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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission file number
1-4087
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PLY GEM INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-1727150
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
777 THIRD AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (212) 832-1550
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.25 par value New York Stock Exchange
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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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant, using the closing price which the registrant's voting stock was
sold on such date, was $214,862,000 as of March 24, 1995.
The number of shares outstanding of the registrant's common stock, $.25 par
value was 14,561,894 as of March 24, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
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IDENTIFICATION OF DOCUMENT PART INTO WHICH INCORPORATED
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Proxy Statement for Annual Meeting
of Stockholders to be held on May
11, 1995 Part III -- Items 10, 11, 12 and 13
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PART I
ITEM 1. BUSINESS.
PLY GEM Industries, Inc., a Delaware corporation ("PLY GEM", hereinafter with
its subsidiaries referred to collectively as the "Company"), was originally
incorporated in 1946 in New York and reincorporated in Delaware in 1987. The
Company is a national manufacturer and distributor of a wide range of specialty
products for the home improvement industry. The Company believes that it is
among the nation's largest manufacturers of wood windows, vinyl siding and
accessories, and vinyl windows, and one of the major suppliers of specialty
wood and other related products. Each of the Company's ten wholly-owned
subsidiaries and its one division have achieved a leading market position
within their respective niches of the home improvement industry.
The home improvement industry includes products designed for all remodeling,
repair and alteration of residential structures whether the work is performed
by the homeowner (the "do-it-yourselfer" or "D-I-Y"), or by a professional
contractor. Home improvement products, which in some cases are also used in new
construction applications, are sold either through retailers or specialty
wholesale distributors that in turn sell to retailers, contractors and
builders. The success of the recently introduced warehouse home center format,
such as that utilized by Home Depot, continues to change the traditional way in
which home improvement products are sold.
The Company's primary objective is to become the supplier of choice to the
home improvement industry for high margin specialty products. The Company
believes that it is uniquely positioned to provide products and services to the
major home center retailers, which the Company believes is the fastest growing
segment of the home improvement industry.
The Company's products are distributed through an extensive network which
includes major retail home center chains, specialty home remodeling
distributors, lumber and building products wholesalers, professional
contractors and Company operated distribution centers. The products are
marketed throughout the United States and Canada through Company sales
personnel and independent representatives.
During 1994, the Company announced a restructuring program which is intended
to strengthen the Company's core businesses, improve long-term profitability
and enhance shareholder value. These actions are part of the Company's
continuing effort to identify opportunities to improve its cost structure. The
Company's restructuring program provides for a wide range of targeted
initiatives including delayering the organization, consolidation and closure of
selected regional distribution and manufacturing facilities, abandonment of
certain information systems and other actions including lease termination
expenses. Implementation of certain of these initiatives has already begun,
while others are planned to be completed during 1995.
The Company operates predominantly in one business segment -- Home
Improvement Products. Prior to 1992, the Company reported in two industry
segments, Home Improvement Products and Home Products. The operations of the
latter segment, consisting of manufacturing and distribution of disposable
paper vacuum cleaner bags, have become less significant over the past several
years and as a result the Home Products operations are not material to an
understanding of the Company's business taken as a whole.
BUSINESSES OF THE COMPANY
The Company operates in four primary business groups: Windows, Doors and
Siding; Specialty Wood Products; Distribution; and Home Products. Set forth
below are the operating entities within each group and the year in which the
entity was acquired by the Company. Ply*Gem Manufacturing is a division of the
Company and constitutes the Company's original business.
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YEAR ACQUIRED
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WINDOWS, DOORS AND SIDING
Variform, Inc. ("Variform")....................................... 1986
Great Lakes Window, Inc. ("Great Lakes").......................... 1986
SNE Enterprises, Inc. ("SNE")..................................... 1989
Richwood Building Products, Inc. ("Richwood")..................... 1992
SPECIALTY WOOD PRODUCTS
Ply*Gem Manufacturing
Hoover Treated Wood Products, Inc. ("Hoover")..................... 1983
Sagebrush Sales, Inc. ("Sagebrush")............................... 1988
Continental Wood Preservers, Inc. ("Continental")................. 1988
DISTRIBUTION
Goldenberg Group, Inc. ("Goldenberg")............................. 1983
Allied Plywood Corporation ("Allied")............................. 1985
HOME PRODUCTS
Studley Products, Inc. ("Studley")................................ 1969
</TABLE>
WINDOWS, DOORS AND SIDING
SNE Enterprises, Inc.: SNE is a major manufacturer of wood windows, competing
with companies such as Andersen, Marvin and Pella. The Company believes that it
is the second largest supplier of wood windows to the major home center
retailers.
SNE manufactures a full line of wood and vinyl windows and patio doors, glass
and polycarbonate skylights, and wooden interior bifold doors and shutters. Its
products are sold primarily under the Crestline (R) and Vetter (R) brand names
and include double hung, casement, sliding and awning windows as well as hinged
and sliding patio doors. SNE recently introduced a window that offers the
maintenance free and insulating benefits of a solid vinyl window yet has a wood
interior that can be painted or stained. SNE's windows are available primed or
with an exterior cladding of either aluminum or vinyl. They are available in
both custom and stock sizes, and are sold through an extensive network of home
centers, lumber and building materials retailers, and specialized value added
distributors. SNE's products are marketed to both the home improvement and new
construction markets.
The market for wood windows is highly competitive. SNE differentiates itself
from its competition by pursuing a dual brand strategy, having a distribution
base in both the remodeling and new construction markets, extensive custom
design and manufacturing capabilities, and a superior field service and support
network. The Company believes that SNE will continue to grow as its existing
products gain brand recognition from cooperative and other advertising programs
with its retail customers, and as it introduces new products.
Variform, Inc.: Variform is a producer of vinyl siding in the United States
and a leading supplier to the major home center retailers. Its vinyl siding,
soffit and accessories are produced in a variety of patterns and colors,
including woodgrains. Vinyl siding is used in both remodeling and new
construction applications and has captured an increasing share of the market
for exterior siding materials (which primarily includes wood, aluminum and
masonry) due to its ease of installation, durability and low maintenance
requirements.
Vinyl siding is sold to either specialized wholesale distributors who in turn
sell directly to remodeling contractors (one-step distribution), or to building
materials distributors who sell to home centers and lumberyards who, in turn,
sell to remodeling contractors (two-step distribution). While Variform sells
through both channels of distribution, it focuses on the two-step market, where
management believes it is the dominant supplier to the major home center
retailers and retail lumber yards, primarily through private label programs
with building materials distributors. The Company believes that Variform is
able to compete on
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favorable terms as a result of its broad distribution coverage, high quality
innovative products, and production efficiency. Additionally, Variform is
strongest in the retail segment of the market, which continues to grow at a
rate that is faster than the overall market, as warehouse retailers continue to
take business away from the traditional one-step market by offering remodeling
contractors a "one-stop-shop" for all of their home improvement material needs.
Great Lakes Window, Inc.: Great Lakes is a manufacturer of high quality,
energy efficient, maintenance free vinyl windows. Its products include double
hung, casement, sliding and awning windows, as well as hinged and sliding patio
doors. Great Lakes offers a wide selection of products, including a variety of
exterior colors and interior woodgrains, several different grille patterns and
a wide assortment of glass options. Great Lakes products are primarily used in
replacement applications, where windows and patio doors are manufactured for a
specific order on a custom size basis. During 1994, Great Lakes introduced a
new vinyl window line to penetrate the new construction market which will be
sold primarily through two-step distribution.
