<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 June 30, 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
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3082903
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1077 Pleasant Street Norwood, MA 02062
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(Address of principal executive offices) (Zip Code)
(617) 551-0656
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed, since
last report.)
980 Washington Street Dedham, MA 02026
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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 August 1, 1995. 4,111,906 shares.
<PAGE> 2
<TABLE>
BIRD CORPORATION
----------------
INDEX
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. Financial Information:
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 ..................... 2
Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1995 and 1994 ....... 4
Consolidated Statements of Cash Flows For the
Six Months Ended June 30, 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>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
($000 omitted except share data) June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 4,479 $ 321
Accounts and notes receivable 10,717 22,781
Allowance for doubtful accounts (2,129) (3,137)
Inventories 6,825 8,371
Prepaid expenses and other assets 1,711 3,095
Deferred income tax 680 6,836
------- -------
Total current assets 22,283 38,267
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 2,743 3,145
Buildings 6,903 11,742
Machinery and equipment 28,573 33,760
Construction in progress 1,031 5,705
------- -------
39,250 54,352
Less - Depreciation and amortization 15,046 24,323
------- -------
24,204 30,029
------- -------
Assets held for sale 0 7,500
Other assets 826 1,247
Deferred tax asset 7,514 8,662
------- -------
$54,827 $85,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
<TABLE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
June 30, December 31,
($000 omitted except share data) 1995 1994
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $14,134 $13,671
Long-term debt, portion due within one year 740 18,071
Retirement plan contributions payable 160 302
Income taxes payable 329 596
------- -------
Total current liabilities 15,363 32,640
------- -------
Long-term debt, portion due after one year 5,470 12,504
------- -------
Other liabilities 3,696 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 4,386,997 shares
in 1995, 4,375,179 shares in 1994 4,387 4,375
Other capital 27,318 27,235
Retained earnings 60 7,860
------- -------
33,161 40,866
Less -
Treasury stock, at cost:
Common - 275,100 shares in 1995 and 1994 (2,991) (2,991)
Unearned compensation 0 (157)
------- -------
30,170 37,718
------- -------
$54,827 $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 Six Months Ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
($000 omitted except share data)
Net Sales $15,138 $58,486 $31,761 $95,349
------- ------- ------- -------
Costs and expenses:
Cost of sales 12,517 47,543 27,608 77,736
Selling, general and
administrative expense 2,374 8,912 6,913 17,266
Interest expense 145 1,776 786 2,526
Net discontinued business
activities expense (income) 1,959 1,261 (17,120) 1,261
Equity losses from partnership 0 474 372 1,438
------- ------- ------- -------
Total costs and expenses 16,995 59,966 18,559 100,227
------- ------- ------- -------
Earnings (loss) from continuing operations
before income taxes (1,857) (1,480) 13,202 (4,878)
Provision for income taxes 2,209 0 8,232 0
------- ------- ------- -------
Earnings (loss) from continuing operations (4,066) (1,480) 4,970 (4,878)
------- ------- ------- -------
Discontinued operations:
Earnings from operations of discontinued
businesses, net of taxes 0 2,769 0 2,019
Loss on disposal of environmental business (11,368) (8,477) (11,604) (8,477)
------- ------- ------- -------
Net loss from discontinued operations (11,368) (5,708) (11,604) (6,458)
------- ------- ------- -------
Net loss before dividends $(15,434) $(7,188) $(6,634) $(11,336)
Preferred and preference stock
cumulative dividends 384 384 768 768
------- ------- ------- -------
Net loss applicable to common
stockholders $(15,818) $(7,572) $(7,402) $(12,104)
======= ======= ======= =======
Primary earnings (loss) per common share:
Continuing operations $ (1.08) $ (0.44) $ 1.03 $ (1.36)
Discontinued operations $ (2.77) $ (1.38) $ (2.84) $ (1.56)
------- ------- ------- -------
Net earnings (loss) after dividends $ (3.85) $ (1.82) $ (1.81) $ (2.92)
