivable. WARRANTY COSTS The Company warrants under certain circumstances that its building material products meet certain manufacturing and material specifications. The warranty policy is unique to each product, ranges from twenty to forty years, is generally for the material cost and requires the owner to meet specific criteria such as proof of purchase. The Company offers the original manufacturer's warranty only as part of the original sale and at no additional cost to the F11 43 customer. In addition, for marketing considerations, the Company makes elective settlements in response to customer complaints. The Company records the liability for warranty claims and elective customer settlements when it determines that a specific liability exists or a payment will be made. STOCK COMPENSATION The Company's employee stock option plans are accounted for in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". In 1996, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation". 2. INVENTORIES The percentages of inventories valued on the LIFO method was 98% at December 31, 1996 and 1995. It is not practical to separate LIFO inventories by raw materials and finished goods components; however, the following table (in thousands) presents these components on a current cost basis with the LIFO reserve shown as a reduction.
December 31, 1996 1995 ------ ------ Current Costs: Raw materials $1,378 $1,202 Finished goods 4,093 4,217 ------ ------ 5,471 5,419 Less LIFO reserve 198 718 ------ ------ $5,273 $4,701 ====== ======
3. DEBT At December 31, the Company's borrowings and debt obligations are summarized as follows (in thousands):
1996 1995 ------ ------ Long Term Debt: Term Loan $1,804 $5,000 Obligations under capital leases 628 982 ------ ------ 2,432 5,982 Less - portion due within 2,177 1,113 ------ ------ one year $ 255 $4,869 ====== ======
The Company's external financing needs are augmented by its ability to borrow under the three year Loan and Security Agreement (the "Loan Agreement") dated November 30, 1994 with Fleet Capital Corporation ("Fleet Capital"). At the end of the three year period, the Loan Agreement will be automatically renewed for successive one year periods unless terminated specifically in writing. On March 8, 1995, Fleet Capital executed the First Amendment to the Loan Agreement amending the amount of the facility to $20 million consisting of a $15 F12 44 million revolving credit commitment and a $5 million term loan. Up to $5 million of the revolving credit facility can be used for letters of credit. At December 31, 1996, letters of credit totaled $1,401,000 compared to $2,233,000 as of December 31, 1995. Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by the Company and the Company's other subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The revolving credit line availability is determined with reference to a percentage of accounts receivable and inventory which are pledged to the lender. During the period January 1 through April 30, the Loan Agreement provides a $2 million over advance on accounts receivable and inventories in order to assist the Company in assuring adequate funding of any seasonal build up of accounts receivable which may occur under sales programs offered during the winter months. Currently, the availability calculation does not allow borrowings to the full extent of the revolving credit commitment, due to the seasonality of the building materials manufacturing business. As of March 20, 1997, an aggregate of $7,654,000 was available to Bird under the terms of the revolving credit facility under the Loan Agreement of which $5,243,000 remains available, net of current borrowings and letter of credit utilization. The Loan Agreement contains financial and operating covenants which, among other things, (i) require the Company to maintain prescribed levels of tangible net worth, net cash flow and working capital and (ii) place limits on the Company's capital expenditures. The Loan Agreement also contains restrictions on indebtedness, liens, investments, distributions (including payment of common and preference dividends), mergers, acquisitions and disposition of assets. As of December 31, 1996, the Company was in compliance with each of the prescribed financial and operating covenants as outlined in the Loan Agreement. Interest on the revolving credit commitment under the First Amended Loan Agreement accrues at the Fleet Capital base rate (as specified in such Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the Company's election on all borrowings plus the greater of $25,000 per annum or 1/4% on any unused portion of the commitment payable monthly in arrears. The interest on the term loan accrues at the base rate or the LIBOR rate plus 2 3/4% at the Company's election. The interest rate on outstanding borrowings at December 31, 1996 was 8.125%. The repayment of the principal on the term loan is at the rate of $71,417 per month with a final principal payment of $1,018,000 due on November 30, 1997. Proceeds in excess of $100,000 from the sale of fixed assets may, at Fleet Capital's discretion, be applied to the outstanding principal payments of the term loan. The weighted average interest rates on short term borrowings at December 31, 1996 and December 31, 1995 were 8.25% and 9.74%, respectively. The fair value of the Company's total debt approximated the carrying value at December 31, 1996 and 1995, respectively. The fair value is based on management's estimate of current rates available to the Company for similar debt with the same remaining maturity. F13 45 Maturities of long-term debt for each of the five years subsequent to December 31, 1996 are as follows: 1997 - $2,177,000; 1998 - $255,000; Thereafter - None. The Company incurred net interest expense of $435,000 in 1996, $927,000 in 1995 and $4,782,000 in 1994 (net of $257,000 capitalized interest). 4. INCOME TAXES Earnings (loss) from continuing operations before income taxes and the provision(benefit) for income taxes are shown below (in thousands):
Year Ended December 31, ----------------------- 1996 1995 1994 ------- -------- ------- Earnings (loss) from continuing operations before income taxes: $ 2,169 $ 10,627 $(5,927) ======= ======== ======= Provision (benefit) for continuing operations: Currently payable $ 0 $ 120 $ 200 Deferred 0 11,304 (7,210) ------- -------- ------- $ 0 $ 11,424 $(7,010) ======= ======== =======
The provision (benefit) for income taxes on continuing operations varied from the U.S. federal statutory rate for the following reasons:
1996 1995 1994 ------ ------ ------ Continuing operations: U.S. federal statutory rate 34.0% 34.0% (34.0%) State income taxes, net 0.0 7.3 (6.5) Corporate owned life insurance (7.0) 2.5 (9.9) Effect of valuation allowance (28.4) 63.7 (67.5) Other 1.4 0.0 (0.4) ------ ------ ------ 0.0% 107.5% (118.3%) ====== ====== ------
The net benefit for income taxes related to discontinued operations amounted to $2,962,000 for 1994. F14 46 The deferred income tax asset recorded in the consolidated balance sheet results from differences between financial statement and tax reporting of income and deductions. A summary of the composition of the deferred income tax asset at December 31, 1996 and 1995 is as follows (in thousands):
1996 1995 -------- -------- Deferred tax assets: Compensation/pension accruals $ 641 $ 648 Net operating loss carryover 17,716 14,810 Investment tax credit carryover 1,136 1,233 Minimum tax credit carryover 1,091 1,091 Other reserves & accruals 1,789 2,506 Other 1,053 782 -------- -------- Total deferred tax assets 23,426 21,070 Deferred tax liabilities: Depreciation (2,141) (1,942) -------- -------- Net deferred tax asset before valuation reserve 21,285 19,128 Less: Valuation reserve (17,219) (15,062) -------- -------- Net deferred tax asset $ 4,066 $ 4,066 ======== ========
The Company has available for federal income tax purposes unused net operating loss and investment tax credit carryforwards, which may provide future tax benefits, expiring as follows (in thousands):
Year of Net Investment Expiration Operating Loss Tax Credit ---------- -------------- ---------- 1997 0 317 1998 0 135 1999 0 212 2000 0 297 2001 0 175 2002 138 0 2008 9,898 0 2009 16,122 0 2010 15,735 0 2011 416 0 ------- ------ $42,309 $1,136 ======= ======
