<PAGE> 1
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 March 31, 1995
-----------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ -------------------
Commission file number 0-828
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BIRD CORPORATION
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3082903
- ------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
980 Washington Street Dedham, MA 02026
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 461-1414
- ------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed, since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 1, 1995. 4,107,874 shares.
<PAGE> 2
<TABLE>
BIRD CORPORATION
----------------
INDEX
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. Financial Information:
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 ................. 2
Consolidated Statements of Operations for the
Three Months Ended March 31, 1995 and 1994 ............... 4
Consolidated Statements of Cash Flows For the
Three Months Ended March 31, 1995 and 1994................ 5
Notes to Consolidated Financial Statements.................. 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................................. 13
Part II. Other Information ................................ 19
</TABLE>
1
<PAGE> 3
<TABLE>
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000) Omitted (except share data) MARCH 31, DECEMBER 3
1995 1994
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $19,378 $ 321
Accounts and notes receivable 13,829 22,781
Allowance for doubtful accounts (3,141) (3,137)
Inventories 6,660 8,371
Prepaid expenses and other assets 2,120 3,095
Deferred income tax 1,837 6,836
------- -------
Total current assets 40,683 38,267
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 2,670 3,145
Buildings 10,625 11,742
Machinery and equipment 29,129 33,760
Construction in progress 879 5,705
------- -------
43,303 54,352
Less - Depreciation and amortization 15,664 24,323
------- -------
27,639 30,029
------- -------
Other investments 677 675
Assets held for sale 7,500 7,500
Other assets 1,631 572
Deferred tax asset 8,662 8,662
------- -------
$86,792 $85,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
<TABLE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 3
(000) Omitted (except share data) 1995 1994
----------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $25,182 $13,671
Long-term debt, portion due within one year 2,192 18,071
Retirement plan contributions payable 129 302
Income taxes payable 1,343 596
------- -------
Total current liabilities 28,846 32,640
------- -------
Long-term debt, portion due after one year 6,511 12,504
------- -------
Other liabilities 4,582 2,715
------- -------
Deferred income taxes 128 128
------- -------
STOCKHOLDERS' EQUITY
5% cumulative preferred stock, par value
$100. Authorized 15,000 shares;issued 5,820
shares (liquidating preference $110 per share,
aggregating $640 before dividends) 582 582
Preference stock, par value $1. Authorized
1,500,000 shares; issued 814,300 shares
of $1.85 cumulative convertible preference
stock (liquidating preference $20 per share,
aggregating $16,286 before dividends) 814 814
Common stock, par value $1. Authorized
15,000,000 shares; issued 4,382,137 shares
in 1995, 4,375,179 shares in 1994 4,382 4,375
Other capital 27,285 27,235
Retained earnings 16,653 7,860
------- -------
49,716 40,866
Less -
Treasury stock, at cost:
Common - 275,100 shares in 1995 and 1994 (2,991) (2,991)
Unearned compensation 0 (157)
------- -------
46,725 37,718
------- -------
$86,792 $85,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
<TABLE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
---- ----
<S> <C> <C>
(000) Omitted (except share data)
Net Sales $ 16,623 $36,863
-------- -------
Costs and expenses:
Cost of sales 15,091 30,193
Selling, general and administrative expense 3,002 7,473
Interest expense 641 750
Net discontinued business activities (income) (19,079) 0
Equity losses from partnership 372 964
Other expense 1,537 881
-------- -------
Total costs and expenses 1,564 40,261
-------- -------
Earnings (loss) from continuing operations
before income taxes 15,059 (3,398)
Provision for income taxes 6,023 0
-------- -------
Earnings (loss) from continuing operations 9,036 (3,398)
-------- -------
Discontinued operations:
Loss from operations of discontinued
business, net of taxes 0 (750)
Loss on disposal of environmental business,
net of taxes (236) 0
-------- -------
Net loss from discontinued operations (236) (750)
-------- -------
Net earnings (loss) before dividends $ 8,800 $(4,148)
Preferred and preference stock
cumulative dividends 384 384
-------- -------
Net earnings (loss) applicable to common
stockholders $ 8,416 $(4,532)
======== =======
Primary earnings (loss) per common share:
Continuing operations $ 2.11 $ (0.92)
Discontinued operations $ (0.06) $ (0.18)
-------- -------
Net earnings (loss) after dividends $ 2.05 $ (1.10)