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
<TABLE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(Unaudited)
Six Months Ended
($000 omitted) June 30,
1995 1994
---- ----
<S> <C> <C>
Cash flow provided (used)
by operations:
Net earnings (loss) $ (6,634) $(11,336)
Adjustments to reconcile to net
cash used by operations:
Depreciation and amortization 1,525 2,983
Provision for losses on accounts receivable 17 825
Deferred income taxes 7,304 0
Loss on disposal of environmental business 7,500 8,477
Gain on sale of vinyl business (20,579) 0
Loss on sale of window business 1,959 0
Changes in balance sheet items:
Accounts receivable 2 (9,208)
Inventories (4,788) (1,881)
Prepaid expenses 1,179 (1,400)
Liquidation reserve 0 (3,188)
Liabilities not related to
financing activities (8,712) 1,431
Other assets 61 2,554
-------- --------
Cash flow used by operations (21,166) (10,743)
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (941) (3,485)
Proceeds from sale of businesses 50,680 3,083
Other investments (9) (1,017)
-------- --------
Net cash provided by (used in) investing activities 49,730 (1,419)
-------- --------
Cash flows from financing activities:
Debt proceeds 16,814 67,751
Debt repayments (40,901) (61,393)
Dividends paid (414) 0
Other equity changes 95 475
-------- --------
Net cash provided by (used in) financing activities (24,406) 6,833
-------- --------
Net increase (decrease) in cash and equivalents 4,158 (5,329)
Cash and cash equivalents at beginning of year 321 7,518
-------- --------
Cash and cash equivalents at end of period $ 4,479 $ 2,189
======== ========
</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 Financial Statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly its financial position as of June 30, 1995 and
December 31, 1994 and the results of its operations and cash
flows for the three and six month periods ended June 30, 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 and six month periods ended June 30, 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 loss per share amounted to $1.38 for the
six month period ended June 30, 1995 compared to a loss per
share of $2.33 for the same period in the prior year.
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.
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1995 1994
----------- ------------
(Thousands of dollars)
<S> <C> <C>
Current Costs:
Raw Materials $ 1,323 $ 3,554
Finished goods 6,036 6,924
-------- ---------
7,359 10,478
Less: LIFO reserve 534 2,107
-------- ---------
$ 6,825 $ 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>
(Unaudited)
June 30, December 31,
1995 1994
----------- ------------
(Thousands of dollars)
<S> <C> <C>
Long-Term Debt:
Revolving Credit
Agreement $ -0- $ 13,937
Term Loans 5,036 15,000
Obligations under
capital leases 1,174 1,638
-------- --------
6,210 30,575
Less - portion due
within one year 740 18,071
-------- --------
Long term debt $ 5,470 $ 12,504
======== ========
</TABLE>
As of June 30, 1995, the Company had cash and cash equivalents
on hand totaling $4,479,000. 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 "Bank"). The loan agreement contains
financial and operating covenants, which among other things, (i)
require the Company to maintain prescribed levels of tangible
net worth, cash flow, earnings before interest, taxes,
depreciation and amortization and (ii) place limits on capital
expenditures. There are also restrictions on indebtedness,
liens, investments, acquisitions, dispositions, mergers, and the
payment of dividends.
As of June 30, 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 June 30, 1995 there were no loans
outstanding under the revolving credit line portion of the Loan
7
<PAGE> 9
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
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 June
30, 1995, or at the London Interbank Offering Rate ("LIBOR")
plus 275 basis points at the Company's election, plus the
greater of $25,000 or 1/4% on any unused portion of the
facility.
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
allowed 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
could 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 agreement required, among other things,
unanimous approval of
8
<PAGE> 10
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
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 was 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 was permanently fixed
at 90%, resulting in a change in financial reporting from the
equity method to consolidation beginning March 1, 1995.
