-----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, ONWPU5v2mfX77yxDzcoTlJ8W7FzTVbWK/LznhGEXcqXcnGedUFeM/vs66MTrTGfZ LHm5lsgZ2d/sJUdzgh6+NQ== 0000909518-05-000661.txt : 20050817 0000909518-05-000661.hdr.sgml : 20050817 20050817114427 ACCESSION NUMBER: 0000909518-05-000661 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050703 FILED AS OF DATE: 20050817 DATE AS OF CHANGE: 20050817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUILDING MATERIALS MANUFACTURING CORP CENTRAL INDEX KEY: 0001078706 STANDARD INDUSTRIAL CLASSIFICATION: ASPHALT PAVING & ROOFING MATERIALS [2950] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-69749-01 FILM NUMBER: 051032550 BUSINESS ADDRESS: STREET 1: 1361 ALPS ROAD CITY: WAYNE STATE: NJ ZIP: 07470 BUSINESS PHONE: 9736283000 MAIL ADDRESS: STREET 1: 1361 ALPS ROAD CITY: WAYNE STATE: NJ ZIP: 07470 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUILDING MATERIALS CORP OF AMERICA CENTRAL INDEX KEY: 0000927314 STANDARD INDUSTRIAL CLASSIFICATION: ASPHALT PAVING & ROOFING MATERIALS [2950] IRS NUMBER: 223276290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-81808 FILM NUMBER: 051032551 BUSINESS ADDRESS: STREET 1: 1361 ALPS RD CITY: WAYNE STATE: NJ ZIP: 07470 BUSINESS PHONE: 2016283000 MAIL ADDRESS: STREET 1: 1361 ALPS ROAD CITY: WAYNE STATE: NJ ZIP: 07470 10-Q 1 mv8-15_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended JULY 3, 2005 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 33-81808 BUILDING MATERIALS CORPORATION OF AMERICA (Exact name of registrant as specified in its charter) DELAWARE 22-3276290 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 1361 ALPS ROAD, WAYNE, NEW JERSEY 07470 (Address of Principal Executive Offices) (Zip Code) (973) 628-3000 (Registrant's telephone number, including area code) NONE (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) See Table of Additional Registrants Below. 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES / / NO /X/ As of August 17, 2005, 1,015,010 shares of Class A Common Stock, $.001 par value of the registrant were outstanding. There is no trading market for the common stock of the registrant. As of August 17, 2005, the additional registrant had the number of shares outstanding which is shown on the table below. There is no trading market for the common stock of the additional registrant. As of August 17, 2005, no shares of the registrant or the additional registrant were held by non-affiliates. ADDITIONAL REGISTRANTS
State or other Address, including zip code and jurisdiction of telephone number, including area Exact name of registrant as incorporation or No. of Shares Commission File No./I.R.S. code, of registrant's principal specified in its charter organization Outstanding Employer Identification No. executive offices - --------------------------- ---------------- ------------- --------------------------- -------------------------------- Building Materials Delaware 10 333-69749-01/ 1361 Alps Road Manufacturing Corporation 22-3626208 Wayne, NJ 07470 (973) 628-3000
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PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (DOLLARS IN THOUSANDS) SECOND QUARTER ENDED SIX MONTHS ENDED -------------------- ----------------- JULY 3, JULY 4, JULY 3, JULY 4, 2005 2004 2005 2004 -------- -------- -------- -------- Net Sales............................. $497,637 $451,549 $976,435 $843,531 -------- -------- -------- -------- Costs and expenses: Cost of products sold............... 341,511 306,678 677,228 580,714 Selling, general and administrative. 107,656 98,576 212,941 184,636 -------- -------- -------- -------- Total costs and expenses......... 449,167 405,254 890,169 765,350 -------- -------- -------- -------- Operating income...................... 48,470 46,295 86,266 78,181 Interest expense...................... (16,415) (14,526) (32,519) (28,680) Other expense, net.................... (2,163) (1,777) (3,162) (2,561) -------- -------- -------- -------- Income before income taxes............ 29,892 29,992 50,585 46,940 Income tax expense.................... (11,360) (11,172) (19,223) (17,485) -------- -------- -------- -------- Net income............................ $ 18,532 $ 18,820 $ 31,362 $ 29,455 ======== ======== ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) JULY 3, DECEMBER 31, ASSETS 2005 2004 Current Assets: ---------- ---------- Cash and cash equivalents................................................. $ 57,127 $ 129,482 Accounts receivable, trade, less allowance of $1,447 and $1,139 in 2005 and 2004, respectively......................................................... 329,559 250,543 Accounts receivable, other................................................ 6,887 3,826 Tax receivable from parent corporation.................................... 824 - Inventories, net.......................................................... 188,774 174,914 Deferred income tax assets, net........................................... 45,994 43,398 Other current assets...................................................... 12,259 6,499 ---------- ---------- Total Current Assets.................................................... 641,424 608,662 Property, plant and equipment, net.......................................... 360,455 364,514 Goodwill, net of accumulated amortization of $16,370 in 2005 and 2004, respectively................................. 63,199 63,294 Other noncurrent assets..................................................... 30,778 29,075 ---------- ---------- Total Assets................................................................ $1,095,856 $1,065,545 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt...................................... $ 152,665 $ 152,525 Accounts payable.......................................................... 94,357 120,337 Payable to related parties................................................ 15,510 16,900 Loans payable to parent corporation....................................... 52,840 52,840 Accrued liabilities....................................................... 116,016 93,467 Reserve for product warranty claims....................................... 14,900 14,900 ---------- ---------- Total Current Liabilities................................................. 446,288 450,969 ---------- ---------- Long-term debt less current maturities...................................... 534,653 535,952 ---------- ---------- Reserve for product warranty claims......................................... 16,339 17,213 ---------- ---------- Deferred income tax liabilities............................................. 47,940 44,773 ---------- ---------- Other liabilities........................................................... 22,063 19,349 ---------- ---------- Stockholders' Equity (Deficit): Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per share; 400,000 shares authorized; no shares issued............................. - - Class A Common Stock, $.001 par value per share, 1,300,000 shares authorized; 1,015,010 shares issued and outstanding.................................................. 1 1 Class B Common Stock, $.001 par value per share; 100,000 shares authorized; no shares issued............................. - - Loans receivable from parent corporation.................................. (55,759) (55,691) Retained earnings......................................................... 89,684 58,332 Accumulated other comprehensive loss...................................... (5,353) (5,353) ---------- ---------- Total Stockholders' Equity (Deficit).................................... 28,573 (2,711) ---------- ---------- Total Liabilities and Stockholders' Equity (Deficit)......................................................... $1,095,856 $1,065,545 ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS) SIX MONTHS ENDED --------------------- JULY 3, JULY 4, 2005 2004 -------- --------- Cash and cash equivalents, beginning of period............................... $129,482 $ 2,880 -------- --------- Cash provided by (used in) operating activities: Net income................................................................. 31,362 29,455 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation........................................................... 22,019 20,848 Amortization........................................................... 1,174 1,114 Deferred income taxes.................................................. 571 3,592 Noncash interest charges, net.......................................... 2,850 2,794 Increase in working capital items.......................................... (105,128) (144,090) Decrease in long-term reserve for product warranty claims.................. (874) (536) Increase in other assets................................................... (4,918) (1,396) Increase in other liabilities.............................................. 2,661 16 Change in net receivable from/payable to related parties/parent corporations.............................................. (2,214) 11,131 Other, net................................................................. 200 117 -------- --------- Net cash used in operating activities........................................ (52,297) (76,955) -------- --------- Cash provided by (used in) investing activities: Capital expenditures and acquisition of manufacturing facility in 2004.................................................................. (22,877) (43,467) Proceeds from sale of assets............................................... 4,717 - -------- --------- Net cash used in investing activities........................................ (18,160) (43,467) -------- --------- Cash provided by (used in) financing activities: Proceeds from issuance of long-term debt................................... 127,000 325,000 Repayments of long-term debt............................................... (128,374) (187,489) Distributions to parent corporation........................................ (10) (85) Dividends to parent corporation............................................ - (10,000) Loan to parent corporation................................................. (68) (48) Financing fees and expenses................................................ (446) (544) -------- --------- Net cash provided by (used in) financing activities.......................... (1,898) 126,834 -------- --------- Net change in cash and cash equivalents...................................... (72,355) 6,412 -------- --------- Cash and cash equivalents, end of period..................................... $ 57,127 $ 9,292 ======== ========= Supplemental Cash Flow Information: Cash paid during the period for: Interest (net of amount capitalized of $358 and $518 in 2005 and 2004, respectively)......................................... $ 28,150 $ 24,818 Income taxes (including federal income taxes paid pursuant to a tax sharing agreement of $21,953 and $6,401 in 2005 and 2004, respectively)............................................ 