-----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, BziQEVPYlSOwW409ghxOPowPGfDOTDNnMtdrAPNz/lvB6GQw2bqXzzN+lXJf6Htt +XBk/Dl2aFwQfmFhxXDHEw== 0000950130-96-003109.txt : 19960813 0000950130-96-003109.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950130-96-003109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 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: 96608675 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 JUNE 30, 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 AUGUST 1, 1996 - --------------------------------------- --------------------------------------- COMMON STOCK, PAR VALUE $.25 PER SHARE 14,118,465 SHARES PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS) ASSETS JUNE 30, DECEMBER 31, - ------ 1996 1995 ----------- ------------ (UNAUDITED) CASH AND CASH EQUIVALENTS $ 4,005 $ 8,107 ACCOUNTS RECEIVABLE, NET OF ALLOWANCE OF $4,174; $4,511 IN 1995 45,324 33,020 INVENTORIES 100,722 96,228 PREPAID AND DEFERRED INCOME TAXES 14,442 15,714 OTHER CURRENT ASSETS 11,944 9,194 -------- -------- TOTAL CURRENT ASSETS 176,437 162,263 PROPERTY, PLANT AND EQUIPMENT - AT COST NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION OF $57,752; $51,573 IN 84,548 81,832 1995 PATENTS AND TRADEMARKS, NET OF ACCUMULATED AMORTIZATION OF $9,548; $8,971 IN 1995 14,788 15,334 OTHER INTANGIBLE ASSETS - NET 15,005 15,507 COST IN EXCESS OF NET ASSETS ACQUIRED - 22,350 23,081 NET OTHER ASSETS 22,639 26,973 -------- -------- TOTAL ASSETS $335,767 $324,990 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 61,518 $ 52,645 ACCRUED RESTRUCTURING 2,030 4,480 CURRENT MATURITIES OF LONG-TERM DEBT 570 458 AND CAPITAL LEASES -------- -------- TOTAL CURRENT LIABILITIES 64,118 57,583 LONG-TERM DEBT 102,447 93,135 CAPITAL LEASES 7,491 7,106 OTHER LIABILITIES 20,053 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 17,611,657; 17,463,072 IN 1995 4,403 4,366 ADDITIONAL PAID-IN CAPITAL 149,165 148,618 RETAINED EARNINGS 53,897 53,246 UNREALIZED APPRECIATION IN MARKETABLE SECURITIES 509 - LESS: TREASURY STOCK-AT COST (3,332,069 SHARES; 3,015,311 IN 1995) 60,306 55,676 UNAMORTIZED RESTRICTED STOCK AND NOTE RECEIVABLE 6,010 6,069 -------- -------- TOTAL STOCKHOLDERS' EQUITY 141,658 144,485 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $335,767 $324,990 ======== ======== SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 2 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA)
QUARTER ENDED ---------------------------------------- JUNE 30, JULY 1, 1996 1995 --------- --------- NET SALES $212,079 $203,265 COST OF GOODS SOLD 169,385 169,116 -------- -------- GROSS PROFIT 42,694 34,149 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 32,591 30,347 -------- -------- INCOME FROM OPERATIONS 10,103 3,802 INTEREST EXPENSE (1,933) (1,770) OTHER INCOME (EXPENSE), NET (611) (414 ) -------- -------- INCOME BEFORE INCOME TAXES 7,559 1,618 INCOME TAXES 3,402 590 -------- -------- NET INCOME $ 4,157 $ 1,028 ======== ======== EARNINGS PER SHARE: PRIMARY $ .28 $ .07 FULLY DILUTED .28 .07 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: PRIMARY 16,102 14,440 FULLY DILUTED 16,102 14,440 CASH DIVIDENDS PER SHARE $ .03 $ .03
