-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, C123Ywt0shy2mel/m31Isief7Sn7v3Q/YYk/KO6t0uxakjVvSTjynlNYdmapoMWC PS56weQQceqL6EvuqwFUuA== 0000950109-94-002128.txt : 19941116 0000950109-94-002128.hdr.sgml : 19941116 ACCESSION NUMBER: 0000950109-94-002128 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941001 FILED AS OF DATE: 19941115 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLY GEM INDUSTRIES INC CENTRAL INDEX KEY: 0000079209 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94560387 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 10-Q 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 October 1, 1994 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, NY 10017 - --------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 212-832-1550 ------------------ - --------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 November 1, 1994 - -------------------------------------- ---------------------------------- Common stock, par value $.25 per share 14,973,234 Shares PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands) October 1, December 31, ASSETS 1994 1993 - ------ ----------- ------------ (Unaudited) Cash and cash equivalents $ 10,121 $ 12,499 Marketable securities 1,850 1,942 Accounts receivable, net of allowance of $8,332; $7,197 in 1993 75,220 54,432 Inventories 121,457 117,515 Prepaid expenses and other current assets 27,757 11,077 -------- -------- Current assets 236,405 197,465 Funds held for construction 1,038 2,375 Property, plant and equipment - at cost net of accumulated depreciation and amortization of $44,381; $38,704 in 1993 72,581 67,766 Patents and trademarks, net of accumulated amortization of $7,537; $6,677 in 1993 16,752 17,595 Other intangible assets - net 15,581 21,557 Cost in excess of net assets acquired - net 25,181 26,492 Other assets 28,430 11,694 -------- -------- $395,968 $344,944 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Accounts payable and accrued expenses $ 79,661 $ 55,764 Notes payable and current maturities of long-term debt and capital leases 489 5,206 -------- -------- Current liabilities 80,150 60,970 Long-term debt 112,182 142,898 Capital leases 7,143 7,166 Deferred income taxes and other liabilities 26,747 4,968 Stockholders' equity: Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued Common stock, $.25 par value; authorized 30,000,000 shares; issued 17,116,195; 11,872,509 in 1993 4,279 2,968 Additional paid-in capital 143,879 64,006 Retained earnings 62,361 72,601 Less: Treasury stock-at cost (2,149,961 shares; 910,073 in 1993) 39,631 9,362 Unamortized restricted stock 1,142 1,271 -------- -------- Stockholders' equity 169,746 128,942 -------- -------- $395,968 $344,944 ======== ========
See accompanying notes to the financial statements. 2 PLY GEM INDUSTRIES,INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
(Dollars in Thousands) Nine Months Ended ----------------- October 1, September 30, 1994 1993 ---------- ------------- Net sales $602,214 $539,735 Cost of goods sold 483,005 437,054 -------- -------- Gross profit 119,209 102,681 Selling, general and administrative expenses 85,635 78,915 Nonrecurring charges 36,275 -- -------- -------- Income (loss) from operations (2,701) 23,766 Amortization of goodwill and other intangibles (3,332) (3,557) Interest expense (6,026) (7,821) Investment and other income expense, net (414) (234) -------- -------- Income (loss) before income taxes (12,473) 12,154 Income taxes (benefit) (3,456) 5,493 -------- -------- Net income (loss) ($9,017) $6,661 ======== ======== Earnings (loss) per share: Primary ($.66) $.57 Fully diluted (.66) .55 Weighted average number of shares outstanding: Primary 13,594,000 11,604,000 Fully diluted 13,594,000 14,967,000 Cash dividends per share $.09 $.09
See accompanying notes to financial statements. 3 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
(Dollars in Thousands) Quarter Ended ------------- October 1, September 30, 1994 1993 ---------- ------------- Net sales $218,997 $208,966 Cost of goods sold 172,344 168,194 -------- -------- Gross profit 46,653 40,772 Selling, general and administrative expenses 29,153 27,114 Nonrecurring charges 36,275 -- -------- -------- Income (loss) from operations (18,775) 13,658 Amortization of goodwill and other intangibles (1,007) (1,180) Interest expense (1,614) (2,702) Investment and other income expense, net (81) (169) -------- -------- Income (loss) before income taxes (21,477) 9,607 Income taxes (benefit) (7,500) 4,347 -------- -------- Net income (loss) ($13,977) $5,260 ======== ======== Earnings (loss) per share: Primary ($.95) $.44 Fully diluted ($.95) $.41 Weighted average number of shares outstanding: Primary 14,720,000 11,835,000 Fully diluted 14,720,000 14,988.000 Cash dividends per share $.03 $.03
