<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1996
--------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- ----------------------------
Commission file number 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.)
1077 Pleasant Street Norwood, MA 02062
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 551-0656
- --------------------------------------------------------------------------------
(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, 1996. 4,126,297 shares.
<PAGE> 2
BIRD CORPORATION
----------------
INDEX
PAGE NO.
--------
Part I. Financial Information:
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 ................. 2
Consolidated Statements of Operations for the
Three Months Ended March 31, 1996 and 1995 ............... 4
Consolidated Statements of Cash Flows For the
Three Months Ended March 31, 1996 and 1995................ 5
Notes to Consolidated Financial Statements.................. 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................................. 12
Part II. Other Information ................................ 17
1
<PAGE> 3
BIRD CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 10 $ 3,679
Accounts and notes receivable 4,977 5,614
Allowance for doubtful accounts (184) (153)
Inventories 5,957 4,701
Refundable income taxes 1,021 1,021
Prepaid expenses and other assets 1,348 1,157
Deferred income taxes 435 435
------- -------
Total current assets 13,564 16,454
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 2,810 2,810
Buildings 6,896 7,184
Machinery and equipment 29,325 28,980
Construction in progress 1,107 672
------- -------
40,138 39,646
Less - Depreciation and amortization 16,857 16,127
------- -------
23,281 23,519
------- -------
Deferred income taxes 3,631 3,631
Other assets 74 99
------- -------
$40,550 $43,703
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
BIRD CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $10,875 $ 9,275
Long-term debt, portion due within one year 1,146 1,113
Retirement plan contributions payable 41 88
------- -------
Total current liabilities 12,062 10,476
------- -------
Long-term debt, portion due after one year 2,125 4,869
------- -------
Other liabilities 3,867 3,942
------- -------
STOCKHOLDERS' EQUITY
5% cumulative preferred stock, par value
$100. Authorized 15,000 shares;issued 5,820
shares (liquidating preference $110 per share,
aggregating $640,000 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 $16,286,000 before dividends) 814 814
Common stock, par value $1. Authorized
15,000,000 shares; 4,399,613 shares issued
in 1996 and 4,395,162 shares issued in 1995 4,400 4,395
Other capital 27,381 27,362
Retained earnings (deficit) (7,690) (5,746)
------- -------
25,487 27,407
Less Treasury stock, at cost:
Common - 275,100 shares in 1996 and 1995 (2,991) (2,991)
------- -------
22,496 24,416
------- -------
$40,550 $43,703
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
BIRD CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net sales $ 6,446 $ 16,623
----------- -----------
Costs and expenses:
Cost of sales 6,557 15,091
Selling, general and administrative expense 1,374 4,539
Interest expense 75 641
Net discontinued business activities (income) 0 (19,079)
Equity losses from partnership 0 372
----------- -----------
Total costs and expenses 8,006 1,564
----------- -----------
Earnings (loss) from continuing operations
before income taxes (1,560) 15,059
Provision for income taxes 0 6,023
----------- -----------
Earnings (loss) from continuing operations (1,560) 9,036
Discontinued operations:
Loss on disposal of environmental business 0 (236)
----------- -----------
Net earnings (loss) before dividends ($ 1,560) $ 8,800
Preferred and preference stock
cumulative dividends 384 384
----------- -----------
Net earnings (loss) applicable to common
stockholders ($ 1,944) $ 8,416
=========== ===========
Primary earnings (loss) per common share:
Continuing operations ($ 0.47) $ 2.11
Discontinued operations $ 0.00 ($ 0.06)
----------- -----------
Net earnings (loss) after dividends ($ 0.47) $ 2.05
=========== ===========
Average number of shares used in primary
earnings per share computations 4,122,742 4,108,543
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
BIRD CORPORATION AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
------- --------
<S> <C> <C>
Cash flow provided (used) by operations:
Net earnings (loss) ($1,560) $ 8,800
Adjustments to reconcile to net
cash used by operations:
Depreciation and amortization 674 840
Provision for losses on accounts receivable 31 135
Deferred income taxes 0 4,999
Gain on sale of vinyl business 0 (20,579)
Changes in balance sheet items:
Accounts receivable 637 1,605
Inventories (1,256) (2,865)
Prepaid expenses (191) 836
Liabilities not related to
financing activities 1,478 1,975
Other assets 25 53
------- --------
Cash flow used by operations (162) (4,201)
------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (436) (636)
Proceeds from disposal of assets 0 47,900
Other investments 0 (26)
------- --------
Net cash provided by (used in) investing activities (436) 47,238
------- --------
Cash flows from financing activities:
Debt proceeds 0 17,051
Debt repayments (2,711) (41,081)
Dividends paid (384) (7)
Other equity changes 24 57
------- --------
Net cash used in financing activities (3,071) (23,980)
------- --------
Net increase (decrease) in cash and equivalents (3,669) 19,057
Cash and cash equivalents at beginning of year 3,679 321
------- --------
Cash and cash equivalents at end of period $ 10 $ 19,378
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. In the opinion of Bird Corporation (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 March 31, 1996 and December 31, 1995 and the
results of its operations and cash flows for the three month periods ended
March 31, 1996 and 1995.