On June 2, 1995, the Company sold all of the outstanding capital
stock of Bird-Kensington Holding Corp. ("Bird-Kensington"),
which owned the Company's interest in Kensington, to Jannock,
Inc. ("Jannock"). The sale was consummated pursuant to the
exercise by Jannock of an option granted under that certain
Asset Purchase Agreement dated as of September 23, 1994 (as
amended by amendments dated as of January 24, 1995, January 31,
1995, and April 27, 1995), (the "Asset Purchase Agreement").
The purchase price consisted of cash in the amount of $2,780,000
and the assumption of certain liabilities related to the
Kensington business.
Cash proceeds were reduced by $1 million representing the cost
to acquire the minority partner's interest in Kensington. In
addition, $3,692,000 was invested by the Company in Bird-
Kensington, as a condition of the sale, to enable Kensington to
pay certain liabilities and to assure that the equity of
Kensington was not less than $1,150,000 at the time of closing
as stipulated in the Asset Purchase Agreement. Certain
adjustments, subject to increase or decrease upon final
determination at the closing date, affecting equity were
required to be made to the Kensington financial statements as of
March 31, 1995. These adjustments were primarily asset write-
downs and the exclusion of certain assets related to affiliated
companies to be assumed by the Company of approximately $700,000
and $500,000, respectively.
Within 30 days following the closing date, Jannock presented to
the Company Kensington's financial statements as of June 2,
9
<PAGE> 11
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
1995, in accordance with the Asset Purchase Agreement, as
amended, indicating that the Company may be required to make an
additional investment of up to $471,000 as a condition of the
sale to assure that the equity of Bird-Kensington was not less
than $1,050,000, as stipulated in the Asset Purchase Agreement.
The Company established a reserve for the full amount at June
30, 1995.
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
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 million at June 30, 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 June 30, 1995 for its proportionate share
of the estimated ultimate cost of cleanup based on management's
10
<PAGE> 12
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
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 June 30, 1995.
8. For the six months ended June 30, 1995, the Company recorded
income from discontinued business activities of $17,120,000
comprised of a first quarter gain of $20,579,000 on the sale of
the vinyl business to Jannock offset by $1.5 million in
provisions relating to pension plans and product liability
claims associated with former roofing operations and a second
quarter loss of $1,959,000 on the sale of the Kensington
business to Jannock.
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.
9. During the second quarter of 1994, the Company's 40% interest in
Mid-South Building Supply, Inc. was redeemed for $1 million in
cash resulting in a loss of $1,261,000.
10. Restrictions 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. The
quarterly dividends on the Preferred Stock due March 1 and June
1, 1995 in the aggregate amount of $14,500 were declared and
paid in full when due. Quarterly dividends in arrears amounting
to $21,800 on the Preferred Stock due March 1, June 1 and
September 1, 1994 were declared and paid in full on June 15,
1995. Dividends are in arrears on the Preference Stock in the
aggregate amount of $1,883,000 for the five quarterly periods
ended February 15, 1995. The quarterly dividend on the
Preference Stock due May 15, 1995 has been paid. The quarterly
dividend on the Preference Stock due August 15, 1995 and one
quarterly dividend in arrears amounting to $753,000 were, with
the consent of the Bank, declared on May 25, 1995 and are
expected to be paid on August 15, 1995.
11. 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, operation and management of
waste processing sites and the removal and remediation of
sludge.
11
<PAGE> 13
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
As of June 30, 1995, the remaining assets and liabilities
relating to the "on site" environmental remediation business
approximated $291,000 and $612,000, 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"), which owns and operates the "on-site" environmental
business, 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 the purchase of the facility. The Company is actively
seeking another purchaser for its interest in the facility.
However, efforts to attract a buyer have been unsuccessful even
at severely discounted prices. The continuing losses of the
facility combined with equipment related problems and the
limited apparent prospects for near term improvement
precipitated a vote by the Company's Board of Directors to
suspend further funding of the facility. As a result of this
action, the Company's remaining investment of $7.5 million was
written-off and a $3 million reserve was established for the
potential costs, such as the potential buy-out of minority
shareholders and cleanup expenses associated with the closure of
the facility. In addition, for the six month period ending
June 30, 1995, the Company made additional investments in BEGCI of
$1,104,000 which were not considered recoverable and as a result
were written-off.