See accompanying notes to financial statements. 4 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands) Nine Months Ended ----------------- October 1, September 30, 1994 1993 ---------- ------------- Cash flows from operating activities ------------------------------------ Net income (loss) (9,017) 6,661 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Nonrecurring charges 36,275 -- Depreciation and amortization 10,314 9,494 Provision for doubtful accounts 1,096 3,658 Changes in assets and liabilities: Accounts receivable (22,684) (30,648) Inventories (11,145) (13,245) Prepaid expenses and other current assets (16,680) (1,550) Accounts payable and accrued expenses 6,999 14,090 Other 910 5,085 2,215 (15,986) ------- ------- ------- ------ Net cash (used in) operating activities (3,932) (9,325) ------- ------ Cash flows from investing activities ------------------------------------ Additions to property, plant and equipment (14,648) (16,040) Funds used for construction 1,337 6,031 Other 1,053 593 ------- ------ Net cash (used in) investing activities (12,258) (9,416) ------- ------ Cash flows from financing activities ------------------------------------ Short-term debt borrowings, (repayments), net (2,365) (1,075) Repayments of long-term debt (2,925) (8,290) Long-term borrowings 19,834 29,390 Cash dividends (1,222) (970) Other 490 400 ------- ------ Net cash provided by financing activities 13,812 19,455 ------- ------ Net increase (decrease) in cash and cash equivalents (2,378) 714 Cash and cash equivalents at beginning of period 12,499 1,880 ------- ------ Cash and cash equivalents at end of period $10,121 $2,594 ======= ======
See accompanying notes to financial statements. 5 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 1994 presentation. In 1994 the Company modified its interim fiscal reporting periods. Each period will end on the Saturday nearest to the end of the respective calendar quarters for March, June and September. This change will have no effect on the annual reporting period which will continue to end on December 31 and will have no material effect on the quarterly or nine month comparisons. 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. NOTE 2 - During the third quarter of 1994, the Company recorded nonrecurring charges of $36.3 million ($22.5 million or $1.53 per share after tax). The charges consist of approximately $29.3 million related to a restructuring program designed to improve profitability and $7.0 million for unusual items primarily consisting of the write down of certain intangible assets and obsolete and discontinued products. The Company began working on the proposed restructuring program during the fiscal 1994 second quarter. The restructuring charge consists of several components including: severance and related costs in connection with the planned reduction of approximately 15% of the Company's workforce or approximately 600 salaried and hourly jobs, consolidation and closure of selected regional distribution and manufacturing facilities, the abandonment of certain information systems and other actions including lease termination expenses and transaction costs to execute the restructuring program. It is anticipated that these actions will be implemented over the next twelve months and the Company should realize annualized pretax savings of approximately $12 million upon full implementation. The balance of the restructuring accrual at October 1, 1994 is approximately $20.2 million of which approximately $16.9 million is included in accounts payable and accrued expenses and the remainder included in deferred income taxes and other liabilities. 6 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited) The current status of the components of the restructuring liability is as follows:
(In Thousands) Balance at Initial Liability October 1, 1994 ----------------- --------------- Severance and related costs $ 8,500 $ 7,600 Consolidation and closure of facilities 15,900 9,700 Abandonment of certain information systems 1,600 --- Other, including lease termination expenses and costs to execute the program 3,300 2,900 ------- ------- $29,300 $20,200 ======= =======
NOTE 3 - The major classes of inventories were as follows:
(In Thousands) October 1, December 31, 1994 1993 ---------- ------------ Finished goods $55,819 $56,630 Work in process 26,976 25,806 Raw Materials 38,662 35,079 -------- -------- $121,457 $117,515 ======== ========
NOTE 4 - Earnings (loss) per share of common stock are based on the weighted average number of shares outstanding during each of the periods. Primary and fully diluted earnings per share for the 1993 periods include the dilutive effect of unexercised stock options. Fully diluted earnings per share in 1993 include the assumed conversion of the Company's Convertible Senior Subordinated Discount Debentures ("Debentures"). NOTE 5 - Supplemental cash flow information for the nine month periods are as follows:
(In Thousands) October 1, September 30, 1994 1993 ---------- ------------- Interest paid $ 3,617 $ 6,190 Income taxes paid 2,707 6,799
7 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited) Non-cash financing activities involve the issuance of common stock during the first quarter of 1994 upon conversion of $49,963,000 of the Company's Debentures. NOTE 6 - The accumulated amortization of cost in excess of net assets acquired and other intangibles is $25,498,000 at October 1, 1994 and $26,136,000 at December 31, 1993. NOTE 7 - The Company's loan agreement with its banks require the attainment of certain working capital and tangible net worth levels and the maintenance of various financial ratios, among its provisions. Under the most restrictive of these covenants, at October 1, 1994 approximately $1,770,000 of retained earnings was available for the payment of dividends for the balance of 1994. NOTE 8 - Hoover Treated Wood Products, Inc. ("Hoover"), a wholly-owned subsidiary of the Company, is a defendant, along with many other parties, in a number of commercial lawsuits, including a purported class action on behalf of certain Maryland homeowners, 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 Company is also a defendant in some of these suits. The number of lawsuits pending, as of October 1, 1994, where Hoover is not being defended and indemnified by a third party, as well as the number of lawsuits filed in 1993 and 1994 have declined significantly from earlier periods. Many of the suits and claims have been settled. In those suits that remain pending, direct defense costs are being paid by either insurance carriers, under reservations of rights agreements, or 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. Hoover is appealing the other judgment and believes that it has meritorious grounds for overturning it in whole or in part. 8 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited) Hoover and the Company have engaged in litigation with 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, including the jury verdict now on appeal. 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. 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. In accordance with the provisions of Financial Accounting Standards Board Interpretation No. 39, which became effective on January 1, 1994, Hoover has a receivable at October 1, 1994 (included in other assets) for $17.9 million for the estimated proceeds and recoveries related to insurance matters discussed above and 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 estimating both this liability, which Hoover expects to discharge over the next four years, and its anticipated additional insurance recoveries, Hoover and the Company have considered a number of factors, including: the number and exposure posed by the pending lawsuits; the significant decline in the number of lawsuits filed in 1993 and 1994; 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 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 adverse effect upon the financial position of the Company. 9 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited) NOTE 9 - During the period February 23 to March 23, 1994 holders of $49,963,000 principal amount of 10% Convertible Senior Subordinated Discount Debentures, due October 1, 2008, exchanged them for 2,751,328 shares of common stock of the Company. The remaining $37,000 of the original $50 million face amount was redeemed by the Company. 10 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED OCTOBER 1, 1994 NONRECURRING CHARGES - -------------------- During the third quarter of 1994, the Company recorded nonrecurring charges of $36.3 million. As more fully described in Note 2 to the Consolidated Financial Statements, the nonrecurring charges consist of $29.3 million related to a restructuring program and $7.0 million related to unusual items primarily consisting of the write down of certain intangible assets and obsolete and discontinued products. Approximately $14 million of the charge is for non cash charges resulting from asset write-offs. The profit improvement actions involve delayering the organization, changing business processes, utilizing facilities more effectively and improving product line management. The actions are expected to be implemented over the next twelve months and the Company expects to realize annualized pretax savings of approximaely $12 million upon full implementation. RESULTS OF OPERATIONS - --------------------- Net sales for the third quarter of 1994 increased to $219.0 