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 PLY GEM INDUSTRIES, INC., AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA) SIX MONTHS ENDED --------------------- JUNE 30, JULY 1, 1996 1995 ---- ---- NET SALES $354,097 $366,199 COST OF GOODS SOLD 290,889 307,188 -------- -------- GROSS PROFIT 63,208 59,011 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 55,988 57,753 -------- -------- INCOME FROM OPERATIONS 7,220 1,258 INTEREST EXPENSE (3,757) (3,248) OTHER INCOME (EXPENSE), NET (657) (986) -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 2,806 (2,976) INCOME TAXES (BENEFIT) 1,287 (1,339) -------- -------- $ 1,519 $ (1,637) NET INCOME (LOSS) ======== ======== EARNINGS (LOSS) PER SHARE: PRIMARY $ .11 $ (.11) FULLY DILUTED .11 (.11) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: PRIMARY 14,251 14,444 FULLY DILUTED 14,251 14,444 CASH DIVIDENDS PER SHARE $ .06 $ .06 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED --------------------------------------- JUNE 30, JULY 1, 1996 1995 ------------------ ------------------- CASH FLOWS FROM OPERATING ACTIVITIES - ---------------------------------------- NET INCOME (LOSS) $ 1,519 $ (1,637) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 7,569 $ 6,787 PROVISION FOR DOUBTFUL ACCOUNTS 1,526 1,136 CHANGES IN ASSETS AND LIABILITIES: - ---------------------------------------- ACCOUNTS RECEIVABLE (13,830) (2,691) INVENTORIES (4,494) (5,398) PREPAID AND DEFERRED INCOME TAXES 1,272 (804) PREPAID EXPENSES AND OTHER CURRENT (2,241) (4,006) ASSETS ACCOUNTS PAYABLE AND ACCRUED EXPENSES 8,873 (5,241) RESTRUCTURING (4,294) (3,784) OTHER 3,550 (2,069) (1,659) (15,660) ------- ------- ------- -------- NET CASH USED IN OPERATING (550) (17,297) ACTIVITIES ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES - ---------------------------------------- ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT (8,623) (15,804) OTHER 117 900 ------- -------- NET CASH USED IN INVESTING ACTIVITIES (8,506) (14,904) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES - ---------------------------------------- PURCHASE OF TREASURY SHARES (4,630) (2,190) NET CHANGE IN REVOLVING NOTE BORROWINGS WITH ORIGINAL MATURITY OF 90 DAYS OR LESS 9,460 21,785 CASH DIVIDENDS (868) (875) OTHER 992 847 ------- -------- NET CASH PROVIDED BY FINANCING 4,954 19,567 ACTIVITIES ------- -------- NET DECREASE IN CASH AND CASH (4,102) (12,634) EQUIVALENTS CASH AND CASH EQUIVALENTS AT 8,107 14,403 BEGINNING OF PERIOD ------- -------- CASH AND CASH EQUIVALENTS AT END OF $ 4,005 $ 1,769 PERIOD ======= ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED 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 1996 PRESENTATION. THESE STATEMENTS INCLUDE ALL ADJUSTMENTS, CONSISTING ONLY OF NORMAL RECURRING ACCRUALS, CONSIDERED NECESSARY FOR A FAIR PRESENTATION OF FINANCIAL POSITION, RESULTS OF OPERATIONS AND CASH FLOWS OF THE COMPANY. 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 JUNE 30, 1996 ------------ -------- ------------- CONSOLIDATION AND CLOSURE OF FACILITIES, INCLUDING SEVERANCE AND RELATED COSTS $7,779 $3,875 $ 3,904 OTHER, INCLUDING LEASE TERMINATION EXPENSES AND COSTS TO EXECUTE THE RESTRUCTURING PROGRAM 235 150 85 ------ ------ ------- $8,014 $4,025 $3,989* ====== ====== ======= *THE FOLLOWING AMOUNTS ARE INCLUDED IN THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 UNDER THE CAPTIONS: "ACCRUED RESTRUCTURING" ($2.1 MILLION), "OTHER LIABILITIES" ($1.2 