======== =======
Fully diluted earnings (loss) per common share:
Continuing operations $ 1.87 $ (0.92)
Discontinued operations $ (0.05) $ (0.18)
-------- -------
Net earnings (loss) after dividends $ 1.82 $ (1.10)
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
<TABLE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(Unaudited)
Three Months Ended
(000) Omitted March 31,
1995 1994
---- ----
<S> <C> <C>
Cash flow provided (used)
by operations:
Net earnings (loss) $ 8,800 $(4,148)
Adjustments to reconcile to net
cash used by operations:
Depreciation and amortization 840 1,416
Provision for losses on accounts receivable 135 403
Deferred income taxes 4,999 0
Gain on sale of vinyl business (20,579) 0
Changes in balance sheet items:
Accounts receivable 1,605 (719)
Inventories (2,865) (5,945)
Prepaid expenses 836 (352)
Liquidation reserve 0 (2,603)
Liabilities not related to
financing activities 1,975 4,733
Other assets 53 194
-------- -------
Cash flow used by operations (4,201) (7,021)
-------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment (636) (2,562)
Proceeds from disposal of assets 47,900 0
Other investments (26) (613)
-------- -------
Net cash provided by (used in) investing activities 47,238 (3,175)
-------- -------
Cash flows from financing activities:
Debt proceeds 17,051 13,050
Debt repayments (41,081) (9,044)
Dividends paid (7) 0
Other equity changes 57 384
-------- -------
Net cash provided by (used in) financing activities (23,980) 4,390
-------- -------
Net increase (decrease) in cash and equivalents 19,057 (5,806)
Cash and cash equivalents at beginning of year 321 7,518
-------- -------
Cash and cash equivalents at end of period $ 19,378 $ 1,712
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. In the opinion of the Company, the accompanying unaudited Consolidated
Condensed Financial Statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly its
financial position as of March 31, 1995 and December 31, 1994 and the
results of its operations and cash flow for the three month periods
ended March 31, 1995 and 1994.
2. The Company's business is seasonal to the extent that activity in the
outside repair and remodeling business and in new construction declines
in certain areas of the country during the winter months. Accordingly,
the results of operations for the three month periods ended March 31,
1995 and 1994 are not necessarily indicative of the results to be
expected for the full year.
3. Primary earnings(loss) per common share are determined after deducting
the dividend requirements of the preferred and preference shares and are
based on the weighted average number of common shares outstanding during
each period increased by the effect of dilutive stock options. Fully
diluted earnings(loss) per common share also give effect to the
reduction in earnings per share which would result from the conversion
of the $1.85 cumulative convertible preference stock at the beginning of
each period. Fully diluted earnings per share amounted to $1.82 for the
three month period ended March 31, 1995 compared to a loss per share of
$1.10 for the same period in the prior year.
<TABLE>
4. It is not practical to separate LIFO inventories by raw materials and
finished goods components; however, the following table presents these
components on a current cost basis with the LIFO reserve shown as a
reduction.
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
(Thousands of dollars)
<S> <C> <C>
Current Costs:
Raw Materials $2,328 $ 3,554
Work In Process 565 -0-
Finished goods 4,340 6,924
------ -------
7,233 10,478
Less: LIFO reserve 573 2,107
------ -------
$6,660 $ 8,371
====== =======
</TABLE>
6
<PAGE> 8
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
<TABLE>
5. The Company's borrowing and debt obligations are summarized as follows:
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
(Thousands of dollars)
<S> <C> <C>
Long-Term Debt:
Revolving Credit
Agreement $ -0- $13,937
Term Loans 6,355 15,000
Obligations under
capital leases 2,348 1,638
------ -------
8,703 30,575
Less - portion due
within one year 2,192 18,071
------ -------
Long term debt $6,511 $12,504
====== =======
</TABLE>
As of March 31, 1995, the Company had cash and cash equivalents
on hand totaling $19,378,000. Additionally, the Company's external
financial needs are augmented by its ability to borrow under a loan and
security agreement dated November 30, 1994, as amended (The "Loan
Agreement") between Bird Incorporated and Shawmut Capital. The loan
agreement contains financial and operating covenants, which among other
things, (i) requires the Company to maintain prescribed levels of
tangible net worth, cash flow, earnings before interest, taxes,
depreciation and amortization and (ii) places limits on capital
expenditures. There are also restrictions on indebtedness, liens,
investments, acquisitions, dispositions, mergers, and the payment of
dividends.