Additionally, for federal income tax purposes, at December 31, 1996 the Company had available for carryforward minimum tax credits with no expiration aggregating $1,091,000. If certain substantial changes in the Company's ownership should occur, there would be an annual limitation on the amount of the carryforwards, including certain unrealized built-in losses, which can be utilized for regular and alternative minimum tax purposes. F15 47 At December 31, 1996 the Company's net deferred tax asset is approximately $21.3 million less a valuation reserve of $17.2 million which was determined based upon the Company's review of all available evidence including projections of future taxable income. The Company expects to be profitable and with other tax planning strategies expects to generate future taxable income. Realization of the $4,066,000 net deferred tax asset is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes that it is more likely than not that the net deferred tax asset will be realized. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. 5. STOCKHOLDERS' EQUITY The $1.85 cumulative convertible preference stock is redeemable, in whole or in part, at the option of the Company, at a redemption price of $20.00 per share. The convertible preference stock has a liquidation value of $20.00 per share and is convertible at the option of the holder into common stock of the Company at a conversation price of $22.25 per share, subject to adjustment in certain events. Dividends are cumulative from the date of issue and are payable quarterly. There are five preference dividends in arrears. The Company has the option to redeem the convertible preference stock. The Company's 5% cumulative preferred stock ranks senior to the convertible preference stock as to dividends and upon liquidation. On June 18, 1992, the Company announced that its Board of Directors authorized it to buy back, on the open market or in privately negotiated transactions, up to 400,000 of its outstanding shares of common stock at prices available from time to time that the Company deems attractive. Since this announcement, the Company has repurchased 97,619 shares. The Company is prohibited from purchasing its common stock as long as dividends on the convertible preference stock are in arrears. Under the 1992 Stock Option Plan described in Note 6, 931,325 shares of common stock are reserved for issuance upon exercise of options and stock appreciation rights at December 31, 1996. Restrictions on the payment of dividends on common and preference stock are imposed by the terms of the Loan Agreement dated November 30, 1994. Payment of dividends on the preferred stock are permitted under the Loan Agreement. As of December 31, 1996, all dividends on the preferred stock have been declared and paid in full. Dividends are in arrears on the preference stock in the aggregate amount of $1,506,000 for the four quarterly periods ended February 15, 1995 and $377,000 for the quarterly period ended May 15, 1996. Dividends on the preference stock must be paid in full before any dividends could be declared and paid on the common stock. The quarterly dividends on the preference stock due February 15, August 15, and November 15, 1996 in the aggregate amount of $1,130,000 have, with the consent of Fleet Capital, been declared and paid in full. The quarterly dividend on the preference stock due February 15, 1997 has been declared and will be paid when due. F16 48 6. EMPLOYEE BENEFIT PLANS RETIREMENT PLANS The Company's "Bird Employees' Savings and Profit Sharing Plan" provides for a defined base contribution and profit sharing and savings contributions. DEFINED BASE CONTRIBUTION The Company contributes annually 2% of plan participants' basic compensation. Vesting accrues at 20% per year of service. Contributions for continuing operations for the years ended December 31, 1996, 1995, and 1994 amounted to $64,000, $72,000, and $203,000, respectively. PROFIT SHARING CONTRIBUTION Profit sharing contributions are made annually, if earned, based upon certain defined levels of return on equity by the Company and its business units. The distribution of the contribution to the plan's participants is based upon annual basic compensation. No profit sharing contributions were earned for 1996, 1995 or 1994. SAVINGS CONTRIBUTION The Company's savings plan provides that eligible employees may contribute to the plan any whole percentage of their basic compensation varying from 2 to 15%. The Company may make discretionary matching contributions not exceeding 6% of the participant's basic compensation during the plan year. Such matching Company contributions are invested in shares of the Company's common stock. The Company's contributions for continuing operations for the years ended December 31, 1996, 1995, and 1994 amounted to $91,000, $124,000, and $142,000, respectively. POST RETIREMENT BENEFITS Certain health care and life insurance benefits are provided for substantially all of the Company's retired employees, except those covered under union plans. Benefits are provided by the payment of premiums for life insurance benefits and the reimbursement for eligible employees of a portion of their health care premiums. The Company's cost for the years 1996, 1995, and 1994 amounted to $71,000, $66,000, and $79,000, respectively. EMPLOYEE INCENTIVE PLANS Under the 1982 Stock Option Plan, as amended, options to purchase up to 900,000 shares of the Company's common stock may be granted to officers, directors and key employees upon terms and conditions determined by a committee of the Board of Directors which administers the plan. In 1993, the Company adopted a new stock option plan which allows the issuance of up to 450,000 stock options in addition to the unissued shares approved for issuance under the 1982 plan. The new plan will expire in 2002 and no further options will be granted under F17 49 the former plan. A Non-Employee Directors' Stock Option Plan was also adopted in 1993 which will automatically provide grants of options to each non-employee director serving on the Board of Directors at the time of such grant. Each annual grant will cover 2,500 shares of common stock and any recipient may not receive option grants exceeding a total of 30,000 shares. An aggregate of 100,000 shares of common stock are available for grants under the Non-Employee Directors' Stock Option Plan. Options granted by the committee may be designated as either incentive stock options, as defined under the current tax laws, or non-qualified options. The committee may also grant stock appreciation rights, either singly or in tandem with stock options. A right entitles the holder to benefit from market appreciation in the Company's common stock subject to the right between the date of the grant and the date of exercise without any payment on the part of the holder. Upon exercise of a right, the holder surrenders the option and receives an amount of common stock (or, at the election of the committee, cash) equal in value to the amount of such appreciation. The exercise price of options specified by the committee must be at least 100% of the fair market value of the Company's common stock as of the date of grant. All options and rights granted become exercisable at the rate of 20 to 25% per year, on a cumulative basis, beginning with the first anniversary of the date of grant for options granted under the Stock Option Plan and in full one year after grant for option granted under the Non-Employee Directors' Stock Option Plan. In case of termination of employment, options and grants vested, but not yet exercised, are subject to forfeiture under the Stock Option Plan and are exercisable up to 90 days after termination for the Non-Employee Directors' Stock Option Plan. In tandem with the stock options there are 8,000 stock appreciation rights at December 31, 1996. Transactions involving the Stock Option Plan are summarized as follows for the years ended December 31, 1996 and 1995:
1996 1995 Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price ------ -------------- ------ -------------- Outstanding beginning of year 438,100 $10.40 500,650 $10.91 Granted 171,500 $ 4.35 65,000 $ 7.78 Exercised 0 -- (2,000) $ 5.00 Forfeited (51,500) $10.58 (125,550) $11.15 Expired (11,800) $ 8.75 0 -- Outstanding end of year 546,300 $ 8.52 438,100 $10.40 Options exercisable at end of year 168,100 $10.00 186,300 $10.70 Weighted average fair value of options granted during the year (exercise price equals market price) $ 2.67 $ 4.52
F18 50 The following table summarizes information about stock options outstanding at December 31, 1996:
Range of Exercise Prices ------------------------ $4.13 - $6.13 $8.13 - $10.75 $11.00 - $17.50 ------------- -------------- --------------- Number outstanding at 12/31/96 192,200 209,100 145,000 Weighted Average Remaining Contractual Life 6.6 years 4.8 years 3.0 years Weighted Average Exercise Price $4.52 $9.31 $12.73 Number Exercisable at 12/31/96 20,700 102,100 45,300 Weighted Average Exercise Price $5.86 $9.33 $13.38
Had the Company elected to recognize compensation cost based on the fair value of options granted in years beginning after December 31, 1994, at grant date as prescribed by Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation," issued in October 1995, net income and earning per share would have been reduced to the pro forma amounts indicated below:
(In thousands, except per share amounts) ---------------------------------------- 1996 1995 ---- ---- Net income (loss) - as reported $ 767 $ (13,585) Net income (loss) - pro forma $ 600 $ (13,650) Earnings (loss) per share - as reported $ 0.18 $ (3.31) Earnings (loss) per share - pro forma $ 0.14 $ (3.33)
The assumptions and methods used in estimating the fair value at the grant date of options granted are listed below:
Grant Year ---------- 1996 1995 ---- ---- Expected Volatility of Share Price 46% 43% Dividend Yield -- -- Interest Rate 6.8% 7.0% Expected Life 7.7 years 7.3 years Valuation Methodology Black-Scholes Option Pricing Model