Great Lakes sells its products through its highly trained sales force. It
sells its products to specialty window distributors who in turn sell to
remodeling contractors, and direct to large remodeling companies. The Company
believes that Great Lakes is able to compete successfully due to the breadth
and quality of its product offering and its merchandising support. In addition,
Great Lakes has been the forerunner in introducing new designs to the industry.
Great Lakes' innovative locking system, interior woodgrains and its use of
various glass treatments are a few examples of innovations that distinguish
Great Lakes from its competition. Great Lakes expects to continue to develop
new designs and features for its products in the future.
Richwood Building Products, Inc.: Richwood is a manufacturer of siding
accessories to the remodeling and new construction markets. Siding accessories
include blocks, which allow for the flush mounting of items like light fixtures
to the exterior of a home, and gable vents. Their products are sold through a
network of manufacturers representatives and directly to home centers,
lumberyards and wholesale distributors of building materials, electrical and
plumbing products. Richwood is the only manufacturer of siding accessories to
offer a color selection that matches the colors offered by most, if not all,
major manufacturers of vinyl siding in the United States and Canada.
SPECIALTY WOOD PRODUCTS
Hoover Treated Wood Products, Inc.: Hoover is a manufacturer of pressure
treated wood products, selling to home center chains, lumberyards and building
material retailers and wholesalers. Its products include lumber and plywood
which have been treated for fire retardancy and for protection against moisture
and insect infestation.
Sagebrush Sales, Inc.: Sagebrush is a manufacturer and distributor of
specialty lumber and building products serving the home improvement and
building materials market in the Southwest.
Ply*Gem Manufacturing is a manufacturer and distributor of decorative wall
coverings. Its products include decorator paneling, planking and tileboard for
the home improvement market. Ply*Gem Manufacturing also distributes a complete
line of imported ceramic, porcelain and marble floor tile marketed through home
centers and lumberyards.
Continental Wood Preservers, Inc.: Continental is a Midwestern manufacturer
of pressure treated wood products for home improvement retailers and
lumberyards in the Midwest.
While the specialty wood products industry is very competitive, the Company
believes it is able to compete effectively by providing superior customer
service, outstanding quality and, wherever possible, proprietary products. The
companies within the group focus on high margin, niche markets within the
broader defined wood products industry which tends to be commodity driven. Its
products are sold through home center retailers and wholesalers of building
materials. The Company believes that growth in this segment of its business
will result from continued expansion of its share of the home center market.
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DISTRIBUTION
Allied Plywood Corporation: Allied is a national distributor of a broad range
of high end specialty wood and wood related products, including hardwood
plywood, melamine and other laminated board products, hardwood lumber, solid
surface materials and cabinet hardware. It is also a major importer of Russian
wood products, through its affiliate, Russian Wood Express Inc. ("Russian
Wood"). Allied's customers are industrial woodworkers, including cabinet
manufacturers, architectural millworkers, and manufacturers of store fixtures,
furniture, signs and exhibits. Allied sells its products through an extensive
network of eleven company operated warehouse facilities and utilizes numerous
public warehouses located primarily in the East. A hub and spoke distribution
network was recently established at Allied to serve its six Northeast
distribution centers. This operation, which allows a central warehouse to serve
a broad region, now handles approximately 60% of the material sold in the
Northeast and has improved inventory turns. Sales are generated by a well
trained and experienced sales force.
Allied differentiates itself from its competitors, which primarily include
local independent distributors, by its superior customer service, geographic
coverage and breadth of product line. As a result, it has become a preferred
distributor of many products, selling them on an exclusive, or limited
exclusive, basis.
The Company believes that Allied's future growth will be from the
introduction of new products, expansion of its customer base and the
development of further opportunities through Russian Wood. Allied recently
began to penetrate the retail home center market with some of its products and,
the Company believes, will increase its sales to that industry segment.
Goldenberg Group, Inc.: Goldenberg is a West Coast distributor and
manufacturer of furniture components, laminates and board products to furniture
manufacturers and other original equipment manufacturers, building material
retailers and wholesalers.
HOME PRODUCTS
Studley Products, Inc.: Studley is a manufacturer of disposable paper vacuum
cleaner bags. In addition, it sells related floor care products. Studley's
products are sold to manufacturers of vacuum cleaners, mass merchandisers and
other retailers and recently to the retail home center market.
Even though the market is very competitive Studley is able to compete on the
basis of its technical expertise in the design and manufacture of its products,
and in its use of high performance materials. Studley introduced an innovative
new vacuum cleaner bag that is able to capture pollen and other allergy causing
bacteria through the use of high performance materials. The continued
introduction of new products and the fact that many consumers are now likely to
own more than one vacuum cleaner are expected to provide opportunities for
future growth.
PRODUCTION AND FACILITIES
The Windows, Doors and Siding group operates ten manufacturing and warehouse
facilities in the United States and one in Canada. Vinyl siding is produced by
an extrusion process which forms siding through various dies from certain resin
compounds, primarily polyvinyl chloride. Siding accessories are manufactured
through an injection molding process using proprietary mold designs. Insulated
vinyl framed replacement windows are manufactured, using a patented process,
from insulated glass and vinyl extrusions. The manufacturing process of wood
windows and patio doors involves cutting and shaping of components that are
assembled with high speed tools. In 1994, SNE closed three window assembly and
distribution facilities and consolidated these operations into its main
manufacturing facility in Mosinee, Wisconsin. This action plus the addition of
new automated production equipment, will effectively double the manufacturing
capacity of SNE and lead to improved service to its customers.
The Specialty Woods Products group operates eight production and warehouse
facilities in the United States. The treatment process of wood products
generally involves vacuum pressure impregnation of chemicals into the wood in
an enclosed vessel to ensure thorough penetration to meet industry and
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government standards. Some of the wood is kiln dried after treatment to remove
moisture imparted during the pressure impregnation process, providing a clean,
dry and easily handled product. The Company's high-speed laminating production
facilities afford flexibility in laminating paper and vinyl to various
substrate materials. Specialty lumber products, including siding, decking and
paneling are manufactured by the Company in two facilities with a combined
annual production capacity in excess of 100 million board feet.
The Distribution group operates thirteen distribution centers and utilizes
numerous public warehouses located in various major port cities. It also
operates two manufacturing facilities.
Disposable paper vacuum cleaner bags are manufactured at one facility in the
United States and one in Canada. Disposable paper vacuum cleaner bags are
manufactured on highly automated equipment, the major part of which was
designed and built by the Company. The Company is continuously engaged in
designing vacuum cleaner bags for new vacuum cleaner models.
RAW MATERIALS
The principal raw materials used in the manufacture of the Company's products
are polyvinyl chloride, polypropylene, glass, vinyl extrusions, particle board,
fiberboard, plywood, various species of lumber such as pine, spruce, luaun,
hemlock and fir, various chemicals, filter paper, and paper.
The Company purchases its raw materials from a large number of domestic and
international sources. The Company believes that there are alternative sources
of supply in the event of its inability to purchase from its present suppliers.
SEASONALITY
The Company's home improvement business is seasonal, particularly in the
Northeast and Midwest regions of the United States where inclement weather
during the winter months usually reduces the level of activity in both the home
improvement and new construction markets. The Company's lowest sales levels
usually occur during the first and fourth quarters. Since a high percentage of
the Company's manufacturing overhead and operating expenses are relatively
fixed throughout the year, operating income tends to be lower in quarters with
lower sales. Inventory and borrowings to satisfy working capital requirements
are usually at their highest level during the second and third quarters.
BACKLOG
In general, the Company does not produce against a backlog of firm orders;
production is geared primarily to the level of incoming orders and to
projections of future demand. Significant inventories of finished goods, work-
in-process and raw materials are maintained to meet delivery requirements of
customers.