As of March 31, 1995, the Company was in compliance with each of
the prescribed covenants as outlined in the Loan Agreement. The loan,
which is guaranteed by the Company and secured by substantially all of
the assets of the Company and its subsidiaries, is defined as a $15
million revolving credit line and a $5 million term loan for working
capital, letters of credit and general corporate purposes. The
revolving credit availability is determined with reference to a
percentage of accounts receivable and inventory which are pledged to the
bank. Currently the availability calculation does not allow borrowing
to the full extent of the loan due to the seasonality of the housing
business. The Company believes that the full amount will be available
as the level of accounts receivable increases during the year. As of
March 31, 1995 there were no loans
7
<PAGE> 9
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
outstanding under the revolving credit line portion of the Loan
Agreement. Principal payments of $62,500 on the $5 million term loan
are due and payable monthly commencing on January 1, 1996 and continuing
on the first day of each month thereafter to and including the first day
of November, 1996 after which beginning on December 1, 1996 the monthly
principal payment will increase to $71,417 continuing monthly through
and including November 1, 1997. The entire remaining principal amount
then outstanding will be due and payable on November 30, 1997. Proceeds
in excess of $100,000 from the sale of any fixed asset may, at the
bank's discretion, be applied against the outstanding principal balance
of the term loan at the time of any such sale. Interest on the loans is
either the bank's base rate which was 9% on March 31, 1995, or at the
London Interbank Offering Rate ("LIBOR") plus 275 basis points, at the
Company's election.
6. On July 1, 1992 the Company entered into a 50% joint venture with
Kensington Manufacturing Company to manufacture vinyl replacement
windows through Kensington Partners ("Kensington"). The Company's
portion of the joint venture results have been previously reported using
the equity method. Beginning March 1, 1995, results have been included
in the Company's consolidated results as discussed below.
In 1993, Kensington accepted significant contracts which provided an
immediate impact of new orders. Additionally, Kensington greatly
improved the design of its windows by introducing a new manufacturing
process. The combination of the rapid increase of business and
manufacturing changes caused unusual delays in meeting customer needs
and therefore sales and profits were negatively impacted. As a result,
Kensington experienced serious cash needs which further hampered
production requirements. Primarily as a result of continuing losses and
the inability of Kensington to properly finance its operation,
Kensington's independent accountants have issued "going concern"
opinions at December 31, 1994 and December 31, 1993. After negotiating
with its partner, the Company agreed to invest additional cash in return
for temporarily increasing its ownership in Kensington to 90%. The
terms of the new agreement (which expires on December 31, 2012) allow
Kensington to return to an equal partnership if, before the later of
December 31, 1994 or six months following the Company's last
investment (made in August, 1994), its partner can match the additional
investment made by the Company. Under the terms of the Kensington
Partnership Agreement, a Management Committee was established to oversee
the operations of the partnership. The
8
<PAGE> 10
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
agreement required, among other things, unanimous approval of the
Management Committee for the following: (a) any distributions; (b) the
incurrence of any indebtedness; (c) the creation of any form of
encumbrance; (d) the adoption or modification of the partnership's
annual plan and operating budget; and (e) any transaction requiring
expenditures in excess of $15,000 and not contemplated in or provided
for in the annual business plan or operating budget. Each partner is
entitled to name two of the five members of the Management Committee
with the fifth member being the President of Kensington. Approval from
both partners was required to hire the President of Kensington. Under
the terms of the agreement, significant operating decisions require
unanimous approval as noted above.
As of February 28, 1995, the minority partner did not match the
additional investment made by the Company. As a result, the Company's
ownership in the joint venture is permanently fixed at 90%, resulting in
a change in financial reporting from the equity method to consolidation
beginning March 1, 1995.
As of April 27, 1995, the Company signed an amended Asset Purchase
Agreement with Jannock, Inc. whereby Jannock advised the Company that it
is willing to exercise the option to acquire all of the outstanding
capital stock of Bird-Kensington Holding Corporation, which owns the
Company's interest in Kensington, for the sum of $2,780,000. This
sale is subject to certain conditions and requirements including, but
not limited to minimum equity as outlined in the Asset Purchase
Agreement dated September 23, 1994, the result of which will have no
material affect on the financial condition of the Company. Such
conditions and requirements include an estimated $3.2 million in cash,
net of proceeds, to be used by the Company to return Kensington's net
worth to the contractual requirement as outlined in the Asset Purchase
Agreement and to buy out the 10% interest held by the minority partner.
7. In 1986, the Company, along with numerous other companies, was named by
the EPA as a Potentially Responsible Party ("PRP") under the
Comprehensive Environmental Response, Compensation, and Liability Act,
as amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA"), in connection
with the existence of hazardous substances at a site known as the Fulton
Terminal Superfund site located in Fulton, Oswego County, New York. On
September 28, 1990 the Company and a number of other PRPs reached a
negotiated settlement with the EPA pursuant to which the settling PRPs
agreed to pay the costs of certain expenses in connection with the
proceedings, and to pay certain other expenses including the
9
<PAGE> 11
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
costs and expenses of administering a trust fund to be established by
the settling PRPs. The settlement agreement is embodied in a consent
decree lodged with the United States District Court for the Western
District of New York and fixed the Company's proportionate share of the
total expenses. The ultimate cost of the remedial work and other
expenses covered by the settlement agreement can only be estimated. The
Company has provided a reserve amounting to $1.3 million at March 31,
1995 for its estimated share of the ultimate cost of cleanup, most of
which will be paid in 1995.