Because the determination of the fair value of all options granted includes vesting periods over several years and additional option grants are expected to be made each year, the above pro forma disclosures are not representative of pro forma effects of reported net income for future periods. F19 51 LONG TERM INCENTIVE COMPENSATION Under the terms of a Long Term Incentive Compensation Plan, certain officers and key management employees received common stock of the Company on a restricted time lapse grant basis. These shares were to be released from escrow and delivered to the plan's participants when the market price of the Company's common stock achieved certain designated levels between $12 and $24 per share for 30 consecutive days prior to June 28, 1994 or in any event if the participant has remained in the continuous employ of the Company through June 2003. Certain market prices were achieved and maintained for the required 30-day period during 1994; therefore, 40,670 shares of the Company's common stock were released in June of 1994 to the plan's participants. Additionally, 30,000 shares were released to the former Chief Executive Officer in 1994 as part of his Termination Agreement. As a result of his termination and the termination of certain other officer and key management personnel during 1994, 125,145 shares of restricted stock valued at $910,000 were forfeited and returned to treasury stock. Upon consummation of the sale of the vinyl business in 1995, all restrictions on the remaining 23,560 shares of common stock held under the plan automatically lapsed and such shares were distributed to the intended recipients. Amortization of unearned compensation under this agreement for 1995 amounted to $157,000. In 1994, amortization was reduced by $113,000 associated with the forfeiture of shares. 7. SALE OF BUSINESSES The Company records income and expenses associated with former business activities on the Consolidated Statement of Operations under the caption "Gain on Disposal of Businesses". In April 1996, the Company favorably settled a legal dispute related to the cancellation of a Supply and Sales Representative Agreement with a former business partner. The settlement agreement calls for Bird to receive total payments of $410,000 over a period of two years, for cancellation of the Sale Representative and Supply Agreements, and termination of the partnership. In July 1996, the Company received an aggregate of $535,000 in cash for the settlement of three legal disputes relating to insurance coverage. These legal disputes related to the Company's former vinyl and roofing businesses. In December 1996, the Company was reimbursed $123,000 for costs associated with the remediation of an underground storage tank system at its former distribution center located in Arizona. On March 8, 1995, the Company sold substantially all of the assets of its vinyl business to Jannock, Inc. for $47.5 million in cash subject to certain downward adjustments which totaled $4,962,000. Net of adjustments, the gain on the sale of the vinyl business totaled $20,579,000. Sales of $6,365,000 were recorded for the vinyl business in 1995 through the date of the sale. F20 52 On June 2, 1995 the Company sold all of the outstanding capital stock of Bird-Kensington Holding Corp., which owned the Company's interest in Kensington Partners, to Jannock, Inc. The purchase price consisted of cash in the gross amount of $2,780,000 and the assumption of certain liabilities related to the Kensington window business. The sale resulted in a loss of $1,959,000. Sales of $4,265,000 were recorded for this business for the period March 1, 1995 through June 2, 1995. On June 10, 1994, the Company's 40% interest in Mid-South Building Supply, Inc. was redeemed for $1 million in cash resulting in a loss of $1,261,000. On August 22, 1994, the Company sold the assets of substantially all of its distribution businesses to Wm. Cameron & Co. for a purchase price consisting of cash in the amount of $26,142,000, including $1 million held in escrow which was released in full to the Company in November 1995. The sale resulted in a gain of $2,677,000. Sales of $67,089,000 were recorded for these businesses for the period ending August, 22, 1994. On November 28, 1994, the Company sold its last remaining building materials distribution business, Southland Building Products, Inc., to Ashley Aluminum, Inc. for a purchase price of $2,134,000. The sale resulted in a modest gain. Sales of $9,092,000 were recorded for this business for the period ending November 27, 1994. The Company recorded other expenses related to former business activities of $149,000, $1,050,000, and $153,000 for the years 1996, 1995, and 1994, respectively. These charges against earnings include warranty claims and other costs directly related to former business activities. Expenses incurred in 1995 also included $1.5 million in provisions relating to employee benefit plans and product liability claims associated with former roofing operations which were offset by a $602,000 crude oil refund from the Department of Energy. 8. OTHER EXPENSE, NET Other expenses in 1996 were primarily due to the $806,000 of costs associated with the terminated merger agreement with CertainTeed. 9. DISCONTINUED OPERATIONS ENVIRONMENTAL BUSINESSES On June 18, 1994, the Company agreed to cause the sale of its 80% interest in its "off-site" environmental business, Bird Environmental Gulf Coast,Inc. ("BEGCI") to the minority shareholders thereof, subject to financing, resulting in the complete withdrawal from the environmental business. Accordingly, the Company, as of June 30, 1994, recorded the operating results of BEGCI as a discontinued operation for all years presented. In conjunction with this decision, the Company recorded an aggregate charge of approximately $9 million, to adjust its book value to approximate the net realizable value of $7.5 million at June 30, 1994. In June 1994, the Company estimated that the results of operations from the "off-site" environmental business would be breakeven through the disposal date and, F21 53 accordingly, no liability for anticipated losses from the measurement date to the disposal date was recorded. However, at December 31, 1994, the Company had invested an additional $1,270,000 in BEGCI which, based on the Company's assessment, would not be recoverable and was accordingly written-off, thus maintaining the Company's investment at $7.5 million. During 1995, the minority partner became unable to finance the purchase of the facility and efforts to attract another purchaser were unsuccessful. In July 1995, the Company's Board of Directors suspended further funding of the facility. As a result of this action, during the second quarter of 1995, the Company's remaining investment of $8.6 million was written off and a $3 million reserve was established for additional expenses associated with the closure of the facility. On November 29, 1995, the Company caused the sale of all of the outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of $1.00. In 1993, the Company decided to close its "on-site" environmental remediation business. This business involved environmental remediation projects such as the processing of oily waste sites at a refinery, operations and management of waste processing sites and the removal and remediation of sludge. In connection with its decision to withdraw from this business, the Company charged the results of operations for the write-down of assets, the expected loss from operations and general expenses related to closing of such "on-site" remediation business. Based upon the actual results of the environmental "on-site" remediation operations and the sale of its assets, excess costs of $3,861,000 charged in 1993 were reversed and recorded as discontinued operations in the consolidated statement of operations for the twelve months ended December 31, 1994. Net sales relating to these environmental businesses amounted to $2,848,000 and $3,715,000 for 1995 and 1994, respectively. 10. ACQUISITIONS On July 1, 1992 the Company entered into a 50% joint venture with Kensington Manufacturing Company to manufacture vinyl replacement windows through Kensington Partners ("Kensington"). On February 28, 1995, the Company's ownership in the joint venture was permanently fixed at 90%, resulting in a change in financial reporting from the equity method to consolidation beginning March 1, 1995 through June 2, 1995 when the operation was sold (see Note 7). The following table represents summarized financial information for Kensington Partners for the year ended December 31, 1994 (in thousands): Current Assets $ 5,040 Property and Equipment 3,137 Other Assets 677 ------- Total Assets $ 8,854 ======= Current Liabilities $ 9,722 Other Liabilities 1,288 ------- Total Liabilities $11,010 =======
F22 54 The following table represents summarized financial information for the years ended December 31, 1994 and and the two month period ended February 28, 1995 (in thousands):
1995 1994 ---- ---- Net Sales $ 1,774 $ 24,180 Gross Profit (Loss) $ (18) $ 1,317 Net Loss $ (413) $ (5,310)
11. COMMITMENTS AND CONTINGENCIES LEASE COMMITMENTS The Company leases certain manufacturing, administrative, warehousing, transportation equipment and other facilities. The leases generally provide that the Company pay the taxes, insurance and maintenance expenses related to the leased assets. At December 31, 1996 minimum lease commitments under noncancelable operating leases are as follows (in thousands):
Year ---- 1997 $ 1,003 1998 1,003 1999 1,003 2000 885 2001 777 Later years 9,614 -------- $ 14,285 ========
Total rental expense for continuing operations, exclusive of taxes, insurance and other expenses paid by the lessee related to all operating leases (including those with terms of less than one year) was as follows (in thousands):
Year Amount ---- ------ 1996 $ 1,043 1995 $ 1,059 1994 $ 2,883