Hoover and Continental maintain a backlog of firm orders to be filled in an
amount representing approximately 5% of its annual sales. Distribution consists
of warehouse operations where orders are filled from stock and where there is
no significant backlog.
EMPLOYEES
At December 31, 1994 approximately 4,200 persons were employed by the
Company. Approximately 1,500 of such employees are covered by collective
bargaining agreements which expire at various times over the next five years.
Although the Company had two work stoppages of short duration during 1994,
neither had a material adverse effect on the Company's operations and the
Company considers its relations with its employees to be good. Under the
Company's restructuring program, the Company expects to reduce its work force
through 1995 by approximately 600 positions. Approximately 150 positions were
eliminated under the program during 1994.
ITEM 2. PROPERTIES.
The Windows, Doors and Siding group operates ten manufacturing and warehouse
facilities in the United States and one in Canada ranging in size from
approximately 20,000 square feet to 660,000 square feet. Of these facilities,
six are owned, and five are leased under net leases that expire at various
dates through 2017. The group's manufacturing facilities operated at ranges of
approximately 75% to 90% of capacity during 1994.
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The Specialty Woods group has eight manufacturing and warehouse facilities in
the United States ranging in size from approximately 20,000 square feet to
215,000 square feet. Of these facilities, six are owned,
and two are leased under net leases that expire in 1996. The group's
manufacturing facilities operated at ranges of approximately 60% to 70% of
capacity during 1994.
The Distribution group operates thirteen distribution centers ranging in size
from approximately 16,000 square feet to 177,000 square feet and two
manufacturing facilities of approximately 38,000 square feet and 91,000 square
feet. Two facilities are owned, and thirteen are leased under leases that
expire at various dates through 2003. Goldenberg's two manufacturing facilities
operated at approximately 80% of capacity during 1994.
Home Products has one manufacturing facility (approximately 160,000 square
feet) in the United States and one (approximately 39,000 square feet) in
Canada. These facilities are leased by the Company under leases that expire in
2007. The facilities operated at ranges of approximately 60% to 65% of capacity
during 1994.
The Company's building, machinery and equipment have been generally well
maintained, are in good operating condition and are adequate for current and
future production requirements.
The Company's executive offices are located at 777 Third Avenue, New York,
New York and consist of approximately 14,700 square feet of office space which
is leased through 1999.
ITEM 3. LEGAL PROCEEDINGS.
Hoover, a wholly-owned subsidiary of Ply Gem, is a defendant, along with many
other parties, in a number of commercial lawsuits, including a purported class
action on behalf of certain Maryland homeowners, alleging property damage
caused by alleged defects in certain pressure treated interior wood products it
produced and sold through August, 1988. Sales of this product constituted less
than 3% of the total sales of Ply Gem and its subsidiaries on a consolidated
basis during the period January 1, 1984 through December 31, 1990. Ply Gem is
also a defendant in many of these suits. The number of lawsuits pending as of
December 31, 1994, as well as the number of lawsuits filed in 1993 and 1994 has
declined significantly from earlier periods.
Many of the suits and claims have been settled. In those suits that remain
pending, direct defense costs are being paid by either insurance carriers,
under reservations of rights agreements, or out of insurance proceeds. Two
actions have proceeded to trial against Hoover and resulted in jury verdicts
against it. In one of these actions, judgment was entered in Hoover's favor by
the court after a jury verdict against it and the plaintiff's petition to
appeal the judgment entered in Hoover's favor was denied. Hoover is appealing
the other judgment and believes that it has meritorious grounds for overturning
it in whole or in part.
Hoover and the Company are engaged in litigation with their insurers
regarding coverage for these lawsuits and claims. Hoover has settled its
coverage claims with a majority of its insurers and is negotiating settlements
with others. Hoover and the Company believe they have meritorious claims for
coverage from their remaining unsettled insurers and are seeking declaratory
judgments confirming such coverage. The proceeds from settled insurance claims,
along with the proceeds from a settlement of claims by Hoover against certain
suppliers of materials used by it in the production of treated wood, are
available for the settlement of the underlying property damage actions,
including the jury verdict now on appeal. The Company believes that Hoover's
remaining coverage disputes will be resolved within the next two years on a
satisfactory basis and a sufficient amount of additional coverage will be
available to Hoover. In reaching this belief, it has analyzed Hoover's
insurance coverage, considered its history of successful settlements with
primary and excess insurers and consulted with counsel.
Hoover and the Company are vigorously defending the underlying lawsuits which
cannot be resolved on a reasonable basis and believe that they have meritorious
defenses to those suits including, in the case of the Company, the defense that
it has been improperly joined, as it did not manufacture or market the Hoover
products at issue, and is not legally liable for the damage allegedly caused by
them.
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In evaluating the effect of the lawsuits, a number of factors have been
considered, including: the number and exposure posed by the pending lawsuits;
the significant decline in the number of lawsuits filed in 1993 and to date;
the availability of various legal defenses, including statutes of limitations;
the existence of settlement protocols; an agreement indemnifying Hoover as to
certain past and future claims; and Hoover's experience to date in settling
with its insurance companies and the likely availability of proceeds from
additional insurance. Based on its evaluation, the Company believes that the
ultimate resolution of the lawsuits and the insurance claims will not have a
material adverse effect upon the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock has been listed on the New York Stock Exchange
since December 1, 1994. Prior to that date, the stock traded on the American
Stock Exchange. The following table sets forth, for the periods indicated, the
high and low market prices for the Company's Common Stock and dividends paid.
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1994 1993
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QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
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First......................... $25 5/8 $17 1/2 $.03 $13 3/8 $11 1/2 $.03
Second........................ 23 5/8 19 1/2 .03 11 7/8 10 1/8 .03
Third......................... 23 1/2 18 3/4 .03 13 1/2 10 3/8 .03
Fourth........................ 23 1/4 17 .03 18 1/4 14 1/4 .03
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The Company has paid cash dividends on its Common Stock since 1976 and
presently pays quarterly dividends at the annual rate of $.12 per share.
The Company's revolving credit facility has limitations on the annual
amounts of the Company's dividends. Under the most restrictive provision, at
December 31, 1994, approximately $2,900,000 was available for the payment of
dividends in 1995.
The number of holders of record of the Company's Common Stock as of March
13, 1995 was approximately 2,700.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below as of the dates and for the
periods indicated are derived from the consolidated financial statements of
the Company. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and notes
thereto.
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1994(1) 1993 1992 1991 1990(1)
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
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INCOME STATEMENT DATA:
Net sales........................ $796,419 $722,600 $623,182 $561,550 $545,511
Net income (loss)................ (8,531) 9,650 6,306 4,039 3,175
Net income (loss) per share...... (.62) .75 .56 .39 .31
BALANCE SHEET DATA:
Total assets..................... $345,569 $344,944 $313,997 $281,124 $329,975
Long-term debt................... 79,501 92,898 62,451 57,996 106,186
Capital lease obligations........ 7,159 7,166 7,215 105 236
Convertible subordinated deben-
tures........................... -- 50,000 50,000 50,000 46,489
Stockholders' equity............. 161,636 128,942 118,439 111,349 107,620
Dividends per common share....... .12 .12 .12 .12 .12
</TABLE>
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(1) Results include a nonrecurring pretax charge of $41.0 million and $4.2
million in 1994 and 1990, respectively related to employee severance,
facility consolidations and closures and asset writedowns.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
This discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of the Company during
the three-year period ended December 31, 1994. It should be read in
conjunction with the financial statements and notes thereto.