MILLION), "PROPERTY, PLANT AND EQUIPMENT" (REDUCTION OF $ .2 MILLION), "INVENTORIES" (REDUCTION OF $ .4 MILLION), AND "ACCOUNTS RECEIVABLE" (REDUCTION OF $.1 MILLION). NOTE 3 -THE MAJOR CLASSES OF INVENTORIES WERE AS FOLLOWS: (IN THOUSANDS) JUNE 30 , 1996 DECEMBER 31, 1995 -------------- ----------------- FINISHED GOODS $ 56,426 $54,530 WORK IN PROCESS 12,276 12,508 RAW MATERIALS 32,020 29,190 -------- ------- $100,722 $96,228 ======== ======= 6 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 4 - EARNINGS (LOSS) PER SHARE OF COMMON STOCK ARE COMPUTED BY DIVIDING NET EARNINGS (LOSS) BY THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING. THE DILUTIVE EFFECT OF STOCK OPTIONS HAS BEEN EXCLUDED FROM THE CALCULATIONS IN 1995 AND FOR THE FIRST THREE AND SIX MONTHS OF 1996 AS THEIR EFFECT WOULD BE ANTI-DILUTIVE. EARNINGS PER SHARE FOR THE SECOND QUARTER OF 1996 IS CALCULATED USING THE MODIFIED TREASURY STOCK METHOD, WHICH LIMITS THE ASSUMED PURCHASE OF TREASURY SHARES TO 20% OF THE OUTSTANDING COMMON SHARES. NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION FOR THE SIX MONTH PERIODS ARE AS FOLLOWS: (IN THOUSANDS) JUNE 30, 1996 JULY 1, 1995 ------------- ------------ INTEREST PAID $3,156 $3,022 INCOME TAXES PAID 387 662 NOTE 6 - THE ACCUMULATED AMORTIZATION OF COST IN EXCESS OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS ARE $21,151,000 AT JUNE 30, 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 JUNE 30, 1996 APPROXIMATELY $2,000,000 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 LAWSUITS ALLEGING 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 HAS DECLINED SIGNIFICANTLY FROM EARLIER PERIODS. MOST OF THE SUITS HAVE BEEN RESOLVED BY DISMISSAL OR SETTLEMENT WITH SETTLEMENTS BEING PAID OUT OF INSURANCE PROCEEDS OR OTHER THIRD PARTY RECOVERIES. HOOVER AND THE COMPANY ARE VIGOROUSLY DEFENDING THOSE SUITS WHICH REMAIN PENDING AND DEFENSE AND INDEMNITY COSTS ARE BEING PAID OUT OF INSURANCE PROCEEDS AND PROCEEDS FROM A SETTLEMENT BY HOOVER WITH SUPPLIERS OF MATERIAL USED IN THE PRODUCTION OF INTERIOR TREATED WOOD. HOOVER AND THE COMPANY HAVE ENGAGED IN COVERAGE LITIGATION WITH THEIR INSURERS AND HAVE SETTLED THEIR COVERAGE CLAIMS WITH A MAJORITY OF ITS INSURERS. THE COMPANY BELIEVES THAT THE REMAINING COVERAGE DISPUTES WILL BE RESOLVED 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 SETTLEMENTS WITH PRIMARY AND EXCESS INSURERS AND CONSULTED WITH COUNSEL. HOOVER HAS RECORDED A RECEIVABLE AT JUNE 30, 1996 (INCLUDED IN OTHER ASSETS) FOR APPROXIMATELY $10.4 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. 7 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 8 - (CONTINUED) -------------------- IN EVALUATING THE EFFECT OF THE LAWSUITS, A NUMBER OF FACTORS HAVE BEEN CONSIDERED, INCLUDING: THE LITIGATION HISTORY, THE SIGNIFICANT DECLINE IN THE NUMBER OF CASES, THE AVAILABILITY OF VARIOUS LEGAL DEFENSES 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. 