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, 1996 and
1995 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, if any, which would result from the conversion of the
$1.85 cumulative convertible preference stock at the beginning of each
period if the effect is dilutive. Fully diluted loss per share amounted to
$.47 for the three month period ended March 31, 1996 compared to a earnings
per share of $1.82 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,
1996 1995
---------------------------
(Thousands of dollars)
<S> <C> <C>
Current costs:
Raw materials $ 983 $1,202
Finished goods 5,692 4,217
------ ------
6,675 5,419
Less: LIFO reserve 718 718
------ ------
$5,957 $4,701
====== ======
</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,
1996 1995
--------- ------------
(Thousands of dollars)
<S> <C> <C>
Term loan $2,375 $5,000
Obligations under
capital leases 896 982
------ ------
3,271 5,982
Less - portion due
within one year 1,146 1,113
------ ------
Long term debt $2,125 $4,869
====== ======
</TABLE>
As of March 31, 1996, the Company had cash and cash equivalents on hand
totaling $10,000 and total debt of approximately $3.3 million. The Company
plans to continue its aggressive efforts of managing working capital as a
means of generating funds. The Company's external financing needs are
augmented by the ability of its wholly owned subsidiary, Bird Incorporated
("Bird"), to borrow under the Loan and Security Agreement (the "Loan
Agreement") dated November 30, 1994 between Bird and Fleet Capital
Corporation ("Fleet Capital"). The Loan Agreement consists of a $15 million
revolving credit commitment and a $5 million term loan. On January 10,
1996, Bird paid down the term loan so that the outstanding principal
balance equaled $2.5 million. As of March 31, 1996, the term loan totalled
$2,375,000 and there were no amounts outstanding under the revolving credit
facility. Up to $5 million of the revolving credit facility can be used for
letters of credit. Letters of credit outstanding as of March 31, 1996
totaled $1,833,000.
Borrowings by Bird 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 Bird
in assuring adequate funding of any seasonal build-up of accounts
receivable during the winter months. Currently, the availability
calculation does not allow
7
<PAGE> 9
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
borrowings to the full extent of the revolving credit commitment due to the
seasonality of the building materials manufacturing business. As of May 8,
1996, an aggregate of $10,304,000 was available to Bird under the terms of
the revolving credit facility under the Loan Agreement of which $6,783,000
is outstanding at May 8, 1996.
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 common and preference dividends),
mergers, acquisition, and disposition of assets. As of March 31, 1996, Bird
was in compliance with each of the prescribed covenants as outlined in the
Loan Agreement.
Interest on the revolving credit commitment under the First Amended Loan
Agreement accrues at the Fleet Capital base rate (as specified in such
Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at
Bird's election on all borrowings plus the greater of $25,000 per annum or
1/4% on any unused portion of the commitment payable monthly in arrears.