As more fully described in Note 2 to the consolidated financial statements,
the Company recorded a nonrecurring charge of $41.0 million ($25.7 million
after tax) during 1994. The nonrecurring charge consists of $29.1 million
related to a restructuring program and $11.9 million related to unusual items
primarily consisting of the write-offs of certain intangible assets and
discontinued products and costs associated with the Company's business process
redesign. Approximately $17 million of the charge is for noncash asset write-
offs.
The Company's restructuring program is intended to strengthen the Company's
core businesses, improve long-term profitability and enhance shareholder
value. These actions are part of the Company's continuing effort to identify
opportunities to improve its cost structure. The Company's restructuring
program provides for a wide range of targeted initiatives including delayering
the organization, consolidation and closure of selected regional distribution
and manufacturing facilities, abandonment of certain information systems and
other actions including lease termination expenses. Implementation of certain
of these initiatives has already begun, while others are planned to be
completed during 1995. The restructuring includes an expected reduction in
workforce of approximately 600 positions. As of December 31, 1994,
approximately 150 positions have been eliminated. The restructuring actions
and the unusual charge are expected to result in annualized pretax savings of
approximately $13 million upon full implementation. There can be no assurance,
however, that the Company will realize these savings.
Furthermore, the Company expects to exit certain lower margin businesses
during 1995. The estimated annual net sales associated with these discontinued
products is approximately $25 million. The effect of these lost revenues on
1995 net income is not expected to be significant.
NET SALES
Net sales for the year ended December 31, 1994 were $796.4 million which
represents a 10.2% increase over 1993 net sales of $722.7 million. The Company
continues to improve its position in the retail channel of the home
improvement market as evidenced by a 34% increase in sales to this market. The
1994 sales growth was driven by the Company's Windows, Doors and Siding
subsidiaries which experienced a 14% increase in sales. Increased market
penetration and new products helped fuel this growth. Of the total net sales
increase in 1994, approximately 6% is attributable to increases in unit volume
and the remainder to increases in average selling prices.
Strong sales in the Company's Windows, Doors and Siding group, and improved
sales of the Company's Distribution business, resulted in a 16% increase in
net sales for the year 1993 when compared to 1992. Approximately 10% of the
increase was attributable to unit volume growth and 6% due to increases in
average selling prices.
GROSS PROFIT
Gross profit, expressed as a percentage of net sales, was 19.3% in 1994,
compared with 19.1% in 1993 and 20.7% in 1992. Although the price of PVC resin
and glass, which are used in the manufacturing of siding and windows,
increased significantly during 1994, improved labor productivity, overall
lower conversion costs and the absence of new plant start-up costs, which were
incurred in 1993, offset these increases and were primarily responsible for
the improvement in gross profit during 1994. Higher raw material costs
(particularly wood and resin), competitive pricing pressures, costs of
introducing new products and the aforementioned new plant start-up costs
accounted for most of the decline in gross profit experienced in 1993 as
compared to 1992.
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The Company's results of operations are affected by fluctuations in the
market prices of wood products used as raw materials in its various
manufacturing operations. Over the years, the Company has experienced
significant fluctuations in the cost of wood products from primary suppliers. A
variety of factors over which the Company has no control, including
environmental regulations, weather, economic conditions and natural disasters,
impact the cost of wood products. The Company anticipates that these
fluctuations will continue in the future. Although the Company attempts to
increase sales prices of its products in response to higher wood products
costs, such sales prices often lag behind the escalation of the cost of raw
materials in question. While the Company intends to increase prices in a timely
manner to cover further increases in the cost of wood products, its ability to
do so may be limited by competitive or other factors.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses, as a percentage of net sales,
decreased to 14.2% in 1994 as compared to 14.8% in 1993 and 16.3% in 1992. In
general, the improvement reflects the efforts by the Company to manage expense
growth relative to revenue growth and the implementation of cost containment
programs.
Specifically, the decrease in 1994 is primarily attributable to a lower
provision for bad debts, certain administrative and functional consolidations
and work force reductions, partially offset by employment costs associated with
the creation of new positions in purchasing, executive management, information
systems, total quality management and marketing. Economies resulting from the
absorption of fixed expenses over a larger sales base also attributed somewhat
to the improvement in 1994 and were primarily responsible for the improvement
in 1993.
INCOME FROM OPERATIONS
Income from operations, excluding the $41.0 million nonrecurring charge
described previously, increased 30% to $41.1 million in 1994 from $31.6 million
in 1993. Income from operations was $27.4 million in 1992. The improvements are
due to the factors discussed above.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
Amortization of goodwill and other intangibles was $4.2 million, $4.7 million
and $4.8 million in 1994, 1993 and 1992, respectively. The decrease in
amortization in 1994 of $0.5 million, when compared to 1993, is attributable to
the write-off of certain intangible assets as described in Note 2 to the
consolidated financial statements.
INTEREST EXPENSE
Interest expense was $7.5 million in 1994 compared to $10.1 million in 1993
and $9.6 million in 1992. Lower interest expense in 1994 resulted from the
conversion of the Company's 10% Convertible Subordinated Debentures
("Debentures") into common stock during March 1994, partially offset by higher
average debt balances and higher interest rates experienced during the year.
The slight increase in interest expense during 1993 as compared to 1992 is due
primarily to higher borrowing levels during 1993.
OTHER INCOME (EXPENSE)
Other income (expense) primarily includes the costs associated with the sale
of accounts receivables program, partially offset in 1993 by a gain resulting
from an involuntary conversion of property.
INCOME TAXES
The effective income tax rate (benefit in 1994) was 28.6% in 1994, 44.8% in
1993 and 44.6% in 1992. The lower tax rate in 1994 is due to the
proportionately higher amount of non-deductible goodwill amortization in 1994
as compared to the loss before taxes than in 1993 and certain state tax
benefits related to the nonrecurring charge which, in accordance with the
criteria set forth in Financial Accounting Standards Board Statement No. 109,
were not recognized. Excluding the effect of the nonrecurring charges, the
effective tax rate in 1994 was 41%.
9
<PAGE>
The effective income tax rate in 1993 and 1992 was approximately the same.
During 1993, the federal statutory rate was increased by 1% retroactive to
January 1, 1993. This rate increase in 1993 was offset by a proportionately
lower amount of non-deductible goodwill amortization in 1993 as compared to
income before taxes than in 1992.
NET INCOME
Net income, before the nonrecurring charge, increased 77% to $17.2 million in
1994 from $9.7 million in 1993. Net income was $6.3 million in 1992. The
factors cited above were responsible for the improved results of the Company.
LIQUIDITY AND CAPITAL RESOURCES
In February 1994, the Company entered into a five-year revolving credit
facility with a syndicate of banks which provides available financing of up to
$200 million. Initial borrowings were used to repay the Company's previous bank
credit facilities. The new credit facility provides the Company with financing
at competitive prices, strengthens the balance sheet by extending debt
maturities to 1999 and makes available additional resources to fund the
Company's growth programs. Approximately $92 million was available under this
facility at December 31, 1994. See Note 8 to the consolidated financial
statements for additional information on the new credit facility.
As more fully described in Note 8 to the consolidated financial statements,
in March 1994 holders of the Company's Debentures converted a total principal
amount of approximately $50 million into 2,751,328 shares of the Company's
common stock. As a result, the Company's net worth was increased by
approximately $49.1 million after the costs of the conversion; in addition, the
Company will save $5 million of annual interest expense.
The sale of accounts receivable program, which is a $50 million facility,
resulted in the sale of $40.0 million of accounts receivables at December 31,
1994 compared to $20.0 million at the end of 1993.
