<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999 Commission file number 333-46607
WERNER HOLDING CO. (DE), INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 25-1581345
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
1105 North Market Street, Suite 1300
Wilmington, Delaware 19899
(Address of principal executive offices) (zip code)
(302) 478-5732
Registrant's telephone number, including area code:
</TABLE>
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
As of March 31, 1999 there were 1,000 shares of common stock outstanding.
<PAGE> 2
INDEX
Werner Holding Co. (DE), Inc.
Form 10-Q
Period Ended March 31, 1999
PART I FINANCIAL INFORMATION
- -----------------------------
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<CAPTION>
<S> <C>
Item 1. Financial Statements of Werner Holding Co. (PA), Inc. (Unaudited)
Condensed Consolidated Balance Sheets--March 31, 1999 and
December 31, 1998............................................................. 1
Condensed Consolidated Statements of Operations--Three Months
Ended March 31, 1999 and 1998................................................. 2
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Deficit)-Three Months Ended March 31, 1999 and 1998......................... 3
Condensed Consolidated Statements of Cash Flows--Three Months
Ended March 31, 1999 and 1998................................................. 4
Notes to Condensed Consolidated Financial Statements............................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations of Werner Holding Co. (PA), Inc. ....................17
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................21
PART II OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings.................................................................22
Item 6. Exhibits and Reports on Form 8-K..................................................22
SIGNATURE..................................................................................23
</TABLE>
The financial statements included herein are that of Werner Holding Co. (PA),
Inc. ("Holding"). The registrant is Werner Holding Co. (DE), Inc. (the
"Issuer"),which is a wholly-owned subsidiary of Holding. Holding has no
substantial operations or assets other than its investment in the Issuer. The
consolidated financial condition and results of operations of Holding are
substantially the same as those of the Issuer. As used herein and except as the
context otherwise may require, the "Company" or "Werner" means, collectively,
Holding, the Issuer and all of their consolidated subsidiaries.
<PAGE> 3
PART I-FINANCIAL INFORMATION
ITEM 1.
Werner Holding Co. (PA), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,560 $ 9,387
Undivided interest in accounts receivable 49,723 46,298
Allowance for doubtful accounts (1,650) (1,600)
Refundable income taxes -- 490
Inventories 62,281 46,777
Deferred income taxes 2,940 2,830
Other 2,185 2,559
------------------------------
Total current assets 118,039 106,741
Property, plant and equipment, net 68,376 65,693
Other assets:
Deferred income taxes 7,439 5,997
Deferred financing fees, net 13,177 13,745
Other 19,265 20,603
------------------------------
39,881 40,345
------------------------------
TOTAL ASSETS $ 226,296 $ 212,779
==============================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 27,735 $ 22,742
Accrued liabilities 30,914 28,583
Income taxes payable 1,475 --
Current maturities of long-term debt 1,450 1,450
------------------------------
Total current liabilities 61,574 52,775
Long-term obligations:
Long-term debt 278,212 278,483
Reserve for product liability and workers' compensation claims 17,390 13,639
Accrued employee retirement benefits 22,929 22,279
------------------------------
Total liabilities 380,105 367,176
Shareholders' deficit:
Common stock 1 1
Additional paid-in-capital 198,847 198,847
Retained deficit (350,456) (351,607)
Accumulated other non-owner changes in equity (1,621) (1,638)
Notes receivable arising from stock loan plan (580) --
------------------------------
Total shareholders' deficit (153,809) (154,397)
------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 226,296 $ 212,779
==============================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
1
<PAGE> 4
Werner Holding Co. (PA), Inc. and Subsidiaries
Condensed Consolidated Statements of Operations -- (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
---- ----
<S> <C> <C>
Net sales $ 105,459 $ 98,311
Cost of sales 75,148 74,958
------------------------------
Gross profit 30,311 23,353
General and administrative expenses 7,772 8,066
Selling and distribution expenses 13,779 12,691
------------------------------
Operating profit 8,760 2,596
Other (expense) income, net (51) 1,191
------------------------------
Income before interest and taxes 8,709 3,787
Interest expense 6,732 8,431
------------------------------
Income (loss) before income taxes 1,977 (4,644)
Income taxes (benefit) 826 (1,800)
------------------------------
NET INCOME (LOSS) $ 1,151 $ (2,844)
==============================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
2
<PAGE> 5
Werner Holding Co. (PA), Inc. and Subsidiaries
Condensed Consolidated Statements of Changes
in Shareholders' Equity (Deficit) (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RETAINED OTHER NON- TOTAL
COMMON PAID-IN EARNINGS OWNER EQUITY SHAREHOLDERS'
STOCK CAPITAL (DEFICIT) CHANGES OTHER EQUITY (DEFICIT)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $ 1 $198,847 $(351,607) $(1,638) $ - $(154,397)
Non-owner equity changes:
Net income 1,151 1,151
Other non-owner equity changes:
Unrealized gains on investments
(net of deferred taxes of $19) 35 35
Less: reclassification adjustment
for gains realized included in
net income (net of tax) (18) (18)
-------------
Total non-owner equity changes 1,168
Notes receivable arising from stock
loan plan (580) (580)
--------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 $ 1 $198,847 $(350,456) $(1,621) $(580) $(153,809)
======================================================================================
Balance at January 1, 1998 $ 1 $198,847 $(351,753) $ (767) $ - $(153,672)
Non-owner equity changes:
Net loss (2,844) (2,844)
Other non-owner equity changes:
Unrealized gains on investments
(net of deferred taxes of $42) 78 78
Add: reclassification adjustment
for losses realized included in
net loss (net of benefit) 218 218
-------------
Total non-owner equity changes (2,548)
--------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1998 $ 1 $198,847 $(354,597) $ (471) $ - $(156,220)
======================================================================================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE> 6
Werner Holding Co. (PA), Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,151 $ (2,844)
Reconciliation of net income (loss) to net cash (used in) provided by
operating activities:
Net gain on transfer of loss reserves and discontinuance of MIICA -- (4,506)
Depreciation 2,018 2,314
Amortization of deferred financing fees and original issue discount 660 697
Amortization of Recapitalization and other deferred costs 1,158 2,604
Provision for losses on accounts receivable 50 210
Provision for product liability and workers' compensation claims 4,157 3,973
Payment of product liability and workers' compensation claims (406) (3,333)
Deferred income taxes (1,560) 7,753
Realized net losses on disposition and impairment of investments -- 4,294
Changes in operating assets and liabilities:
Accounts receivable -- (4,703)
Undivided interest in accounts receivable (3,425) --
Refundable income taxes 490 (9,663)
Inventories (15,504) (5,087)
Accounts payable 4,993 4,422
Accrued liabilities 3,430 5,622
Income taxes payable 1,475 --
Other, (net) 26 --
----------------------------
Net cash (used in) provided by operating activities (1,287) 1,753
INVESTING ACTIVITIES
Capital expenditures (4,701) (1,278)
Insurance fund securities available-for-sale:
Purchases of debt and equity securities -- (572)
Net sales (purchases) of other investments 103 (329)
----------------------------
Net cash (used in) investing activities (4,598) (2,179)
FINANCING ACTIVITIES
Issuance of notes receivable arising from stock loan plan (580) --
Repayments of long-term debt (362) (362)
----------------------------
Net cash used in financing activities (942) (362)
----------------------------
Net decrease in cash and cash equivalents (6,827) (788)
Cash and cash equivalents at beginning of period 9,387 3,107
----------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,560 $ 2,319
============================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE> 7
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in Thousands)
A. BASIS OF PRESENTATION AND RECAPITALIZATION
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Werner
Holding Co. (PA), Inc., ("Holding") include its accounts and the accounts of its
wholly-owned subsidiary, Werner Holding Co. (DE), Inc. ("Issuer") and the
Issuer's wholly-owned subsidiaries. Holding has no substantial operations or
assets, other than its investment in the Issuer. The consolidated financial
condition and results of operations of Holding are substantially the same as
those of the Issuer. Intercompany accounts and transactions have been
eliminated. The unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair financial
presentation have been included. Operating results for the three month period
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and notes thereto included in the
Company's Annual Report for 1998 on Form 10-K (File No. 333-46607) as filed with
the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions in
certain circumstances that affect amounts reported in the consolidated financial
statements and notes. Actual results could differ from those estimates.