The interest on the term loan accrues at the base rate or the LIBOR rate
plus 2 3/4% at the Bird's election. The interest rate on outstanding
borrowings at March 31, 1996 was 8.06%. The repayment of the principal on
the term loan is at the rate of $62,500 per month through November 1996 and
$71,417 per month thereafter with a final principal payment due on November
30, 1997. The term loan was paid down by $2,437,500 on January 10, 1996
which reduces the required final payment to $1,018,300. Proceeds in excess
of $100,000 from the sale of fixed assets may, at Fleet Capital's
discretion, be applied to the outstanding principal payments of the term
loan.
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"). During 1993 and 1994,
Kensington experienced serious cash needs which hampered production
requirements. As a result, the Company agreed to invest additional cash in
return for temporarily increasing its ownership in Kensington to 90%. As of
February 28, 1995, the minority partner did not match the additional
investment made by the Company which would have allowed Kensington to
return to an equal partnership.
8
<PAGE> 10
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
Consequently, the Company's ownership in the joint venture was permanently
fixed at 90%, resulting in a change in reporting from the equity method to
consolidation beginning March 1, 1995.
7. Since 1981 Bird has been named as a defendant in approximately 550 product
liability cases throughout the United States by persons claiming to have
suffered asbestos-related diseases as a result of alleged exposure to
asbestos used in products manufactured and sold by Bird. Approximately 140
of these cases are currently pending and costs of approximately $2 million
in the aggregate have been incurred in the defense of these claims since
1981. Employers Insurance of Wausau has accepted the defense of these cases
under an agreement for sharing of the costs of defense, settlements and
judgments, if any. At March 31, 1996, the Company has recorded a reserve of
$950,000 to cover the estimated cost of these claims. In light of the
nature and merits of the claims alleged, in the opinion of management, the
resolution of these remaining claims will not have a material adverse
effect on the results of operations or financial condition of the Company.
In 1986, the Company, along with numerous other companies, was named by the
United States Environmental Protection Agency ("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. The ultimate cost to the Company of the remedial work and other
expenses covered by the settlement agreement is estimated to be between $1
million to $2 million. This range is based, in part, on an allocation of
certain sites' costs which, due to the joint and several nature of the
liability, could increase if the other PRP's are unable to bear their
allocated share. The Company has provided a reserve of approximately $1
million at March 31, 1996 to cover the remaining proportionate share of the
estimated total remaining cost of cleanup, most of which will be paid in
1996. Based on information currently available to the Company,
9
<PAGE> 11
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
management believes that it is probable that the major responsible parties
will fully pay the cost apportioned to them. Management believes that,
based on its financial position and the estimated accrual recorded, its
remediation expense with respect to this site is not likely to have a
material adverse effect on its consolidated financial position or results
of operations of the Company.
8. During the first quarter of 1995, the Company sold its vinyl products
business to Jannock, Inc. for $47.5 million subject to certain downward
adjustments. The resulting gain of $20,579,000 was recorded as discontinued
business activities. This gain was reduced by a provision of $1,500,000
relating to employee benefit plans and future product liability claims,
both associated with former roofing operations.
Sales of $6,365,000 were recorded for the vinyl business for the period
ended March 7, 1995. As a percentage of sales, the gross margin was 6.5%.
9. Restriction on the payment of dividends on common and preference stock are
imposed by the terms of the Loan Agreement. Payment of dividends on
preferred stock are permitted under said Loan Agreement. The quarterly
dividend on the preferred stock due March 1, 1996 has been declared and
paid in full. The quarterly dividend on the preference stock due February
15, 1996 has, with the consent of Fleet Capital, been declared and paid in
full. Dividends are in arrears on the preference stock in the aggregate
amount of $1,506,000 for the four quarterly periods ended February 15,
1995.
10. During the second quarter of 1994, the Company agreed to cause the sale by
Bird Environmental Technologies, Inc. ("BETI"), an indirect wholly owned
subsidiary of the Company, of BETI's 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. The expected disposal date was uncertain since the minority
partner had been unable to finance a purchase of the facility.
Consequently, BETI actively sought another purchaser for its interest in
the facility. BETI continued to believe that by the disposal date, the
results of operations would be at breakeven. However, for the three month
period ended March 31, 1995, BETI had invested an additional $236,000 in
BEGCI which, based on the BETI's assessment, would not be recoverable and
was accordingly written off.