The table below summarizes the Company's cash flow from operating, investing
and financing activities as reflected in the Consolidated Statement of Cash
Flows.
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Cash provided by (used in)
Operating activities................................. $ 48.9 $ 4.7 $ 5.5
Investing activities................................. (20.0) (11.0) (24.9)
Financing activities................................. (27.0) 16.9 16.9
------ ------ ------
Net increase (decrease) in cash and cash equiva-
lents............................................. $ 1.9 $ 10.6 $ (2.5)
====== ====== ======
</TABLE>
OPERATING ACTIVITIES
Cash flow provided from operations was $48.9 million, an increase of $44.2
million compared to $4.7 million provided in 1993. Although the Company
reported a net loss of $8.5 million for 1994, such loss was the result of
nonrecurring charges of $41.0 million. Approximately 60% of the nonrecurring
charge will require cash outlays of which approximately $5.2 was spent as of
the end of 1994.
The increase in cash from operations resulted primarily from improved
operating results (before nonrecurring charges), implementation of inventory
reduction programs resulting primarily from discontinued sales of lower margin
products and proceeds from the Company's accounts receivable program more fully
discussed in Note 3 to the consolidated financial statements. Cash generated
from operations was used to fund capital expenditures, repurchase Company
shares and reduce bank debt.
10
<PAGE>
The Company's working capital requirements for inventory and accounts
receivable are impacted by changes in raw material costs, the availability of
raw materials, growth of the Company's business and seasonality. As a result,
such requirements may fluctuate significantly.
INVESTING ACTIVITIES
Investing activities of the Company during the discussion periods primarily
consist of acquisition of property, plant and equipment and the receipt and use
of funds held for construction.
Capital expenditures were $23.0 million in 1994 compared to $20.5 million in
1993 and $17.1 million in 1992. Most of the outlays in 1994 were for machinery
and equipment used to expand capacity and improve productivity. Approximately
$4.3 million was incurred in connection with the design and development of the
Company's new information systems.
Funds Held for Construction relate to proceeds and usage of cash from the
industrial development revenue obligations which were used to finance plant
expansions in prior years.
Capital expenditures provide a basis for future growth. The Company has a
formalized review procedure for all capital spending. The acceptability of a
capital project is based on many factors, including its discounted cash flow,
return on investment and projected payback period. Management expects that 1995
capital expenditures will approximate 1994 levels.
FINANCING ACTIVITIES
In the fourth quarter of 1994, the Board of Directors authorized the
repurchase of up to 1 million shares of the Company's common stock. Aggregate
repurchases for the year approximated 641,000 shares with a total purchase
price of $12.2 million. The Company is expected to continue its buy-back
program during 1995 as determined by market conditions.
During 1994, the Company reduced bank debt by $15.8 million. In addition, the
Company received approximately $6.5 million from the exercise of employee stock
options.
BALANCE SHEET ANALYSIS
The capitalization of the Company (long-term debt plus stockholders' equity)
was $248.3 million at December 31, 1994. The ratio of debt to capitalization
was 35% at December 31, 1994, which reflects the conversion of the Company's
Debentures. This is substantially improved from such ratio at December 31, 1993
which was 54%.
The Company's working capital was $110.5 million at December 31, 1994
compared to $137.4 million at December 31, 1993. The current ratio was 2.5 at
December 31, 1994, compared to 3.2 at December 31, 1993. The decrease in
working capital and the current ratio was the result of a decrease in current
assets of $13.2 million from December 31, 1993 to December 31, 1994 and an
increase in current liabilities of $13.8 million during the same period. The
decrease in current assets at December 31, 1994 compared to December 31, 1993
resulted primarily from lower inventories due to the implementation of
inventory reduction programs and lower accounts receivable as a result of
additional sales under the Company's accounts receivable program, offset by
higher deferred taxes resulting from the tax benefits associated with the
nonrecurring charge. Such benefits are deductible for income tax purposes in
years when the assets are disposed of or expenditures incurred. The increase in
current liabilities from December 31, 1993 to December 31, 1994 was due
primarily to the restructuring accrual.
11
<PAGE>
The increase in other assets and other liabilities resulted primarily from
the adoption of Financial Accounting Standards Board Interpretation No. 39
which became effective January 1, 1994 and is more fully described in Note 12
to the consolidated financial statements.
Long-term debt at December 31, 1994 was $79.5 million compared $142.9 million
at December 31, 1993. Conversion of the Company's Debentures and the additional
proceeds of the Company's accounts receivable program used to repay long-term
debt were primarily responsible for the decline.
The Company will continue to have cash requirements to support working
capital needs, pay interest, fund the restructuring program and fund capital
expenditures. In order to meet these cash requirements, the Company intends to
use internally generated funds and, if necessary, borrowings from the new
credit facility. Management believes cash generated from these sources will be
adequate to meet the Company's cash requirements over the next 12 months.
SEASONAL NATURE OF BUSINESS
The home improvement business is seasonal, particularly in the Northeast and
Midwest regions of the United States where inclement weather during the winter
months usually reduces the level of building and remodeling activity in both
the home improvement and new construction markets. The Company's lowest sales
levels usually occur during the first and fourth quarters. Since a high
percentage of the Company's manufacturing overhead and operating expenses are
relatively fixed throughout the year, operating income tends to be lower in
quarters with lower sales. Inventory and borrowings to satisfy working capital
requirements are usually at their highest level during the second and third
quarters.
12
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(THE INDEX TO CONSOLIDATED FINANCIAL STATEMENTS IS INCORPORATED
BY REFERENCE IN ITEM 14(A) OF PART IV OF THIS FORM 10-K)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants........................ 14
Financial Statements......................................................
Consolidated Balance Sheets at December 31, 1994 and 1993............... 15
Consolidated Statements of Operations for the Three Years Ended December
31, 1994............................................................... 16
Consolidated Statements of Stockholders' Equity for the Three Years
Ended December 31, 1994................................................ 17
Consolidated Statements of Cash Flows for the Three Years Ended December
31, 1994............................................................... 18
Notes to Consolidated Financial Statements.............................. 19
Quarterly Data............................................................ 29
</TABLE>
13
<PAGE>
(ART)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Ply Gem Industries, Inc.