Certain amounts for 1998 have been reclassified to conform to the 1999 interim
period presentation.
5
<PAGE> 8
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
A. BASIS OF PRESENTATION AND RECAPITALIZATION -- CONTINUED
The Recapitalization
In 1997, the Company entered into a recapitalization agreement (the "Agreement")
with certain affiliates of INVESTCORP S.A. ("Investcorp") and certain other
international investors organized by Investcorp (collectively, the "Investors").
Pursuant to the Agreement, the Company's common stock was reclassified and the
Company redeemed certain shares of its reclassified stock for $330,700 and a
market participation right, and sold to the Investors newly created common
shares for $122,700 representing 67% of the outstanding voting equity of the
Company (all of which actions together constituted the "Recapitalization"). The
transaction was accounted for as a recapitalization and as such the historical
basis of the Company's assets and liabilities was not affected. The
Recapitalization was funded through borrowings under a senior credit facility
with a syndicate of banks (the "Senior Credit Facility"), the issuance of Senior
Subordinated Notes (the "Notes"), and the proceeds from the sale of stock to the
Investors.
B. CHANGE IN ACCOUNTING METHOD-DEPRECIATION
The straight-line method of depreciation was adopted for all property, plant and
equipment placed into service after January 1, 1999. For property, plant and
equipment placed into service prior to January 1, 1999, depreciation is computed
using accelerated methods. The Company believes the new method will more
appropriately reflect its financial results by better allocating costs of new
property over the useful lives of these assets. In addition, the new method more
closely conforms with that prevalent in the industries in which the Company
operates. The effect of this change was not material to the earnings or
financial position of the Company for the three months ended March 31, 1999.
C. INVENTORIES
Components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Finished products $34,141 $26,887
Work-in-process 15,511 12,339
Raw materials and supplies 22,594 17,808
------------------------
72,246 57,034
Less excess of cost over LIFO stated values 9,965 10,257
------------------------
NET INVENTORIES $62,281 $46,777
========================
</TABLE>
6
<PAGE> 9
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
D. COMMITMENTS AND CONTINGENCIES
In March 1998, an action was filed in the United States District Court for the
Western District of Pennsylvania entitled Elizabeth Werner, et al v. Eric J.
Werner, et al (Civil Action No. 98-503). The action purports, in part, to be
brought derivatively on behalf of Holding and, in part, to be brought on behalf
of plaintiffs individually against the Company and certain current and former
officers and directors of the Company. The aspect of the case purportedly
brought on behalf of Holding alleges breaches of fiduciary duty by various
members of the Company's management arising out of, among other things, the
issuance of restricted stock to management of the Company in 1992 and 1993.
Holding's Board of Directors has referred the matter to a special committee of
disinterested directors to investigate the merits of the claim and to take
appropriate actions on behalf of Holding. After a detailed investigation, the
special committee recommended that the derivative claims not be pursued by or on
behalf of Holding. Accordingly, all the defendants have made motions to dismiss
the derivative claims. Pursuant to an amendment to the complaint filed by
plaintiffs on March 29, 1999, the only remaining corporate defendant in this
action is Holding. Pursuant to the same amendment, the only remaining derivative
claim asserted by the plaintiffs is a claim for excessive compensation, not
relating to the restricted stock issuances. The aspect of the case purportedly
brought on behalf of plaintiffs individually against the Company appear to arise
out of the 1992 and 1993 restricted stock issuances as well as certain alleged
misrepresentations by representatives of the Company. The plaintiffs seek
monetary damages in an unspecified amount. Management believes that the ultimate
resolution of this lawsuit will not have a material adverse effect on the
Company's financial condition.
E. RESERVE FOR PRODUCT LIABILITY AND WORKERS' COMPENSATION CLAIMS AND
INSURANCE FUND INVESTMENTS
On March 31, 1998, the Company obtained third party commercial insurance
coverage for its product liability and workers' compensation claims. Previously,
the Company provided insurance for such claims through MIICA, the Company's
captive insurance subsidiary. Under the terms of the commercial insurance
coverage, the commercial insurance provider agreed to assume losses which
occurred on or before March 31, 1998, capped such losses at a maximum of
$75,000, and extinguished the Company's liability in regard to such losses (the
"MIICA Insurance Transfer"). The Company paid approximately $42,400 for the
commercial insurance coverage from the proceeds of liquidating certain of
MIICA's insurance fund investments. As of the date of the MIICA Insurance
Transfer, the Company had a reserve for such losses of approximately $47,500. As
a result of the MIICA
7
<PAGE> 10
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
E. RESERVE FOR PRODUCT LIABILITY AND WORKERS' COMPENSATION CLAIMS AND
INSURANCE FUND INVESTMENTS -- CONTINUED
Insurance Transfer, the Company recognized a gain of approximately $4,500, which
is net of costs to discontinue the operations of MIICA. The Company has obtained
third party commercial insurance coverage for product liability and workers'
compensation claims occurring on or after April 1, 1998, subject to certain
deductible provisions, for which the Company has provided reserves at March 31,
1999 and December 31, 1998.
F. SEGMENT INFORMATION
The Company classifies its business in two segments: Climbing Products, which
includes aluminum, fiberglass and wood ladders, scaffolding, stages and planks;
and Extruded Products, which includes aluminum extrusions and fabricated
components. The Company's reportable segments are based on the characteristics
of the product and the markets and distribution channels through which the
products are sold. The Company evaluates segment performance based on operating
profit. There has not been a material change in total assets, the basis of
segmentation or the basis of measurement of segment profit or loss from that
disclosed in the Company's 1998 Annual Report on Form 10-K. Net sales and
operating profit (loss) of the Company's segments for the three months ended
March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
---- ----
<S> <C> <C>
NET SALES
Climbing Products $ 80,828 $ 71,984
Extruded Products 24,631 26,327
-----------------------------
$ 105,459 $ 98,311
==============================
OPERATING PROFIT (LOSS)
Climbing Products $ 7,576 $ 5,400
Extruded Products 3,380 1,566
Corporate & Other (2,196) (4,370)
-----------------------------
$ 8,760 $ 2,596
==============================
</TABLE>
Corporate & Other includes various corporate expenses and eliminations.
