-----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, S5+l4/xHtbsAV88xvmTU2MqSI5yoicNyAQiz0BavJh9xomzvkK1hntYx58JBzrT6 scMIm8G6gCuHYI2K+VZgVw== 0000940180-96-000048.txt : 19960515 0000940180-96-000048.hdr.sgml : 19960515 ACCESSION NUMBER: 0000940180-96-000048 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLY GEM INDUSTRIES INC CENTRAL INDEX KEY: 0000079209 STANDARD INDUSTRIAL CLASSIFICATION: MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS [2430] IRS NUMBER: 111727150 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04087 FILM NUMBER: 96562952 BUSINESS ADDRESS: STREET 1: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017-1401 BUSINESS PHONE: 2128321550 MAIL ADDRESS: STREET 1: PLY GEM INDUSTRIES INC STREET 2: 777 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017-1401 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL PLYWOOD CO INC DATE OF NAME CHANGE: 19680729 FORMER COMPANY: FORMER CONFORMED NAME: CRAFTMAN PLYWOOD CORP DATE OF NAME CHANGE: 19680212 FORMER COMPANY: FORMER CONFORMED NAME: CRAFTSMAN PLYWOOD CORP DATE OF NAME CHANGE: 19661006 10-Q 1 FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 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 1-4087 ---------- PLY GEM INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-1727150 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 777 Third Avenue, New York, New York 10017 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 212-832-1550 ----------------------------- 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at April 28,1996 - ------------------------------------ ---------------------------------- Common stock, par value $.25 per share 14,347,683 Shares 1 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands)
March 31, December 31, ASSETS 1996 1995 - ---------------------------------------- ------------------ --------------- (Unaudited) Cash and cash equivalents $ 7,627 $ 8,107 Accounts receivable, net of allowance of $4,712; $4,511 in 1995 42,550 33,020 Inventories 104,474 96,228 Prepaid and deferred income taxes 17,580 15,714 Other current assets 11,648 9,194 -------- -------- Total current assets 183,879 162,263 Property, plant and equipment - at cost net of accumulated depreciation and amortization of $55,359; $51,573 in 1995 82,748 81,832 Patents and trademarks, net of accumulated amortization of $9,259; $8,971 in 1995 15,059 15,334 Other intangible assets - net 15,254 15,507 Cost in excess of net assets acquired - net 22,715 23,081 Other assets 25,249 26,973 -------- -------- Total assets $344,904 $324,990 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------- Accounts payable and accrued expenses $ 53,017 $ 52,645 Accrued restructuring 3,122 4,480 Current maturities of long-term debt and capital leases 464 458 -------- -------- Total current liabilities 56,603 57,583 -------- -------- Long-term debt 119,510 93,135 Capital leases 7,092 7,106 Other liabilities 20,831 22,681 Stockholders' equity: Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued - - Common stock, $.25 par value; authorized 60,000,000 shares; issued 17,611,157; 17,463,072 in 1995 4,403 4,366 Additional paid-in capital 149,126 148,618 Retained earnings 50,167 53,246 Unrealized appreciation in marketable securities 1,060 - Less: Treasury stock-at cost (3,150,284 shares; 3,015,311 in 1995) 57,834 55,676 Unamortized restricted stock and note receivable 6,054 6,069 -------- -------- Total stockholders' equity 140,868 144,485 -------- -------- Total liabilities and stockholders' equity $344,904 $324,990 ======== ========
See accompanying notes to the financial statements. 2 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands Except per Share Data)
Quarter Ended ------------- March 31, April 1, 1996 1995 ---------- --------- Net sales $142,018 $162,934 Cost of goods sold 121,504 138,072 -------- -------- Gross profit 20,514 24,862 Selling, general and administrative expenses 23,397 27,406 -------- -------- Loss from operations (2,883) (2,544) Interest expense (1,824) (1,478) Other income (expense), net (46) (572) -------- -------- Loss before income taxes (4,753) (4,594) Income tax benefit (2,115) (1,929) -------- -------- Net loss $ (2,638) $ (2,665) ======== ======== Loss per share: Primary $ (.18) $ (.18) Fully diluted (.18) (.18) Weighted average number of shares outstanding: Primary 14,324 14,448 Fully diluted 14,324 14,448 Cash dividends per share $ .03 $ .03
See accompanying notes to financial statements 3 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
Quarter Ended ------------- March 31, April 1, 1996 1995 ------------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES - ---------------------------------------- Net loss $ (2,638) $ (2,665) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization $ 3,835 $ 3,394 Provision for doubtful accounts 461 207 Changes in assets and liabilities: Accounts receivable (9,991) 6,134 Inventories (8,246) (6,550) Prepaid and deferred income taxes (1,866) (1,016) Other current assets (1,394) (1,941) Accounts payable and accrued expenses 372 (7,081) Restructuring (1,358) (2,559) Other (126) (18,313) (1,615) (11,027) ------- -------- ------- -------- Net cash used in operating (20,951) (13,692) activities -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES - ---------------------------------------- Additions to property, plant and equipment (3,945) (5,443) Other 101 83 -------- -------- Net cash used in investing activities (3,844) (5,360) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES - ---------------------------------------- Purchase of treasury shares (2,158) (1,209) Net change in revolving note borrowings with original 26,367 15,408 maturity of 90 days or less Cash dividends (441) (440) Other 547 930 -------- -------- Net cash provided by financing activities 24,315 14,689 -------- -------- Net decrease in cash and cash equivalents (480) (4,363) Cash and cash equivalents at beginning of period 8,107 14,403 -------- -------- Cash and cash equivalents at end of period $ 7,627 $ 10,040 ======== ========