12. The Company warrants under certain circumstances that its
building material products meet certain manufacturing and
material specifications. The warrant policy is unique to each
product, ranges from twenty to forty years, is generally for the
material cost and requires the owner to meet specific criteria
such as proof of purchase. The Company offers the original
manufacturer's warranty only as part of the original sale and at
no additional cost to the customer. In addition, for marketing
considerations, the Company makes elective settlements in
response to customer complaints. 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 June 30, 1995, the Company had cash and cash equivalents on
hand totaling $4.5 million and total debt of $6.2 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 July 31, 1995, an aggregate amount of $9,840,000
was available to the Company under the terms of the revolving credit
facility under the Loan Agreement. As of June 30, 1995, there were
no amounts outstanding under the revolving credit facility. Letters
of credit outstanding as of June 30, 1995 totaled $2,733,000.
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) require 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) place 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
June 30, 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 November 1, 1996 after
13
<PAGE> 15
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
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.
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 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 purchase 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 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 agreed to provide up to
$2.5 million in financing based on the value of certain acceptable
receivables. The amount advanced at any one time could not exceed
80% of the value of these receivables. Interest on the amount
advanced was at the prime lending rate plus 1#%. Additionally,
Bankers Capital charged 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 increased. In light
of the interest and fees described above, the average borrowing rate
for the quarters ending March 31, and June 30, 1995 under the Bankers
Capital Agreement was 37.8%. The financing by Bankers Capital was
co-guaranteed by the Company.
On June 2, 1995, the Company sold all of the outstanding capital
stock of Bird-Kensington Holding Corp. ("Bird-Kensington"), which
owned the Company's interest in Kensington, to Jannock. The sale was
consummated pursuant to the exercise by Jannock of the option granted
under the Asset Purchase Agreement. The purchase price consisted of
cash in the gross amount of $2,780,000 and the assumption of certain
liabilities related to the Kensington business.
Cash proceeds were reduced by $1 million representing the cost to
acquire the minority partner's interest in Kensington. In addition,
$3,692,000 was invested by the Company in Bird-Kensington, as a
14
<PAGE> 16
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
condition of the sale, to enable Kensington to pay certain
liabilities including the repayment of all loans outstanding with
Bankers Capital and to assure that the equity of Kensington was not
less than $1,150,000 at the time of closing. Certain adjustments,
subject to increase or decrease upon final determination at the
closing date, affecting equity were required to be made to the
Kensington financial statements as of March 31, 1995. These
adjustments were primarily asset write-downs and the exclusion of
certain assets related to affiliated companies to be assumed by the
Company of approximately $700,000 and $500,000, respectively.
Within 30 days following the closing date, Jannock presented to the
Company, Kensington's financial statements as of June 2, 1995, in
accordance with the Asset Purchase Agreement as amended, indicating
that the Company may be required to make an additional investment of
up to $471,000 as a condition of the sale to assure that the equity
of Bird-Kensington was not less than $1,050,000. The Company
established a reserve for the full amount at June 30, 1995.
Net cash and cash equivalents increased during the six month period
ending June 30, 1995 by $4,158,000 to $4,479,000 due to cash received
from the sale of the vinyl business. The cash used by operations for
the six month period ended June 30, 1995 increased $10,423,000, from
$10,743,000 to $21,166,000. The change was attributable primarily to
the fact that at June 30, 1995 the Company reported a gain of
$20,579,000 on the sale of its vinyl business, a loss of $1,959,000
on the sale of its window fabrication business and a $7,304,000
reduction to deferred taxes. There were also changes in balance
sheet items such as liabilities related to financing and inventories.
Liabilities related to financing increased approximately $9 million
primarily the result of the $5 million build-up of finished goods
inventory related to sluggish demand for roofing products during the
second quarter of 1995 and the establishment of a $3 million reserve
for the closure of the San Leon facility.