22,171 7,126 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Building Materials Corporation of America ("BMCA" or the "Company") was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation ("BHC"), which is a wholly-owned subsidiary of G-I Holdings Inc. ("G-I Holdings"). G-I Holdings is a wholly-owned subsidiary of G Holdings Inc. The consolidated financial statements of the Company reflect, in the opinion of management, all adjustments necessary to present fairly the financial position of the Company at July 3, 2005, and the results of operations and cash flows for the second quarter and six month periods ended July 3, 2005 and July 4, 2004, respectively. All adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2004 (the "2004 Form 10-K"). Certain reclassifications have been made to conform to current year presentation. NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS In November 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 151 "Inventory Costs" ("SFAS No. 151") which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS No. 151 amends Accounting Research Bulletin ("ARB") No. 43, Chapter 4 "Inventory Pricing" ("ARB No. 43") and requires abnormal inventory costs to be recognized as current period charges regardless of whether they meet the "so abnormal" criterion outlined in ARB No. 43. SFAS No. 151 also introduces the concept of "normal capacity" and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period in which they are incurred. SFAS No. 151 is effective for costs occurring in fiscal reporting years beginning after June 15, 2005. As of January 1, 2006 the Company will adopt the provisions of SFAS No. 151 and does not anticipate any material effect on its consolidated financial statements. In December 2004, the FASB issued a revised SFAS No. 123 "Accounting for Stock-Based Compensation," ("SFAS No. 123(R)") which will require compensation costs related to share-based payment transactions to be recognized in the financial statements. SFAS No. 123(R) establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees. SFAS No. 123(R) replaces the original SFAS No. 123 and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123(R) becomes effective beginning with the first annual reporting period after June 15, 2005. As of July 3, 2005, the Company currently accounts for its 2001 Long-Term Incentive Plan under the accounting prescribed by FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock 6 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS - (CONTINUED) Option and Award Plans," ("FIN 28"). Since compensation expense related to the Company's incentive units is currently included in its consolidated statements of income, the Company does not expect SFAS No. 123(R) to have an impact on its consolidated financial statements. See Note 7. In December 2004, the FASB issued SFAS No. 153 "Exchanges of Nonmonetary Assets" ("SFAS No. 153") which replaces the exception from fair value measurement in APB Opinion No. 29 "Accounting for Nonmonetary Transactions," for nonmonetary exchanges of similar productive assets. SFAS No. 153 replaces this exception with a general exception from fair value measurement for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal reporting periods beginning after June 15, 2005. As of July 4, 2005, the Company will adopt the provisions of SFAS No. 153 and does not anticipate having any nonmonetary asset exchanges. In March 2005, the FASB issued FASB Staff Position ("FSP") FIN 46(R)-5 "Implicit Variable Interests Under FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities," ("FSP FIN 46(R)-5"). FSP FIN 46(R)-5 offers additional guidance to FIN 46(R) stating that implicit variable interests are implied financial interests in an entity that change in accordance with changes in the fair value of the entity's net assets, exclusive of variable interests. FSP FIN 46(R)-5 is effective during a company's first reporting period after March 3, 2005; accordingly the Company adopted FSP FIN 46(R)-5 during its second quarter ended July 3, 2005. At July 3, 2005, the Company did not have any interests in variable interest entities; therefore, FSP FIN 46(R)-5 or FIN 46(R) did not have any impact on the Company's financial condition or results of operations. In March 2005, the FASB issued FASB Interpretation No. 47 "Accounting for Conditional Asset Retirement Obligations," ("FIN 47"), which clarifies how the term conditional asset retirement obligation is used in SFAS No. 143 "Accounting for Asset Retirement Obligations" ("SFAS No. 143"). SFAS No. 143 provides for a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 provides factors for when a reasonable estimate of the fair value of the obligation can be determined and indicators which would preclude an entity from recognizing a liability for such obligations. FIN 47 is effective for fiscal years ending after December 15, 2005. The Company will adopt FIN 47 during its fourth quarter in fiscal year ending December 31, 2005 and does not expect there to be an impact on its financial condition or results of operations. 7 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS - (CONTINUED) In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" ("SFAS No. 154"), which eliminates the requirement of APB Opinion No. 20, "Accounting Changes," to include the cumulative effect adjustment resulting from a change in an accounting principle in the income statement in the period of change. SFAS No. 154 requires that a change in an accounting principle or reporting entity be retrospectively applied. Under retrospective application, SFAS No. 154 is applied as of the beginning of the first accounting period presented in the financial statements and the cumulative effect of the change is reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments are recorded to opening retained earnings. Each period presented is adjusted to reflect the period-specific effects of applying the change. Changes in accounting estimate and corrections of errors continue to be accounted for in the same manner as prior to the issuance of SFAS No. 154. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. As of January 1, 2006, the Company will adopt the provisions of SFAS No. 154 and does not anticipate any material effect on its consolidated financial statements. NOTE 2. INVENTORIES Inventories consisted of the following as of July 3, 2005 and December 31, 2004, respectively: JULY 3, DECEMBER 31, 2005 2004 -------- -------- (THOUSANDS) Finished goods....................... $130,440 $119,649 Work-in-process...................... 11,727 13,829 Raw materials and supplies........... 57,108 50,237 -------- -------- Total................................ 199,275 183,715 Less LIFO reserve.................... (10,501) (8,801) -------- -------- Inventories.......................... $188,774 $174,914 ======== ======== 8 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 3. ACQUISITION AND PROPERTY DISPOSITION On May 7, 2004, the Company acquired certain assets of a manufacturing facility located in Quakertown, Pennsylvania from Atlas Roofing Corporation. The acquisition was accounted for under the purchase method of accounting. Accordingly, the purchase price was allocated to the fair value of the identifiable assets acquired, which consisted almost entirely of property, plant and equipment. The operating results of the Quakertown manufacturing facility are included in the Company's results of operations from the date of its acquisition. In June 2005, the Company sold property in Houston, Texas for cash proceeds of approximately $4.1 million, which approximated carrying value. NOTE 4. LONG-TERM DEBT On May 7, 2004, the Company amended its $350 million Senior Secured Revolving Credit Facility (the "Senior Secured Revolving Credit Facility"), which reduced the floating rate of interest as defined in the Senior Secured Revolving Credit Facility. NOTE 5. WARRANTY CLAIMS The Company provides certain limited warranties covering most of its residential roofing products for periods generally ranging from 20 to 40 years, with lifetime limited warranties on certain specialty shingle products. The Company also offers certain limited warranties of varying duration covering most of its commercial roofing products. Most of the Company's specialty building products and accessories provide limited warranties for periods generally ranging from 5 to 10 years, with lifetime limited warranties on certain products. The reserve for product warranty claims consists of the following for the second quarter and six month periods ended July 3, 2005 and July 4, 2004, respectively:
SECOND QUARTER ENDED SIX MONTHS ENDED -------------------- ------------------- JULY 3, JULY 4, JULY 3, JULY 4, 2005 2004 2005 2004 -------- --------- -------- --------- (THOUSANDS) Beginning balance................... $ 31,851 $ 32,122 $ 32,113 $ 31,972 Charged to cost of products sold.... 6,021 5,828 11,910 11,039 Payments/deductions................. (6,633) (6,514) (12,784) (11,575) -------- -------- -------- -------- Ending balance...................... $ 31,239 $ 31,436 $ 31,239 $ 31,436 ======== ======== ======== ========
9 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. BENEFIT PLANS Defined Benefit Plans The Company provides non-contributory defined benefit retirement plans for certain hourly and salaried employees (the "Retirement Plans"). Benefits under these plans are based on stated amounts for each year of service. The Company's funding policy is consistent with the minimum funding requirements of the Employee Retirement Income Security Act of 1974. The Company's net periodic pension cost for the Retirement Plans included the following components for the second quarter and six month periods ended July 3, 2005 and July 4, 2004, respectively:
SECOND QUARTER ENDED SIX MONTHS ENDED -------------------- ------------------- JULY 3, JULY 4, JULY 3, JULY 4, 2005 2004 2005 2004 -------- --------- -------- --------- (THOUSANDS) Service cost....................... $ 360 $ 349 $ 721 $ 698 Interest cost...................... 520 484 1,039 968 Expected return on plan assets..... (708) (671) (1,416) (1,343) Amortization of unrecognized prior service cost..................... 9 9 18 18 Amortization of net losses from earlier periods.................. 77 72 154 145 -------- --------- -------- --------- Net periodic pension cost.......... $ 258 $ 243 $ 516 $ 486 ======== ========= ======== =========
At July 3, 2005, the Company does not expect to make any pension contribution to the Retirement Plans in 2005, which is consistent with its expectations at December 31, 2004. 10 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. BENEFIT PLANS - (CONTINUED) Postretirement Medical and Life Insurance The Company generally does not provide postretirement medical and life insurance benefits, although it subsidizes such benefits for certain employees and certain retirees. Such subsidies were reduced or ended as of January 1, 1997. Net periodic postretirement benefit cost included the following components for the second quarter and six month periods ended July 3, 2005 and July 4, 2004, respectively:
SECOND QUARTER ENDED SIX MONTHS ENDED -------------------- ------------------- JULY 3, JULY 4, JULY 3, JULY 4, 2005 2004 2005 2004 -------- --------- -------- --------- (THOUSANDS) Service cost....................... $ 34 $ 36 $ 69 $ 71 Interest cost...................... 71 76 143 152 Amortization of unrecognized prior service cost..................... (23) (23) (47) (47) Amortization of net gains from earlier periods.................. (61) (60) (123) (118) -------- --------- -------- --------- Net periodic postretirement benefit cost..................... $ 21 $ 29 $ 42 $ 58 ======== ========= ======== =========
At July 3, 2005, the Company expects to make benefit claim payments of approximately $0.3 million in 2005, which are related to postretirement medical and life insurance expenses. This is consistent with the Company's expectations at December 31, 2004. 11 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 7. 2001 LONG-TERM INCENTIVE PLAN The Company currently accounts for its 2001 Long-Term Incentive Plan units granted to certain employees under the accounting prescribed by applying FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option and Award Plans" ("FIN 28"), which requires an entity to measure compensation as the amount by which the Book Value (as defined in the plan) of the incentive units covered by the grant exceeds the option price or value specified of such incentive units at the date of grant. Changes, either increases or decreases, in the Book Value of those incentive units between the date of grant and the measurement date result in a change in the measure of compensation for the right or award. The Company has also adopted the additional disclosure provisions prescribed in SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS No. 148"), which requires additional disclosures on both an annual and interim basis about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. The Company expects to continue to account for its long-term incentive units under the accounting prescribed by FIN 28 and the additional disclosure provisions of SFAS No. 148. Compensation expense for the Company's incentive units was $2.8 and $1.7 million for the second quarter ended July 3, 2005 and July 4, 2004, respectively, and $5.8 and $3.3 million for the six month period ended July 3, 2005 and July 4, 2004 respectively. At July 3, 2005 and July 4, 2004, the 2001 Long-Term Incentive Plan liability amounted to $23.9 and $14.3 million, respectively and was included in accrued liabilities. The Company's pro forma net income for the quarter ended and six month period ended July 3, 2005 and July 4, 2004, respectively, as it relates to compensation expense is the same as actual net income. NOTE 8. RELATED PARTY TRANSACTIONS The Company makes loans to, and borrows from, its parent corporations from time to time at prevailing market rates. As of July 3, 2005 and July 4, 2004, BMCA Holdings Corporation owed the Company $55.8 and $55.6 million, including interest of $0.5 and $0.4 million, respectively, and the Company owed BMCA Holdings Corporation $52.8 and $52.8 million, with no unpaid interest payable to BMCA Holdings Corporation, respectively. Interest income on the Company's loans