The following represents property under capital leases (in thousands):
December 31, ------------ 1996 1995 ---- ---- Machinery and equipment $ 2,248 $ 2,456 Less, accumulated depreciation 903 903 ------ ------ $ 1,345 $ 1,553 ======= =======
F23 55 At December 31, 1996 minimum lease commitments under capital leases are as follows (in thousands):
Year Amount ---- ------ 1997 $ 406 1998 262 Thereafter 0 -------- Total minimum lease payments 668 Imputed interest (@ rates ranging from 3.4% to 7.2%) (40) -------- Total future principal payments of lease obligations $ 628 ========
LITIGATION Since 1981, the Company has been named as a defendant in approximately 650 product liability cases throughout the United States by persons claiming to have suffered asbestos-related diseases as a result of alleged exposure to asbestos in products manufactured and sold by the Company. Approximately 200 of these cases are currently pending and costs of approximately $2 million in the aggregate have been incurred in the defense of these claims since 1981. The Company's insurance provider has accepted the defense of these cases under an agreement for sharing of the costs of defense, settlements and judgements, if any. The Company has a reserve of $950,000 at December 31, 1996 for its estimated share of losses related to these claims. In light of the nature and merits of the claims alleged, in the opinion of management, the resolution of these remaining claims will not have a material adverse effect on the results of operations or financial condition of the Company. In 1986, the Company, along with numerous other companies, was named by the United States Environmental Protection Agency ("EPA") as a Potentially Responsible Party ("PRP") under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA"), in connection with the existence of hazardous substances at a site known as the Fulton Terminal Superfund site located in Fulton, Oswego County, New York. On September 28, 1990 the Company and a number of other PRPs reached a negotiated settlement with the EPA pursuant to which the settling PRPs agreed to pay the costs of certain expenses in connection with the proceedings, and to pay certain other expenses including the costs and expenses of administering a trust fund to be established by the settling PRPs. The settlement agreement is embodied in a consent decree lodged with the United States District Court for the Western District of New York and fixed the Company's proportionate share of the total expenses. The soil has been cleaned-up and the ground water is now being treated. The remaining cost to the Company of the remedial work and other expenses covered by the settlement agreement is estimated to be approximately $350,000. This is based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRP's are unable to bear their allocated share. The Company has a reserve of $350,000 at December 31, 1996 to cover the remaining proportionate share of the estimated cost to clean-up the ground water, most of which will be paid in 1997. Based on information F24 56 currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the cost apportioned to them. Management believes that, based on its financial position and the estimated accrual recorded, its remediation expense with respect to this site is not likely to have a material adverse effect on its consolidated financial position or results of operations of the Company. The Company has been named as a PRP with respect to certain other sites which are being investigated by federal or state agencies responsible for regulation of the environment. Status as a PRP means that the Company may be jointly and severally liable for all of the potential monetary sanctions and remediation costs applicable to each site. In assessing the potential liability of the Company at each site, management has considered, among other things, the aggregate potential cleanup costs of each site; the apparent involvement of the Company at each site and its prospective share of the remediation costs attributable thereto; the number of the PRPs identified with respect to each site and their financial ability to contribute their proportionate shares of the remediation costs for such site; the availability of insurance coverage for the Company's involvement at each site and the likelihood that such coverage may be contested; and whether and to what extent potential sources of contribution from other PRPs or indemnification by insurance companies constitute reliable sources of recovery for the Company. On the basis of such consideration, management has determined that such environmental matters will not have a material affect on the Company's financial position or results of operations. The Company has provided an aggregate reserve amounting to approximately $250,000 at December 31, 1996 for its estimated share of the ultimate cost of cleanup for such claims excluding any potential sources of indemnification or recovery from third parties. In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly Atlantic Building Products Corporation ("ABPCO"), commenced an action against a former vendor, alleging violation of an exclusive distributorship without adequate and fair compensation to ABPCO. A jury trial was held in November 1995 in the Superior Court of Plymouth County, Massachusetts. The jury found in favor of ABPCO and judgement was entered on January 26, 1996 in the principal amount of approximately $1.8 million. The award, with interest accruing at 12% per annum, is expected to be in excess of $3 million and will not be reported as income until collected. The defendant has appealed the judgement. The Company is also exposed to a number of other asserted and unasserted potential claims encountered in the normal course of business and unrelated to environmental matters. In the opinion of management, the resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. WARRANTY OBLIGATIONS The Company warrants under certain circumstances that its Housing Group's products meet certain manufacturing and material F25 57 specifications. In addition, for marketing considerations, the Company makes elective settlements in response to customer complaints. The Company records the liability for warranty claims and elective customer settlements when it determines that a specific liability exists or a payment will be made. During 1996, 1995 and 1994, the Company recorded (exclusive of those claims related to former roofing operations) approximately $2,155,000, $2,262,000, and $2,687,000, respectively, in warranty expenses and elective customer settlements. The warranty expense related to former roofing operations for 1996, 1995 and 1994 amounted to approximately $85,000, $94,000 and $100,000, respectively. Based upon analyses performed by the Company's management, a reasonably possible range of potential liability from unasserted warranty obligations for all products sold prior to December 31, 1996 is estimated to be between $3.5 million and $17.5 million. However, the Company has not recorded any liability for these future unasserted claims or complaints because management has concluded, based on such analyses, that no particular estimate within this range is probable. 12. OPERATIONS IN DIFFERENT INDUSTRIES The Company has had two business segments which it defined as the Housing Group and the Environmental Group. The Housing Group manufactures and markets residential and commercial roofing products in the northeastern United States, including a full line of fiberglass based asphalt shingles and roll roofing. Until early to mid 1995, the Group also manufactured vinyl siding, window profiles, trim and accessories which were distributed nationwide. In prior years, the Group operated distribution centers primarily in the southeastern and southwestern markets for vinyl siding and in the Arizona and northeastern markets for roofing and other building materials products. The Company's Environmental Group provided recycling, remediation, and beneficial re-use services for applications as diverse as food processing waste streams, oily waste recovery and the treatment of municipal wastes. Generally, these on-site services recovered valuable constituents, removed wastes and reduced the volume of materials which must be disposed of by other means. In December 1993, the Company decided to close this portion of the environmental segment and dedicate this group to operating BEGCI, the fixed site facility in Texas. As discussed in Note 9, the Company sold its interest in BEGCI in November 1995 to GTS Duratek, Inc. Net sales represent sales to unaffiliated customers. Since the dispositon of the environmental group, which was recorded as a discontinued operation as discussed in Note 9, the Company has operated exclusively in the housing group. As such, net sales and earnings (loss) from continuing operations recorded on the consolidated statement of operations are attributable to the housing group. F26 58 Identifiable assets are those that are used in the Company's operations in each industry segment. Corporate assets are principally cash and equivalents and property maintained for general corporate purposes. Summarized identifiable assets and capital expenditures by business segment for 1996, 1995 and 1994 are as follows (in thousands):