The Company had approximately $49.7 million of net cash provided from
investing activities for the period ended June 30, 1995 as compared
to a total of approximately $1.4 million of net cash receipts used in
investing activities for the period ended June 30, 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 of
the roofing business. The net cash resulting from financing
activities changed by $31 million for the period ended June 30, 1995
as compared to the period ended June 30, 1994. The change is
attributable to the fact that during 1995 the Company repaid $24
15
<PAGE> 17
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
million of debt in excess of borrowings, as compared to 1994 when the
Company borrowed approximately $6 million in excess of repayments.
There were several significant changes in the balance sheet accounts
between December 31, 1994 and June 30, 1995 which related primarily
to the sale of the Company's vinyl business in March, 1995. Cash
increased $4.2 million, accounts and notes receivable decreased $12
million, deferred income taxes was reduced by $6 million, current
liabilities decreased $17.3 million and long term debt decreased $7
million. Assets held for sale decreased $7.5 million due to the
write-down of BEGCI.
RESULTS OF OPERATIONS
---------------------
Net sales from continuing operations decreased 66.7% from $95,349,000
to $31,761,000 for the first six months of 1995 as compared to the
same period in the prior year primarily due to the sale of the
Company's distribution and vinyl products business units. Sales from
the roofing manufacturing business decreased $1,723,000 or 7.5%
compared to the same six month period in the prior year due to the
erosion of volume. The decreased volume was attributable to a weak
remodeling market in the Northeast and decreasing customer confidence
that the Company would remain an autonomous roofing producer. The
Company plans to expand its sales territories to include areas
bordering the Northeastern states in order to replace lost volume.
Net sales from continuing operations decreased $43,348,000 or 74.1%
for the second quarter of 1995 compared to the same quarter in the
prior year primarily as a result of the sale of the Company's
distribution and vinyl products business units. Net sales for the
roofing manufacturing business decreased $4,403,000 or 26.4% compared
to the same quarter in the prior year due to a decrease in volume
primarily due to the aforementioned weak remodeling market. Another
contributing factor was that a portion of the volume that would
normally be shipped in the second quarter was actually shipped during
the first quarter due to unseasonably favorable weather conditions in
the Northeast region during that period.
The Company's cost of sales from continuing operations compared to
the same period in the prior year decreased 64.5% from $77,736,000 to
$27,608,000 for the six months of 1995. The decline was primarily a
result of the sale of the Company's distribution and vinyl products
business units. Cost of sales for the roofing business decreased
11.6% or $2,338,000 due primarily to decreased manufacturing costs
related to a decrease in sales volume. Although the Company
16
<PAGE> 18
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
experienced raw material price increases in glass mat and dry felt,
the cost of asphalt, along with related freight was reduced
significantly as a result of the newly constructed asphalt oxidizer
which produces asphalt saturant and coatings. The oxidizer became
operational in the first quarter of 1995. The Company's cost of
sales from continuing operations for the second quarter of 1995
compared to the same period in the prior year decreased 73.7% from
$47,543,000 to $12,517,000. Cost of sales for the roofing business
decreased 30.9% due primarily to the reasons previously stated.
For the six months ended June 30, 1995, the roofing manufacturing
business cost of sales as a percentage of sales decreased 3.9% from
88.4% to 84.5%, as compared to the same period in the prior year.
For the three months ended June 30, 1995 the percentage of cost of
sales to sales as compared to the same period in the prior year
decreased 6% from 86.1% to 80.8%.
Selling, general and administrative ("SG&A") expenses for the three
months ended June 30, 1995 decreased 73.4% from $8,912,000 to
$2,374,000 and decreased 60% for the six month comparative period
from $17,266,000 to $6,913,000. The decrease was primarily
attributable to the sale of the Company's distribution and vinyl
products business units. However, SG&A expenses (expressed as a
percentage of sales) remained relatively constant at approximately
15.5% for the three month comparative period and increased slightly
from 18.1% to 21.8% for the six month comparative period. 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 recorded during
the first quarter of 1995.