to BMCA Holdings Corporation amounted to $0.9 and $0.7 million during the second quarter ended July 3, 2005 and July 4, 2004, respectively and $1.8 and $1.4 million during the six month period ended July 3, 2005 and July 4, 2004, respectively. Interest expense on the Company's loans from BMCA Holdings Corporation amounted to $0.9 and $0.6 million during the second quarter ended July 3, 2005 and July 4, 2004, respectively and $1.8 and $1.3 million during the six month period ended July 3, 2005 and July 4, 2004, respectively. Loans payable to/receivable from any parent corporation are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations as outlined in the Company's Senior Secured Revolving Credit Facility and its 7 3/4% Senior Notes due 2005, the 8% Senior Notes due 2007, the 8% Senior Notes due 2008 and the 7 3/4% Senior Notes due 2014 (collectively, the "Senior Notes"). Under the terms of the Senior Secured 12 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 8. RELATED PARTY TRANSACTIONS - (CONTINUED) Revolving Credit Facility and the indentures governing the Company's Senior Notes at July 3, 2005, the Company could repay demand loans to its parent corporation amounting to $52.8 million, subject to certain conditions. The Company also makes non-interest bearing advances to affiliates, of which no balance was outstanding as of July 3, 2005 and July 4, 2004. In addition, for the six month period ended July 3, 2005 and July 4, 2004, no loans were owed or other lending activities were entered into by the Company to other affiliates. During the six month period ended July 3, 2005, the Company updated its management agreement with International Specialty Products Inc., an affiliate, (the "ISP Management Agreement") to provide the Company with certain management services. Based on services provided to the Company in 2005 under the ISP Management Agreement, the aggregate amount payable to ISP under the ISP Management Agreement for 2005, inclusive of the services provided to G-I Holdings, is approximately $5.9 million. For the six month period ended July 3, 2005 and July 4, 2004, the Company paid $22.0 and $6.4 million, respectively in federal income tax payments to its parent corporation pursuant to a tax sharing agreement. These amounts are included in the change in net receivable from/payable to related parties/parent corporations in the consolidated statement of cash flows. On February 25, 2004 and April 21, 2004 the Company declared and paid cash dividends of $5.0 million and $5.0 million, respectively to its parent corporation. NOTE 9. CONTINGENCIES Asbestos Litigation Against G-I Holdings In connection with its formation, the Company contractually assumed and agreed to pay the first $204.4 million of liabilities for asbestos-related bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos Claims") of its parent, G-I Holdings. As of March 30, 1997, the Company paid all of its assumed asbestos-related liabilities. In January 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to Asbestos Claims. Most asbestos claims do not specify the amount of damages sought. This Chapter 11 proceeding remains pending. Claimants in the G-I Holdings' bankruptcy, including judgment creditors, might seek to satisfy their claims by asking the bankruptcy court to require the sale of G-I Holdings' assets, including its holdings of BMCA Holdings Corporation's common stock and its indirect holdings of the Company's common stock. Such action could result in a change of control of the Company. In addition, those creditors may seek to file Asbestos Claims against the Company (with approximately 1,900 alleged Asbestos Claims having been filed against the Company as of July 3, 2005). The Company believes that it will not sustain any 13 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 9. CONTINGENCIES - (CONTINUED) liability in connection with these or any other asbestos-related claims. On February 2, 2001, the United States Bankruptcy Court for the District of New Jersey issued a temporary restraining order enjoining any existing or future claimant from bringing or prosecuting an Asbestos Claim against the Company. By oral opinion on June 22, 2001, and written order entered February 22, 2002, the court converted the temporary restraints into a preliminary injunction, prohibiting the bringing or prosecution of any such Asbestos Claim against the Company. On February 7, 2001, G-I Holdings filed an action in the United States Bankruptcy Court for the District of New Jersey seeking a declaratory judgment that BMCA has no successor liability for Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I Holdings (the "BMCA Action"). On May 13, 2003 the United States District Court for the District of New Jersey overseeing the G-I Holdings' Bankruptcy Court withdrew the reference of the BMCA Action from the Bankruptcy Court, and this matter will be heard by the District Court directly. On July 26, 2005, one party in the BMCA Action, the legal representative of future demand holders in the G-I Holdings bankruptcy, was dismissed from the case. The BMCA Action continues against the creditors' committee in the G-I Holdings bankruptcy. The BMCA Action is in a pretrial discovery stage and no trial date has been set by the court. As a result, it is not possible to predict the outcome of this litigation, although the Company believes its claims are meritorious. While the Company cannot predict whether any additional Asbestos Claims will be asserted against it or its assets, or the outcome of any litigation relating to those claims, the Company believes that it has meritorious defenses to any claim that it has asbestos-related liability, although there can be no assurances in this regard. On or about February 8, 2001, the creditors' committee established in G-I Holdings' bankruptcy case filed a complaint in the United States Bankruptcy Court, District of New Jersey against G-I Holdings and the Company. The complaint requests substantive consolidation of the Company with G-I Holdings or an order directing G-I Holdings to cause the Company to file for bankruptcy protection. The Company and G-I Holdings intend to vigorously defend the lawsuit. The plaintiffs also filed for interim relief absent the granting of their requested relief described above. On March 21, 2001, the bankruptcy court denied plaintiffs' application for interim relief. In November 2002, the creditors' committee, joined in by the legal representative of future demand holders, filed a motion for appointment of a trustee in the G-I Holdings' bankruptcy. In December 2002, the bankruptcy court denied the motion. The creditors' committee appealed the ruling to the United States District Court, which denied the appeal on June 27, 2003. The creditors' committee has appealed the denial to the Third Circuit Court of Appeals, which denied the appeal on September 24, 2004. The creditors' committee filed a petition with the Third Circuit Court of Appeals for a rehearing of its denial of the creditors' committee's appeal, which was denied by the Court on October 26, 2004. 14 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 9. CONTINGENCIES - (CONTINUED) On February 27, 2004, the creditors' committee, joined in by the legal representative, filed a motion to modify the preliminary injunction and to seek authority by the bankruptcy court to avoid, on various grounds, certain liens granted in connection with the financing obtained by the Company in December, 2000. G-I Holdings and the Company have opposed the motion and a hearing on the motion was held by the bankruptcy court on March 29, 2004. By opinion dated June 8, 2004, the court granted the motion in part and denied it in part. On July 7, 2004, the creditors' committee filed a claim challenging, as a fraudulent conveyance, the transactions entered into in connection with the Company's formation in 1994, in which G-I Holdings caused to be transferred to the Company all of its roofing business and assets and in which the Company assumed certain liabilities relating to those assets, including a specified amount of asbestos liabilities (the "1994 transaction"). In addition, on July 7, 2004, the creditors' committee filed a claim against holders of the Company's bank and bond debt outstanding in 2000, seeking to avoid the liens granted to them, based on the committee's theory that the 1994 transaction was a fraudulent conveyance. On August 3, 2004, the creditors' committee filed an amended complaint adding the names of additional alleged bondholders. On July 20, 2004, the creditors' committee appealed the court's decision, issued on June 8, 2004, seeking the authority to file a lawsuit against the banks and bondholders discussed above, challenging the liens granted to them in 2000 as a fraudulent conveyance and is appealing, among other things, certain adverse rulings relating to statute of limitation issues. G-I Holdings, the holders of the Company's bank and bond debt and the Company have filed cross appeals. These appeals remain pending before the District Court. The Company believes that the claims of the creditors' committee are without merit. However, if the Company is not successful defending against one or more of these claims, the Company may be forced to file for bankruptcy protection and/or contribute all or a substantial portion of its assets to satisfy the claims of G-I Holdings' creditors. Either of these events, or the substantive consolidation of G-I Holdings and the Company, would weaken its operations and cause it to divert a material amount of its cash flow to satisfy the asbestos claims of G-I Holdings, and may render it unable to pay interest or principal on its credit obligations. On May 17, 2005, the creditors' committee filed a motion before the bankruptcy court seeking an order directing that approximately $150 million of payments falling due on July 15, 2005, to holders of notes issued by the Company on July 17, 1998, be made in escrow pending further order of the Court. By order dated July 12, 2005, the Court denied the committee's motion. For a further discussion with respect to the history of the foregoing litigation, and asbestos-related matters and other litigation, see Notes 5, 13 and 18 to consolidated financial statements contained in the Company's 2004 Form 10-K. 15 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 9. CONTINGENCIES - (CONTINUED) Environmental Litigation The Company, together with other companies, is a party to a variety of proceedings and lawsuits involving environmental matters under the Comprehensive Environmental Response Compensation and Liability Act, and similar state laws, in which recovery is sought for the cost of cleanup of contaminated sites or remedial obligations are imposed, a number of which are in the early stages or have been dormant for protracted periods. The Company refers to these proceedings and lawsuits as "Environmental Claims." Most of the Environmental Claims do not seek to recover an amount of specific damages. At most sites, the Company anticipates that liability will be apportioned among the companies found to be responsible for the presence of hazardous substances at the site. The Company believes that the ultimate disposition of such matters will not, individually or in the aggregate, have a material adverse effect on the liquidity, financial position or results of operations of the Company. Other Litigation On or about February 17, 2004, litigation was commenced against the Company in the United States District Court for the Eastern District of Pennsylvania by CertainTeed Corporation alleging patent infringement in connection with certain of the Company's products representing less than 5% of the Company's net sales. No specific amount of damages have been sought in the litigation. The Company intends to defend itself vigorously in this matter, has denied CertainTeed's claims and has filed counterclaims against CertainTeed for patent infringement, violations of the antitrust laws and for trade libel. Although this matter is in its preliminary stages and there can be no assurances made, the Company believes that the claims filed by CertainTeed Corporation are without merit and will not have a material adverse effect against it. In addition, although the Company's counterclaims against CertainTeed are in their preliminary stages, the Company believes its counterclaims are meritorious. For a further discussion with respect to the history of environmental matters and other litigation, reference is made to Notes 2 and 18 to consolidated financial statements contained in the Company's 2004 Form 10-K. Tax Claim Against G-I Holdings The Company and certain of its subsidiaries were members of the consolidated group (the "G-I Holdings Group") for federal income tax purposes that included G-I Holdings in certain prior years and, accordingly, would be severally liable for any tax liability of the G-I Holdings Group in respect of those prior years. 