See accompanying notes to financial statement 4 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Certain prior year items have been reclassified to conform to the 1996 presentation. These statements include all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of financial position and results of operations. The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the latest annual report on Form 10-K. In 1996 the Company changed its interim fiscal reporting periods to conform to calendar presentation. The change has no material effect on the interim comparisons. Note 2 - During 1994, the Company recorded a charge of approximately $29.1 million related to a restructuring program. The status of the components of the restructuring provision at the end of the period was:
(In Thousands) Balance at December 31, 1996 Balance at 1995 Activity March 31, 1996 ------------ -------- -------------- Consolidation and closure of facilities, including severance and related costs $7,779 $ 955 $6,824 Other, including lease termination expenses and costs to execute the restructuring program 235 235 ------ ------- ------ $8,014 $ 955 $7,059* ====== ======= ======
*The following amounts are included in the consolidated balance sheet at March 31, 1996 under the captions: "accrued restructuring" ($3.1 million), "other liabilities" ($3.1 million), "property, plant and equipment" (reduction of $.3 million), inventories (reduction of $.5 million), and "accounts receivable" (reduction of $.1 million). NOTE 3 -The major classes of inventories were as follows:
(In Thousands) March 31, 1996 December 31, 1995 -------------- ----------------- Finished goods $ 61,375 $54,530 Work in process 13,208 12,508 Raw materials 29,891 29,190 -------- ------- $104,474 $96,228 ======== =======
5 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 4 - Loss per share of common stock are based on the weighted average number of shares outstanding during each of the periods. Common stock equivalents were not used because the results would be anti-dilutive. NOTE 5 - Supplemental cash flow information for the quarterly periods are as follows:
(In Thousands) March 31, 1996 April 1, 1995 -------------- ------------- Interest paid $1,412 $1,430 Income taxes paid 154 270
NOTE 6 - The accumulated amortization of cost in excess of net assets acquired and other intangible assets are $20,535,000 at March 31, 1996 and $19,917,000 at December 31, 1995. NOTE 7 - The Company's loan agreements with its banks require the Company to maintain a specified leverage ratio, fixed charge ratio and tangible net worth levels and maintain certain financial ratios, among its provisions. Under the most restrictive of these covenants, at March 31, 1996 approximately $2,400,000 of retained earnings was available for the payment of dividends in 1996. NOTE 8- Hoover Treated Wood Products, Inc.("Hoover"), a wholly-owned subsidiary of the Company, is a defendant, in a number of commercial lawsuits, alleging property damage caused by alleged defects in certain pressure treated interior wood products. Hoover has not manufactured or sold these products since August 1988. The number of lawsuits pending, as of March 31, 1996 as well as the number of lawsuits filed since 1993 have declined significantly from earlier periods. Most of the suits and claims have been resolved by dismissal or settlement. A purported class action on behalf of certain Maryland homeowners was dismissed in November, 1995 when the Maryland Court of Appeals, the State's highest court, found that the homeowners had no viable claims against Hoover. In those suits that remain pending, direct defense costs are being paid out of insurance proceeds. Two actions have proceeded to trial against Hoover and resulted in jury verdicts against it. In one of these actions, judgment was entered in Hoover's favor by the court after a jury verdict against it and the plaintiff's petition to appeal the judgment entered in Hoover's favor was denied. In the other case, the judgment against Hoover was vacated and the case was settled with proceeds from insurance settlements. Hoover and the Company have engaged in litigation with some of their insurers regarding coverage for these lawsuits and claims. Hoover has settled its coverage claims with a majority of its insurers and is negotiating settlements with others. Hoover and the Company believe they have meritorious claims for coverage from their remaining unsettled insurers and are seeking declaratory judgments confirming such coverage. The proceeds from settled insurance claims, along with the proceeds from a settlement of claims by Hoover against certain suppliers of materials used by it in the production of treated wood, are available for the settlement of the underlying property damage actions. The Company believes that Hoover's remaining coverage disputes will be resolved within the next two years on a satisfactory basis and a substantial amount of additional coverage will be available to Hoover. In reaching this belief, it has analyzed Hoover's insurance coverage, considered its history of successful settlements with primary and excess insurers and consulted with counsel. 