Year Ended December 31, 1996 1995 1994 ---- ---- ---- Identifiable assets: Housing group $30,910 $34,111 $57,282 Environmental group 0 75 7,874 Corporate 8,759 9,517 20,549 ------- ------- ------- $39,669 $43,703 $85,705 ======= ======= ======= Capital expenditures: Housing group $ 1,130 $ 1,924 $ 9,446 Environmental group 0 0 1,283 Corporate 0 0 37 ------- ------- ------- $ 1,130 $ 1,924 $10,766 ======= ======= =======
F27 59 13. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1996 and 1995 is shown below:
THREE MONTHS ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- (thousands of dollars, except per share amounts) 1996 Net sales $ 6,446(1) $ 14,960(2) $ 17,084(2) $ 13,466(2) Gross profit ($ 111)(1) $ 2,942 $ 3,539 $ 1,746 Earnings(loss): Continuing operations ($ 1,560) $ 1,140 $ 2,112 $ 477 Discontinued operations 0 60 81 (7) -------- -------- -------- -------- Net earnings (loss) ($ 1,560) $ 1,200 $ 2,193 $ 470 ======== ======== ======== ======== Earnings per share data: Primary earnings (loss) per common share: Continuing operations ($ 0.47) $ 0.19 $ 0.42 $ 0.02 Discontinued operations 0.00 0.01 0.02 0.00 -------- -------- -------- -------- Net earnings (loss) ($ 0.47) $ 0.20 $ 0.44 $ 0.02 ======== ======== ======== ======== 1995 Net sales $ 16,623 $ 15,138 $ 12,170 $ 10,249 Gross profit $ 1,532 $ 2,621 $ 1,817 $ 203(3) Earnings(loss): Continuing operations $ 9,036 ($ 4,066) ($ 596) ($ 5,171) Discontinued operations (236) (11,368) 0 352 -------- -------- -------- -------- Net earnings (loss) $ 8,800 ($15,434) ($ 596) ($ 4,819) ======== ======== ======== ======== Earnings per share data: Primary earnings (loss) per common share: Continuing operations $ 2.11 ($ 1.08) ($ 0.24) ($ 1.35) Discontinued operations (0.06) (2.77) 0.00 0.09 -------- -------- -------- -------- Net earnings (loss) $ 2.05 ($ 3.85) ($ 0.24) ($ 1.26) ======== ======== ======== ========
(1) Decrease in gross profit and the decline in sales is attributable to unfavorable weather conditions in the northeast during the first quarter. (2) Increase in sales during the last three quarters of 1996 is due in part to the release of pent-up demand caused by the severe weather conditions during the first quarter. (3) Decrease in gross profit in the fourth quarter compared to the previous quarter is due to sales price weakness and the decline in sales volume attributable to a weak re-roofing market caused by a dry, hot summer. F28 60 BIRD CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1996, 1995 and 1994 (In thousands)
Additions --------- Balance Charged to Charged to Balance beginning cost and other Deduc- at end of year expenses accounts(a) tions of year ------- -------- ----------- ----- ------- Year Ended December 31, 1996: Allowance for doubtful accounts $ 153 $ 0 $ 0 $ (3)(b) $ 150 Valuation allowance for deferred tax assets $15,062 $ 2,157 $ 0 $ 0 $17,219 Year Ended December 31, 1995: Allowance for doubtful accounts $ 3,137 $ 26 $ 56 $(3,066)(c) $ 153 Valuation allowance for deferred tax assets $ 5,000 $10,789 $ 0 $ (727) $15,062 Year Ended December 31, 1994: Allowance for doubtful accounts $ 4,273 $ 905 $100 $(2,141)(b) $ 3,137 Valuation allowance for deferred tax assets $ 9,000 $ 0 $ 0 $(4,000) $ 5,000
(a) Represents recovery of balances previously written off. (b) Uncollectable accounts written off by a charge to reserve. (c) Represents the allowance for doubtful accounts of vinyl business sold of $517 and the uncollectable accounts written off by a charge to reserve of $2,549. F29 61 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION ITEM 14 (d) DECEMBER 31, 1994 F30 62 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- DECEMBER 31, 1994 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE FINANCIAL STATEMENTS Independent Auditors' Report F32 Combined Balance Sheet F33 Combined Statement of Operations and Partners' Deficit F35 Combined Statement of Cash Flows F36 Notes to the Combined Financial Statements F38 SUPPLEMENTAL INFORMATION Independent Auditors' Report on Financial Statement Schedule F51 Financial Statement Schedule II F52
F31 63 INDEPENDENT AUDITORS' REPORT TO THE PARTNERS KENSINGTON PARTNERS AND AFFILIATE Leechburg, Pennsylvania We have audited the accompanying combined balance sheet of Kensington Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and the related combined statements of operations and partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Kensington Partners and Affiliate as of December 31, 1994, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that Kensington Partners and Affiliate will continue as going concerns. As discussed in Note 2 to the financial statements, the Companies have incurred significant operating losses and current liabilities exceed current assets. Those conditions, among others, raise substantial doubt about the Companies' ability to continue as going concerns. Management's plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania February 10, 1995 F32 64 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED BALANCE SHEET
- -------------------------------------------------------------------------------- DECEMBER 31 1994 - -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 55,655 Accounts receivable Trade - net of allowance for doubtful accounts of $323,000 - Note 3 1,742,715 Related parties - Note 13B 1,286,189 Inventories - Note 4 1,875,584 Prepaid expenses 79,862 ---------- TOTAL CURRENT ASSETS 5,040,005 ---------- PROPERTY AND EQUIPMENT - At cost - net of accumulated depreciation of $1,139,398 - Note 5 3,136,639 ---------- OTHER ASSETS Other receivables - related party - net of allowance - Note 13D 306,386 Other assets - Note 6 371,249 ---------- 677,635 ---------- TOTAL ASSETS $8,854,279 ==========
The accompanying notes are an integral part of these combined financial statements. F33 65 KENSINGTON PARTNERS AND AFFILIATES (JOINT VENTURE PARTNERSHIPS) Combined Balance Sheet
- -------------------------------------------------------------------------------- DECEMBER 31 1994 - -------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES Demand notes payable - Note 7 $ 1,628,302 Current maturities of capital lease obligations and long-term debt - Note 8 312,023 Accounts payable Trade 2,485,977 Related parties - Note 13A 3,654,990 Accrued expenses - Note 9 1,640,238 ----------- TOTAL CURRENT LIABILITIES 9,721,530 ----------- LONG-TERM LIABILITIES Capital lease obligations and long-term debt - net of current maturities - Note 8 807,012 Accounts payable - trade - long-term 354,636 Other long-term liabilities - related parties - Notes 13D 126,314 ----------- TOTAL LONG-TERM LIABILITIES 1,287,962 ----------- TOTAL LIABILITIES 11,009,492 ----------- PARTNERS' DEFICIT (2,155,213) COMMITMENTS AND CONTINGENCIES - Note 12 -- ------------ TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 8,854,279 ============
The accompanying notes are an integral part of these combined financial statements. F34 66 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT
- -------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1994 - -------------------------------------------------------------------------------- NET SALES (related parties - 26%) $ 24,180,093 COST OF GOODS SOLD (purchased from related parties - 28%) 22,863,159 ------------ GROSS PROFIT 1,316,934 OPERATING EXPENSES (related parties - 11%) 5,346,966 ------------ LOSS FROM OPERATIONS (4,030,032) ------------ OTHER INCOME (EXPENSE) Interest expense (289,638) Income from equity investment 3,468 Provision for doubtful accounts (595,417) Tax penalties (199,872) Other expense - net (198,186) ------------ TOTAL OTHER EXPENSE (1,279,645) ------------ NET LOSS (5,309,677) PARTNERS' DEFICIT - Beginning of year (195,526) Capital Contributions 3,349,990 ------------ PARTNERS' DEFICIT - End of year $ (2,155,213) ============
The accompanying notes are an integral part of these combined financial statements. F35 67 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1994 - -------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES Net loss ($5,309,677) Adjustments for noncash items included in net loss Depreciation and amortization 763,183 Loss from equity investment (3,468) Working capital changes (below) 2,818,892 ----------- NET CASH USED FOR OPERATING ACTIVITIES (1,731,070) ----------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES Purchase of property and equipment (38,222) Proceeds from sale of equipment 81,430 Other assets (98,273) Other receivables - related parties 18,723 ----------- NET CASH USED FOR INVESTING ACTIVITIES (36,342) ----------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES Cash contributed by the partners - Note 10 2,825,000 Demand notes payable (617,278) Proceeds from long-term debt 169,706 Payments on long-term debt (631,082) Other long-term liabilities - related parties 61,203 ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,807,549 ----------- INCREASE IN CASH 40,137 CASH - Beginning of year 15,518 ----------- CASH - End of year $ 55,655 ===========
The accompanying notes are an integral part of these combined financial statements. F36 68 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED STATEMENT OF CASH FLOWS (CONTINUED)