16 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 9. CONTINGENCIES - (CONTINUED) On September 15, 1997, G-I Holdings received a notice from the Internal Revenue Service (the "IRS") of a deficiency in the amount of $84.4 million (after taking into account the use of net operating losses and foreign tax credits otherwise available for use in later years) in connection with the formation in 1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the "surfactants partnership"), a partnership in which G-I Holdings held an interest. G-I Holdings has advised the Company that it believes that it will prevail in this tax matter arising out of the surfactants partnership, although there can be no assurance in this regard. The Company believes that the ultimate disposition of this matter will not have a material adverse effect on its business, financial position or results of operations. On September 21, 2001, the IRS filed a proof of claim with respect to such deficiency against G-I Holdings in the G-I Holdings' bankruptcy. If such proof of claim is sustained, the Company and/or certain of the Company's subsidiaries together with G-I Holdings and several current and former subsidiaries of G-I Holdings would be severally liable for a portion of those taxes and interest. G-I Holdings has filed an objection to the proof of claim. If the IRS were to prevail for the years in which the Company and/or certain of its subsidiaries were part of the G-I Holdings Group, the Company would be severally liable for approximately $40.0 million in taxes plus interest, although this calculation is subject to uncertainty depending upon various factors including G-I Holdings' ability to satisfy its tax liabilities and the application of tax credits and deductions. Other Contingencies In the ordinary course of business, the Company has several supply agreements that include minimum annual purchase requirements. In the event these purchase requirements are not met, the Company may be required to make payments under these supply agreements. NOTE 10. SUBSEQUENT EVENT On July 15, 2005, the Company used cash and cash equivalents on hand and proceeds from its Senior Secured Revolving Credit Facility to redeem its 7 3/4% Senior Notes due 2005 at maturity, aggregating $150.0 million plus accrued interest of $2.9 million. NOTE 11. GUARANTOR FINANCIAL INFORMATION At July 3, 2005, all of the Company's subsidiaries, each of which is wholly owned by the Company are guarantors under the Company's $350.0 million Senior Secured Revolving Credit Facility and the indentures governing the 7 3/4% Senior Notes due 2005, the 8% Senior Notes due 2007 (the "2007 Notes"), the 8% Senior Notes due 2008 and the 7 3/4% Senior Notes due 2014. These guarantees are full, unconditional and joint and several. In addition, Building Materials Manufacturing Corporation ("BMMC"), a wholly-owned subsidiary of the Company, is a co-obligor on the 2007 Notes. 17 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) The Company and BMMC entered into license agreements, effective January 1, 1999, for the right to use intellectual property, including patents, trademarks, know-how, and franchise rights owned by Building Materials Investment Corporation, a wholly-owned subsidiary of the Company, for a license fee stated as a percentage of net sales. The license agreements are for a period of one year and are subject to automatic renewal unless either party terminates with 60 days written notice. Also, effective January 1, 1999, BMMC sells all finished goods to the Company at a manufacturing profit. Presented below is condensed consolidating financial information for the Company and the guarantor subsidiaries. This financial information should be read in conjunction with the consolidated financial statements and other notes related thereto. Separate financial statements for the Company and the guarantor subsidiaries are not included herein because the guarantees are full, unconditional and joint and several. 18
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF INCOME SECOND QUARTER ENDED JULY 3, 2005 (THOUSANDS) (UNAUDITED) Parent Guarantor Company Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ Net sales............................................... $464,997 $ 32,640 $ - $ 497,637 Intercompany net sales.................................. 863 295,197 (296,060) - --------- --------- --------- --------- Total net sales....................................... 465,860 327,837 (296,060) 497,637 --------- --------- --------- --------- Cost and expenses, net: Costs of products sold................................ 349,201 288,370 (296,060) 341,511 Selling, general and administrative................... 81,450 26,206 - 107,656 Transition service agreement (income) expense......... 25 (25) - - --------- --------- --------- --------- Total costs and expenses, net......................... 430,676 314,551 (296,060) 449,167 --------- --------- --------- --------- Operating income........................................ 35,184 13,286 - 48,470 Equity in earnings of subsidiaries...................... 17,068 - (17,068) - Intercompany licensing income (expense), net............ (18,634) 18,634 - - Interest expense........................................ (12,008) (4,407) - (16,415) Other income (expense), net............................. (2,179) 16 - (2,163) --------- --------- --------- --------- Income before income taxes.............................. 19,431 27,529 (17,068) 29,892 Income tax expense...................................... (899) (10,461) - (11,360) --------- --------- --------- --------- Net income.............................................. $ 18,532 $ 17,068 $ (17,068) $ 18,532 ========= ========= ========= =========
19
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF INCOME SECOND QUARTER ENDED JULY 4, 2004 (THOUSANDS) (UNAUDITED) Parent Guarantor Company Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ Net sales............................................... $ 419,070 $ 32,479 $ - $ 451,549 Intercompany net sales.................................. 20,491 305,279 (325,770) - --------- --------- --------- --------- Total net sales....................................... 439,561 337,758 (325,770) 451,549 --------- --------- --------- --------- Cost and expenses, net: Costs of products sold................................ 335,531 296,917 (325,770) 306,678 Selling, general and administrative................... 76,296 22,280 - 98,576 Transition service agreement (income) expense......... 25 (25) - - --------- --------- --------- --------- Total costs and expenses, net......................... 411,852 319,172 (325,770) 405,254 --------- --------- --------- --------- Operating income........................................ 27,709 18,586 - 46,295 Equity in earnings of subsidiaries...................... 20,882 - (20,882) - Intercompany licensing income (expense), net............ (17,583) 17,583 - - Interest expense........................................ (11,594) (2,932) - (14,526) Other income (expense), net............................. (1,818) 41 - (1,777) --------- --------- --------- --------- Income before income taxes.............................. 17,596 33,278 (20,882) 29,992 Income tax (expense) benefit............................ 1,224 (12,396) - (11,172) --------- --------- ---------- --------- Net income.............................................. $ 18,820 $ 20,882 $ (20,882) $ 18,820 ========= ========= ========== =========
20
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF INCOME SIX MONTHS ENDED JULY 3, 2005 (THOUSANDS) (UNAUDITED) Parent Guarantor Company Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ Net sales............................................... $918,292 $ 58,143 $ - $ 976,435 Intercompany net sales.................................. 1,724 620,529 (622,253) - --------- --------- --------- --------- Total net sales....................................... 920,016 678,672 (622,253) 976,435 --------- --------- --------- --------- Cost and expenses, net: Costs of products sold................................ 700,679 598,802 (622,253) 677,228 Selling, general and administrative................... 161,000 51,941 - 212,941 Transition service agreement (income) expense......... 50 (50) - - --------- --------- --------- --------- Total costs and expenses, net......................... 861,729 650,693 (622,253) 890,169 --------- --------- --------- --------- Operating income........................................ 58,287 27,979 - 86,266 Equity in earnings of subsidiaries...................... 35,421 - (35,421) - Intercompany licensing income (expense), net............ (36,800) 36,800 - - Interest expense........................................ (24,611) (7,908) - (32,519) Other income (expense), net............................. (3,421) 259 - (3,162) --------- --------- --------- --------- Income before income taxes.............................. 28,876 57,130 (35,421) 50,585 Income tax (expense) benefit............................ 2,486 (21,709) - (19,223) --------- --------- --------- --------- Net income.............................................. $ 31,362 $ 35,421 $ (35,421) $ 31,362 ========= ========= ========= =========
21
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF INCOME SIX MONTHS ENDED JULY 4, 2004 (THOUSANDS) (UNAUDITED) Parent Guarantor Company Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ Net sales............................................... $ 785,723 $ 57,808 $ - $ 843,531 Intercompany net sales.................................. 40,290 574,883 (615,173) - --------- --------- --------- --------- Total net sales....................................... 826,013 632,691 (615,173) 843,531 --------- --------- --------- --------- Cost and expenses, net: Costs of products sold................................ 638,187 557,700 (615,173) 580,714 Selling, general and administrative................... 142,556 42,080 - 184,636 Transition service agreement (income) expense......... 50 (50) - - --------- --------- --------- --------- Total costs and expenses, net......................... 780,793 599,730 (615,173) 765,350 --------- --------- --------- --------- Operating income........................................ 45,220 32,961 - 78,181 Equity in earnings of subsidiaries...................... 37,767 - (37,767) - Intercompany licensing income (expense), net............ (33,040) 33,040 - - Interest expense........................................ (22,785) (5,895) - (28,680) Other income (expense), net............................. (2,641) 80 - (2,561) --------- --------- --------- --------- Income before income taxes.............................. 24,521 60,186 (37,767) 46,940 Income tax (expense) benefit............................ 4,934 (22,419) - (17,485) --------- --------- --------- --------- Net income.............................................. $ 29,455 $ 37,767 $ (37,767) $ 29,455 ========= ========= ========= =========
22
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET JULY 3, 2005 (THOUSANDS) (UNAUDITED) Parent Guarantor Elim- Company Subsidiaries inations Consolidated ----------- ----------- ----------- ----------- ASSETS Current Assets: Cash and cash equivalents.............. $ 4 $ 57,123 $ - $ 57,127 Accounts receivable, trade, net........ 306,031 23,528 - 329,559 Accounts receivable, other............. 4,241 2,646 - 6,887 Tax receivable from parent corporation.......................... 824 - - 824 Inventories, net....................... 126,780 61,994 - 188,774 Deferred income tax assets, net........ 45,994 - - 45,994 Other current assets................... 6,704 5,555 - 12,259 ----------- ----------- ----------- ----------- Total Current Assets................. 490,578 150,846 - 641,424 Investment in subsidiaries............... 546,831 - (546,831) - Intercompany loans including accrued interest............................... 141,760 (141,760) - - Due from/(to) subsidiaries, net.......... (443,424) 443,424 - - Property, plant and equipment, net....... 36,892 323,563 - 360,455 Goodwill, net............................ 40,080 23,119 - 63,199 Other noncurrent assets.................. 11,379 19,399 - 30,778 ----------- ----------- ----------- ----------- Total Assets............................. $ 824,096 $ 818,591 $ (546,831) $1,095,856 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt... $ 149,995 $ 2,670 $ - $ 152,665 Accounts payable....................... 40,393 53,964 - 94,357 Payable to related parties............. 6,252 9,258 - 15,510 Loans payable to parent corporation.... 52,840 - - 52,840 Accrued liabilities.................... 40,302 75,714 - 116,016 Reserve for product warranty claims.... 14,900 - - 14,900 ----------- ----------- ----------- ----------- Total Current Liabilities............ 304,682 141,606 - 446,288 Long-term debt less current maturities... 405,526 129,127 - 534,653 Reserve for product warranty claims...... 15,499 840 - 16,339 Deferred income tax liabilities.......... 47,940 - - 47,940 Other liabilities........................ 21,876 187 - 22,063 ----------- ----------- ----------- ----------- Total Liabilities........................ 795,523 271,760 - 1,067,283 Total Stockholders' Equity............... 28,573 546,831 (546,831) 28,573 ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity.............................. $ 824,096 $ 818,591 $ (546,831) $1,095,856 =========== =========== =========== ===========