8 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER AND SIX MONTHS ENDED JUNE 30, 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 --------------------- THE COMPANY REPORTED SIGNIFICANTLY BETTER OPERATING RESULTS FOR THE SECOND QUARTER OF 1996 WHEN COMPARED WITH THE SECOND QUARTER OF 1995. ON A SALES INCREASE OF 4.3%, NET INCOME QUADRUPLED TO $4.2 MILLION UP FROM $1.0 MILLION FOR THE SAME QUARTER A YEAR AGO. OPERATING INCOME INCREASED OVER TWO AND ONE- HALF TIMES TO $10.1 MILLION FROM $3.8 MILLION FOR THE QUARTERLY COMPARISON PERIODS. THE SIGNIFICANT REASONS FOR THE IMPROVEMENT ARE DISCUSSED BELOW. NET SALES FOR THE SECOND QUARTER OF 1996 TOTALED $212.1 MILLION, AN INCREASE OF 4.3% OVER THE SAME PERIOD IN 1995. THE SECOND QUARTER SALES GROWTH WAS DRIVEN BY THE COMPANY'S WINDOWS, DOORS AND SIDING BUSINESSES WHICH EXPERIENCED DOUBLE DIGIT SALES GROWTH AND IMPROVED SALES IN THE COMPANY'S SPECIALTY WOOD BUSINESSES. APPROXIMATELY TWO-THIRDS OF THE SALES GROWTH WAS ATTRIBUTED TO UNIT VOLUME INCREASES AND THE REMAINDER TO INCREASES IN AVERAGE SELLING PRICES. FOR THE SIX MONTHS ENDED JUNE 30, 1996, NET SALES WERE $354.1 MILLION, AS COMPARED WITH $366.2 MILLION FOR THE CORRESPONDING PERIOD IN 1995. APPROXIMATELY ONE-HALF OF THE DECLINE IN NET SALES WAS DUE TO THE COMPANY'S PLANNED EXIT OR DE-EMPHASIS OF CERTAIN LOW MARGIN PRODUCTS WITH THE REMAINDER PRIMARILY DUE TO LOWER SALES IN THE COMPANY'S DISTRIBUTION BUSINESSES. GROSS PROFIT, EXPRESSED AS A PERCENTAGE OF SALES, WAS 20.1% IN THE SECOND QUARTER OF 1996 COMPARED WITH 16.8% FOR THE SAME PERIOD IN 1995. GROSS PROFIT DOLLARS INCREASED $8.5 MILLION OR 25% FOR THE COMPARISON PERIOD. GROSS PROFIT FOR THE FIRST HALF OF 1996 WAS 17.9% COMPARED WITH 16.1% IN 1995. THE SIGNIFICANT IMPROVEMENT WAS PRIMARILY ATTRIBUTABLE TO LOWER RAW MATERIAL COSTS, PARTICULARLY PVC RESIN AND GLASS, IMPROVED MANUFACTURING EFFICIENCIES AND PROCESS IMPROVEMENTS. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, AS A PERCENTAGE OF SALES, FOR THE 1996 SECOND QUARTER WAS 15.4% COMPARED WITH 14.9% FOR THE CORRESPONDING PERIOD IN 1995. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE FIRST HALF OF 1996 WERE ESSENTIALLY FLAT COMPARED TO THE FIRST HALF OF 1995. 9 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER AND SIX MONTHS ENDED JUNE 30, 1996 RESULTS OF OPERATIONS - (CONTINUED) ----------------------------------- THE COMPANY'S EFFECTIVE TAX RATE IN THE SECOND QUARTER OF 1996 WAS 45.0%, WHICH COMPARES WITH 36.5% IN THE SECOND QUARTER OF 1995. THE LOWER EFFECTIVE RATE FOR THE SECOND QUARTER OF 1995 RESULTS FROM THE REVISION OF THE COMPANY'S ESTIMATE OF THE EFFECTIVE TAX RATE EXPECTED TO BE APPLICABLE FOR THE FULL YEAR. THE EFFECTIVE TAX RATE FOR THE FIRST HALF OF 1995 AND 1996 WAS APPROXIMATELY THE SAME. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- THE COMPANY USED $.6 MILLION IN CASH FROM OPERATIONS DURING THE FIRST HALF OF 1996 COMPARED TO $17.3 MILLION IN THE CORRESPONDING 1995 PERIOD. THE SIGNIFICANT IMPROVEMENT IS DUE TO IMPROVED OPERATING RESULTS AND IMPROVED MANAGEMENT OF WORKING CAPITAL. SIGNIFICANT INVESTING ACTIVITIES IN THE FIRST HALF OF 1996 INCLUDE CAPITAL EXPENDITURES OF $8.6 MILLION PRIMARILY INCURRED BY THE COMPANY'S WINDOWS, DOORS AND SIDING SUBSIDIARIES. SIGNIFICANT FIRST HALF OF 1996 FINANCING ACTIVITIES RELATED TO THE NET INCREASE IN REVOLVING CREDIT BORROWINGS OF $9.5 MILLION USED PRINCIPALLY TO FINANCE THE CAPITAL EXPENDITURES OF THE COMPANY. THE COMPANY'S CURRENT RATIO OF 2.8 TO 1 AT JUNE 30, 1996 WAS SUBSTANTIALLY THE SAME AS IT WAS AT THE END OF 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 $48 MILLION AT JUNE 30, 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 FOR THE NEXT OPERATING CYCLE. 