In 1994, the Arizona Department of Environmental Quality (the "ADEQ")
issued a notice of violation ("NV") to Southwest Roofing Supply, a
former division of the Company ("Southwest"), which directed Southwest
to conduct a site investigation of property formerly leased by
Southwest. Receipt of the NV prompted negotiations between the ADEQ,
Southwest and the Company. The negotiation resulted in a consent order
between the ADEQ and the Company on September 23, 1994. Pursuant to the
consent order, the Company agreed to submit a work plan with a view to
remediating the soil and ground water that may have been contaminated by
leaks from an underground storage tank previously removed by the
Company. In accordance with the work plan, the Company expects to
remediate the soil and ground water where and if necessary. The
Company's management believes that the cost to the Company of such
remediation will be in the range from $200,000 to $700,000. The Company
has provided a reserve totaling $504,000 at March 31, 1995 for its
proportionate share of the estimated ultimate cost of cleanup based on
management's best estimate of the cost to be incurred. The Company
anticipates that $200,000 will be reimbursed to the Company by the ADEQ
in accordance with Arizona law and regulation. This potential recovery
has not been recorded as of March 31, 1995.
8. During the first quarter of 1995, the Company recorded income from
discontinued business activities of $19,079,000, of which $20,579,000
represented the gain on the sale of the vinyl business to Jannock, Inc.
offset by $1.5 million in provisions relating to pension plans and
product liability claims associated with former roofing operations.
Sales of $6,365,000 and $8,859,000 were recorded for the vinyl business
for the periods ending March 7, 1995 and March 31, 1994, respectively.
As a percentage of sales, gross margins for these periods were 6.5% and
22.7%, respectively. Expenses and
10
<PAGE> 12
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
adjustments of $7.0 million relating to the sale of the vinyl business
to Jannock, Inc. have been included in accounts payable and accrued
expenses on the balance sheet for the period ended March 31, 1995.
Included in the $7.0 million is a $5.0 million adjustment payable to
Jannock, Inc. to reflect the change in working capital from the contract
date of September 23, 1994 and the closing date of March 8, 1995.
9. Restriction on the payment of dividends on Common and Preference Stock
are imposed by the terms of the amended Loan Agreement dated November
30, 1994. Payment of dividends on Preferred Stock are permitted under
said Loan Agreement. Dividends are in arrears on the Preferred Stock in
the aggregate amount of $22,000 for the three quarterly periods ended
September 1, 1994 and on the Preference Stock in the aggregate amount of
$1,883,000 for the five quarterly periods ended February 15, 1995.
Quarterly dividends on the Preferred Stock due December 1, 1994 and
March 1, 1995 were declared and paid in full. The quarterly dividend on
the Preference Stock due May 15, 1995 has, with the consent of Shawmut
Capital, been declared and is expected to be paid when due.
10. During 1993, the Company decided to close its "on-site" environmental
remediation business. This business involved environmental remediation
projects such as the processing of oily waste sites at refineries,
operations and management of waste processing sites and the removal and
remediation of sludge.
As of March 31, 1995, the remaining assets and liabilities relating to
the "on site" environmental remediation business approximated $367,000
and $856,000 respectively. The assets relate primarily to accounts
receivable due to holdbacks on asset sales and the liabilities relate
primarily to severance payments, a disputed trade payable and certain
other obligations such as for taxes and workers compensation.
During the second quarter of 1994, the Company agreed to sell its 80%
interest in Bird Environmental Gulf Coast, Inc. ("BEGCI") to the
minority shareholders thereof, subject to financing, resulting in the
complete withdrawal from the environmental business. Currently, the
expected disposal date is uncertain since the minority partner has been
unable to finance a purchase of the facility. The Company is actively
seeking another purchaser for its interest in the facility. The Company
continues to believe that by the disposal date, the
11
<PAGE> 13
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
results of operations will be at breakeven. However, for the
three month period ending March 31, 1995, the Company had invested an
additional $357,000 in BEGCI which, based on the Company's assessment,
would not be recoverable and was accordingly written off, thus
maintaining the Company's investment at $7.5 million.
11. The Company warrants under certain circumstances, that its building
material products meet certain manufacturing and material
specifications. The Company records the liability for warranty claims
and elective customer settlements when it determines that a specific
liability exists or a payment will be made.