23
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2004 (THOUSANDS) (UNAUDITED) Parent Guarantor Elim- Company Subsidiaries inations Consolidated ----------- ----------- ----------- ----------- ASSETS Current Assets: Cash and cash equivalents............... $ 12 $ 129,470 $ - $ 129,482 Accounts receivable, trade, net......... 234,733 15,810 - 250,543 Accounts receivable, other.............. 2,630 1,196 - 3,826 Inventories, net........................ 114,643 60,271 - 174,914 Deferred income tax assets, net......... 43,398 - - 43,398 Other current assets.................... 2,311 4,188 - 6,499 ----------- ----------- ----------- ----------- Total Current Assets.................. 397,727 210,935 - 608,662 Investment in subsidiaries................ 556,410 - (556,410) - Intercompany loans including accrued interest................................ 58,807 (58,807) - - Due from (to) subsidiaries, net........... (309,854) 309,854 - - Property, plant and equipment, net........ 41,356 323,158 - 364,514 Goodwill, net............................. 40,080 23,214 - 63,294 Other noncurrent assets................... 8,329 20,746 - 29,075 ----------- ----------- ----------- ----------- Total Assets.............................. $ 792,855 $ 829,100 $ (556,410) $1,065,545 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt.... $ 149,949 $ 2,576 $ - $ 152,525 Accounts payable........................ 53,216 67,121 - 120,337 Payable to related parties, net......... 6,625 10,275 - 16,900 Loans payable to parent corporation..... 52,840 - - 52,840 Accrued liabilities..................... 32,020 61,447 - 93,467 Reserve for product warranty claims..... 14,900 - - 14,900 ----------- ----------- ----------- ----------- Total Current Liabilities............. 309,550 141,419 - 450,969 Long-term debt less current maturities.... 405,530 130,422 - 535,952 Reserve for product warranty claims....... 16,553 660 - 17,213 Deferred income tax liabilities........... 44,773 - - 44,773 Other liabilities......................... 19,160 189 - 19,349 ----------- ----------- ----------- ----------- Total Liabilities......................... 795,566 272,690 - 1,068,256 Total Stockholders' Equity (Deficit)...... (2,711) 556,410 (556,410) (2,711) ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity (Deficit)..................... $ 792,855 $ 829,100 $ (556,410) $1,065,545 =========== =========== =========== ===========
24
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SIX MONTHS ENDED JULY 3, 2005 (THOUSANDS) (UNAUDITED) Parent Guarantor Company Subsidiaries Consolidated ------------ ------------ ------------ Cash and cash equivalents, beginning of period...... $ 12 $ 129,470 $ 129,482 ------------ ------------ ------------ Cash provided by (used in) operating activities: Net income (loss)................................. (4,059) 35,421 31,362 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation.................................... 1,748 20,271 22,019 Amortization.................................... - 1,174 1,174 Deferred income taxes........................... 571 - 571 Noncash interest charges, net................... 2,195 655 2,850 Increase in working capital items................. (93,979) (11,149) (105,128) Increase (decrease) in long-term reserve for product warranty claims.......................... (1,055) 181 (874) Increase in other assets.......................... (4,608) (310) (4,918) Increase in other liabilities..................... 2,569 92 2,661 Change in net receivable from/payable to related parties/parent corporations............. 94,419 (96,633) (2,214) Other, net........................................ (29) 229 200 ------------ ------------ ------------ Net cash used in operating activities............... (2,228) (50,069) (52,297) ------------ ------------ ------------ Cash provided by (used in) investing activities: Capital expenditures.............................. (1,388) (21,489) (22,877) Proceeds from sale of assets...................... 4,132 585 4,717 ------------ ------------ ------------ Net cash provided by (used in) investing activities. 2,744 (20,904) (18,160) ------------ ------------ ------------ Cash provided by (used in) financing activities: Proceeds from the issuance of long-term debt...... 127,000 - 127,000 Repayments of long-term debt...................... (127,000) (1,374) (128,374) Distribution to parent corporation................ (10) - (10) Loan to parent corporation........................ (68) - (68) Financing fees and expenses....................... (446) - (446) ------------ ------------ ------------ Net cash used in financing activities............... (524) (1,374) (1,898) ------------ ------------ ------------ Net change in cash and cash equivalents............. (8) (72,347) (72,355) ------------ ------------ ------------ Cash and cash equivalents, end of period............ $ 4 $ 57,123 $ 57,127 ============ ============ ============
25
BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)- (CONTINUED) NOTE 11. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SIX MONTHS ENDED JULY 4, 2004 (THOUSANDS) (UNAUDITED) Parent Guarantor Company Subsidiaries Consolidated -------------- -------------- -------------- Cash and cash equivalents, beginning of period....... $ 8 $ 2,872 $ 2,880 -------------- -------------- -------------- Cash provided by (used in) operating activities: Net income (loss).................................. (8,312) 37,767 29,455 Adjustments to reconcile net income (loss)to net cash provided by (used in) operating activities: Depreciation..................................... 1,487 19,361 20,848 Amortization..................................... - 1,114 1,114 Deferred income taxes............................ 3,592 - 3,592 Noncash interest charges, net.................... 2,074 720 2,794 (Increase) decrease in working capital items....... (145,197) 1,107 (144,090) Increase (decrease) in long-term reserve for product warranty claims.......................... (1,020) 484 (536) (Increase) decrease in other assets................ 272 (1,668) (1,396) Increase (decrease) in other liabilities........... 21 (5) 16 Change in net receivable from/payable to related parties/parent corporations.............. 44,983 (33,852) 11,131 Other, net......................................... 44 73 117 -------------- -------------- -------------- Net cash provided by (used in) operating activities.. (102,056) 25,101 (76,955) -------------- -------------- -------------- Cash provided by (used in) investing activities: Capital expenditures and acquisition of manufacturing facility........................... (26,263) (17,204) (43,467) -------------- -------------- -------------- Net cash used in investing activities................ (26,263) (17,204) (43,467) -------------- -------------- -------------- Cash provided by (used in) financing activities: Proceeds from issuance of long-term debt........... 325,000 - 325,000 Repayments of long-term debt....................... (186,000) (1,489) (187,489) Distribution to parent corporation................. (85) - (85) Dividends to parent corporation.................... (10,000) - (10,000) Loan to parent corporation......................... (48) - (48) Financing fees and expenses........................ (544) - (544) -------------- -------------- -------------- Net cash provided by (used in) financing activities.. 128,323 (1,489) 126,834 -------------- -------------- -------------- Net change in cash and cash equivalents.............. 4 6,408 6,412 -------------- -------------- -------------- Cash and cash equivalents, end of period............. $ 12 $ 9,280 $ 9,292 ============== ============== ==============
26 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless otherwise indicated by the context, "we," "us" and "our" refer to Building Materials Corporation of America and its consolidated subsidiaries. CRITICAL ACCOUNTING POLICIES There have been no significant changes to our Critical Accounting Policies during the six month period ended July 3, 2005. For a further discussion on our Critical Accounting Policies, reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations, "Critical Accounting Policies" in our annual report on Form 10-K for the fiscal year ended December 31, 2004, which we refer to as the 2004 Form 10-K. RESULTS OF OPERATIONS Roofing product sales is our dominant business, typically accounting for approximately 95% of our consolidated net sales. The main drivers of our roofing business include: the nation's aging housing stock; existing home sales; new home construction; larger new homes; increased home ownership rates; and severe weather and energy concerns. Our roofing business is also affected by raw material costs, including asphalt and other petroleum-based raw materials, energy, and transportation and distribution costs. Second Quarter 2005 Compared With Second Quarter 2004 We recorded net income in the second quarter of 2005 of $18.5 million compared with net income of $18.8 million in the second quarter of 2004. The decrease in second quarter of 2005 net income was primarily attributable to higher operating income, offset by higher interest expense and slightly higher other expenses. Net sales for the second quarter of 2005 were $497.6 million, a 10.2% increase over second quarter of 2004 net sales of $451.5 million, with the increase primarily due to higher average selling prices and higher unit volumes of both residential and commercial roofing products. Operating income in the second quarter of 2005 was $48.5 million compared to $46.3 million in the second quarter of 2004, representing an increase of 4.8%. Operating income in the second quarter of 2005 was positively affected by increased net sales primarily resulting from higher average selling prices and higher unit volumes of both residential and commercial roofing products. Partially offsetting these improvements in operating results were higher raw material costs, including asphalt, and higher selling, general and administrative expenses, mostly due to higher distribution costs, primarily resulting from higher sales volume and a rise in fuel prices. 27 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Interest expense for the second quarter of 2005 increased to $16.4 million from $14.5 million for the second quarter of 2004, primarily due to a higher average interest rate. Other expense, net was $2.2 million for the second quarter of 2005 compared with $1.8 million for the second quarter of 2004. BUSINESS SEGMENT INFORMATION Net Sales. Net sales of roofing products for the second quarter of 2005 increased to $474.7 million from $428.2 million for the second quarter of 2004, representing an increase of $46.5 million or 10.9%. The increase in net sales of roofing products was primarily attributable to higher average selling prices and higher unit volumes. Roofing product net sales were favorably impacted by an increase in net sales of premium laminate shingles primarily due to higher average selling prices and higher unit volumes. Net sales of specialty building products and accessories decreased to $22.9 million for the second quarter of 2005 from $23.3 million for the second quarter of 2004. Gross Margin. Our overall gross margin increased to $156.1 million or 31.4% for the second quarter of 2005 from $144.9 million or 32.1% for the second quarter of 2004. The increase in our overall gross margin is primarily attributable to an increase in net sales due to higher average selling prices and an improved sales mix, partially offset by higher raw material costs. Operating Income. Operating income for the second quarter of 2005 increased to $48.5 million or 9.7% of net sales, compared to $46.3 million or 10.3% of net sales for the second quarter of 2004. The overall increase in operating income for the second quarter of 2005 is primarily attributable to increased net sales of roofing products driven by higher average selling prices and higher unit volumes, partially offset by higher raw material costs, including asphalt, and higher selling, general and administrative expenses resulting from higher distribution costs, primarily due to higher sales volume and a rise in fuel prices. Six Months 2005 Compared With Six Months 2004 We recorded net income in the first six months of 2005 of $31.4 million compared with net income of $29.5 million in the first six months of 2004. The increase in the first six months of 2005 net income was primarily attributable to higher operating income, partially offset by higher interest expense and slightly higher other expenses. Net sales for the first six months of 2005 were $976.4 million, a 15.8% increase over the first six months of 2004 net sales of $843.5 million, with the increase primarily due to higher average selling prices and higher unit volumes of both residential and commercial roofing products. 