10
<PAGE> 12
BIRD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(continued)
11. Bird warrants under certain circumstances, that its building material
products meet certain manufacturing and material specifications. The
warranty policy is unique to each portion of the labor and material cost
and requires the owner to meet specific criteria such as proof of purchase.
Bird offers the original manufacturer's warranty only as part of the
original sale and at no addition cost to the customer. In addition, for
marketing considerations, Bird makes elective settlements in response to
customer complaints. Bird 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. On April 16, 1996, a class action suit was filed in the Superior Court of
the Commonwealth of Massachusetts against Bird. The complaint alleges that
Bird has knowingly manufactured, distributed and falsely advertised
defectively designed fiber glass based roofing shingles. The complaint sets
forth claims of fraud, negligent misrepresentation, negligence and breach
of express and implied warranty. The Company is currently in the process of
evaluating the complaint. The Company has tendered the defense of the
action to its insurance carriers. One of its insurance carriers has assumed
its defense.
13. On or about April 18, 1996, Bird received a grand jury subpoena issued upon
application of the United States Department of Justice, Antitrust Division,
for the production of certain documents. In addition, an executive officer
and a senior manager of Bird have received grand jury subpoenas providing
testimony before the grand jury. Bird and such executive officer and senior
manager are in the process of evaluating the subpoena and intend to
cooperate fully with the Department of Justice. It appears that the
subpoena relates to an investigation of the roofing materials industry.
Management does not believe that this matter will cause any material
change, adverse or otherwise, in the financial position or results of
operations of the Company.
14. Kensington Partners owned a 50% equity investment in Quantum II Partners
which was formed in 1993 to be the exclusive marketing representative to
sell Quantum II replacement windows manufactured by Kensington Partners.
In April 1996, certain litigation between the other 50% owner of Quantum
II Partners and Bird, as successor in interest to certain of Kensington
Partners' rights and obligations under the Quantum II Partnership, Supply
and Sales Representative Agreements, was concluded as a result of the
parties entering into a settlement agreement. The agreement calls for
Bird to receive total payments of $410,000 and for cancellation of the Sale
Representative and Supply Agreements, and termination of the partnership.
The settlement will be reported as income when realized which is expected
to be in the second quarter of 1996.
11
<PAGE> 13
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
PROPOSED MERGER
- ---------------
On March 14, 1996, the Company signed a definitive agreement with CertainTeed
Corporation ("CertainTeed"), a subsidiary of Saint-Gobain Corporation, providing
for CertainTeed to acquire in a merger transaction all of the Company's
outstanding common, preferred and preference shares.
On May 10, 1996, the Company received a notice from CertainTeed that stated that
CertainTeed terminated the merger agreement in accordance with its terms and
allowed the related tender offer for the outstanding common and preference stock
of the Company to expire without accepting any shares.
FINANCIAL CONDITION
- -------------------
As of March 31, 1996, the Company had cash and cash equivalents on hand totaling
$10,000 and total debt of approximately $3.3 million. The Company plans to
continue its aggressive efforts of managing working capital as a means of
generating funds.
The Company's external financing needs are augmented by the ability of its
wholly owned subsidiary, Bird Incorporated ("Bird"), to borrow under the Loan
and Security Agreement (the "Loan Agreement") dated November 30, 1994 between
Bird and Fleet Capital Corporation ("Fleet Capital"). The Loan Agreement
consists of a $15 million revolving credit commitment and a $5 million term
loan. On January 10, 1996, Bird paid down the term loan so that the outstanding
principal balance equaled $2.5 million. As of March 31, 1996, the term loan
totalled $2,375,000 and there were no amounts outstanding under the revolving
credit facility. Up to $5 million of the revolving credit facility can be used
for letters of credit. Letters of credit outstanding as of March 31, 1996
totaled $1,833,000.
Borrowings by Bird 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 Bird 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
12
<PAGE> 14
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
commitment due to the seasonality of the building materials manufacturing
business. As of May 8, 1996, an aggregate of $10,304,000 was available to the
Bird under the terms of the revolving credit facility under the Loan Agreement
of which $6,783,000 is outstanding.