We have audited the accompanying consolidated balance sheets of Ply Gem
Industries, Inc. and Subsidiaries (the "Company") as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conduct our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ply Gem
Industries, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
GRANT THORNTON LLP
New York, New York
February 24, 1995
14
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $ 14,403,000 $ 12,499,000
Marketable securities................................ 1,813,000 1,942,000
Accounts receivable, net of allowance of $6,353,000;
$7,197,000 in 1993.................................. 42,243,000 54,432,000
Inventories.......................................... 103,089,000 117,515,000
Prepaid and deferred income taxes.................... 17,426,000 4,000,000
Prepaid expenses and other current assets............ 6,257,000 8,017,000
------------ ------------
Total current assets............................. 185,231,000 198,405,000
Funds held for construction.......................... 1,048,000 2,375,000
Property, plant and equipment--at cost, net.......... 77,084,000 67,766,000
Patents and trademarks, net of accumulated amortiza-
tion of $7,825,000; $6,677,000 in 1993.............. 16,464,000 17,595,000
Other intangible assets, net......................... 16,586,000 21,557,000
Cost in excess of net assets acquired, net........... 24,647,000 26,492,000
Other assets......................................... 24,509,000 10,754,000
------------ ------------
$345,569,000 $344,944,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses................ $ 46,743,000 $ 41,328,000
Accrued restructuring................................ 13,413,000 --
Accrued payroll and commissions...................... 10,539,000 10,165,000
Accrued insurance.................................... 3,523,000 3,090,000
Income taxes payable................................. -- 1,181,000
Short-term borrowings................................ 35,000 2,365,000
Current maturities of long-term debt and capital
leases.............................................. 480,000 2,841,000
------------ ------------
Total current liabilities........................ 74,733,000 60,970,000
Long-term debt....................................... 79,501,000 142,898,000
Capital leases....................................... 7,159,000 7,166,000
Deferred income taxes................................ -- 724,000
Other liabilities.................................... 22,540,000 4,244,000
Stockholders' equity
Preferred stock, $.01 par value; authorized
5,000,000 shares;
none issued....................................... -- --
Common stock, $.25 par value; authorized 30,000,000
shares; issued 17,296,195 shares; 11,872,509
shares in 1993.................................... 4,324,000 2,968,000
Additional paid-in capital......................... 146,967,000 64,006,000
Retained earnings.................................. 62,397,000 72,601,000
------------ ------------
213,688,000 139,575,000
Less
Treasury stock--at cost (2,745,319 shares; 910,073
shares in 1993)................................... 50,954,000 9,362,000
Unamortized restricted stock....................... 1,098,000 1,271,000
------------ ------------
Total stockholders' equity....................... 161,636,000 128,942,000
------------ ------------
$345,569,000 $344,944,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................ $796,419,000 $722,660,000 $623,182,000
Cost of goods sold................... 642,337,000 584,271,000 494,093,000
------------ ------------ ------------
Gross profit....................... 154,082,000 138,389,000 129,089,000
Selling, general and administrative
expenses............................ 113,019,000 106,812,000 101,738,000
Nonrecurring charges................. 40,962,000 -- --
------------ ------------ ------------
Income from operations............. 101,000 31,577,000 27,351,000
Amortization of goodwill and other
intangibles......................... (4,165,000) (4,748,000) (4,825,000)
Interest expense..................... (7,479,000) (10,056,000) (9,644,000)
Other income (expense)............... (406,000) 708,000 (1,508,000)
------------ ------------ ------------
Income (loss) before income taxes.. (11,949,000) 17,481,000 11,374,000
Income tax provision (benefit)....... (3,418,000) 7,831,000 5,068,000
------------ ------------ ------------
NET INCOME (LOSS).................. $ (8,531,000) $ 9,650,000 $ 6,306,000
============ ============ ============
Earnings (loss) per share
Primary............................ $ (.62) $ .76 $ .56
Fully diluted...................... (.62) .75 .56
------------ ------------ ------------
Weighted average number of shares
outstanding
Primary............................ 13,870,000 14,217,000 13,065,000
Fully diluted...................... 13,870,000 14,217,000 13,065,000
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
--------------------- ----------------------
NUMBER ADDITIONAL NUMBER
OF PAID-IN RETAINED OF
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
---------- ---------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1992................... 11,408,009 $2,852,000 $ 59,701,000 $59,209,000 891,327 $ 8,786,000
Cash dividends on common
stock ($.12 per share). (1,266,000)
Exercise of employee
stock options.......... 142,810 35,000 1,070,000 32,501 389,000
Tax benefit arising from
exercise of stock
options................ 121,000
Contribution of treasury
stock to employee
profit sharing trust... 30,000 (76,000) (749,000)
Other................... 92,000 (16,706) (164,000)
Net income.............. 6,306,000
---------- ---------- ------------ ----------- --------- -----------
Balance at December 31,
1992................... 11,550,819 2,887,000 61,014,000 64,249,000 831,122 8,262,000
Cash dividends on common
stock ($.12 per share). (1,298,000)
Exercise of employee
stock options.......... 321,690 81,000 2,591,000 87,356 1,185,000
Tax benefit arising from
exercise of stock
options................ 210,000
Contribution of treasury
stock to employee
profit sharing trust... 42,000 (5,600) (58,000)
Other................... 149,000 (2,805) (27,000)
Net income.............. 9,650,000
---------- ---------- ------------ ----------- --------- -----------
Balance at December 31,
1993................... 11,872,509 2,968,000 64,006,000 72,601,000 910,073 9,362,000
Cash dividends on common
stock ($.12 per share). (1,673,000)
Exercise of employee
stock options.......... 2,672,318 668,000 23,423,000 1,197,241 29,465,000
Tax benefit arising from
exercise of stock
options................ 9,962,000
Conversion of
debentures............. 2,751,328 688,000 48,379,000
Repurchase of common
stock.................. 640,700 12,175,000
Other................... 40 -- 1,197,000 (2,695) (48,000)
Net loss................ (8,531,000)
---------- ---------- ------------ ----------- --------- -----------
Balance at December 31,
1994................... 17,296,195 $4,324,000 $146,967,000 $62,397,000 2,745,319 $50,954,000
========== ========== ============ =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss)..... $ (8,531,000) $ 9,650,000 $ 6,306,000
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities
Depreciation and
amortization......... $13,385,000 $ 12,166,000 $ 11,830,000
Nonrecurring charges
net of cash payments
of $5,223,000........ 35,739,000 -- --
Deferred taxes........ (8,067,000) (1,782,000) (2,389,000)
Provision for doubtful
accounts............. 874,000 4,642,000 4,652,000
Changes in assets and
liabilities
Accounts receivable.. 10,515,000 (16,720,000) (7,732,000)
Inventories.......... 5,575,000 (10,325,000) (12,754,000)
Prepaid expenses and
other current
assets.............. 1,459,000 (423,000) (2,199,000)
Accounts payable and
accrued expenses.... 3,860,000 4,768,000 6,040,000
Income taxes payable. (4,902,000) (1,535,000) 2,716,000
Other................ (1,061,000) 57,377,000 4,273,000 (4,936,000) (994,000) (830,000)
----------- ------------ ------------ ------------ ------------ ------------
Net cash provided by
operating
activities......... 48,846,000 4,714,000 5,476,000
------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to property,
plant and equipment.. (23,046,000) (20,519,000) (17,138,000)
Funds (held) used for
construction......... 1,327,000 7,721,000 (8,357,000)
Proceeds from proper-
ty, plant and equip-
ment disposals....... 1,681,000 216,000 361,000
Other................. 129,000 1,564,000 247,000
------------ ------------ ------------
Net cash used in
investing
activities......... (19,909,000) (11,018,000) (24,887,000)
------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Short-term debt
borrowings
(repayments), net.... (2,330,000) (4,752,000) 5,928,000
Repayment of long-term
debt................. (15,765,000) (13,482,000) (11,850,000)
Purchase of treasury
shares............... (12,175,000) -- --
Long-term borrowings.. -- 34,760,000 16,392,000
Additions to capital
leases............... -- -- 7,000,000
Cash dividends........ (1,673,000) (1,298,000) (1,266,000)
Proceeds from exercise
of employee stock
options.............. 6,491,000 1,655,000 731,000
Other................. (1,581,000) 40,000 (62,000)
------------ ------------ ------------
Net cash provided by
(used in) financing
activities......... (27,033,000) 16,923,000 16,873,000
------------ ------------ ------------
Net increase
(decrease) in cash
and cash
equivalents........ 1,904,000 10,619,000 (2,538,000)
Cash and cash
equivalents at
beginning of year.. 12,499,000 1,880,000 4,418,000
------------ ------------ ------------
CASH AND CASH
EQUIVALENTS AT END OF
YEAR.................. $ 14,403,000 $ 12,499,000 $ 1,880,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Ply Gem
Industries, Inc. and its wholly-owned subsidiaries after eliminating all
significant intercompany accounts and transactions. Certain prior year items
have been reclassified to conform to the 1994 presentation.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and temporary investments
having a maturity of three months or less.