28 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Operating income for the first six months of 2005 was $86.3 million compared with $78.2 million for the first six months of 2004. Operating income for the first six months of 2005 was positively affected by increased net sales primarily resulting from higher average selling prices and higher unit volumes of both residential and commercial roofing products. Partially offsetting these improvements in operating results were higher raw material costs, including asphalt, and higher selling, general and administrative expenses, mostly due to higher distribution costs, primarily resulting from higher sales volume and a rise in fuel prices. Interest expense for the first six months of 2005 increased to $32.5 million from $28.7 million for the first six months of 2004, primarily due to a higher average interest rate and higher average borrowings. The higher interest expense in the first six months of 2005 was primarily due to the issuance, in July 2004, of $200 million 7 3/4% Senior Notes due 2014, together with an issuance, in November 2004,of an additional $50 million of 7 3/4% Senior Notes due 2014, which we refer to collectively as the 2014 Notes, partially offset by the redemption of the Company's $100 million 8 5/8% Senior Notes due 2006, which we refer to as the 2006 Notes, and a reduction in the amount outstanding under the Company's $350 million Senior Secured Revolving Credit Facility, which we refer to as the Senior Secured Revolving Credit Facility. Other expense, net was $3.2 million for the first six months of 2005 compared with $2.5 million for the first six months of 2004. BUSINESS SEGMENT INFORMATION Net Sales. Net sales of roofing products for the first six months of 2005 increased to $937.0 million from $803.6 million for the first six months of 2004, representing an increase of $133.4 million or 16.6%. The increase in net sales of roofing products was primarily attributable to higher average selling prices and higher unit volumes. Roofing product net sales were favorably impacted by an increase in net sales of premium laminate shingles primarily due to higher average selling prices and higher unit volumes. Net sales of specialty building products and accessories decreased to $39.4 million for the first six months of 2005 from $39.9 million for the first six months of 2004. Gross Margin. Our overall gross margin increased to $299.2 million or 30.6% for the first six months of 2005 from $262.8 million or 31.2% for the first six months of 2004. The increase in our overall gross margin is primarily attributable to an increase in net sales due to higher average selling prices and an improved sales mix, partially offset by higher raw material costs. 29 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Operating Income. Operating income for the first six months of 2005 increased to $86.3 million or 8.8% of net sales, compared to $78.2 million or 9.3% of net sales for the first six months of 2004. The overall increase in operating income for the first six months of 2005 is primarily attributable to increased net sales of roofing products driven by higher average selling prices and higher unit volumes, partially offset by higher raw material costs, including asphalt, and higher selling, general and administrative expenses resulting from higher distribution costs, primarily due to higher sales volume and a rise in fuel prices. LIQUIDITY AND FINANCIAL CONDITION Cash Flows and Cash Position Sales of roofing products and specialty building products and accessories in the northern regions of the United States generally decline in the late fall and winter months due to cold weather. In addition, adverse weather conditions can result in higher customer demand during our peak operating season depending on the extent and severity of the damage from these severe weather conditions. Due to the seasonal demands of our business together with extreme weather conditions, we generally have negative cash flows from operations during the first six months of our fiscal year. Our negative cash flows from operations are primarily driven by our cash invested in both accounts receivable and inventories to meet these seasonal operating demands. Generally, in the third and fourth quarters of our fiscal year, our cash flows from operations become positive for each quarter, as our investment in inventories and accounts receivable no longer continues to increase, as is customary in the first six months of our fiscal year. Our seasonal working capital needs, together with our debt service obligations, capital expenditure requirements and other contracted arrangements, adversely impact our liquidity during this period. We rely on our cash and cash equivalents on hand and our Senior Secured Revolving Credit Facility due November 2006 to support our overall cash flow requirements during these periods. We expect to continue to rely on our cash and cash equivalents on hand and external financings to maintain operations over the short and long-term and to continue to have access to the financing markets, subject to the then prevailing market terms and conditions. Net cash outflow during the first six months of 2005 from operating and investing activities was $70.5 million, including the use of $52.3 million of cash from operations and the reinvestment of $22.9 million for capital programs, partially offset by $4.7 million of proceeds from the sale of assets. 30 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Cash invested in additional working capital totaled $105.1 million during the first six months of 2005, reflecting an increase in total accounts receivable of $82.1 million, due to our increased operating performance and the seasonality of our business, a $13.9 million increase in inventories to meet our seasonal operating demands, a $5.7 million increase in other current assets, and a $3.4 million net decrease in accounts payable and accrued liabilities. The net cash used for operating activities also included a $2.2 million net decrease in the payable to related parties/parent corporations, primarily attributable to a $4.7 million net decrease in federal income taxes payable, pursuant to our tax sharing agreement with our parent corporation and a $2.5 million increase in amounts due under our long-term granule supply agreement with an affiliated company. In addition, cash used in operating activities also included a $5.0 million increase in other assets, primarily reflecting a payment to our glass fiber supplier in connection with a requirements contract entered into in December 2004, coupled with a $2.7 million decrease in other liabilities. Net cash used in financing activities totaled $1.9 million during the first six months of 2005, including $127.0 million of proceeds from the issuance of long-term debt related to 2005 year to date cumulative borrowings under our Senior Secured Revolving Credit Facility. Financing activities also included $128.4 million in repayments of long-term debt, of which $127.0 million related to 2005 year to date cumulative repayments under our Senior Secured Revolving Credit Facility, $1.2 million related to our Chester, South Carolina loan obligation, $0.1 million related to our 10 1/2% Michigan City, Indiana note, and $0.1 million related to our Shafter, California Industrial Development Revenue Bonds. In addition, financing activities included $0.5 million in financing fees and expenses. Intercompany Transactions We make loans to, and borrow from, our parent corporations from time to time at prevailing market rates. As of July 3, 2005 and July 4, 2004, BMCA Holdings Corporation owed us $55.8 and $55.6 million, including interest of $0.5 and $0.4 million, respectively, and we owed BMCA Holdings Corporation $52.8 and $52.8 million, with no unpaid interest payable to BMCA Holdings Corporation, respectively. Interest income on our loans to BMCA Holdings Corporation amounted to $0.9 and $0.7 million during the second quarter ended July 3, 2005 and July 4, 2004, respectively and $1.8 and $1.4 million during the six month period July 3, 2005 and July 4, 2004, respectively. Interest expense on our loans from BMCA Holdings Corporation amounted to $0.9 and $0.6 million during the second quarter ended July 3, 2005 and July 4, 2004, respectively and $1.8 and $1.3 million during the six month period ended July 3, 2005 and July 4, 2004, respectively. Loans payable to/receivable from any parent corporation are due on demand and provide each party with the right of offset of its related obligation to the 31 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) other party and are subject to limitations as outlined in our Senior Secured Revolving Credit Facility and our 7 3/4% Senior Notes due 2005, the 8% Senior Notes due 2007, the 8% Senior Notes due 2008, and the 2014 Notes, which we refer to collectively as the Senior Notes. Under the terms of the Senior Secured Revolving Credit Facility and the indentures governing our Senior Notes, at July 3, 2005, we could repay demand loans to our parent corporation amounting to $52.8 million, subject to certain conditions. We also make non-interest bearing advances to affiliates, of which no balance was outstanding as of July 3, 2005 and July 4, 2004. In addition, for the six month period ended July 3, 2005 and July 4, 2004, no loans were owed or other lending activities were entered into by us to other affiliates. For the six month period ended July 3, 2005 and July 4, 2004, we paid $22.0 and $6.4 million, respectively in federal income tax payments to our parent corporation pursuant to a tax sharing agreement. These amounts are included in the change in net receivable from/payable to related parties/parent corporations in the consolidated statement of cash flows. On February 25, 2004 and April 21, 2004, we declared and paid cash dividends of $5.0 million and $5.0 million, respectively to our parent corporation. Long-Term Debt As of July 3, 2005 we had total outstanding consolidated indebtedness of $740.2 million, including $52.8 million of demand loans to our parent corporation, of which $152.7 million matures prior to the end of the second quarter of 2006. We anticipate funding these obligations principally from our cash and cash equivalents on hand, cash flow from operations and/or borrowings under our Senior Secured Revolving Credit Facility. As of July 3, 2005, we were in compliance with all covenants under our Senior Secured Revolving Credit Facility and our Senior Notes. As of July 3, 2005, the book value of the collateral securing the Senior Notes and the Senior Secured Revolving Credit Facility was approximately $1,080.8 million. On May 7, 2004, we amended our Senior Secured Revolving Credit Facility, which reduced the floating rate of interest as defined in the Senior Secured Revolving Credit Facility. Acquisition and Property Disposition On May 7, 2004, we acquired certain assets of a manufacturing facility located in Quakertown, Pennsylvania from Atlas Roofing Corporation. The acquisition was accounted for under the purchase method of accounting. Accordingly, the purchase price was allocated to the fair value of the identifiable assets acquired, which consisted almost entirely of property, plant and equipment. The operating results of the Quakertown manufacturing facility are included in our results of operation from the date of its acquisition. 