8
<PAGE> 11
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
G. SALES OF ACCOUNTS RECEIVABLE
The undivided interest in accounts receivable is the net residual interest
associated with accounts receivable sold under a receivables purchase agreement
of $69,723 and $66,298 as of March 31, 1999 and December 31, 1998, respectively.
The expense incurred on the sale of accounts receivable under the agreement is
reported in the accompanying condensed consolidated statements of operations in
"Other (expense) income, net".
H. SUPPLEMENTAL GUARANTOR INFORMATION
The Company refinanced substantially all of its outstanding debt through
borrowings under the Senior Credit Facility and the Notes. Holding has provided
a full, unconditional, joint and several guaranty of the Issuer's obligations
under the Senior Credit Facility and the Notes. In addition, the Issuer's
wholly-owned subsidiaries, except for MIICA and Werner Funding Corporation,
(collectively referred to as the "Guarantor Subsidiaries") have provided full,
unconditional, joint and several guarantees of the Senior Credit Facility and
the Notes.
Following is condensed consolidated information for Holding (the "Parent
Company"), the Issuer, the Guarantor Subsidiaries, and MIICA and Werner Funding
Corporation (each a "Non-Guarantor Subsidiary" and collectively the
"Non-Guarantor Subsidiaries"). Separate financial statements of the Guarantor
Subsidiaries are not presented because management has determined that they would
not provide additional information that is material to investors. Therefore,
each of the Guarantor Subsidiaries are combined in the presentation below.
Further, separate financial statements of the Issuer have not been provided as
management has determined that they would not provide information that is
material to investors, as the Issuer has no substantial operations or assets,
other than its investment in its subsidiaries.
Investments in subsidiaries are accounted for on the equity method of
accounting. Earnings of subsidiaries are, therefore, reflected in the respective
investment accounts of the Parent Company and the Issuer. The investment in
subsidiaries and intercompany balances and transactions have been eliminated.
For presentation purposes, all current and deferred taxes have been combined
in the financial statements of the Guarantor Subsidiaries.
9
<PAGE> 12
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1999
---------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY (a) ELIMINATIONS CONSOLIDATED
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ $ 314 $ 2,234 $ 12 $ - $ 2,560
Undivided interest in accounts receivable 49,723 49,723
Allowance for doubtful accounts (1,650) (1,650)
Inventories 62,281 62,281
Deferred income taxes 2,940 2,940
Other 7 95 2,083 2,185
---------------------------------------------------------------------------------
Total current assets 7 409 67,888 49,735 118,039
Property, plant and equipment, net 68,376 68,376
Other assets:
Deferred income taxes 7,439 7,439
Deferred financing fees, net 13,177 13,177
Investment in subsidiaries (165,728) (154,154) 5,265 314,617
Other 4 5,580 13,681 19,265
---------------------------------------------------------------------------------
TOTAL ASSETS $ (165,717) $ (134,988) $ 162,649 $ 49,735 $ 314,617 $ 226,296
==================================================================================
</TABLE>
(a) Includes the accounts of Werner Funding Corporation only.
10
<PAGE> 13
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1999
-------------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY (a) ELIMINATIONS CONSOLIDATED
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable $ $ $ 27,735 $ $ $ 27,735
Intercompany payable (receivable) (11,908) (250,116) 217,599 44,425
Accrued liabilities 6,194 24,675 45 30,914
Income taxes payable 1,475 1,475
Current maturities of long-term debt 1,450 1,450
--------------------------------------------------------------------------------------
Total current liabilities (11,908) (242,472) 271,484 44,470 61,574
Long-term obligations:
Intercompany payable (receivable)
Long-term debt 273,212 5,000 278,212
Reserve for product liability and workers'
compensation claims 17,390 17,390
Other 22,929 22,929
-------------------------------------------------------------------------------------
Total liabilities (11,908) 30,740 316,803 44,470 380,105
Shareholders' equity (deficit) (153,809) (165,728) (154,154) 5,265 314,617 (153,809)
-------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ (165,717) $ (134,988) $ 162,649 $ 49,735 $ 314,617 $ 226,296
=====================================================================================
</TABLE>
(a) Includes the accounts of Werner Funding Corporation only.
11
<PAGE> 14
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
-------------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY (a) ELIMINATIONS CONSOLIDATED
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1 $ 2,618 $ 6,768 $ - $ - $ 9,387
Undivided interest in accounts receivable 46,298 46,298
Allowance for doubtful accounts (1,600) (1,600)
Refundable income taxes 490 490
Inventories 46,777 46,777
Deferred income taxes 2,830 2,830
Other 125 2,434 2,559
-------------------------------------------------------------------------------------
Total current assets 1 2,743 57,699 46,298 106,741
Property, plant and equipment, net 65,693 65,693
Investments and other assets:
Deferred income taxes 5,997 5,997
Deferred financing fees, net 13,745 13,745
Investment in subsidiaries (166,607) (154,397) 5,343 315,661
Other 5,688 14,915 20,603
-------------------------------------------------------------------------------------
TOTAL ASSETS $(166,606) $(132,221) $ 149,647 $ 46,298 $ 315,661 $ 212,779
=====================================================================================
</TABLE>
(a) Includes the accounts of Werner Funding Corporation only.
12
<PAGE> 15
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
----------------------------------------------------------------------------------
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY(a) ELIMINATIONS CONSOLIDATED
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ $ $ 22,742 $ $ $ 22,742
Intercompany payable (receivable) (12,209) (243,934) 215,233 40,910
Accrued liabilities 3,387 25,151 45 28,583
Current maturities of long-term debt 1,450 1,450
-----------------------------------------------------------------------------------
Total current liabilities (12,209) (239,097) 263,126 40,955 52,775
Long-term obligations:
Long-term debt 273,483 5,000 278,483
Reserve for product liability and workers'
compensation claims 13,639 13,639
Other 22,279 22,279
-----------------------------------------------------------------------------------
Total liabilities (12,209) 34,386 304,044 40,955 367,176
Shareholders' equity (deficit) (154,397) (166,607) (154,397) 5,343 315,661 (154,397)
-----------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT) $(166,606) $(132,221) $ 149,647 $46,298 $315,661 $ 212,779
===================================================================================
</TABLE>
(a) Includes the accounts of Werner Funding Corporation only.
13
<PAGE> 16
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY(a) ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Net sales $ - $ - $105,459 $ $ $105,459
Cost of sales 75,148 75,148
-----------------------------------------------------------------------------------
Gross profit 30,311 30,311
General and administrative expenses 3 7,769 7,772
Selling and distribution expenses 13,779 13,779
-----------------------------------------------------------------------------------
Operating profit (3) 8,763 8,760
Income from equity investees 862 243 (93) (1,012)
Other income (expense), net 7 10 (1,038) 970 (51)
-----------------------------------------------------------------------------------
Income before interest and taxes 869 250 7,632 970 (1,012) 8,709
Interest income (expense) 282 612 (6,506) (1,120) (6,732)
-----------------------------------------------------------------------------------
Income before income taxes 1,151 862 1,126 (150) (1,012) 1,977
Income taxes 883 (57) 826
-----------------------------------------------------------------------------------
NET INCOME $ 1,151 $ 862 $ 243 $ (93) $(1,012) $ 1,151
===================================================================================
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Net sales $ - $ - $ 98,311 $ 630 $ (630) $ 98,311
Cost of sales 74,958 74,958
-----------------------------------------------------------------------------------
Gross profit 23,353 630 (630) 23,353
General and administrative expense 4 7,673 617 (228) 8,066
Selling and distribution expense 12,691 12,691
-----------------------------------------------------------------------------------
Operating (loss) profit (4) 2,989 13 (402) 2,596
(Loss) income from equity investees (3,102) (6,004) 9,106
Other (expense) income, net (32) (1,833) 3,056 1,191
-----------------------------------------------------------------------------------
(Loss) income before interest and taxes (3,102) (6,040) 1,156 3,069 8,704 3,787
Interest income (expense) 258 2,938 (11,638) 11 (8,431)
-----------------------------------------------------------------------------------
(Loss) income before income taxes (benefit) (2,844) (3,102) (10,482) 3,080 8,704 (4,644)
Income taxes (benefit) (2,847) 1,047 (1,800)
-----------------------------------------------------------------------------------
NET (LOSS) INCOME $(2,844) $(3,102) $ (7,635) $ 2,033 $ 8,704 $ (2,844)
===================================================================================
</TABLE>
(a) For the three months ended March 31, 1999, includes the accounts of Werner
Funding Corporation only.