Marketable Securities
Marketable securities are carried at fair value. The fair value of these
securities is estimated based on current market prices and management's
estimates.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on
the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Owned property, plant and equipment are depreciated, generally on a straight-
line basis over their estimated useful lives. Leasehold improvements are
amortized on a straight-line basis over their respective lives or the terms of
the applicable leases, including expected renewal options, whichever is
shorter. Accelerated depreciation methods are used for tax purposes.
Capitalized leases are amortized on a straight-line basis over the terms of the
leases or their economic useful lives.
Intangible Assets
(a) Patents and Trademarks
Purchased patents and trademarks are recorded at appraised value at time of
acquisition and are being amortized on a straight-line basis over their
estimated remaining economic lives; thirteen to sixteen years for patents and
thirty years for trademarks.
(b) Other Intangibles
Cost in excess of net assets acquired is being amortized from twenty to
thirty years on a straight-line basis. On a periodic basis, the Company
estimates the future undiscounted cash flows of the businesses to which
goodwill relates in order to ensure that the carrying value of such goodwill
has not been impaired. Other purchased intangibles are being amortized on a
straight-line basis generally from ten to thirty-nine years.
Income Taxes
Deferred income tax liabilities and assets reflect the tax effects of
temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes and
net operating loss carryforwards. Deferred income tax assets, such as benefits
related to net operating loss carryforwards, are recognized to the extent that
such benefits are more likely than not to be realized.
19
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
(a) Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity of
those instruments.
(b) Long-Term Debt
The carrying amount approximates fair value, as the debt carries variable
interest rates.
Earnings (Loss) Per Share
Earnings (loss) per share of common stock is computed by dividing net
earnings (loss) by the weighted average number of common shares outstanding.
Stock options have been excluded from the calculation in 1994 as their effect
would be anti-dilutive. Earnings per share is calculated using the modified
treasury stock method, which limits the assumed purchase of treasury shares to
20% of the outstanding common shares. The assumed conversion of the Company's
10% Convertible Subordinated Debentures ("Debentures") was not used in 1993
and 1992 because the result would be anti-dilutive.
NOTE 2 -- NONRECURRING CHARGES
During 1994, the Company recorded nonrecurring charges of $41.0 million
($25.7 million after tax), of which $4.7 million ($3.2 million after tax) was
recorded in the fourth quarter. The charges consist of approximately $29.1
million related to a restructuring program designed to improve profitability
and $11.9 million for unusual items primarily consisting of the write down of
certain intangible assets and discontinued products and costs associated with
the Company's business process redesign.
The Company began working on the proposed restructuring program during the
fiscal 1994 second quarter. The restructuring charge consists of several
components including: severance and related costs in connection with the
planned reduction of approximately 15% of the Company's workforce or
approximately 600 salaried and hourly jobs, consolidation and closure of
selected regional distribution and manufacturing facilities, the abandonment
of certain information systems and other actions including lease termination
expenses and transaction costs to execute the restructuring program. It is
anticipated that these actions will be implemented over the next twelve months
and the Company expects to realize annualized pretax savings of approximately
$13 million upon full implementation. However, there can be no assurance that
the Company will realize these savings.
The status of the components of the restructuring provision at the end of
the year was:
<TABLE>
<CAPTION>
BALANCE
AT
INITIAL 1994 DECEMBER 31,
PROVISION ACTIVITY 1994
----------- ---------- ------------
<S> <C> <C> <C>
Consolidation and closure of facilities,
including severance and related costs..... $19,500,000 $4,400,000 $15,100,000
Other severance and related costs.......... 5,000,000 1,100,000 3,900,000
Abandonment of certain information systems. 1,700,000 400,000 1,300,000
Other, including lease termination expenses
and costs to execute the restructuring
program................................... 2,900,000 900,000 2,000,000
----------- ---------- -----------
$29,100,000 $6,800,000 $22,300,000*
=========== ========== ===========
</TABLE>
--------
* The following amounts are included in the consolidated balance sheet at
December 31, 1994 under the captions: "accrued restructuring" ($13.4
million), "other liabilities" ($4.1 million), "property, plant and equipment"
(reduction of $2.0 million), "inventory" (reduction of $1.5 million),
"accounts receivable" (reduction of $.8 million) and various other asset
accounts (reduction of $.5 million).
20
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3 -- ACCOUNTS RECEIVABLE
The Company has a program which currently allows for the sale of up to $50
million of undivided fractional interests in a designated pool of eligible
accounts receivable to a financial institution with limited recourse. The
program expires in January 1998 with options to extend the agreement to January
2000. At December 31, 1994, the Company sold $40 million of receivables under
this program compared to $20 million at December 31, 1993. Program costs of
$1,892,000, $1,495,000 and $1,502,000 are included in other income (expense)
for 1994, 1993 and 1992, respectively.
NOTE 4 -- INVENTORIES
The classification of inventories at the end of each year was as follows:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Finished goods..................................... $ 52,390,000 $ 56,630,000
Work in progress................................... 18,002,000 25,806,000
Raw materials...................................... 32,697,000 35,079,000
------------ ------------
$103,089,000 $117,515,000
============ ============
</TABLE>
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at the end of each year consisted of the
following:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Land............................................. $ 2,679,000 $ 2,420,000
Buildings and improvements....................... 26,389,000 26,240,000
Machinery and equipment.......................... 64,285,000 53,726,000
Transportation equipment......................... 2,313,000 2,720,000
Furniture and fixtures........................... 11,107,000 10,057,000
Capital leases................................... 7,397,000 7,364,000
Construction in progress......................... 6,760,000 3,943,000
------------ ------------
120,930,000 106,470,000
Accumulated depreciation and amortization........ (43,846,000) (38,704,000)
------------ ------------
$ 77,084,000 $ 67,766,000
============ ============
</TABLE>
NOTE 6 -- INTANGIBLE AND OTHER ASSETS
The accumulated amortization of cost in excess of net assets acquired and
other intangible assets is $25,990,000 at December 31, 1994 and $26,136,000 at
December 31, 1993.
Other assets at December 31, 1994 include notes receivable from an executive
officer of $5,400,000 ($6,340,000 at December 31, 1993) and $3,250,000. The
$5,400,000 notes have an average interest rate of 7.1% and are due in
approximately equal annual installments through 2003. Under the terms of the
notes, principal and interest are forgiven upon the attainment of at least a
20% improvement in net income, as defined, versus the prior year or at the
discretion of the Board of Directors. Accordingly, the annual installments for
1994 and 1993 were forgiven. Furthermore, under the terms of the officer's
employment agreement, the loan shall be forgiven upon the occurrence of a
change in control of the Company or permanent disability of the officer. The
$3,500,000 note has an interest rate which is the higher of the Company's
average bank borrowing rate or the applicable Federal rate in effect for such
period. The note is payable in annual installments of $250,000 with the final
payment due December 31, 1998.
21
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ----------- ----------
<S> <C> <C> <C>
Interest paid (net of $323,000 capitalized
in 1994, $510,000 in 1993 and $263,000 in
1992).................................... $5,546,000 $ 9,692,000 $9,723,000
---------- ----------- ----------
Income taxes paid......................... $2,819,000 $10,180,000 $4,064,000
---------- ----------- ----------
</TABLE>
Noncash financing activities involve the issuance of common stock upon
conversion of $49,963,000 of the Company's Debentures in 1994.