12
<PAGE> 14
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FINANCIAL CONDITION
- -------------------
As of March 31, 1995, the Company had cash and cash equivalents on hand totaling
$19.4 million and long term debt of $8.7 million. The Company's external
financial needs are augmented by its ability to borrow under the amended Loan
and Security Agreement (the "Loan Agreement") dated November 30, 1994 between
Bird Incorporated and Shawmut Capital of Glastonbury, Connecticut. The Loan
Agreement consists of a $15.0 million revolving credit commitment and a $5.0
million term loan. Up to $5.0 million of the revolving credit facility can be
used for letters of credit. Borrowings by Bird Incorporated under the Loan
Agreement are guaranteed by the Company and the Company's other subsidiaries and
are secured by substantially all of the assets of the Company and its
subsidiaries. The revolving credit line availability is determined with
reference to a percentage of accounts receivable and inventory which are pledged
to the Lender. During the period January 1 through April 30, the Loan
Agreement provides a $2 million over-advance on accounts receivable and
inventories in order to assist the Company in assuring adequate funding of any
seasonal build-up of accounts receivable during the winter months. Currently,
the availability calculation does not allow borrowings to the full extent of the
revolving credit commitment. As of April 30, 1995, an aggregate amount of
$11,415,000 was available to the Company under the terms of the revolving credit
facility under the Loan Agreement. As of March 31, 1995, there were no amounts
outstanding under the revolving credit facility. Letters of credit outstanding
as of March 31, 1995 totaled $3,662,000. Intercompany loans and advances to
non-borrowing affiliates including BEGCI and Kensington are permitted under the
Loan Agreement.
The Loan Agreement contains financial and operating covenants which, among other
things,(i) requires the Company to maintain prescribed levels of tangible net
worth, net cash flow, earnings before interest, taxes, depreciation and
amortization, and ratio of current assets to current liabilities and (ii) places
limits on capital expenditures. The Loan Agreement also contains restrictions
on indebtedness, liens, investments, distributions (including payment of
dividends), mergers, acquisitions, and disposition of assets.
Interest on both the revolving credit portion and term loan portion of the Loan
Agreement accrues at either the base rate which was 9% on March 31, 1995, or at
the London Interbank Offering Rate ("LIBOR") plus 275 basis points at the
borrower's election, plus the greater of $25,000 or 1/4% on any unused portion
of the facility. Principal payments of $62,500 on the $5 million term loan are
due and payable monthly commencing on January 1, 1996 and continuing on the
first day of each month thereafter to and including the first day of
13
<PAGE> 15
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
November, 1996 after which beginning on December 1, 1996 the monthly principal
payment will increase to $71,417 continuing monthly through and including
November 1, 1997. The entire remaining principal amount then outstanding will
be due and payable on November 30, 1997. Proceeds in excess of $100,000 from
the sale of any fixed asset may, at the bank's discretion, be applied against
the outstanding principal balance of the term loan at the time of any such sale.
As of June 15, 1994, the Company's 90% owned joint venture, Kensington Partners,
("Kensington") entered into a financing/ factoring agreement with Bankers
Capital of Chicago, Illinois. Under the terms of the agreement, Bankers Capital
agrees to provide up to $2.5 million in financing based on the value of certain
acceptable receivables. The amount advanced at any one time cannot exceed 80%
of the value of these receivables. Interest on the amount advanced is at the
prime lending rate plus 1 1/2%. Additionally, Bankers Capital charges a fee
ranging from 1.0% to 3.45% of the total amount of the value of acceptable
receivables used to extend financing and based on the age of such receivables.
As the receivables age, the applicable fee percentage increases. In light of
the interest and fees described above, the average borrowing rate for the
quarter ending March 31, 1995 under the Bankers Capital Agreement was 37.8%.
The financing by Bankers Capital is co-guaranteed by the Company.
On March 8, 1995, the Company sold substantially all of the assets of its vinyl
business to Jannock, Inc. for $47.5 million in cash subject to certain downward
adjustments which as of April 19, 1995 totaled $4,962,000. Net of adjustments,
the gain on the sale of the vinyl business totaled $20.6 million. The sale
included the assumption by the purchaser, of certain specified liabilities of
the vinyl business. The transaction also included an option to purchase the
Company's interest in Kensington for a purchase price of $2,780,000. Kensington
operates a vinyl window fabrication business in Leechburg, Pennsylvania.
As of April 27, 1995, the Company signed an amended Asset Purchase Agreement
with Jannock, Inc. whereby Jannock advised the Company that it is willing to
exercise the option to acquire all of the outstanding capital stock of
Bird-Kensington Holding Corporation, which owns the Company's interest in
Kensington, for the sum of $2,780,000. This sale is subject to certain
conditions and requirements including, but not limited to, minimum equity as
outlined in the Asset Purchase Agreement dated September 23, 1994, the result of
which will have no material affect on the financial
14
<PAGE> 16
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
condition of the Company. Such conditions and requirements include an estimated
$3.2 million in cash, net of proceeds, to be used by the Company to return
Kensington's net worth to the contractual requirement as outlined in the Asset
Purchase Agreement and to buy out the 10% interest held by the minority partner.