For the three months ended March 31, 1998, includes the accounts of MIICA
only.
14
<PAGE> 17
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
-------------------------------------------------------------------------
COMBINED NON-
PARENT GUARANTOR GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY(a) CONSOLIDATED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $ - $ - $(1,299) $ 12 $ (1,287)
INVESTING ACTIVITIES
Capital expenditures (4,701) (4,701)
Net sales of other investments 103 103
Intercompany transactions 579 (2,045) 1,466
-------------------------------------------------------------------------
Net cash (used in) provided by investing activities 579 (1,942) (3,235) (4,598)
FINANCING ACTIVITIES
Issuance of notes receivable arising from
stock loan plan (580) (580)
Repayments of long-term debt (362) (362)
-------------------------------------------------------------------------
Net cash used in financing activities (580) (362) (942)
-------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (1) (2,304) (4,534) 12 (6,827)
Cash and equivalents at beginning of period 1 2,618 6,768 9,387
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ $ 314 $ 2,234 $ 12 $ 2,560
=========================================================================
</TABLE>
(a) Includes the accounts of Werner Funding Corporation only.
15
<PAGE> 18
Werner Holding Co. (PA), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
--Continued
(Dollars in Thousands)
H. SUPPLEMENTAL GUARANTOR INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
------------------------------------------------------------------------
COMBINED NON-
PARENT GUARANTOR GUARANTOR
COMPANY ISSUER SUBSIDIARIES SUBSIDIARY(a) CONSOLIDATED
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ - $ - $ 852 $ 901 $ 1,753
INVESTING ACTIVITIES
Capital expenditures (1,278) (1,278)
Insurance fund securities available-for-sale:
Purchases of debt and equity securities (572) (572)
Sales of debt and equity securities (329) (329)
Intercompany transactions (17) 357 (340)
------------------------------------------------------------------------
Net cash provided by (used in) investing activities (17) 357 (1,618) (901) (2,179)
FINANCING ACTIVITIES
Repayments of long-term debt (362) (362)
------------------------------------------------------------------------
Net cash used in financing activities (362) (362)
------------------------------------------------------------------------
Net increase in cash and cash equivalents (17) (5) (766) (788)
Cash and equivalents at beginning of period 17 6 3,084 3,107
------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 1 $ 2,318 $ - $ 2,319
========================================================================
</TABLE>
(a) Includes the accounts of MIICA only.
16
<PAGE> 19
Werner Holding Co. (PA), Inc. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Unaudited
Condensed Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this document and the Company's Annual Report for 1998 on
Form 10-K as filed with the Securities and Exchange Commission. This document
contains, in addition to historical information, forward-looking statements that
are subject to risks and other uncertainties. The Company's actual results may
differ materially from those anticipated in these forward-looking statements. In
the text below, financial statement amounts have been rounded and the percentage
changes are based on the financial statements.
RESULTS OF OPERATIONS -- QUARTER ENDED MARCH 31, 1999 AS COMPARED TO QUARTER
ENDED MARCH 31, 1998
Net Sales. Net sales increased $7.2 million or 7.3% to $105.5 million
for the quarter ended March 31, 1999 from $98.3 million for the quarter ended
March 31, 1998. Net sales of climbing products increased $8.8 million, or 12.3%
to $80.8 million for the quarter ended March 31, 1999 from $72.0 million for the
quarter ended March 31, 1998. The increase in net sales of climbing products was
primarily due to increases in the volume of fiberglass step, and aluminum and
fiberglass extension ladders sold, offset by volume decreases in sales of attic
ladders. Net sales of extruded products decreased $1.7 million, or 6.4% to $24.6
million for the quarter ended March 31, 1999 from $26.3 million for the quarter
ended March 31, 1998. The decrease is due to volume decreases in extrusions sold
to customers in the transportation sector and the impact of lower aluminum
prices for the quarter ended March 31, 1999.
Gross Profit. Gross profit increased $6.9 million or 29.8% to $30.3
million for the quarter ended March 31, 1999 from $23.4 million for the quarter
ended March 31, 1998. The increase was primarily due to more sales of higher
margin climbing products and the effects of higher production volumes.
General and Administrative Expenses. General and administrative
expenses decreased $0.3 million or 3.6% to $7.8 million for the quarter ended
March 31, 1999 from $8.1 million for the quarter ended March 31, 1998. The
decrease was principally due to certain non-recurring expenses in 1998
associated with the Recapitalization.
Selling and Distribution Expenses. Selling and distribution expenses
increased $1.1 million or 8.6% to $13.8 million for the quarter ended March 31,
1999 from $12.7 million for the quarter ended March 31, 1998. The increase was
primarily due to increases in advertising and distribution expenses.
17
<PAGE> 20
Operating Profit (Loss). Operating profit increased $6.2 million to
$8.8 million for the quarter ended March 31, 1999 from $2.6 million for the
quarter ended March 31, 1998. Operating profit of the Climbing Products segment
increased $2.2 million to $7.6 million in the first quarter of 1999 from $5.4
million in the first quarter of 1998. This increase was primarily due to the
increased sale of higher margin climbing products partially offset by related
increases in advertising and distribution expenses. Operating profit of the
Extruded Products segment increased $1.8 million to $3.4 million for the quarter
ended March 31, 1999 from $1.6 million for the quarter ended March 31, 1998. The
increase is primarily attributable to improvements in profitability of the
product mix. Corporate and Other expenses decreased $2.2 million for the quarter
ended March 31, 1999 compared to the quarter ended March 31, 1998. The decrease
was primarily due to certain non-recurring expenses in 1998 associated with the
Recapitalization and the operating losses of MIICA prior to the MIICA Insurance
Transfer.
Other (Expense) Income, Net. Other (expense), net was $(.05) million
for the quarter ended March 31, 1999 compared to other income, net of $1.2
million for the quarter ended March 31, 1998. The difference was primarily
attributable to the income on MIICA insurance fund investments in the first
quarter of 1998.
Interest Expense. Interest expense decreased $1.7 million to $6.7
million for the quarter ended March 31, 1999 from $8.4 million for the quarter
ended March 31, 1998. The decrease was primarily due to a decrease in short-term
bank debt and lower interest rates.