million, a 4.8% increase from the corresponding 1993 period. Sales for the current quarter were affected by a ten day work stoppage at the Company's largest window manufacturing facility. Net sales for the first nine months of 1994 were 11.6% higher compared to the corresponding 1993 period as substantially all operating entities reported higher sales for the first nine months of 1994 compared to 1993. Of the total net sales increase in the nine month comparison periods, approximately 6% is attributable to additional unit volume and the remainder to increases in average selling prices. The increase in net sales in the quarterly comparison was primarily attributable to increases in average selling prices. Gross profit, expressed as a percent of sales, was 21.3% for the third quarter of 1994 as compared with 19.5% for the same 1993 period. For the first nine months of 1994 gross profit was 19.8% compared to 19.0% for the same period in 1993. Improved labor productivity, overall lower conversion costs and the absence of new plant start-up costs incurred in 1993 were primarily responsible for the improvement in gross profit. Selling, general and administrative expenses, as a percent of sales, for the 1994 third quarter were essentially flat compared to the prior year. For the year to date comparison, selling, general and administrative expenses were 14.2% in 1994 compared to 14.6% in 1993. The decline is primarily due to economies resulting from absorption of fixed expenses over a larger sales base and a lower provision for bad debts partially offset by higher employment costs. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED OCTOBER 1, 1994 The nonrecurring charges created a loss from operations of $18.8 million in the 1994 third quarter compared to operating income of $13.7 million in the comparable 1993 period. Excluding the charges operating income would have advanced approximately 28% and 41% respectively, for the quarter and year to date comparisons for the reasons described in the preceding paragraphs. Interest expense declined approximately $1.1 million for the third quarter of 1994 when compared to the second quarter of 1993. Lower interest expense for the quarter resulted from the conversion of the Company's Debentures into common stock on March 25, 1994, partially offset by higher borrowing levels primarily needed to support the higher level of operations and slightly higher interest rates. The Company's effective tax rate was 34.9% and 27.7% respectively, for the three and nine months ended October 1, 1994 compared to approximately 45.2% for the 1993 comparison periods. The lower effective rates, which are used to compute the tax benefit on the periods losses, are attributable to a proportionately larger amount of non deductible goodwill amortization in 1994 when compared to income (loss) before taxes than in 1993. Liquidity and Capital Resources - ------------------------------- The Company used $3.9 million in cash from operations during the first nine months of 1994 principally as a result of an increase in working capital primarily associated with the higher level of overall business activity and the timing of the tax benefit related to the exercise of stock options. Significant investing activities during the first nine months of 1994 include capital expenditures of $14.7 million primarily incurred in the Company's Windows, Doors and Siding subsidiaries. Significant financing activities in the first nine months of 1994 related to the net increase in revolving credit borrowings of $19.8 million used principally to finance the working capital and capital expenditures of the Company. The Company expects to spend approximately $11 million after taxes in connection with the restructuring program over the next several years. The Company's current ratio was 2.9 to 1 at October 1, 1994 compared to 3.2 at December 31, 1993. Available bank credit facilities were approximately $70 million at October 1, 1994. 12 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES October 1, 1994 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) Exhibit 27 - Financial Data Schedule (b) Reports - None 13 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q October 1, 1994 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: November 15, 1994 /s/ Herbert P. Dooskin ----------------- --------------------------- Executive Vice President Principal Financial Officer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1993 JAN-01-1994 OCT-01-1994 10,121 1,850 83,552 8,332 121,457 236,405 116,962 44,381 395,968 80,150 119,325 4,279 0 0 165,467 395,968 602,214 602,214 483,005 84,539 40,021 1,096 6,026 (12,473) (3,456) (9,017) 0 0 0 (9,017) (.66) (.66)
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