Net cash and cash equivalents increased during the three month period ending
March 31, 1995 by $19,057,000 to $19,378,000 due to cash received from the sale
of the vinyl business. The cash used by continuing operations for the three
month period ended March 31, 1995 decreased $3,020,000, from $7,021,000 to
$4,001,000. The change was attributable primarily to the fact that at March 31,
1994 the Company reported a net loss of $4,148,000 as compared to net earnings
of $8,800,000 for the period ended March 31, 1995. In addition, there were
several changes in balance sheet items such as a decrease of approximately $2
million in trade accounts receivable, an increase of approximately $2 million in
liabilities not relating to financing activities, a decrease of $5 million in
deferred income taxes and an increase of $3 million in inventory. Due to the
seasonality of the roofing business, the winter months are historically the time
when the Company builds its inventory in anticipation of sales for the summer
months.
In addition, the Company recorded a gain of $20,579,000 on the sale of its vinyl
business for the period ended March 31, 1995. The Company had approximately
$47.2 million of net cash provided from investing activities for the period
ended March 31, 1995 as compared to a total of approximately $3.2 million of net
cash receipts used in investing activities for the period ended March 31, 1994.
The change is primarily the result of $47.9 million of cash receipts from the
proceeds of the sale of certain of the Company's assets (including, primarily,
the sale of the assets of the vinyl business to Jannock, Inc. in March 1995),
offset by cash used for capital expenditures. The net cash resulting from
financing activities changed by $28 million for the period ended March 31, 1995
as compared to the period ended March 31, 1995. The change is attributable to
the fact that during 1995 the Company repaid significant amounts of debt by
approximately $24 million in excess of borrowings, as compared to 1994 when the
Company borrowed approximately $4 million in excess of repayments.
There were several significant changes in the balance sheet accounts between
December 31, 1994 and March 31, 1995 which related primarily to the sale of the
Company's vinyl business in March, 1995. Cash increased $19.1 million, accounts
and notes receivable decreased $9
15
<PAGE> 17
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
million, deferred income taxes was reduced by $5 million, current liabilities
decreased $3.8 million and long term debt decreased $6 million. The decrease in
accounts receivable, current liabilities and long term debt reflect increases of
$4.2 million, $10.6 million and $1 million, respectively due to the
consolidation of Kensington. Also included in the change in current liabilities
for the period between December 31, 1994 and March 31, 1995 are $7.0 million of
expenses and adjustments relating to the sale of the vinyl business to Jannock,
Inc. Included in the $7.0 million is a $5.0 million adjustment payable to
Jannock, Inc. to reflect the change in working capital from the contract date of
September 23, 1994 and the closing date of March 8, 1995.
RESULTS OF OPERATIONS
- ---------------------
Net sales from continuing operations decreased $20,240,000 or 54.9% for the
first quarter of 1995 compared to the same quarter in the prior year as a result
of the sale of the Company's distribution and vinyl products business units.
However, net sales for the roofing manufacturing business increased $2,681,000
or 43.1% compared to the same quarter in the prior year due to increases in
volume and price. The increased volume was primarily due to favorable weather
conditions in the Northeastern region of the United States.
The Company's cost of sales from continuing operations for the first quarter of
1995 compared to the same period in the prior year decreased 50% from
$30,193,000 to $15,091,000. Cost of sales for the roofing business increased
35.8% due primarily to increased manufacturing costs related to an increase in
volume as well as raw material price increases in glass mat and dry felt. These
increases were more than offset by the decline in cost of sales due to the sale
of the Company's vinyl products and distribution business units. A newly
constructed asphalt oxidizer which produces asphalt saturant and coatings,
became operational as of January 20, 1995. As a result of this investment, it
is anticipated that the cost of asphalt will be reduced significantly. Savings
in the cost of asphalt has already become apparent during the first quarter.
For the three month period ending March 31, 1995, the roofing manufacturing
business cost of sales as a percentage of sales decreased 4.9% from 94.5% to
89.6% as compared to the same period in the prior year.
Selling, general and administrative ("SG&A") expenses for the three months ended
March 31, 1995 decreased 59.8% from $7,473,000 to $3,002,000 as compared to the
same period in the prior year. The
16
<PAGE> 18
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
decrease was primarily attributable to the sale of the Company's vinyl products
and distribution business units. SG&A expenses of the Company's roofing
manufacturing business decreased 3.3% from the same period in the prior year.