6 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Hoover and the Company are vigorously defending the underlying lawsuits which cannot be resolved on a reasonable basis and believe that they have meritorious defenses to those suits including, in the case of the Company, the defense that it has been improperly joined, as it did not manufacture or market the Hoover products at issue, and is not legally liable for the damage allegedly caused by them. Hoover has recorded a receivable at March 31, 1996 (included in other assets) for approximately $10.9 million for the estimated proceeds and recoveries related to insurance matters discussed above and recorded an accrual for the same amount (included in other liabilities) for its estimated cost to resolve those matters not presently covered by existing settlements with insurance carriers and suppliers. In evaluating the effect of the lawsuits, a number of factors have been considered, including: the number and exposure posed by the pending lawsuits; the significant decline in the number of lawsuits filed in 1994 and 1995; the availability of various legal defenses, including statutes of limitations; the existence of settlement protocols; an agreement indemnifying Hoover as to certain past and future claims; and Hoover's experience to date in settling with its insurance companies and the likely availability of proceeds from additional insurance. Based on its evaluation, the Company believes that the ultimate resolution of the lawsuits and the insurance claims will not have a material effect upon the financial position of the Company. 7 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 1996 When used in this discussion, the words "believes", "anticipates", "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company, in this report, as well as the Company's periodic reports on Forms 10- K, 10-Q and 8-K filed with the Securities and Exchange Commission. Results of Operations - --------------------- Net sales for the first quarter of 1996 were approximately $142.0 million compared to $162.9 million for the corresponding 1995 period. The 12.8% decline was primarily due to lower unit volume in the Company's Windows, Doors and Siding subsidiaries caused by an unusually harsh winter, particularly in the regions of the United States which are the primary markets for the Company's exterior building products. Approximately one-third of the decline in net sales was due to the Company's plan exit or de-emphasis of certain low margin products. Gross profit, expressed as a percentage of net sales, was 14.4% for the first quarter of 1996 compared to 15.3% for the corresponding period in 1995. The lower margins were due primarily to product mix and competitive pricing issues in the Company's Distribution businesses offset somewhat by lower raw material costs, particularly PVC resin. Selling, general and administrative expenses, as a percentage of net sales, were 16.5% for the first quarter of 1996 as compared to 16.8% for the corresponding 1995 period. In absolute dollars, selling, general and administrative expenses declined $4.0 million for the comparison periods. In general, the improvement primarily reflects the efforts by the Company to realign its cost structure by reducing administrative costs and managing expense growth relative to sales growth. Specifically the improvement is primarily due to lower employment costs related in part to the reduction in work force and lower incentive compensation expense. Liquidity and Capital Resources - ------------------------------- The Company used $21.0 million in cash from operations during the first quarter of 1996 compared to $13.7 million in the corresponding 1995 period. The usage of cash is due to seasonal working capital needs. Significant investing activities in the first quarter of 1996 include capital expenditures of $3.9 million primarily incurred by the Company's Windows, Doors and Siding subsidiaries. Significant first quarter 1996 financing activities related to the net increase in revolving credit borrowings of $26.4 million used principally to finance the working capital requirements and capital expenditures of the Company as well as lower outstandings under the Company's accounts receivable program. 8 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 1996 Liquidity and Capital Resources - Continued - ------------------------------------------- The Company's current ratio improved to 3.2 to 1 at March 31, 1996 compared to 2.8 to 1 at December 31, 1995. The Company has a revolving credit facility with a syndicate of eleven banks which provides financing through February 1999. Availability under this facility was approximately $30 million at March 31, 1996. The Company anticipates that internally generated funds from operations, existing cash balances and the Company's existing credit facility should be sufficient to satisfy its cash requirements over the next twelve months. 9 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES March 31, 1996 PART II - OTHER INFORMATION All items are inapplicable except: Item 1. Legal Proceedings. See Note 8 to the consolidated financial statements. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Reports: Dated August 2, 1995, the Company reported on Form 8-K that it had engaged the investment banking firm of Bear, Stearns & Co. Inc. to explore strategic alternatives for the Company with the intent of maximizing shareholder value, including the possible sale of the Company. The Company does not expect to disclose developments with respect to its exploration of strategic alternatives unless and until it is in a position to announce a definitive transaction. Furthermore, no assurances can be given that the process will result in any specific transaction. 10 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q March 31, 1996 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ply Gem Industries, Inc. ------------------------ (Registrant) Date: May 14, 1996___ /s/ Herbert P. Dooskin ---------------------------- Executive Vice President Principal Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1996 7,627 0 47,262 4,712 104,474 183,879 138,107 55,359 344,904 56,603 126,602 0 0 4,403 0 344,904 142,018 142,018 121,504 0 0 461 1,824 (4,753) (2,115) (2,638) 0 0 0 (2,638) (0.18) (0.18)
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