Interest expense decreased approximately 91.8% from $1,776,000 to
$145,000 for the second quarter of 1995 compared to the second
quarter of 1994. For the six months ended June 30, 1995, interest
expense decreased approximately 68.9% or $1,740,000 as compared to
the same period in the prior year. 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 has been 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.
17
<PAGE> 19
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
On June 2, 1995, the Company sold its window fabrication business to
Jannock for $2,780,000 resulting in a loss of $1,959,000 which was
recorded as discontinued business activities during the quarter ended
June 30, 1995. 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.
In connection with the Board of Director's 1994 decision to sell
BEGCI and the Company's agreement on June 18, 1994 to sell its shares
in BEGCI to the minority stockholders, subject to financing, the
Company reclassified BEGCI results as a discontinued operation as of
June 30, 1994 and adjusted its book value resulting in an aggregate
charge for the six months ended June 30, 1994 of $10,318,000. In
addition, excess costs of $3,861,000 related to the "on-site"
environmental remediation business and charged to results of
operations in 1993 had been reversed and were recorded as
discontinued operations in the consolidated statement of operations
for the six months ending June 30, 1994. The Company had intended to
operate the San Leon Facility owned by BEGCI until the sale of its
interest in BEGCI was consummated. Efforts to sell the facility had
been unsuccessful through the second quarter of 1995 and the facility
continued to incur losses. Consequently, on July 18, 1995 the
Company's Board of Directors voted to suspend further funding of the
facility. As a result of this action, the Company wrote-off its $7.5
million investment and established a $3 million reserve for potential
costs such as the potential buy-out of minority shareholders and cleanup
expenses associated with the closure of the facility. For the three
and six month periods ended June 30, 1995, the Company invested
$868,000 and $1,104,000, respectively, which were deemed non-
recoverable and charged to discontinued operations.
The Company's effective income tax rate from continuing operations
was 62.4% for the six month period ended June 30, 1995 and zero for
the same period in the prior year. No tax benefit was recorded for
the period ending June 30, 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 an increase of approximately
$2,951,000 in the valuation allowance to $7,951,000 due primarily to
the loss on the window fabrication business and charges to
discontinued business activities related to former roofing operations
where there is no assurance that any tax benefit would be realized
from these losses in the future. 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"). (See
Item 3 (b), below). The Articles of Organization of the Company
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 Preference Stock in the
aggregate amount of $1,883,000 for the five quarterly
periods ended February 15, 1995. The quarterly dividend on
the Preference Stock due August 15, 1995 and one quarterly
dividend in arrears have, with the consent of Shawmut
Capital, been declared and are expected to be paid on
August 15, 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
(a) Proxies for the annual meeting were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
there was no solicitation in opposition to management's
nominees for the Board of Directors, as listed in the Proxy
Statement for the meeting, and all of such nominees were
elected.
19
<PAGE> 21
PART II - OTHER INFORMATION
---------------------------
(continued)
(b) A brief description of each matter voted upon at the
meeting, and the results of voting, are as follows:
<TABLE>
(i) Election of three directors to the class whose term
expires in 1998:
<CAPTION>
FOR WITHHELD
---------------- -------------
<S> <C> <C>
Charles S. Bird, Jr. 3,702,246 Shares 65,956 Shares
Richard C. Maloof 3,702,837 Shares 65,368 Shares
Loren R. Watts 3,697,164 Shares 71,041 Shares
</TABLE>
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 June 16, 1995, the Company filed a
Form 8-K disclosing the sale of its window fabrication
business to Jannock, Inc. on June 2, 1995. The Form 8-K
included pro forma financial information as of March 31,
1995, assuming the sale of the window fabrication business
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: August 8, 1995
-------------------------------
Donald L. Sloper, Jr.
Corporate Controller and
Principal Accounting Officer
-------------------------------
Richard C. Maloof
President and COO
<PAGE> 23
<TABLE>
BIRD CORPORATION
EXHIBIT INDEX
-------------
<CAPTION>
Sequential
Exhibit No. Page No.