Net Income (Loss). Net income increased $4.0 million to $1.2 million
for the quarter ended March 31, 1999 from a loss of $(2.8) million for the
quarter ended March 31, 1998 as a result of all of the above factors.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used in operating activities were $1.3 million for the
three months ended March 31, 1999 compared to net cash provided by operating
activities of $1.8 million for the three months ended March 31, 1998. The
decrease is primarily attributable to an increase in operating working capital
(accounts receivable, including the undivided interest in accounts receivable,
inventory, accounts payable and accrued expenses) partially offset by reductions
in product liability and workers' compensation claim payments and the effects of
other non-cash items. Net cash used in investing activities was $4.6 million for
the three months ended March 31, 1999 compared to $2.2 million for the three
months ended March 31, 1998. The increase was primarily due to an increase in
capital expenditures in the three months ended March 31, 1999. Net cash used by
financing activities decreased $0.6 million due to the issuance of notes
receivable arising from the Stock Loan Plan.
The Company satisfies its working capital needs and capital expenditure
requirements primarily through a combination of operating cash flow, borrowings
under the Senior Credit Facility and sales of accounts receivable under a
receivables purchase agreement with a financial institution. The Company
believes it has sufficient funds
18
<PAGE> 21
available to support debt service requirements, projected capital expenditures
and working capital needs based on projected results of operations, availability
under its Senior Credit Facility, and its Receivables Purchase Agreement.
SEASONALITY, WORKING CAPITAL AND CYCLICALITY
Sales of certain products of the Company are subject to seasonal
variation. Demand for the Company's ladder products is affected by residential
housing starts and existing home sales, commercial construction activity and
overall home improvement expenditures. The residential and commercial
construction markets are sensitive to cyclical changes in the economy. Due to
seasonal factors associated with the construction industry, sales of products
and working capital requirements are typically higher during the second and
third quarters than at other times of the year. The Company expects to use the
Senior Credit Facility and its Receivables Purchase Agreement to meet seasonal
variations in its working capital requirements.
YEAR 2000 READINESS PROGRAM
The Year 2000 issue arises because many computer hardware and software
systems use only the last two digits to represent a year. As a result, these
systems may not properly process dates beyond 1999 which could cause errors in
information or system failures. If the Company's computer systems do not
correctly recognize and process date information beyond the year 1999, the Year
2000 issue could have a material adverse impact on the operations of the
Company.
The following discussion of the Company's Year 2000 Readiness Program
contains numerous forward-looking statements based upon inherently uncertain
information. The cost of the Year 2000 project and the date upon which the
Company plans to complete its internal modifications are based upon management's
best estimates, which were derived utilizing a number of assumptions of future
events including the continued availability of internal and external resources,
third party modifications and other factors. Although management believes it
will be able to make the necessary modifications in advance, there can be no
guarantee that these estimates and timetable will be achieved and actual results
could differ materially from those anticipated.
In addition, the Company relies upon the computer systems of certain
third parties such as customers, suppliers and financial institutions. Although
the Company is assessing the readiness of these third parties and preparing
contingency plans, there can be no guarantee that the failure of these third
parties to modify their systems in advance of December 31, 1999 would not have a
material adverse effect on the Company.
State of Readiness. In 1996, the Company commenced a program intended
to mitigate and prevent the adverse effect of the Year 2000 issue. This program
consists of the following phases:
19
<PAGE> 22
AWARENESS PHASE-development of a detailed strategic approach
to address the Year 2000 issue;
ASSESSMENT PHASE-an assessment of all computer systems,
software, building infrastructure components and equipment
with embedded technology to identify each item that will
require date code remediation and an assessment and
certification of third parties' Year 2000 compliance;
REMEDIATION PHASE-implementation of code enhancements,
hardware and software upgrades, system replacements, vendor
and customer assurances, contingency planning and other
associated changes; and
VALIDATION PHASE-testing of systems for Year 2000 readiness.
The Awareness and Assessment Phases have been completed. The Company
expects the Remediation Phase to be substantially completed by the end of the
second quarter of 1999. The Company's Remediation Phase consists of numerous
individual projects that vary in size, materiality and importance. Approximately
two-thirds of the projects currently identified have been completed while the
remaining one-third are in process. With respect to those projects involving
embedded systems (non-information technology processes), the appropriate
end-users are evaluating and modifying those systems as required, in some
instances in conjunction with the vendors of these products. In addition, the
certification of third parties' Year 2000 readiness efforts by the Company is
ongoing with the expectation that this process will also be substantially
complete by the end of the second quarter of 1999. Approximately two-thirds of
the Company's significant suppliers and business partners have responded to the
Company's requests for information that they will be ready for the Year 2000.
The Company will attempt to take appropriate measures to minimize its risk with
the remaining critical suppliers and business partners. However, there can be no
assurance that these measures will prevent any material adverse effect on the
operations and business of the Company if such suppliers and business partners
fail to convert their systems before December 31, 1999.
Costs. The Company primarily utilizes internal resources to reprogram,
replace and test its computer systems, software, equipment and building
infrastructure components for Year 2000 modifications. The Company estimates
that Year 2000 expenditures will be approximately $1.5 million and will be
funded by normal operating cash flow. All Year 2000 expenditures are expensed as
incurred and are not expected to have a material effect on results of
operations, liquidity or capital resources. As of March 31, 1999 approximately
$1.1 million of the estimated project costs have been incurred. The remaining
costs are expected to be incurred evenly over the period up through January 31,
2000. These cost estimates may change as additional remediation and testing
efforts progress.
Risks. The Year 2000 issue presents a number of risks and uncertainties
that could affect the Company, including failure of utilities, competition for
skilled personnel
20
<PAGE> 23
and disruption of Company operations due to system failures or operational
failures of third parties. With respect to risks associated with the Company's
computer systems and equipment, management believes that it will be able to make
the necessary modifications and conversions in advance of the Year 2000. With
respect to risks associated with the failure of computer systems or equipment of
third parties, the Company could experience a material adverse impact on its
operations if such third parties fail to make timely conversions or
modifications. The most serious impact on Company operations in this regard
would result if basic services such as telecommunications, electric power and
financial services were disrupted.
Contingency Plans. The Company is in the process of developing business
resumption contingency plans specific to the Year 2000. These plans will address
the actions that would be taken if critical business functions cannot be carried
out in the normal manner upon entering the next century due to system or third
party failure. Management estimates that these contingency plans will be
developed by the end of the third quarter of 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The following discussion about the Company's market risk disclosures
involves forward looking statements. Actual results could differ materially from
those projected in the forward looking statements. The Company is exposed to
market risk related to changes in interest rates, foreign currency exchange
rates and commodity prices. The Company does not use derivative financial
instruments for speculative or trading purposes.
The Company is exposed to market risk from changes in interest rates on
long-term debt obligations. The Company manages such risk through the use of a
combination of fixed and variable rate debt. Currently, the Company does not use
derivative financial instruments to manage its interest rate risk. There have
been no material changes in market risk from changes in interest rates from that
disclosed in the Company's Annual Report for 1998 on Form 10-K.
The Company has no operations in foreign countries. International sales
were not material to the Company's operations for the three months ended March
31, 1999. Accordingly, the Company is not subject to material foreign currency
exchange risk. To date, the Company has not entered into any foreign currency
forward exchange contracts or other derivative financial instruments relative to
foreign currency exchange rates.