32 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) In June 2005, we sold property in Houston, Texas for cash proceeds of approximately $4.1 million, which approximated carrying value. As a result of the foregoing factors, cash and cash equivalents decreased by $72.4 million during the first six months of 2005 to $57.1 million. Contingencies See Note 9 to Consolidated Financial Statements for information regarding contingencies. Economic Outlook We do not believe that inflation has had a material effect on our results of operations during the first six months of 2005. However, we cannot assure you that our business will not be affected by inflation in the future, or by increases in the cost of energy and asphalt purchases used in our manufacturing process principally due to fluctuating oil prices. During the first six months of 2005, the cost of asphalt continued to be high relative to historical levels. Due to the strength of the Company's manufacturing operations, which allows us to use many types of asphalt, together with our ability to secure alternative sources of supply, we do not anticipate that any future disruption in the supply of asphalt will have a material impact on future net sales, although no assurances can be provided in that regard. To mitigate these and other petroleum-based cost increases, we announced and implemented multiple price increases during the first six months of 2005. We will attempt to pass on future additional unexpected cost increases from suppliers as needed; however, no assurances can be provided that these price increases will be accepted in the marketplace. Contractual Obligations We have contracts with several different asphalt terminal suppliers where asphalt imported from Venezuela or other suppliers is stored prior to its use at our plants. These asphalt terminals are located at several locations including the ports of Tampa, Florida and Savannah, Georgia and are used to service our plants at those sites. We are obligated to pay these suppliers for use of the terminals under these contracts through 2008. Monthly pricing is fixed and includes capital improvements made at each asphalt terminal by its owner. No changes have been made to these contracts during the first six months of 2005. 33 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) On May 7, 2004, we entered into a long-term supply agreement, whereby we are obligated to purchase certain minimum amounts of dry felt and other products at fair market value through April 30, 2011. Effective January 31, 2005, this agreement was modified to reduce our minimum purchase obligation for dry felt and other products by fifty percent. Based on the modification to this agreement, as of July 3, 2005, our minimum purchase obligation for the life of the agreement aggregated to $10.8 million. In December 2004, we entered into a requirements contract with a supplier to purchase certain glass fiber. Under this contract, we are required to purchase specified annual quantities of glass fiber through 2014. Pricing for the glass fiber under this contract may be adjusted upward or downward relating to various factors including changes in the cost of energy and freight, among others. Under the requirements contract we have the right to terminate the contract if, during any two consecutive calendar years, we purchase less than a specified percentage of our glass fiber requirements. As of December 31, 2004, if we were to terminate this contract on or after December 31, 2006, as a result of not having purchased specified quantities of glass fiber during the prior two-year period, we would be required to pay an amount of not more than $37.3 million to the supplier, although we believe that the actual payment amount would be substantially less based on the terms of the contract. No changes have been made to this contract during the first six months of 2005. We also have a management agreement with International Specialty Products Inc., an affiliate, which we refer to as the ISP Management Agreement, to provide us with certain management services. The management fees payable under the ISP Management Agreement are adjusted annually. Based on services provided to us in 2005 under the ISP Management Agreement, the aggregate amount payable to ISP under the ISP Management Agreement for 2005, inclusive of the services provided to G-I Holdings, is approximately $5.9 million. For a further discussion on the ISP Management Agreement reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations, "Intercompany Transactions" in our 2004 Form 10-K. We purchase substantially all of our colored roofing granules and algae-resistant granules under a long-term requirements contract with International Specialty Products, Inc., which we refer to as ISP. The amount of mineral products purchased each year under the ISP contract is based on current demand and is not subject to minimum purchase requirements. For the six month period ended July 3, 2005 and the year ended December 31, 2004, we purchased $54.7 and $98.2 million, respectively, of mineral products from ISP under this contract. 2005 7 3/4% Senior Notes Redemption On July 15, 2005, we used cash and cash equivalents on hand and proceeds from our Senior Secured Revolving Credit Facility to redeem our 7 3/4% Senior Notes due 2005 at maturity, aggregating $150.0 million plus accrued interest of $2.9 million. 34 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) New Accounting Pronouncements In November 2004, the Financial Accounting Standards Board, which we refer to as FASB issued Statement of Financial Accounting Standards, which we refer to as SFAS, No. 151 "Inventory Costs," which we refer to as SFAS No. 151, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS No. 151 amends Accounting Research Bulletin, which we refer to as ARB, No. 43, Chapter 4 "Inventory Pricing," which we refer to as ARB No. 43, and requires abnormal inventory costs to be recognized as current period charges regardless of whether they meet the "so abnormal" criterion outlined in ARB No. 43. SFAS No. 151 also introduces the concept of "normal capacity" and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period in which they are incurred. SFAS No. 151 is effective for costs occurring in fiscal reporting years beginning after June 15, 2005. As of January 1, 2006 we will adopt the provisions of SFAS No. 151 and do not anticipate any material effect on our consolidated financial statements. In December 2004, the FASB issued a revised SFAS No. 123 "Accounting for Stock-Based Compensation," which we refer to as SFAS No. 123(R), which will require compensation costs related to share-based payment transactions to be recognized in the financial statements. SFAS No. 123(R) establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees. SFAS No. 123(R) replaces the original SFAS No. 123 and supersedes Accounting Principles Board, which we refer to as APB, Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123(R) becomes effective beginning with the first annual reporting period after June 15, 2005. As of July 3, 2005, we currently account for our 2001 Long-Term Incentive Plan under the accounting prescribed by FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option and Award Plans," which we refer to as FIN 28. Since compensation expense related to our incentive units is currently included in our consolidated statements of income, we do not expect SFAS No. 123(R) to have an impact on our consolidated financial statements. See Note 7 to Consolidated Financial Statements. In December 2004, the FASB issued SFAS No. 153 "Exchanges of Nonmonetary Assets," which we refer to as SFAS No. 153, which replaces the exception from fair value measurement in APB Opinion No. 29 "Accounting for Nonmonetary Transactions," for nonmonetary exchanges of similar productive assets. SFAS No. 153 replaces this exception with a general exception from fair value measurement for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the 35 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal reporting periods beginning after June 15, 2005. As of July 4, 2005, we will adopt the provisions of SFAS No. 153 and do not anticipate having any nonmonetary asset exchanges. In March 2005, the FASB issued FASB Staff Position, which we refer to as FSP, FIN 46(R)-5 "Implicit Variable Interests Under FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities," which we refer to as FSP FIN 46(R)-5. FSP FIN 46(R)-5 offers additional guidance to FIN 46(R) stating that implicit variable interests are implied financial interests in an entity that change in accordance with changes in the fair value of the entity's net assets, exclusive of variable interests. FSP FIN 46(R)-5 is effective during a company's first reporting period after March 3, 2005; accordingly we adopted FSP FIN 46(R)-5 during our second quarter ended July 3, 2005. At July 3, 2005, we did not have any interests in variable interest entities; therefore, FSP FIN 46(R)-5 or FIN 46(R) did not have any impact on our financial condition or results of operations. In March 2005, the FASB issued FASB Interpretation No. 47 "Accounting for Conditional Asset Retirement Obligations," which we refer to as FIN 47, which clarifies how the term conditional asset retirement obligation is used in SFAS No. 143 "Accounting for Asset Retirement Obligations," which we refer to as SFAS No. 143. SFAS No. 143 provides for a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 provides factors for when a reasonable estimate of the fair value of the obligation can be determined and indicators which would preclude an entity from recognizing a liability for such obligations. FIN 47 is effective for fiscal years ending after December 15, 2005. We will adopt FIN 47 during our fourth quarter in fiscal year ending December 31, 2005 and do not expect there to be an impact on our financial condition or results of operations. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which we refer to as SFAS No. 154, which eliminates the requirement of APB Opinion No. 20, "Accounting Changes," to include the cumulative effect adjustment resulting from a change in an accounting principle in the income statement in the period of change. SFAS No. 154 requires that a change in an accounting principle or reporting entity be retrospectively applied. Under retrospective application, SFAS No. 154 is applied as of the beginning of the first accounting period presented in the financial statements and the cumulative effect of the change is reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments are recorded to opening retained earnings. Each period presented is 36 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) adjusted to reflect the period-specific effects of applying the change. Changes in accounting estimate and corrections of errors continue to be accounted for in the same manner as prior to the issuance of SFAS No. 154. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. As of January 1, 2006, we will adopt the provisions of SFAS No. 154 and do not anticipate any material effect on our consolidated financial statements. * * * 37 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act and section 21E of the Securities Exchange Act of 1934. These forward-looking statements are only predictions and generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. Our operations are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. The forward-looking statements included herein are made only as of the date of this quarterly report on Form 10-Q and we undertake no obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. We cannot assure you that projected results or events will be achieved. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2004 Form 10-K for a discussion of "Market-Sensitive Instruments and Risk Management." There were no material changes in such information as of July 3, 2005 and we have no hedging arrangements as of July 3, 2005. ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures: Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports filed, furnished or submitted under the Exchange Act. Internal Control Over Financial Reporting: There were no significant changes in our internal control over financial reporting identified in management's evaluation during the second quarter of fiscal year 2005 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. 