As a percentage of sales, SG&A expenses for the roofing manufacturing business
decreased 6% from 18.4% for the three months ended March 31, 1994 to 12.4% for
the same period in the current year.
Interest expense decreased approximately 14.5% from $750,000 to $641,000 for the
first quarter of 1995 compared to the first quarter of 1994. The decreased
interest expense relates primarily to the use of proceeds from the sale of the
vinyl products and distribution business units to reduce debt.
On March 8, 1995, the Company sold its vinyl manufacturing business to Jannock,
Inc. for $47.5 million subject to adjustment. The resulting gain of $20,579,000
was recorded as discontinued business activities. This gain was reduced by a
charge of $1,500,000 for the estimated cost to terminate the qualified and
unqualified unfunded employee benefit plans and future product liability claims
related to former roofing operations.
Effective February 28, 1995, the Company's ownership in Kensington was
permanently fixed at 90% resulting in a change in financial reporting from the
equity method to consolidation. Therefore, the equity losses for 1995 reflect
the results of two months versus three months in 1994. As of April 27, 1995,
the Company signed an amended Asset Purchase Agreement with Jannock, Inc.
whereby Jannock advised the Company that it is willing to exercise the option to
acquire all of the outstanding capital stock of Bird-Kensington Holding
Corporation which owns the Company's interest in Kensington for the sum of
$2,780,000. The sale is subject to certain conditions and requirements
including, but not limited to minimum equity as outlined in the Asset Purchase
Agreement dated September 23, 1994, the result of which will have no material
affect on the financial condition of the Company. Such conditions and
requirements include an estimated $3.2 million in cash, net of proceeds, to be
used by the Company to return Kensington's net worth to the contractual
requirement as outlined in the Asset Purchase Agreement and to buy out the 10%
interest held by the minority partner.
Other expense increased approximately $656,000 for the first quarter of 1995
compared to the first quarter of 1994. The increase was due primarily to the
amortized refinancing costs associated with the 1994 refinancing of an earlier
credit agreement, additional charges related to environmental remediation and
estimated costs associated with closing the corporate office.
17
<PAGE> 19
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
The Company's effective income tax rate from continuing operations was 40%
during the quarter ended March 31, 1995 and zero for the same period in the
prior year. No tax benefit was recorded for the period ending March 31, 1994 as
there was no reasonable assurance that related deferred tax assets would be
realized in future taxable years. For the same period during the current year,
the estimated annual effective tax rate reflects no change in the valuation
allowance; however, the Company expects the roofing business to be a significant
contributor to future taxable income.
18
<PAGE> 20
PART II - OTHER INFORMATION
---------------------------
Item 2. Changes in Securities
- ------------------------------
The Loan and Security Agreement dated as of November 30, 1994 ("Loan
Agreement") by and among Bird Incorporated and Shawmut Capital imposes
restrictions on the Company with respect to the purchase, redemption, or
other retirement of, or any other distribution on or in respect of any
shares of any class of capital stock of the Company with the exception of
payments of dividends on the Company's 5% cumulative preferred stock
("Preferred Stock"). Dividends on the Preferred Stock may not exceed
$35,000 in any fiscal year.
The Company is in arrears in the payment of dividends on its $1.85
cumulative preference stock ("Preference Stock") and its Preferred Stock.
(See Item 3 (b), below). The Articles of Organization of the Company
provide that as long as any arrearage on the payment of dividends on the
Preferred Stock exists, no dividends may be declared or paid on any other
class of stock of the Company and further provide that in the event that
full cumulative dividends on the Preference Stock have not been declared
and paid, the Company may not declare or pay any dividends or make any
distributions on, or make payment on its Common Stock, until full
cumulative dividends on the Preference Stock are declared and paid or set
aside for payment.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
(b) Dividends are in arrears on the Preferred Stock in the aggregate
amount of $22,000 for the three quarterly periods ended September 1,
1994 and on the Preference Stock in the aggregate amount of $1,883,000
for the five quarterly periods ended February 15, 1995.
Quarterly dividends on the Preferred Stock due December 1, 1994 and
March 1, 1995 were declared and paid in full. The quarterly dividend
on the Preference Stock due May 15, 1995 has, with the consent of
Shawmut Capital, been declared and is expected to be paid when due.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
At a special meeting of the stockholders held on March 7, 1995, the
holders of more than 66 2/3% of the Company's Common Stock approved the
sale of the Company's vinyl products business to Jannock, Inc. pursuant to
the terms of an Asset Purchase
19
<PAGE> 21
PART II - OTHER INFORMATION
---------------------------
(continued)
Agreement dated as of September 23, 1994, as amended. The vote on the
transaction was as follows:
For 3,256,229 shares (79.44% of outstanding shares)
Against 8,462 shares
Abstained 8,021 shares
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 11 - Statement Regarding Computation of per Share Earnings
(b) Reports on Form 8-K. On March 22, 1995, the Company filed a Form 8-K
disclosing the sale of its vinyl products business to Jannock, Inc. on
March 8, 1995. The Form 8-K included pro forma financial information
as of September 30, 1994, assuming the sale of the vinyl business
assets had occurred on that date.