The Company is also exposed to market risk from changes in the price of
aluminum. The Company manages such risk through the use of aluminum futures
contracts. There have been no material changes in market risk from changes in
the price of aluminum from that disclosed in the Company's Annual Report for
1998 on Form 10-K.
21
<PAGE> 24
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved from time to time in various legal proceedings
and claims incident to the normal conduct of its business. In the opinion of
management, the amount of any ultimate liability with respect to these
proceedings and claims will not have a material adverse effect on its financial
condition or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated By-laws of Werner Holding Co.
(PA), Inc. dated as of March 1, 1999
10.1 Amendment No. 1 to Stock Loan Plan
18.1 Letter from Independent Auditors Regarding
Preferability of Accounting Principle Changes
27.1 Financial Data Schedule
(b) Reports on Form 8-K: None
22
<PAGE> 25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WERNER HOLDING CO. (DE), INC.
Date: May 17, 1999 By: /s/ R. P. Tamburrino
--------------------
R. P. Tamburrino
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
23
<PAGE> 1
EXHIBIT 3.1
******************************************************************************
THESE BY-LAWS WERE AMENDED AND RESTATED AT A MEETING OF THE BOARD OF
DIRECTORS ON 6/7/82, AMENDED (ART. VI) BY THE DIRECTORS ON 6/6/84,
AMENDED (ART. VI) BY THE SHAREHOLDERS ON 3/27/87, AMENDED AND RESTATED
AT THE ANNUAL MEETING OF THE SHAREHOLDERS ON MARCH 22, 1994 BY ADDING
SECTION 4 TO ARTICLE IV, AMENDED AND RESTATED AT THE ANNUAL MEETING OF
THE BOARD OF DIRECTORS ON MARCH 11, 1997 (REVISIONS TO ARTICLES II AND
III) AND AMENDED AND RESTATED BY UNANIMOUS WRITTEN CONSENT OF THE BOARD
OF DIRECTORS DATED AS OF MARCH 1, 1999 (REVISIONS TO ARTICLES I, II, IV
AND VII).
******************************************************************************
BY-LAWS
OF
WERNER HOLDING CO. (PA), INC.
<PAGE> 2
BY-LAWS
OF
WERNER HOLDING CO. (PA), INC.
*** ARTICLE I ***
SHAREHOLDERS
Section 1 - Annual Meeting
- --------------------------
The annual meeting of the shareholders of the corporation for the
election of directors, consideration of reports to be presented before such
meeting and the transaction of such other business as may properly come before
the meeting shall be held at the registered office of the corporation, or at
such other place or places within or without the Commonwealth of Pennsylvania as
the board of directors of the corporation may designate, on such date and at the
time fixed by the board of directors.
Section 2 - Financial Report to Shareholders
- --------------------------------------------
The directors shall cause to be sent to the shareholders, within one
hundred twenty (120) days after the close of the fiscal year of the corporation,
financial statements which shall include a balance sheet as of the close of such
year, together with statements of income and surplus for such year, prepared so
as to present fairly its financial condition and the results of its operations.
Section 3 - Special Meetings
- ----------------------------
Special meetings of the shareholders may be called at any time by the
president, the board of directors or shareholders entitled to cast at least
one-fifth of the votes which all shareholders are entitled to cast at the
particular meeting. At any time, upon written request of any person or persons
who have duly called a special meeting, it shall be the duty of the secretary to
fix the date of the meeting, to be held not more than sixty (60) days after the
receipt of the request, and to give due notice thereof. If the secretary shall
neglect or refuse to fix the date of the meeting and give notice thereof, the
person or persons calling the meeting may do so.
Section 4 - Notices of Meetings
- -------------------------------
Except as otherwise expressly required by law, written notice of each
meeting of the shareholders shall be given by, or at the direction of, the
person or persons authorized to call such meeting to each shareholder of record
entitled to vote at such meeting at least five (5) days prior to the day named
for such meeting.
Section 5 - Quorum
- ------------------
At all meetings of the shareholders the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of the votes which
all shareholders are entitled to cast on the particular matter shall constitute
a quorum for the purpose of considering such matter.
<PAGE> 3
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 2 OF 8
*** ARTICLE II ***
BOARD OF DIRECTORS
Section 1 - Number and Qualifications
- -------------------------------------
The business and affairs of the corporation shall be managed by a board
of directors, consisting of not less than three nor more than eleven members,
who shall be elected at the annual meeting of the shareholders for a term ending
with the next annual meeting of shareholders and shall hold office until their
successors are elected and qualified. The directors need not be shareholders of
the corporation.
Section 2 - Chairman of the Board
- ---------------------------------
The board of directors shall elect the Chairman of the Board. The
Chairman when present shall preside at all meetings of the shareholders and the
board of directors.
Section 3 - Election of Officers
- --------------------------------
The board of directors shall meet and elect and fix the compensation of
the officers of the corporation who shall hold office for a term ending with the
first meeting of the board of directors following the next annual meeting of
shareholders and until their successors are elected and qualify.
Section 4 - Regular Meetings
- ----------------------------
The first regular meeting of the board of directors shall be held each
year following the shareholder's meeting at which the directors are elected.
Other regular meetings of the board of directors shall be held at such time and
place as may be fixed by the board.
Section 5 - Special Meetings
- ----------------------------
(a) Special meetings of the board of directors may be called at any
time by the president and shall be called by the president on the written
request of a majority of the directors then in office. The secretary shall give
notice of each special meeting by mailing written notice thereof to each
director at least five days prior to the day named for the meeting.
(b) One or more directors may participate in a meeting of the board of
directors or of a committee of the board of directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
Section 6 - Quorum
- ------------------
A majority of the directors in office shall be necessary to constitute
a quorum for the transaction of business and the acts of a majority of the
directors present at a meeting at which a quorum is present shall be the acts of
the board of directors.
<PAGE> 4
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 3 OF 8
Section 7 - Removal
- -------------------
The board of directors may at any time declare vacant the office of a
director who is unable to function as a director because of illness or for any
other reason. Vacancies in the board of directors shall be filled by a majority
of the remaining members of the board though less than a quorum and each person
so elected shall be a director until his successor is elected by the
shareholders.
Section 8 - Committees
- ----------------------
The board of directors may create an executive committee, or any other
committee, and may delegate to such committee or committees such authority as
the board of directors may determine, to the extent permitted by law.
Section 9 - Powers
- ------------------
The board of directors shall manage the business and affairs of the
corporation. In addition to the powers and authority by these By-laws expressly
conferred upon them, the board of directors may exercise all such powers and do
all such lawful acts and things as are not by statute, by these By-laws or by
its Articles of Incorporation directed or required to be exercised or done by
the shareholders.
*** ARTICLE III ***
OFFICERS
Section 1 - Number and Election
- -------------------------------
The officers of the corporation shall consist of the president, chief
executive officer, one or more vice presidents, the secretary and one or more
assistant secretaries and the treasurer and one or more assistant treasurers,
all of whom shall be elected by the board of directors and shall at all times be
subject to the direction and control of the board of directors.
Section 2 - Powers and Duties
- -----------------------------
The officers of the corporation shall each have such powers and duties
as generally pertain to their respective offices and such further powers and
duties as from time to time may be conferred upon them by the board of
directors.