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 common and
preference dividends), mergers, acquisitions, and disposition of assets. As of
March 31, 1996, Bird was in compliance with each of the prescribed covenant as
outlined in the Loan Agreement.
Interest on the revolving credit commitment under the First Amended Loan
Agreement accrues at the Fleet Capital base rate (as specified in such
Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at Bird's
election on all borrowings plus the greater of $25,000 per annum or 1/4% on any
unused portion of the commitment payable monthly in arrears. The interest on the
term loan accrues at the base rate or the LIBOR rate plus 2 3/4% at Bird's
election. The interest rate on outstanding borrowings at March 31, 1996 was
8.06%. The repayment of the principal on the term loan is at the rate of $62,500
per month through November 1996 and $71,417 per month thereafter with a final
principal payment due on November 30, 1997. The term loan was paid down by
$2,437,500 on January 10, 1996 which reduces the required final principal
payment to $1,018,300. Proceeds in excess of $100,000 from the sale of fixed
assets may, at Fleet Capital's discretion, be applied to the outstanding
principal payments of the term loan.
Net cash and cash equivalents decreased during the three month period ended
March 31, 1996 by approximately $3.7 million primarily due to the pay down of
the term loan in January 1996. The cash used by continuing operations for the
period ended March 31, 1996 decreased by $4,039,000 from $4,201,000 to $162,000
as compared to the comparable period in 1995. Cash used by operations was
attributable to a net loss of approximately $1,560,000 and several changes in
the balance sheet such as an a decrease of $637,000 in trade accounts
receivable, an increase of $1,478,000 in liabilities not relating to financing
activities and an increase of $1,256,000 relating to inventories. Due to the
seasonality of the roofing business, the
13
<PAGE> 15
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
winter months are historically the time when the Company builds its inventory in
anticipation of sales for the summer months.
The Company used $435,000 in investing activities for the period ended March 31,
1996 as compared to $47,238,000 of net cash provided from investing activities
for the same period in the prior year. The change is the result of $47.9 million
of cash receipts from the proceeds of the sale of primarily the assets of the
vinyl business, offset by cash used for capital expenditures of the roofing
business.
The net cash resulting from financing activities changed by approximately $21
million from the same period in the prior year. Cash used in financing
activities during 1996 resulted from the repayment of debt of $2.7 million as
compared to 1995 when the Company had net repayments of debt of approximately
$24 million.
The Company believes that cash flows generated from operations and funds
available as a result of its borrowing capacity will be adequate to meet its
working capital, projected capital expenditures and other financing needs.
RESULTS OF OPERATIONS
- ---------------------
Net sales from continuing operations decreased $10,177,000 or 61.2% for the
first quarter of 1996 compared to the same quarter in the prior year primarily
as a result of the sale of the Company's window fabrication and vinyl products
business units. Net sales for the roofing manufacturing business decreased
$2,453,000 or 27.6% compared to the same quarter in the prior year due to a
decline in volume. The decreased volume was primarily due to unfavorable weather
conditions in the northeastern region of the United States.
The Company's cost of sales from continuing operations for the first quarter of
1996 compared to the same period in the prior year decreased 56.6% from
$15,091,000 to $6,557,000 primarily a consequence of the sale of the Company's
window fabrication and vinyl products business units. Cost of sales for the
roofing business decreased 17.8% due primarily to decreased manufacturing costs
related to the decrease in volume. However, for the three month period ending
March 31, 1996, the roofing manufacturing business cost of sales as a percentage
of sales increased 12.1% from 89.6% to 101.7% as compared to the same period in
the prior year. The increase relates primarily to unabsorbed fixed costs during
routine plant shutdown and raw material price increases in glass mat and dry
felt.
14
<PAGE> 16
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
Selling, general and administrative ("SG&A") expenses for the three months ended
March 31, 1996 decreased 69.7% from $4,539,000 to $1,374,000 as compared to the
same period in the prior year. The decrease was primarily attributable to the
sale of the Company's window fabrication and vinyl products business units. SG&A
expenses of the Company's roofing manufacturing business decreased 21.9% from
the same period in the prior year. As a percentage of sales, SG&A expenses for
the roofing manufacturing business increased 1% from 12.4% for the three months
ended March 31, 1995 to 13.4% for the same period in the current year. SG&A
expenses for the three month period ended March 31, 1996 included costs of
approximately $300,000 associated with the proposed merger transaction with
CertainTeed Corporation.