10 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES JUNE 30, 1996 PART II - OTHER INFORMATION ALL ITEMS ARE INAPPLICABLE EXCEPT: ITEM 1. LEGAL PROCEEDINGS. SEE NOTE 8 TO THE CONSOLIDATED FINANCIAL STATEMENTS. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (A) THE ANNUAL MEETING OF STOCKHOLDERS OF PLY GEM INDUSTRIES, INC. WAS HELD ON MAY 10, 1996. (B) THE DIRECTORS NAMED IN THE PROXY STATEMENT CONSTITUTING THE ENTIRE BOARD OF DIRECTORS WERE ELECTED TO ONE YEAR TERMS EXPIRING IN 1996, AS FOLLOWS: FOR WITHHELD --- -------- HERBERT P. DOOSKIN 12,546,929 602,705 JOSEPH GOLDENBERG 12,546,769 602,865 ALBERT HERSH 12,550,402 599,232 WILLIAM LILLEY 12,551,897 597,737 ELIHU H. MODLIN 12,540,525 609,109 JEFFREY S. SILVERMAN 12,545,988 603,646 DANA R. SNYDER 12,551,269 598,365 THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT FOR PLY GEM INDUSTRIES, INC. DATED APRIL 15, 1996 WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A OF THE ACT AND IS INCORPORATED HEREIN BY REFERENCE. ITEM 5. OTHER INFORMATION ON AUGUST 2, 1995, THE COMPANY ENGAGED THE INVESTMENT BANKING FIRM BEAR, STEARNS & CO. INC. TO EXPLORE STRATEGIC ALTERNATIVES FOR THE INTENT OF MAXIMIZING SHAREHOLDERS VALUE, INCLUDING THE POSSIBLE SALE OF THE COMPANY. ON JULY 16, 1996 THE COMPANY ANNOUNCED THE CONCLUSION OF THE BEAR, STEARNS & CO. INC. ENGAGEMENT WITH RESPECT TO THE AFORESAID. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (A) EXHIBITS: EXHIBIT 11 - SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE EXHIBIT 27 - FINANCIAL DATA SCHEDULE (B) REPORTS - NO REPORTS ON FORM 8-K WERE FILED DURING THE QUARTER ENDED JUNE 30, 1996. 11 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q JUNE 30, 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: AUGUST 12, 1996 /S/ HERBERT P. DOOSKIN ---------------------------- ----------------------- EXECUTIVE VICE PRESIDENT PRINCIPAL FINANCIAL OFFICER 12 EX-11 2 SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE QUARTER ENDED JUNE 30, 1996 ------------------------ FULLY PRIMARY DILUTED ----------- ----------- Weighted average number of common shares outstanding during year............. 14,179,000 14,179,000 Excess of weighted average number of shares issuable upon exercise of employee stock options over 20% of shares outstanding at end of quarter....... 1,923,000 1,923,000 ----------- ----------- Weighted average number of shares....... 16,102,000 16,102,000 =========== =========== Proceeds available to repay debt: From exercise of options, including tax benefits, at average market $29,562,000 price........................ From exercise of options, including tax benefits, at quarter-end market price................. $30,508,000 ----------- ----------- $29,562,000 $30,508,000 ----------- ----------- Interest saved, net of taxes............ 302,000 312,000 Net income as reported.................. 4,157,000 4,157,000 ----------- ----------- Adjusted net income..................... $ 4,459,000 $ 4,469,000 =========== =========== Per share............................... $.28 $.28 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 4,005 0 49,498 4,174 100,722 176,437 142,300 57,752 335,767 64,118 109,938 0 0 4,403 0 335,767 354,097 354,097 290,889 0 0 1,526 3,757 2,806 1,287 1,519 0 0 0 1,519 0.11 0.11
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