Section 3 - Absence or Inability to Act
- ---------------------------------------
In the case of absence or inability to act of any officer of the
corporation, or of any person authorized to act in his place, the board of
directors may from time to time delegate the powers or duties of such officer to
any other officer, any director or any other person whom it may select.
<PAGE> 5
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 4 OF 8
Section 4 - Salaries
- --------------------
The salaries of officers of the corporation elected by the board of
directors shall be fixed by the board of directors.
Section 5 - Vacancies
- ---------------------
The board of directors shall have power to fill any vacancies in any
office occurring for whatever reason.
Section 6 - Bonds
- -----------------
Any officer may be required by the board of directors to give bond for
the faithful discharge of his duties in such sum, with such surety or sureties
and of such character as the board may from time to time prescribe.
Section 7 - Removal
- -------------------
Any officer elected by the board of directors may be removed by the
board of directors whenever in its judgment the best interests of the
corporation will be served thereby.
*** ARTICLE IV ***
CERTIFICATES OF STOCK
Section 1 - Form
- ----------------
Certificates for shares shall bear the signatures of the president or a
vice president and the secretary or an assistant secretary and shall contain
such statements as are required by law or by these By-laws and shall otherwise
be in such form as the board of directors may from time to time determine or
approve.
Section 2 - Transfers
- ---------------------
Shares shall be transferable on the books of the corporation by the
holders thereof, in person or by duly authorized attorney, upon surrender and
cancellation, for certificates for a like number of shares of the same class or
series, with duly executed assignment and power of transfer endorsed thereon or
attached thereto and with such proof of the authenticity of the signatures as
the corporation or its agents may reasonably require.
Section 3 - Lost Certificates
- -----------------------------
No certificate for shares shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed except upon the production of
such evidence of the loss, theft or destruction and upon indemnification of the
corporation and its agents to such extent and in such manner as the board of
directors may from time to time prescribe or require.
<PAGE> 6
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 5 OF 8
*** ARTICLE V ***
MISCELLANEOUS
Section 1 - Dividends
- ---------------------
Subject to any restrictions contained in the Articles of Incorporation
and any restrictions imposed by statute, the board of directors may declare and
pay dividends only out of unreserved and unrestricted earned surplus of the
corporation.
Section 2 - Negotiable Instruments
- ----------------------------------
All checks, drafts, bills of exchange, notes, acceptances, obligations
and other instruments for the payment of money shall be signed in the name of
the corporation by such officer or officers or person or persons as the board of
directors may from time to time authorize.
Section 3 - Contracts
- ---------------------
The board of directors may authorize any officer or officers or agent
or agents to enter into or execute and deliver in the name and on behalf of the
corporation any and all deeds, bonds, mortgages, contracts and other obligations
or instruments.
Section 4 - Corporate Seal
- --------------------------
The seal of the corporation shall be in such form as the board of
directors may designate or approve.
Section 5 - Fiscal Year
- -----------------------
The fiscal year of the corporation shall end on the 31st day of
December of each year or such other twelve consecutive months as the board of
directors may by resolution designate.
*** ARTICLE VI ***
INDEMNIFICATION
Personal liability of directors and indemnification of, and advancement
of expenses to directors, officers and others shall be governed by the following
provisions:
Section 1 - Personal Liability of Directors
- -------------------------------------------
(a) To the fullest extent that the laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit
elimination or limitation of the liability of directors, no director of the
corporation shall be personally liable for monetary damages as such for any
action taken, or any failure to take any actions, as a director.
<PAGE> 7
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 6 OF 8
(b) This Section 1 shall not apply to any actions filed prior to
January 27, 1987, nor to any breach of performance of duty or any failure of
performance of duty by any director of the corporation occurring prior to
January 27, 1987. The provisions of this Section shall be deemed to be a
contract with each director of the corporation who serves as such at any time
while this Section is in effect and each such director shall be deemed to be so
serving in reliance on the provisions of this Section. Any amendment or repeal
of this Section or adoption of any other By-law or other provision of the
Articles of the corporation which has the effect of increasing director
liability shall operate prospectively only and shall not affect any action
taken, or any failure to act, prior to the adoption of such amendment, repeal,
other By-law or other provision.
Section 2 - Indemnification of, and Advancement of Expenses to, Directors,
- --------------------------------------------------------------------------
Officers and Others
- -------------------
(a) RIGHT TO INDEMNIFICATION. Except as prohibited by law, every
director and officer of the corporation shall be entitled as of right to be
indemnified by the corporation against expenses and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the corporation or otherwise, in
which he or she may be involved in any manner, as a party witness or otherwise,
or is threatened to be made so involved, by reason of such person being or
having been a director or officer of the corporation or of a subsidiary of the
corporation or by reason of the fact that such person is or was serving at the
request of the corporation as a director, officer, employee, fiduciary or other
representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other entity (such claim, action, suit or proceeding
hereinafter being referred to as "Action"); provided, that no such right of
indemnification shall exist with respect to an Action initiated by an indemnitee
(as hereinafter defined) against the corporation (an "Indemnitee Action") except
as provided in the last sentence of this Subsection (a). Persons who are not
directors or officers of the corporation may be similarly indemnified in respect
of service to the corporation or to another such entity at the request of the
corporation to the extent the board of directors at any time denominates any of
such persons as entitled to the benefits of this Section. As used in this
Section 2, "indemnitee" shall include each director and officer of the
corporation and each other person denominated by the board of directors as
entitled to the benefits of this Section 2, "expenses" shall include fees and
expenses of counsel selected by an indemnitee and "liability" shall include
amounts of judgments, excise taxes, fines, penalties and amounts paid in
settlement.
An indemnitee shall be entitled to be indemnified pursuant to this Subsection
(a) for expenses incurred in connection with any Indemnitee Action only (i) if
the indemnitee is successful, as provided in Subsection (c) of this Section 2,
(ii) if the indemnitee is successful in whole or in part in another Indemnitee
Action for which expenses are claimed or (iii) if the indemnification for
expenses is included in a settlement of, or is awarded by a court in, such other
Indemnitee Action.
(b) RIGHT TO ADVANCEMENT OF EXPENSES. Every indemnitee shall be
entitled as of right to have his or her expenses in defending any Action, or in
initiating and pursuing any Indemnitee Action for indemnity or advancement of
expenses under Subsection (c) of this Section 2, paid in advance by the
corporation prior to final disposition of such Action or Indemnitee Action,
provided that the corporation receives a written undertaking by or on behalf of
the indemnitee to repay the amount advanced if it should ultimately be
determined that the indemnitee is not entitled to be indemnified for such
expenses.
<PAGE> 8
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 7 OF 8
(c) RIGHT OF INDEMNITEE TO INITIATE ACTION. If a written claim under
Subsection (a) or Subsection (b) of this Section 2 is not paid in full by the
corporation within thirty days after such claim has been received by the
corporation, the indemnitee may at any time thereafter initiate an Indemnitee
Action to recover the unpaid amount of the claim and, if successful in whole or
in part, the indemnitee shall also be entitled to be paid the expense of
prosecuting such Indemnitee Action. The only defense to any Indemnitee Action to
recover a claim for indemnification under Subsection (a) of this Section 2 shall
be that the indemnitee's conduct was such that under Pennsylvania law the
corporation is prohibited from indemnifying the indemnitee for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel and its shareholders) to have made a determination
prior to the commencement of such Indemnitee Action that indemnification of the
indemnitee is proper in the circumstances, nor an actual determination by the
corporation (including its board of directors, independent legal counsel or its
shareholders) that the indemnitee's conduct was such that indemnification is
prohibited by Pennsylvania law, shall be a defense to such Indemnitee Action or
create a presumption that the indemnitee's conduct was such that indemnification
is prohibited by Pennsylvania law. The only defense to an Indemnitee Action to
recover a claim for advancement of expenses under Subsection (b) of this Section
2 shall be the indemnitee's failure to provide the undertaking required by
Subsection (b) of this Section 2.