----------- -----------
<S> <C> <C>
11 Statement regarding computation of per share
earnings
</TABLE>
<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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary earnings per share
--------------------------
Net earnings (loss) from continuing operations $ (4,066) $ (1,480) $ 4,970 $ (4,878)
Deduct dividend requirements:
Preferred stock (7) (7) (14) (15)
Convertible preference stock (377) (377) (754) (753)
----------- ----------- ----------- -----------
Net earnings (loss) from continuing operations (4,450) (1,864) 4,202 (5,646)
Net loss from discontinued operations (11,368) (5,708) (11,604) (6,458)
----------- ----------- ----------- -----------
Net loss applicable
to common stock $ (15,818) $ (7,572) $ (7,402) $ (12,104)
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding (1) 4,110,345 4,169,269 4,094,456 4,150,599
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (3) 0 0 0 0
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted 4,110,345 4,169,269 4,094,456 4,150,599
----------- ----------- ----------- -----------
Primary earnings (loss) per common share:
Continuing operations $ (1.08) $ (0.45) $ 1.03 $ (1.36)
Discontinued operation $ (2.77) $ (1.37) $ (2.84) $ (1.56)
----------- ----------- ----------- -----------
Net earnings (loss) $ (3.85) $ (1.82) $ (1.81) $ (2.92)
=========== =========== =========== ===========
</TABLE>
<PAGE> 2
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(Thousands of dollars, except share and per share amounts)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fully diluted earnings per share (2)
-------------------------------------
Net earnings (loss) from continuing operations $ (4,066) $ (1,480) $ 4,970 $ (4,878)
Deduct dividend requirements of
preferred stock (7) (7) (14) (15)
----------- ----------- ----------- -----------
Net earnings (loss) from continuing operations $ (4,073) $ (1,487) $ 4,956 $ (4,893)
Net loss from discontinued operations (11,368) (5,708) (11,604) (6,458)
----------- ----------- ----------- -----------
Net loss applicable
to common stock $ (15,441) $ (7,195) $ (6,648) $ (11,351)
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding (1) 4,110,345 4,169,269 4,094,456 4,150,599
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (3) 0 0 0 0
Assuming conversion of convertible
preference stock 731,955 731,955 731,955 731,955
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted 4,842,300 4,901,224 4,826,411 4,882,554
----------- ----------- ----------- -----------
Fully diluted earnings (loss) per common share
applicable to common stock:
Continuing operations $ (0.84) $ (0.30) $ 1.03 $ (1.00)
Discontinued operation $ (2.35) $ (1.17) $ (2.41) $ (1.33)
----------- ----------- ----------- ----------
$ (3.19) $ (1.47) $ (1.38) $ (2.33)
=========== =========== =========== ==========
<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
JUNE 30, 1995 FINANCIAL STATEMENTS OF BIRD CORPORATION FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10Q FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 4,479,000
<SECURITIES> 0
<RECEIVABLES> 10,717,000
<ALLOWANCES> 2,129,000
<INVENTORY> 6,825,000
<CURRENT-ASSETS> 22,283,000
<PP&E> 39,250,000
<DEPRECIATION> 15,046,000
<TOTAL-ASSETS> 54,827,000
<CURRENT-LIABILITIES> 15,363,000
<BONDS> 5,470,000
<COMMON> 4,387,000
0
1,396,000
<OTHER-SE> 27,378,000
<TOTAL-LIABILITY-AND-EQUITY> 54,827,000
<SALES> 31,761,000
<TOTAL-REVENUES> 31,761,000
<CGS> 27,608,000
<TOTAL-COSTS> 27,608,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 786,000
<INCOME-PRETAX> 13,202,000
<INCOME-TAX> 8,232,000
<INCOME-CONTINUING> 4,970,000
<DISCONTINUED> (11,604,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,634,000)
<EPS-PRIMARY> (1.81)
<EPS-DILUTED> (1.81)
</TABLE>