38 BUILDING MATERIALS CORPORATION OF AMERICA PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As of July 3, 2005, approximately 1,900 alleged asbestos-related bodily injury claims relating to the inhalation of asbestos fiber are pending against Building Materials Corporation of America. See Note 9 to consolidated financial statements in Part I. ITEM 5. OTHER INFORMATION During the second quarter of 2005, the Company amended its ISP Management Agreement with International Specialty Products Inc., an affiliate, effective January 1, 2005, to provide the Company with certain management services. The purpose of the amendment was to adjust the management fees payable by the Company to ISP under the ISP Management Agreement. Accordingly, the aggregate amount payable to ISP under the ISP Management Agreement for services provided to the Company in 2005, inclusive of the services provided to G-I Holdings, is approximately $5.9 million. A more detailed explanation of charges with respect to each party to the agreement is set forth in the Amendment to the ISP Management Agreement, which is filed as Exhibit 10.1 to this report and incorporated by reference herein. ITEM 6. EXHIBITS Exhibit Number 10.1 Amendment No. 7 to the Amended and Restated Management Agreement, dated as of January 1, 2005, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., International Specialty Holdings Inc., ISP Synthetic Elastomers LP, ISP Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. as assignee of ISP Chemco, Inc. 10.2 Form of BMCA 2001 Long-Term Incentive Plan Incentive Unit Grant Agreement 31.2 Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer. 31.3 Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer. 32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer 39 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BUILDING MATERIALS CORPORATION OF AMERICA BUILDING MATERIALS MANUFACTURING CORPORATION DATE: August 17, 2005 BY: /s/John F. Rebele ----------------- ---------------------------------------- John F. Rebele Senior Vice President, Chief Financial Officer and Chief Administrative Officer (Principal Financial Officer) DATE: August 17, 2005 BY: /s/James T. Esposito ----------------- ---------------------------------------- James T. Esposito Vice President and Controller (Chief Accounting Officer) 40 EX-10 2 mv8-15ex10_1.txt 10.1 Exhibit 10.1 AMENDMENT No. 7, dated as of January 1, 2005, to AMENDED AND RESTATED MANAGEMENT AGREEMENT, dated as of January 1, 1999, as amended by Amendment No. 1, dated as of January 1, 2000, Amendment No. 2, dated as of January 1, 2001, Amendment No. 3, dated as of June 27, 2001, Amendment No. 4, dated as of January 1, 2002, Amendment No. 5, dated as of January 1, 2003 and Amendment No. 6 dated as of January 1, 2004 (as so amended, the "Agreement"), by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc. ("ISP"), International Specialty Holdings Inc. ("ISH"), ISP Investco LLC ("Investco"), ISP Synthetic Elastomers LP ("Elastomers"), GAF Broadcasting Company, Inc., Building Materials Corporation of America ("BMCA"), and ISP Management Company, Inc. (the "Company"), as assignee of ISP Chemco Inc. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement. WHEREAS, in accordance with Section 7 of the Agreement, the parties desire to adjust the management fees payable to the Company under the Agreement in order to properly reflect the costs to the Company of providing services thereunder; NOW, THEREFORE, the parties hereby amend the Agreement as follows: 1. Section 3 of the Agreement is hereby amended, effective as of the date hereof, to read in its entirety as follows: "In consideration of the Company providing Services hereunder, each of the parties listed below shall pay to the Company a management fee (the "Management Fee") at the following respective rates for the quarter ending March 31, 2005 and for each quarter thereafter for which this Agreement has been extended as provided in Section 1 of this Agreement: BMCA (on behalf of itself, its parent and its subsidiaries) - $1,000,000; ISP - $5,000; ISH - $20,000; Elastomers - $3,919,000 and Investco (on behalf of itself and its subsidiaries) - $1,160,000. Notwithstanding the foregoing, the Management Fee rate for the quarter ending June 30, 2005 and for each quarter thereafter for which this Agreement has been extended as provided in Section 1 of this Agreement for Investco (on behalf of itself and its subsidiaries) shall be $685,000. The Management Fee shall be payable monthly in arrears. In addition to the Management Fee, a wholly owned subsidiary of BMCA shall pay to the Company (as successor to both the overlandlord's and sublandlord's interests in the subject real property) rent payments pursuant to and in accordance with the terms of the Sublease (as amended) between such wholly owned subsidiary of BMCA and Company, the form of which is attached as Exhibit A hereto and made a part hereof. In consideration of BMCA providing G-I Services hereunder, G-I Holdings Inc. (on behalf of itself and its subsidiaries other than BMCA and BMCA's subsidiaries) shall pay to BMCA a management fee (the "G-I Management Fee") at the rate of $215,000 for the quarter ended March 31, 2005 and for each quarter thereafter for which this Agreement has been extended as provided in Section 1 of this Agreement. The G-I Management Fee shall be payable monthly in arrears." 2. Exhibit A to the Agreement is hereby amended to substitute therefore Exhibit A to this Amendment. 3. In all other respects, the Agreement as previously amended shall remain in full force and effect. 4. This Amendment is subject to the approval of the Board of Directors of the Company. 5. This Amendment may be executed in one or more counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same instrument. Failure by any one party to execute this Amendment shall not affect the rights and obligations of any other party signatory hereto. IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written. G-I HOLDINGS INC. GAF BROADCASTING COMPANY, INC. By: /s/Peter J. Ganz By: /s/Susan B. Yoss ------------------------------------ --------------------------------- Name: Peter J. Ganz Name: Susan B. Yoss Title: President, Chief Executive Officer, Title: Senior Vice President, General Counsel and Secretary Chief Financial Officer and Treasurer MERICK INC. BUILDING MATERIALS CORPORATION OF AMERICA By: /s/Susan B. Yoss By: /s/John F. Rebele ------------------------------------ --------------------------------- Name: Susan B. Yoss Name: John F. Rebele Title: Senior Vice President, Title: Senior Vice President and Chief Financial Officer Chief Financial Officer and Treasurer INTERNATIONAL SPECIALTY PRODUCTS INC. ISP MANAGEMENT COMPANY, INC. By: /s/Salvatore J. Guccione By: /s/Salvatore J. Guccione ------------------------------------ --------------------------------- Name: Salvatore J. Guccione Name: Salvatore J. Guccione Title: Senior Vice President and Title: Senior Vice President and Chief Financial Officer Chief Financial Officer ISP SYNTHETIC ELASTOMERS LP ISP INVESTCO LLC By: ISP Synthetic GP LLC, By: International Specialty Holdings, Inc. its General Partner its sole member By: /s/Salvatore J. Guccione By: /s/Susan B. Yoss ------------------------------------ --------------------------------- Name: Salvatore J. Guccione Name: Susan B. Yoss Title: Senior Vice President and Title: Executive Vice President - Chief Financial Officer Finance and Treasurer INTERNATIONAL SPECIALTY HOLDINGS INC. By: /s/Salvatore J. Guccione ------------------------------------ Name: Salvatore J. Guccione Title: Senior Vice President and Chief Financial Officer
EXHIBIT A AMENDMENT OF SUBLEASE --------------------- THIS AMENDMENT (the "Amendment") is made as of January 1, 2005 by and between ISP MANAGEMENT COMPANY, INC. ("Sublessor") and BUILDING MATERIALS MANUFACTURING CORPORATION, as successor-in-interest to Building Materials Corporation of America ("Sublessee"). WITNESSETH ---------- WHEREAS, Sublessor and Sublessee entered into a certain Sublease Agreement dated as of January 1, 1998, as amended by Amendment of Sublease dated as of January 1, 1999, and as further amended by Amendment of Sublease dated as of January 1, 2000, Amendment of Sublease dated as of April 5, 2000, Amendment of Sublease dated as of January 1, 2001, Amendment of Sublease dated as of January 1, 2002, Amendment of Sublease dated as of January 1, 2003 and Amendment of Sublease dated as of January 1, 2004 (collectively, the "Sublease"); and, WHEREAS, Sublessor and Sublessee wish to modify the Sublease as provided below. NOW THEREFORE, in consideration of the mutual covenants herein set forth, and other good and valuation consideration, the receipt and sufficiency of which are hereby adknowledged, Sublessor and Sublessee hereby agree to amend the Sublease as follows: 1. Paragraph 4 (Rent) is amended to increase the rent for the period commencing January 1, 2005 through and including May 31, 2005 to $152,166.70 per month and for the period commencing June 1, 2005 through and including December 31, 2005 to $158,725.00 per month, based on an annual rent prorated as of June 1, 2005 of $1,871,908. The rent for any partial calendar month shall be prorated based on the actual number of days in such calendar month. Except as expressly provided above, the terms, provisions and conditions of the Sublease remain unmodified and in full force and effect. (Remainder of page left blank intentionally.) IN WITNESS WHEREOF, Sublessor and Sublessee have executed this amendment as of the date first set forth above. SUBLESSOR: SUBLESSEE: ISP MANAGEMENT COMPANY, INC., BUILDING MATERIALS A Delaware corporation MANUFACTURING CORPORATION, A Delaware corporation By: /s/Salvatore J. Guccione By: /s/John F. Rebele ------------------------ -------------------------- Name: Salvatore J. Guccione Name: John F. Rebele Title: Senior Vice President and Title: Senior Vice President and Chief Financial Officer Chief Fianancial Officer EX-10 3 mv8-15ex10_2.txt 10.2 Exhibit 10.2 NOTICE OF GRANT OF INCENTIVE UNTIS AND GRANT AGREEMENT (Date) (Full Name) (Address>) (City, State Zip) (First Name or Nickname) I would like to congratulate you on receiving this discretionary award. It is being granted to you based upon your contributions to GAFMC and the Company's desire for your continued contribution to our future performance. Pursuant to the BMCA 2001 Long-Term Incentive plan (the "Plan"), you are hereby granted Incentive Units as follows: Date of Grant (Date) Vesting Schedule 20% on each grant anniversary for the following five years (Current Year, 200x+1, 200x+2, 200x+3, and 200x+4). Expiration Date: (Date) Total Number of Units Granted (#) BMCA Book Value on the ($0.00) Date of the Grant Enclosed for your further understanding, is a copy of two schedules. One schedule shows your current total dollar value of your vested Incentive Units. The other schedule shows the five-year projected dollar value of all Incentive Units granted to you. Should you have any questions regarding this program or would like a copy of the BMCA 2001 Long-Term Incentive Plan, you may contact Chuck Baker. Bill Collins President and CEO BMCA EX-31 4 mv8-15ex31_1.txt 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, William W. Collins, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Building Materials Corporation of America; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on our evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 17, 2005 /s/ William W. Collins -------------------------------------------- Name: William W. Collins Title: Chief Executive Officer and President EX-31 5 mv8-15ex31_2.txt 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, John F. Rebele, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Building Materials Corporation of America; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on our evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 17, 2005 /s/ John F. Rebele --------------------------------------- Name: John F. Rebele Title: Senior Vice President, Chief Financial Officer and Chief Administrative Officer EX-32 6 mv8-15ex32_1.txt 32.1 Exhibit 32.1 CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Building Materials Corporation of America (the "Company") for the quarterly period ended July 3, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), William W. Collins, as Chief Executive Officer and President of the Company, and John F. Rebele, as Senior Vice President, Chief Financial Officer and Chief Administrative Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ William W. Collins -------------------------------------------- Name: William W. Collins Title: Chief Executive Officer and President Date: August 17, 2005 /s/ John F. Rebele -------------------------------------------- Name: John F. Rebele Title: Senior Vice President, Chief Financial Officer and Chief Administrative Officer Date: August 17, 2005 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----