(d) INSURANCE AND FUNDING. The corporation may purchase and maintain
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense asserted or incurred by such person in
connection with any Action, whether or not the corporation would have the power
to indemnify such person against such liability or expense by law or under the
provisions of this Section 2. The corporation may create a trust fund, grant a
security interest, cause a letter of credit to be issued or use other means
(whether or not similar to the foregoing) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
(e) NON-EXCLUSIVITY; NATURE AND EXTENT OF RIGHTS. The rights to
indemnification and advancement of expenses provided for in this Section 2 shall
(i) not be deemed exclusive of any other rights, whether now existing or
hereafter created, to which any indemnitee may be entitled under any agreement
or by-law, charter provision, vote of shareholders or directors or otherwise,
(ii) be deemed to create contractual rights in favor of each indemnitee who
serves the corporation at any time while this Section 2 is in effect (and each
such indemnitee shall be deemed to be so serving in reliance on the provisions
of this Section), (iii) continue as to each indemnitee who has ceased to have
the status pursuant to which he or she was entitled or was denominated as
entitled to indemnification under this Section 2 and shall inure to the benefit
of the heirs and legal representatives of each indemnitee and (iv) be applicable
to Actions commenced after January 27, 1987, whether arising from acts or
omissions occurring before or after January 27, 1987. Any amendment or repeal of
this Section 2 or adoption of any other By-law or other provision of the
Articles of the corporation which limits in any way the right to indemnification
or the right to advancement of expenses provided for in this Section 2 shall
operate prospectively only and shall not affect any action taken, or failure to
act, by an indemnitee prior to the adoption of such amendment, repeal, other
By-law or other provision.
(f) PARTIAL INDEMNITY. If an indemnitee is entitled under any provision
of this Section 2 to indemnification by the corporation for some or a portion of
the expenses or a liability paid or incurred by the indemnitee in the
preparation, investigation, defense, appeal or settlement of any Action or
Indemnitee
<PAGE> 9
WERNER HOLDING CO. (PA), INC. MARCH 1, 1999
BY-LAWS PAGE 8 OF 8
Action but not, however, for the total amount thereof, the corporation shall
indemnify the indemnitee for the portion of such expenses or liability to which
the indemnitee is entitled. (g) Applicability of Section. This Section 2 shall
apply to every Action other than an Action filed prior to January 27, 1987,
except that it shall not apply to the extent that Pennsylvania law does not
permit its application to any breach of performance of duty or any failure of
performance of duty by an indemnitee occurring prior to January 27, 1987.
*** ARTICLE VII ***
AMENDMENTS
To the extent permitted by law, these By-laws may be amended, altered,
repealed or added to at any regular or special meeting duly convened after
notice to the directors or shareholders of that purpose and the powers hereby
conferred shall be exercised by a majority vote of the members of the board of
directors or by the vote of shareholders entitled to cast at least a majority of
the votes which all shareholders are entitled to cast thereon, as the case may
be.
PLEASE NOTE
- -----------
Article VI of the By-laws of the corporation was deleted and a new
Article VI of the By-laws of the corporation reading as set forth below was
adopted: provided, however, that to the extent only that Section 8367 of the
Directors' Liability Act (Act No. 145 of the Pennsylvania General Assembly
approved November 28, 1986, effective January 27, 1987) does not permit new
Article VI to apply to any breach of performance of duty or any failure of
performance of duty by a director, officer or other person occurring prior to
January 27, 1987, the provisions of the former Article VI of the By-laws of the
corporation shall continue to apply to such matters.
*** OLD ARTICLE VI ***
INDEMNIFICATION
Directors, officers and employees of the corporation shall be
indemnified as of right to the fullest extent now or hereafter permitted by law
in connection with any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding (whether brought by or in the name of
the corporation or otherwise) arising out of their service to the corporation or
to another organization at the corporation's request. The corporation may
maintain insurance to protect itself and any such director, officer or employee
against any liability, cost or expense incurred in connection with any such
action, suit or proceeding, whether or not the corporation would have the power
to indemnify such director, officer or employee against such liability, cost or
expense by law or under the provisions of this Article. The provisions of this
Article shall be applicable to actions, suits or proceedings commenced after the
adoption hereof, whether arising from acts or omissions occurring before or
after the adoption hereof, and to persons who have ceased to be directors,
officers, or employees and shall inure to the benefit of the heirs, executors
and administrators of persons entitled to indemnity or indemnified hereunder.
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 1
TO
WERNER HOLDING CO. (PA), INC.
1997 STOCK LOAN PLAN
--------------------
The Werner Holding Co. (PA), Inc. 1997 Stock Loan Plan (the "Plan") is hereby
amended as follows:
1. Section 3 of the Plan shall be amended by deleting the words "prior to
April 1, 1998" and replacing them with "after November 24, 1997."
2. The Plan shall be amended to permit the Company or any of its
subsidiaries to provide the Purchase Loans under Section 4 of the Plan.
In the event the Purchase Loans are provided by a subsidiary of the
Company, the Loan and Pledge Agreement and Promissory Note required
under the Plan shall be executed by each Participant and such
subsidiary.
3. All other provisions of the Plan unchanged hereby shall continue in full
force and effect.
<PAGE> 1
Exhibit 18.1
May 7, 1999
Board of Directors
Werner Holding Co. (PA), Inc.
Greenville, Pennsylvania 16125
Dear Sirs:
Note B of Notes to the Consolidated Financial Statements of Werner Holding
Co. (PA), Inc. (the "Company") included in its Form 10-Q for the quarter
ended March 31, 1999 describes a change in the method of accounting for
depreciation of property, plant and equipment. Effective January 1, 1999,
the Company adopted the straight-line method of depreciation for all
buildings and equipment placed in service on or after that date. Buildings
and equipment placed in service prior to January 1, 1999 are depreciated
principally using an accelerated method. You have advised us that you
believe that this change is to a preferable method in your circumstances
because the change more appropriately reflects the Company's financial
results by better allocating costs of new property over the useful lives of
these assets. In addition, the new method more closely conforms with that
prevalent in the industry.
There are no authoritative criteria for determining a preferable
depreciation method based on the particular circumstances; however, we
conclude that the change in the method of accounting for depreciating
property, plant and equipment is to an acceptable alternative method which,
based on your business judgment to make this change for the reasons cited
above, is preferable in your circumstances. We have not conducted an audit
in accordance with generally accepted auditing standards of any financial
statements of the Company as of any date or for any period subsequent to
December 31, 1998, and therefore we do not express any opinion on any
financial statements of Werner Holding Co. (PA), Inc. subsequent to that
date.
Very truly yours,
/s/ Ernst & Young LLP
Cleveland, Ohio
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