- -------------------------------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1994 - -------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 255,304 =========== NONCASH INVESTING AND FINANCING ACTIVITIES Capital lease and debt obligations incurred for acquisition of equipment $ 68,431 =========== Partners' capital contribution of inventory $ 399,990 =========== Liability to related party contributed to capital $ 125,000 =========== WORKING CAPITAL (INCREASES) DECREASES Accounts receivable Trade $ 1,020,492 Related parties (280,204) Inventories 1,480,803 Other current assets and liabilities 940,601 Accounts payable Trade (1,087,268) Related parties 744,468 ----------- INCREASE IN WORKING CAPITAL $ 2,818,892 ===========
The accompanying notes are an integral part of these combined financial statements. F37 69 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. PRINCIPLES OF COMBINATION The accompanying combined financial statements include the accounts of Kensington Partners (KP), combined with the accounts of North American Installations Company (NAICO). NAICO is owned 100% by common owners of KP. All significant intercompany balances and transactions have been eliminated in the preparation of the combined financial statements. The combined group is herein referred to as "the Companies". KP is a joint venture partnership formed by ZES, Inc. (formerly Kensington Manufacturing Company) (ZES) and Bird-Kensington Holding Corp., an indirect subsidiary of Bird Corporation (Bird). NAICO was formed in May 1993, as a joint venture partnership, and ceased operations in 1994. B. NATURE OF BUSINESS Kensington Partners operates in one principal industry segment: the manufacture of vinyl replacement windows for wholesalers and home remodelers. The Partnership grants credit to its customers, substantially all of which are retail and wholesale resellers of windows located in the eastern half of the United States. NAICO was an exclusive installer of KP windows for a significant customer of KP, a retail seller of windows to end users, which has sales throughout the United States. The installation of the windows has been transferred to the customer that purchases the windows. C. CASH AND CASH EQUIVALENTS Interest-bearing deposits and other investments with original maturities of three months or less are considered cash equivalents. D. ACCOUNTS RECEIVABLE The Companies provide for estimated losses on uncollectable accounts receivable based on historical data and management's evaluation of individual accounts receivable balances at the end of the year. E. INVENTORIES The Companies value all of its inventories at the lower of cost or market. Raw materials are determined on the last-in, first-out (LIFO) method. Work-in-process and finished goods inventories are determined on a first-in, first-out (FIFO) method. F38 70 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. DEPRECIATION Depreciation is computed by the straight-line method at rates intended to distribute the cost of the assets over their estimated useful lives. Property under capital lease is being amortized over the life of the lease in accordance with generally accepted accounting principles. Rates used by principal classifications are as follows:
Rate (Years) ------- Warehouse and manufacturing equipment 3 - 10 Furniture and fixtures 5 - 10 Leasehold improvements 3 - 15 Transportation equipment 3 - 6
Maintenance and repairs which are not considered to extend the useful lives of assets are charged to operations as incurred. Upon sale or retirement, the cost of assets and related allowances are removed from the accounts and any resulting gains or losses are included in other income (expense) for the year. G. INVESTMENT IN AFFILIATED COMPANY The Companies' investment in a joint venture partnership is carried on the equity basis, which approximates the Companies' equity in the underlying net book value. H. PRODUCT WARRANTIES The Companies provide an accrual for future warranty costs based upon actual claims experience. The warranties are limited and provide for parts and/or labor based upon the type of window sold. I. INCOME TAXES The Companies are being treated as partnerships for Federal and state income tax purposes. Under the Internal Revenue Code provisions for partnerships, the partners reflect their proportionate share of the Companies' taxable income or loss on their respective income tax returns, and the Companies are not liable for income taxes. F39 71 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - OPERATIONS AND LIQUIDITY The Companies' combined financial statements have been presented on the basis that they are going concerns, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Companies incurred net losses of approximately $5,310,000 and negative cash flows from operations of $1,731,000 for 1994. At December 31, 1994, the balance sheet reflects an excess of current liabilities over current assets of $4,682,000, and a net capital deficiency of $2,155,000. In addition, a lease agreement (Note 12A) is in default as a result of late payments being made and certain payroll and sales taxes are delinquent. (Note 9) Management believes the above mentioned losses and the associated balance sheet deficiencies are a result of adding new products in 1993 which required different manufacturing processes and a significant increase in orders, which put strain on the existing systems. The combination of the above resulted in manufacturing inefficiencies, low asset performance, excessive delivery costs and inadequate management information. During 1993, the Companies embarked on a program to correct the problems associated with operations. Management believes that the major components of the plan have been achieved in 1994 and that the effect of addressing and correcting these problems during 1994 will have a positive impact on 1995 operating results. During the first quarter of 1995, KP has secured price increases from a majority of its customers and negotiated a price reduction from a major vendor. In addition, KP continues on a program to increase productivity, which includes: simplifying product lines, improving plant layout, management training and investing in labor saving equipment. KP has also begun a sales program to broaden its customer base. The outcome of the uncertainties discussed above cannot be predicted at this time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Companies be unable to continue in existence. NOTE 3 - ACCOUNTS RECEIVABLE At December 31, 1994, accounts receivable - trade from three customers were approximately 67% of trade receivables. Sales to these unrelated customers comprised 67% of total sales for the year ended December 31, 1994. F40 72 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - INVENTORIES Inventories at December 31, 1994 are as follows: Raw materials $ 950,893 Allowance to state raw materials at LIFO cost (39,005) ----------- Raw materials at LIFO cost 911,888 Work-in-process 648,987 Finished goods 314,709 ----------- Total Inventories $ 1,875,584 =========== NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment at December 31, 1994 is as follows: Equipment under capital leases - Note 8 $ 1,785,817 Warehouse and manufacturing equipment 1,715,676 Furniture and fixtures 290,258 Leasehold improvements 419,791 Transportation equipment 64,495 ----------- 4,276,037 Less: Accumulated depreciation 1,139,398 ----------- Total Property and Equipment $ 3,136,639 =========== NOTE 6 - OTHER ASSETS Other assets at December 31, 1994 are as follows: Deposits $ 199,838 Sample windows 89,965 Other assets 81,446 ----------- $ 371,249 ===========
F41 73 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 7 - DEMAND NOTES On June 15, 1994, KP entered into a financing/factoring agreement with a lending institution to sell, on an ongoing basis, up to 80% or $2,500,000, whichever is less, of acceptable trade accounts receivable. All accounts receivable that remain unpaid after 90 days of the purchase by the lender are subject to recourse at the lender's discretion. KP may, at any time, repurchase the accounts receivable sold. The agreement, which expires on June 15, 1995, is subject to automatic renewal for a six month period, unless notice of nonrenewal is given by either party. The loan was funded with $1,000,000, at which time the Companies' line of credit was paid in full (see below). Under the terms of this agreement, fees ranging from 1% to 3-1/2% are based on the number of days to collect the trade receivable, with a guaranteed minimum monthly fee of $5,000. In addition, interest is charged on any amounts advanced under the agreement, at the rate of prime (8-1/2% at December 31, 1994) plus 1-1/2%. Under the terms of this agreement, Bird has guaranteed $1,250,000 of this debt. The amount outstanding under this agreement, included in the accompanying balance sheet at December 31, 1994, is net of a $150,000 cash reserve held by the lending institution. Prior to June 15, 1994, the Companies had a line-of-credit, with maximum borrowings of $2,500,000. Interest was payable monthly at the bank's basic rate plus 1% (see below). The borrowings on the line were collateralized by substantially all the assets of the Companies. The line was guaranteed by the partners of the Companies. In early 1994, the bank cited defaults under the line of credit agreement and made demand for payment. Based on agreements between the Companies and the bank in February and April, 1994, the bank agreed to forebear collection and set a final due date of August 31, 1994. In addition, the interest rate was changed to the bank's basic rate plus 3%. Bird was required to put up $750,000 as additional collateral, which was later applied to the line. Bird was also required to make additional payments totaling $1,200,000. The payments by Bird were recorded as capital contributions to the partnership. F42 74 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 8 - CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT The following is a schedule by years of future minimum lease payments under capital leases and installment notes together with the present value of the net minimum lease payments and note payments as of December 31, 1994: 1995 $332,000 1996 287,000 1997 278,000 1998 334,000 --------