Interest expense decreased approximately 88.3% from $641,000 to $75,000 for the
first quarter of 1996 compared to the first quarter of 1995. The decreased
interest expense relates primarily to the use of proceeds from the sale of the
Company's vinyl products business to reduce debt in March 1995.
Discontinued business activities income in 1995 reflects a gain of $20,579,000
on the sale of the vinyl products business, offset by a charge of $1,500,000 for
costs associated with the Company's employee benefit plans and future product
liability claims, both related to former roofing operations.
Equity losses from the Company's partnership in the Kensington window
fabrication business amounted to $372,000 for the period January 1, through
February 28, 1995.
No tax benefit was recorded for the period ended March 31, 1996 as there was no
reasonable assurance that related deferred tax assets would be realized in
future taxable years. The company's effective income tax rate from continuing
operations was 40% during the quarter ended March 31, 1995.
The roofing 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. Severe weather conditions also have a
negative impact on short term profitability. Accordingly, the results of
operations for the three month periods ended March 31, 1996 are not necessarily
indicative of the results to be expected for the full year.
On April 16, 1996, a class action suit was filed in the Superior Court of the
Commonwealth of Massachusetts against Bird.
15
<PAGE> 17
BIRD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(continued)
The complaint alleges that Bird has knowingly manufactured, distributed and
falsely advertised defectively designed fiber glass based roofing shingles. The
complaint sets forth claims of fraud, negligent misrepresentation, negligence
and breach of express and implied warranty. The Company is currently in the
process of evaluating the complaint. The Company has tendered the defense of the
action to its insurance carriers. One of its insurance carriers has assumed its
defense.
On or about April 18, 1996, Bird received a grand jury subpoena issued upon
application of the United States Department of Justice, Antitrust Division, for
the production of certain documents. In addition, an executive officer and a
senior manager of Bird have received grand jury subpoenas providing testimony
before the grand jury. Bird and such executive officer and senior manager are in
the process of evaluating the subpoena and intend to cooperate fully with the
Department of Justice. It appears that the subpoena relates to an investigation
of the roofing materials industry. Management does not believe that this matter
will cause any material change, adverse or otherwise, in the financial position
or results of operations of the Company.
16
<PAGE> 18
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- -------------------------
On April 16, 1996, a class action suit was filed in the Superior Court of
the Commonwealth of Massachusetts against Bird Incorporated, a wholly owned
subsidiary of the company. The complaint alleges that Bird Incorporated has
knowingly manufactured, distributed and falsely advertised defectively
designed fiber glass based roofing shingles. The complaint sets forth
claims of fraud, negligent misrepresentation, negligence and breach of
express and implied warranty. The Company is currently in the process of
evaluating the complaint. The Company has tendered the defense of the
action to its insurance carriers. One of its insurance carriers has assumed
its defense.
On or about April 18, 1996, Bird Incorporated received a grand jury
subpoena issued upon application of the untied States Department of
Justices, Antitrust Division, for the production of certain documents. In
addition, an executive officer and a senior manager of the Company have
received grand jury subpoenas providing testimony before the grand jury.
The Company and such executive officer and senior manager are in the
process of evaluating the subpoena and intend to cooperate fully with the
Department of Justice. It appears that the subpoena relates to an
investigation of the roofing materials industry. Management does not
believe that this matter will cause any material change, adverse or
otherwise, in the financial position or results of operations of the
Company.
Item 2. Changes in Securities
- -----------------------------
The Loan and Security Agreement dated as of November 30, 1994 ("Loan
Agreement") by and among Bird Incorporated, a wholly owned subsidiary of
the Company, and Fleet 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
17
<PAGE> 19
PART II - OTHER INFORMATION
---------------------------
(continued)
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 $1,506,000 for the four quarterly periods ended February 15,
1995. The quarterly dividend on the Preference Stock due February 15,
1996 has, with the consent of Fleet Capital, been declared and paid in
full.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibit 11 - Statement Regarding Computation of per Share Earnings
(b) Reports on Form 8-K. On March 25, 1996, the Company filed a Form 8-K
disclosing the signing of an agreement and plan of merger with
CertainTeed Corporation on March 14, 1996.