20
<PAGE> 22
BIRD CORPORATION
SIGNATURES
----------
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.
BIRD CORPORATION
--------------------------
Date: May 12, 1995
--------------------------
Joseph M. Grigelevich, Jr.
Vice President Finance and
Administration
--------------------------
Donald L. Sloper, Jr.
Controller (Principal
Accounting Officer)
<PAGE> 23
BIRD CORPORATION
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Page No.
- ----------- ----------
11 Statement regarding computation of per share
earnings
<PAGE> 1
<TABLE>
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(Thousands of dollars, except share and per share amounts)
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31,
1995 1994
---------- ----------
<S> <C> <C>
Primary earnings per share
- --------------------------
Earnings (loss) from continuing operations $ 9,036 $ (3,398)
Deduct dividend requirements:
Preferred stock (7) (7)
Convertible preference stock (377) (377)
---------- ----------
Net earnings (loss) from continuing operations $ 8,652 $ (3,782)
Net loss from discontinued operations (236) (750)
---------- ----------
Net earnings (loss) applicable to
common stock $ 8,416 $ (4,532)
---------- ----------
Weighted average number of common
shares outstanding (1) 4,101,951 4,131,721
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (3) 6,592 0
---------- ----------
Weighted average number of common
shares outstanding as adjusted 4,108,543 4,131,721
---------- ----------
Primary earnings (loss) per common share:
Continuing operations $ 2.11 $ (0.92)
Discontinued operation $ (0.06) $ (0.18)
---------- ----------
Applicable to common stock $ 2.05 $ (1.10)
========== ==========
</TABLE>
<PAGE> 2
<TABLE>
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(Thousands of dollars, except share and per share amounts)
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31,
1995 1994
---------- ----------
<S> <C> <C>
Fully diluted earnings per share (2)
- ------------------------------------
Earnings (loss) from continuing operations $ 9,036 $ (3,398)
Deduct dividend requirements of
preferred stock (7) (7)
---------- ----------
Net earnings (loss) from continuing operations 9,029 (3,405)
Net loss from discontinued operations (236) (750)
---------- ----------
Net earnings (loss) applicable to
common stock $ 8,793 $ (4,155)
---------- ----------
Weighted average number of common
shares outstanding (1) 4,101,951 4,131,721
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (3) 6,592 0
Assuming conversion of convertible
preference stock 731,955 731,955
---------- ----------
Weighted average number of common
shares outstanding as adjusted 4,840,498 4,863,676
---------- ----------
Fully diluted earnings (loss) per common share
applicable to common stock:
Continuing operations $ 1.87 $ (0.70)
Discontinued operation $ (0.05) $ (0.15)
---------- ----------
$ 1.82 $ (0.85)
========== ==========
<FN>
(1) See Note 1 of Notes to Consolidated Financial Statements.
(2) These calculations are submitted in accordance with Securities Exchange
Act of 1934, Release No. 9083, although in certain instances, it is
contrary to paragraph 40 of APB Opinion No. 15 because it produces an
anti-dilutive result.
(3) APB 15 paragraph 30 indicates computation of primary earnings per share
should not give effect to common stock equivalents if their inclusion
has the effect of decreasing the loss per share amount otherwise computed
or is anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF BIRD CORPORATION FOR THE THREE
MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 19,378,000
<SECURITIES> 0
<RECEIVABLES> 13,829,000
<ALLOWANCES> 3,141,000
<INVENTORY> 6,660,000
<CURRENT-ASSETS> 40,683,000
<PP&E> 43,303,000
<DEPRECIATION> 15,664,000
<TOTAL-ASSETS> 86,792,000
<CURRENT-LIABILITIES> 28,846,000
<BONDS> 6,511,000
<COMMON> 4,382,000
0
1,396,000
<OTHER-SE> 43,938,000
<TOTAL-LIABILITY-AND-EQUITY> 86,792,000
<SALES> 16,623,000
<TOTAL-REVENUES> 16,623,000
<CGS> 15,091,000
<TOTAL-COSTS> 15,091,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 641,000
<INCOME-PRETAX> 15,059,000
<INCOME-TAX> 6,023,000
<INCOME-CONTINUING> 9,036,000
<DISCONTINUED> (236,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,800,000
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 1.82
</TABLE>