Net minimum lease payments 1,231,000 Less: Amount representing interest 158,000 ---------- Present value of net minimum lease payments 1,073,000 Long-term debt principal payments - all due within one year 46,000 ---------- Net obligations under capital leases and notes payable 1,119,000 Less: Current portion 312,000 ---------- Long-term obligations under capital leases and notes payable $ 807,000 ==========
The partners have guaranteed substantially all of the above lease obligations. Assets under capital lease are capitalized using interest rates appropriate at the inception of each lease. The following is an analysis of the Companies' assets under capital lease obligations, included in property and equipment (Note 5), at December 31, 1994: Warehouse and manufacturing equipment $1,624,677 Transportation equipment 161,140 ---------- 1,785,817 Less: Accumulated amortization 290,729 ---------- Total $1,495,088 ==========
F43 75 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 - ACCRUED EXPENSES Accrued expenses at December 31, 1994 are as follows: Accrued and withheld payroll and payroll taxes (Note 2) $ 575,500 Accrued and collected sales taxes (Note 2) 502,415 Accrued tax penalties and interest 239,219 Accrued vacation 155,510 Accrued real estate taxes 105,932 Other accrued expenses 61,662 ---------- Total Accrued Expenses $1,640,238 ==========
NOTE 10 - PARTNERS' CAPITAL Effective July 1, 1992, ZES entered into an agreement with Bird through one of Bird's indirect subsidiaries to form a joint venture partnership, Kensington Partners (KP), for the purpose of manufacturing and selling custom windows, a business previously conducted by ZES. ZES' capital contribution to KP consisted of all of its assets subject to certain of its liabilities, including $2,800,000 owed to Jones and Brown, Inc. (J&B), a related party. Bird's capital contribution consisted of $2,800,000, in cash, which was used to pay off the amount owed by KP to J&B, subsequent to the inception of the Partnership. The net assets contributed by ZES were $1,689,000. During 1994, the partners entered into an agreement to restructure the partnership agreement of KP and to make capital contributions. Each partner's ownership percentage is to be adjusted plus or minus 2% for each $50,000 of capital contributed or collateral provided on the bank loan, but in no event should a partner be diluted below 10%. A diluted partner is entitled to cure any shortfall between its capital account and the other partner's capital account by contributing the capital necessary to equalize each partner's capital account by the later of December 31, 1994 or six months from the date of the last capital contribution (August 1994) made on or before December 31, 1994. Pursuant to the agreement, Bird contributed $2,700,000 in cash, including payments on debt (Note 7), and $150,000 of inventory. ZES has contributed $250,000 in cash and $250,000 of inventory. Accordingly, the ownership percentages for Bird and ZES at December 31, 1994 are 90% and 10%, respectively. In addition to the capital contributed, the partners have advanced various amounts of working capital during 1994 (Note 13). F44 76 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 10 - PARTNERS' CAPITAL (CONTINUED) In September 1994, Bird entered into a sales agreement with Jannock, Inc. to sell all of the assets of a wholly owned subsidiary, Bird Incorporated. The sales agreement contains an option for Jannock to purchase Bird's interest in Kensington Partners for $2,780,000. In addition to the purchase price, Jannock would assume all of Bird's obligations under various security agreements. The option, which expires on April 7, 1995, is subject to Bird fulfilling its obligations under the partnership agreement. Subsequent to December 31, 1994, Bird advanced KP approximately $524,000. NOTE 11 - RETIREMENT PLANS KP participates in a multi-employer defined benefit pension plan for the electrician's union employees. Plan contributions are determined by the union labor agreement. Management has not expressed any intent to terminate its participation in this plan. KP contributed approximately $191,000 to this plan during the year ended December 31, 1994. The Companies also sponsor an executive retirement plan. Under the provisions of the plan certain key employees may elect, at their discretion, to contribute to the plan. The Companies provide a matching contribution of one half of all employee contributions up to a maximum of 3% of gross compensation. Contributions are used to purchase variable rate annuities. Additional benefits under this plan include proceeds from life insurance policies owned by KP or the cash value upon termination of employment. The Companies' contributions to this plan were not material for the year ended December 31, 1994. NOTE 12 - COMMITMENTS AND CONTINGENCIES A. OPERATING LEASES The Companies lease various operating facilities from related and unrelated parties and transportation equipment from unrelated parties under various operating leases. Rent expense for the year ended December 31, 1994 is as follows: Facilities leases - primarily related party $285,000 Transportation equipment 133,000 -------- $418,000 ========
F45 77 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED) A. OPERATING LEASES (CONTINUED) The following are the approximate future minimum operating lease payments at December 31, 1994, substantially all of which are due to a related party:
Year Ending December 31 Amount ----------- ------ 1995 $ 239,000 1996 227,000 1997 215,000 1998 215,000 1999 215,000 Thereafter 1,280,000 ---------- Total minimum lease payments $2,391,000 ==========
KP is currently in default on its lease for its primary operating facility as a result of not making the required rent payments as they became due. Rent of approximately $237,000, due a related party, has been accrued in the accompanying balance sheets at December 31, 1994. Based upon the current payment plan, approximately $61,000 of the accrued rent at December 31, 1994 is included in other long-term liabilities - related parties. B. PURCHASE COMMITMENTS KP and Bird have entered into a supply agreement which requires KP to purchase specified quantities of raw materials from Bird beginning in 1993 and ending in the year 2002. Minimum purchases for the next five years are 1995, $900,000; 1996, $1,100,000; 1997, $1,300,000; and 1998 and 1999, the greater of $1,300,000 or actual amounts purchased in 1997. The agreement includes penalties for shortfalls in purchases on a per year basis. Shortfalls can be offset with credits from years when excess volume is purchased. KP and Domken Plastics (Note 13A) have entered into a supply agreement which requires KP to purchase $2,500,000 of raw materials, annually, through 1999. The agreement includes penalties for shortfalls in total purchases over the term of the agreement. C. SUPPLY AGREEMENTS KP has entered into a supply agreement with a customer that primarily purchases through Quantum II Partners (Notes 12D and 13D). The agreement requires KP to provide not less than 90% of the customer's total requirement of Quantum II vinyl replacement windows (Note 12D). F46 78 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED) D. LITIGATION On September 13, 1994, a complaint was filed in Middlesex Superior Court by the other 50% owner of Quantum II Partners (Note 13D) and others, including Quantum II Partners (collectively, the plaintiffs), against Kensington Partners and Quantum II Partners (collectively, the defendants). The plaintiffs allege various breaches of contract on the part of the defendants including breach of a partnership agreement, a supply agreement (Note 12C) and an employment agreement along with other complaints under the Massachusetts Unfair Trade Practices Act. The plaintiffs are seeking relief of actual damages in an unspecified amount and a doubling or trebling of such damages as provided in the Unfair Trade Practices Act. KP believes that the claims filed by the plaintiffs have no merit and denies any liability. On October 4, 1994, the defendants filed a complaint in Federal Court alleging various breaches of contract by the plaintiffs and seeking collection of outstanding balances due to the Company from the plaintiffs of approximately $560,000, included in accounts receivable - trade. No answers have been filed in these actions because the parties are involved in settlement negotiations. With respect to the litigation filed by KP for the collection of the 1994 balances receivable, management estimates that some loss may occur and has recorded its estimate of possible loss as an allowance for doubtful accounts. The Company anticipates that a settlement agreement will be achieved, as currently contemplated. If the matter is not settled, and goes to trial, management believes that the ultimate loss, if any, will not exceed the amounts recorded. NOTE 13 - RELATED PARTY TRANSACTIONS The Companies have entered into various transactions with related parties during the year ended December 31, 1994. The transactions are as follows: A. PURCHASES AND PAYABLES The Companies have purchases for raw materials, advertising services, and commissions from the following related parties as of and for the year ended December 31, 1994: Vinyl Division of Bird, Inc. $2,862,000 Domken Plastics Limited (DPL) $3,616,000 Quantum II Partners (see below) $ 200,000