18
<PAGE> 20
BIRD CORPORATION
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIRD CORPORATION
-------------------------
Date: May 13, 1996
/s/ Richard C. Maloof
-------------------------
Richard C. Maloof
President and
Chief Operating Officer
/s/ Donald L. Sloper, Jr.
-------------------------
Donald L. Sloper, Jr.
Controller (Principal
Accounting Officer)
<PAGE> 21
BIRD CORPORATION
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Page No.
- ----------- ----------
11 Statement regarding computation of per share
earnings
<PAGE> 1
EXHIBIT 11
BIRD CORPORATION
<TABLE>
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(In thousands, except share and per share amounts)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------------ -----------
<S> <C> <C>
Primary earnings per share
- --------------------------
Earnings (loss) from continuing operations ($ 1,560) $ 9,036
Deduct dividend requirements:
Preferred stock (7) (7)
Convertible preference stock (377) (377)
---------- -----------
Net earnings (loss) from continuing operations ($ 1,944) $ 8,652
Net loss from discontinued operations 0 (236)
---------- -----------
Net earnings (loss) applicable to
common stock ($ 1,944) $ 8,416
---------- -----------
Weighted average number of common
shares outstanding (1) 4,122,742 4,101,951
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (2) 0 6,592
---------- -----------
Weighted average number of common
shares outstanding as adjusted 4,122,742 4,108,543
---------- -----------
Primary earnings (loss) per common share:
Continuing operations ($ 0.47) $ 2.11
Discontinued operation $ 0.00 ($ 0.06)
---------- -----------
Applicable to common stock ($ 0.47) $ 2.05
========== ===========
<FN>
(1) See Note 3 of Notes to Consolidated Financial Statements.
(2) 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>
<PAGE> 2
EXHIBIT 11
BIRD CORPORATION
<TABLE>
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(In thousands, except share and per share amounts)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------------ -----------
<S> <C> <C>
Fully diluted earnings per share (2)
- ------------------------------------
Earnings (loss) from continuing operations ($ 1,560) $ 9,036
Deduct dividend requirements of
preferred stock (7) (7)
---------- -----------
Net earnings (loss) from continuing operations (1,567) 9,029
Net loss from discontinued operations 0 (750)
---------- -----------
Net earnings (loss) applicable to
common stock ($ 1,567) $ 8,279
---------- -----------
Weighted average number of common
shares outstanding (1) 4,122,742 4,101,951
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 6,592
Assuming conversion of convertible
preference stock 731,955 731,955
---------- -----------
Weighted average number of common
shares outstanding as adjusted 4,854,697 4,840,498
---------- -----------
Fully diluted earnings (loss) per common share
applicable to common stock:
Continuing operations ($ (0.32) $ 1.87
Discontinued operation $ 0.00 ($ 0.05)
========== ===========
($ 0.32) $ 1.82
========== ===========
<FN>
(1) See Note 3 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 MARCH 31,
1996 FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10Q.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 10,000
<SECURITIES> 0
<RECEIVABLES> 4,977,000
<ALLOWANCES> 184,000
<INVENTORY> 5,957,000
<CURRENT-ASSETS> 13,564,000
<PP&E> 40,138,000
<DEPRECIATION> 16,857,000
<TOTAL-ASSETS> 40,550,000
<CURRENT-LIABILITIES> 12,062,000
<BONDS> 2,125,000
<COMMON> 4,400,000
0
1,396,000
<OTHER-SE> 19,691,000
<TOTAL-LIABILITY-AND-EQUITY> 40,550,000
<SALES> 6,446,000
<TOTAL-REVENUES> 6,446,000
<CGS> 6,557,000
<TOTAL-COSTS> 6,557,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,000
<INCOME-PRETAX> (1,560,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,560,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,560,000)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