F47 79 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED) A. PURCHASES AND PAYABLES (CONTINUED) Accounts payable to related parties at December 31,1994 is as follows: Bird, Inc. $1,947,000 Domken Plastics Limited (DPL) 1,436,000 Quantum II (Notes 12D and 13D) 16,000 Other related parties 256,000 ---------- $3,655,000 ==========
DMI and DPL are related through common ownership with ZES. Fees from J&B for computer software support of approximately $144,000 were charged to operations for the year ended December 31, 1994. B. SALES AND RECEIVABLES The Companies had sales to Jones & Brown, Inc. (J&B), a related party through common ownership with ZES, of approximately $5,890,000 for 1994. In addition, the Companies had sales to other related parties of approximately $471,000 for 1994. Accounts receivable from related parties are as follows as of December 31, 1994: J&B $1,174,000 Other 112,000 ---------- Total $1,286,000 ==========
C. RENTS KP rents facilities from related parties (Note 12). D. OTHER Kensington Partners owns a 50% equity investment in Quantum II Partners (Note 12D). Quantum II was formed during 1993 to be the exclusive marketing representative to sell Quantum II replacement windows manufactured by KP. Quantum II Partners reported a net partnership deficit of approximately $130,000 for 1994. KP has reflected its share of Quantum's excess of liabilities over assets in other long-term liabilities. F48 80 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED) NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED) D. OTHER (CONTINUED) At December 31, 1994, approximately $306,000 due from Quantum II is included in other receivables - related parties. This amount is net of an allowance for doubtful accounts of $65,000. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT In 1995, Jannock, Inc. exercised its option to purchase Bird's interest, owned by its wholly-owned subsidiary Bird-Kensington Holding Corporation, in KP. Immediately preceding the sale, Bird purchased ZES' interest in KP for $1,000,000. In addition, Bird invested in KP $4,090,000 prior to the sale to fulfill provisions in the asset purchase agreement. On June 2, 1995, the stock of Bird-Kensington Holding Corporation, which owned the assets and liabilities of KP, was sold by Bird to Jannock, Inc. in exchange for cash of $2,780,000 and assumption of certain liabilities. In April 1996, the litigation (Note 12D) between the other 50% owner of Quantum II Partners (Note 13D) and Bird, as successor in interest to certain of Kensington Partners' rights and obligations under the Quantum II Partnership, Supply and Sales Representative Agreements, was concluded as a result of the parties entering into a settlement agreement. The agreement calls for Bird to receive total payments of $410,000, and for cancellation of the Sales Representative and Supply Agreements, and termination of the partnership. F49 81 SUPPLEMENTAL INFORMATION F50 82 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE TO THE PARTNERS KENSINGTON PARTNERS AND AFFILIATE Leechburg, Pennsylvania We have audited the combined financial statements of Kensington Partners and Affiliate as of December 31, 1994 and for the year then ended, and have issued our report thereon dated February 10, 1995. In connection with our audit of these financial statements, we audited financial statement schedule II. In our opinion, such a financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. /s/Alpern, Rosenthal & Company Pittsburgh, Pennsylvania February 10, 1995 F51 83 KENSINGTON PARTNERS AND AFFILIATE SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YEAR ENDED DECEMBER 31, 1994
Additions ------------------------- Balance Charged to Charged to Balance beginning costs and other Deduc- at end of year expenses accounts tions(1) of year ------- -------- -------- -------- ------- YEAR ENDED DECEMBER 31, 1994: Allowance for doubtful accounts $195,000 $595,000 $ - $402,000 $388,000 ======= ======= ======== ======== ========
(1) Uncollectible accounts written off. F52 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 BIRD CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (1) (In thousands, except share and per share amounts)
YEAR ENDED DECEMBER 31, 1996 1995 1994 ----------- ----------- ----------- Primary earnings per share Earnings (loss) from continuing operations $ 2,169 ($ 797) $ 1,083 Deduct dividend requirements: Preferred stock (30) (30) (30) Convertible preference stock (1,506) (1,506) (1,506) ----------- ----------- ----------- Net earnings (loss) from continuing operations 633 (2,333) (453) Net earnings (loss) from discontinued operations 134 (11,252) (4,766) ----------- ----------- ----------- Net earnings (loss) applicable to common stock $ 767 ($ 13,585) ($ 5,219) =========== =========== =========== Weighted average number of common shares outstanding (1) 4,130,224 4,104,965 3,992,251 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options (3) 16,664 0 0 ----------- ----------- ----------- Weighted average number of common shares outstanding as adjusted 4,146,888 4,104,965 3,992,251 =========== =========== =========== Primary earnings (loss) per common share: Continuing operations 0.15 (0.57) (0.11) Discontinued operations 0.03 (2.74) (1.20) ----------- ----------- ----------- Applicable to common stock $ 0.18 ($ 3.31) ($ 1.31) =========== =========== ===========
(1) See Note 1 of Notes to Consolidated Financial Statements. (3) APB 15 paragraph 30 indicates computation of primary earnings per share should not give effect to common stock equivalents if their inclusion has the effect of decreasing the loss per share amount otherwise computed or is anti-dilutive. 2 EXHIBIT 11 BIRD CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (1) (In thousands, except share and per share amounts)
YEAR ENDED DECEMBER 31, 1996 1995 1994 ----------- ----------- ----------- Fully diluted earnings per share (2) Earnings (loss) from continuing operations $ 2,169 ($ 797) $ 1,083 Deduct dividend requirements of preferred stock (30) (30) (30) ----------- ----------- ----------- Net earnings (loss) from continuing operations 2,139 (827) 1,053 Net earnings (loss) from discontinued operations 134 (11,252) (4,766) ----------- ----------- ----------- Net earnings (loss) applicable to common stock $ 2,273 ($ 12,079) ($ 3,713) =========== =========== =========== Weighted average number of common shares outstanding (1) 4,130,224 4,104,965 3,992,251 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 18,023 0 0 Assuming conversion of convertible preference stock 731,955 731,955 731,955 ----------- ----------- ----------- Weighted average number of common shares outstanding as adjusted 4,880,202 4,836,920 4,724,206 =========== =========== =========== Fully diluted earnings (loss) per common share: Continuing operations $ 0.44 ($ 0.17) $ 0.22 Discontinued operations 0.03 (2.33) (1.01) ----------- ----------- ----------- Applicable to common stock $ 0.47 ($ 2.50) ($ 0.79) =========== =========== ===========
(1) See Note 1 of Notes to Consolidated Financial Statements. (2) These calculations are submitted in accordance with Securities Exchange Act of 1934, Release No. 9083, although in certain instances, it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. EX-22 3 SIGNIFIGANT SUBSIDIARIES 1 EXHIBIT 22 BIRD CORPORATION Significant Subsidiaries: All subsidiaries are majority owned and are included in the Consolidated Financial Statements.
State in Which Incorporated or Organized ------------------------- Bird Incorporated Massachusetts
EX-23.(A) 4 CONSENT OF PRICE WATERHOUSE 1 EXHIBIT 23 (a) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of these Registration Statements on Form S-3 (No. 33-44475); Form S-4 (No. 33-44403) and Forms S-8 (Nos. 33-36304, 33-67826, 33-67828 and 33-36305) of our report dated February 20, 1997 appearing on Page F2 of Bird Corporation's Annual Report on Form 10-K for the year ended December 31, 1996. /s/Price Waterhouse LLP Boston, Massachusetts March 31, 1997 EX-23.(B) 5 CONSENT OF ALPERN, ROSENTHAL AND COMPANY 1 EXHIBIT 23 (b) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of these Registration Statements on Form S-3 (No. 33-44475); Form S-4 (No. 33-44403) and Forms S-8 (Nos. 33-36304, 33-67826, 33-67828 and 33-36305) of our report dated February 10, 1995; appearing in Bird Corporation's Form 10-K for the year ended December 31, 1996. /s/Alpern, Rosenthal & Company Pittsburgh, Pennsylvania March 31, 1997 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FORM 10-K. 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 2,310,000 0 5,341,000 150,000 5,273,000 13,993,000 40,745,000 18,805,000 39,669,000 10,618,000 0 0 1,396,000 4,415,000 0 22,450,000 51,956,000 51,956,000 43,840,000 43,840,000 0 0 435,000 2,169,000 0 2,169,000 134,000 0 0 2,303,000 .18 .47
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