NOTE 8 -- LONG-TERM DEBT
The composition of long-term debt at the end of each year was as follows:
<TABLE>
<CAPTION>
1994 1993
----------- ------------
<S> <C> <C>
Revolving credit facility expiring in 1999........ $71,500,000 $ 86,384,000
10% Convertible Subordinated Debentures due 2008.. -- 50,000,000
Industrial Development Revenue
Bonds maturing at various dates to 2012, gener-
ally at floating interest rates which are reset
periodically (4.8% average interest rate for
1994).......................................... 8,324,000 8,760,000
Other............................................. 557,000 107,000
----------- ------------
79,931,000 145,701,000
Less current maturities........................... 430,000 2,803,000
----------- ------------
$79,501,000 $142,898,000
=========== ============
</TABLE>
The Company has a revolving credit facility with a syndicate of banks, which
provides financing of up to $200 million through February 1999. Interest on
borrowings are at varying rates based, at the Company's option, on the London
Interbank Offered Rate (LIBOR) or the bank's prime rate. The Company pays an
annual fee of .375% on the facility amount. The average weighted interest rate
on these loans for the year 1994 was 5.9%. The credit facility includes
customary covenants, including covenants limiting the Company's ability to
pledge assets or incur liens on assets and financial covenants requiring among
other things, the Company to maintain a specified leverage ratio, fixed charge
ratio and tangible net worth levels. In addition, the amount of annual
dividends the Company can pay is limited based on a formula. At December 31,
1994 $2,900,000 was available for payments of dividends in 1995. Borrowings
under this credit facility are collateralized by the common stock of the
Company's principal subsidiaries.
During 1994, holders of the Company's Debentures converted a total principal
amount of $49,963,000 into 2,751,328 shares of the Company's common stock. As a
result of this transaction, the total principal amount converted was credited
to common stock at par and paid-in-capital, net of unamortized expenses of the
original debt issue and transaction costs and offset by the accrued interest
from the last payment date to the conversion date. The remaining $37,000 of the
original $50 million face amount was redeemed by the Company.
The Company has purchased $60 million of interest rate caps, which has the
effect of limiting the Company's exposure to high interest rates. These caps
mature over various periods through October 1996 and have cap rates ranging
from 6.5% to 8.5%.
22
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future maturities of long-term debt, for the years 1996 through 1999, are:
1996-$401,000; 1997-$421,000; 1998-$446,000; and 1999-$71,976,000.
The net book value of property, plant and equipment pledged as collateral
under mortgages and industrial revenue bonds approximated $7,780,000 at
December 31, 1994.
NOTE 9 -- INCOME TAXES
The income tax provision (benefit) for the years ended December 31 consisted
of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Federal
Current........................... $ (6,195,000) $ 7,986,000 $ 5,098,000
Deferred.......................... (7,353,000) (1,782,000) (1,266,000)
Foreign............................. (21,000) 190,000 245,000
State and local
Current........................... 903,000 1,227,000 870,000
Deferred.......................... (714,000) -- --
------------ ----------- -----------
(13,380,000) 7,621,000 4,947,000
Tax benefit from exercise of stock
options.......................... 9,962,000 210,000 121,000
------------ ----------- -----------
Actual tax provision (benefit).... $ (3,418,000) $ 7,831,000 $ 5,068,000
============ =========== ===========
</TABLE>
The significant components of the Company's deferred tax assets and
liabilities as of December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Net deferred tax assets -- current:
Nonrecurring charge............................. $ 6,581,000 $ --
Allowance for bad debts......................... 2,678,000 2,734,000
Accrued expenses deductible for tax purposes
when paid...................................... 1,831,000 1,209,000
State and local net operating loss tax
carryforwards.................................. 897,000 669,000
Other........................................... (290,000) 57,000
----------- -----------
Total deferred tax assets..................... 11,697,000 4,669,000
Valuation allowance for deferred tax assets... (897,000) (669,000)
----------- -----------
Net deferred tax current assets............... 10,800,000 4,000,000
=========== ===========
Net deferred tax liabilities (assets) --
noncurrent:
Nonrecurring charge............................. (2,843,000) --
Accelerated depreciation........................ 4,330,000 2,844,000
Asset revaluations, net......................... (81,000) (1,790,000)
Involuntary conversion.......................... 450,000 450,000
Accrued expenses deductible for tax purposes
when paid...................................... (2,037,000) --
Income not recognized for book purposes......... (493,000) (493,000)
Other........................................... 132,000 (287,000)
----------- -----------
Net deferred tax noncurrent liabilities (as-
sets)........................................ $ (542,000) $ 724,000
=========== ===========
</TABLE>
As of December 31, 1994, the Company has deferred tax assets largely
attributable to the 1994 nonrecurring charge (see Note 2) and other accrued
expenses. These items are expected to reverse when paid and are therefore
likely to be realized.
23
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Prior to the adoption of Financial Accounting Standards Board Statement No.
109, the deferred tax provision was comprised as follows:
<TABLE>
<CAPTION>
1992
-----------
<S> <C>
Depreciation................................................... $ 204,000
Bad debt reserves, net......................................... (690,000)
Accrued expenses deductible for tax purposes when paid......... (400,000)
Unusual charge................................................. (176,000)
Other.......................................................... (204,000)
-----------
$(1,266,000)
===========
</TABLE>
The actual income tax provision (benefit) varies from the Federal statutory
rate applied to consolidated pretax income (loss) as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Income taxes at Federal statutory rate
of 35% in 1994 and 1993; 34% in 1992... $(4,182,000) $6,118,000 $3,867,000
Increases resulting from
State and local income taxes net of
Federal income tax benefit........... 123,000 798,000 574,000
Amortization of cost in excess of net
assets acquired...................... 509,000 513,000 498,000
Other--net............................ 132,000 402,000 129,000
----------- ---------- ----------
Actual tax provision (benefit)........ $(3,418,000) $7,831,000 $5,068,000
=========== ========== ==========
</TABLE>
NOTE 10 -- RETIREMENT PLANS
The Company provides retirement benefits to certain of its salaried and
hourly employees through non-contributory defined benefit pension plans. The
benefits provided are primarily based upon length of service and compensation,
as defined. The Company funds the plans in amounts as actuarially determined
and to the extent deductible for federal income tax purposes. The Company's
pension plan assets consist of marketable securities including stocks, bonds
and U.S. government securities and insurance company contracts.
The components of pension expense are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned in current
year.................................... $1,044,000 $ 786,000 $ 809,000
Interest cost on projected benefit
obligation.............................. 782,000 665,000 595,000
Income earned on plan assets............. (866,000) (680,000) (684,000)
Net amortization and deferral............ 28,000 (134,000) (71,000)
---------- --------- ---------
$ 988,000 $ 637,000 $ 649,000
========== ========= =========
</TABLE>
Assumptions used in the computation of net pension expense are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate for plan obligations........ 8.0% 7.5% 8.0%
Rate of future compensation increases...................... 5.0 5.0 5.0
Weighted average rate of return on plan assets............. 8.8 8.9 8.9
</TABLE>
24
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of the funded status of the plans at year end follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested.......................................... $ 9,748,000 $ 7,917,000
Nonvested....................................... 662,000 491,000
----------- -----------
Total............................................. 10,410,000 8,408,000
Projected salary increases........................ 1,690,000 1,737,000
----------- -----------
Projected benefit obligation...................... 12,100,000 10,145,000
Plan assets at fair value......................... 11,016,000 10,255,000
----------- -----------
Assets (less) greater than projected benefit obli-
gation........................................... (1,084,000) 110,000
Unrecognized net (gain) loss...................... (1,179,000) (90,000)
Additional liability.............................. (1,595,000) --
Unrecognized prior service cost................... 1,828,000 23,000
Unrecognized transition cost...................... 169,000 206,000
----------- -----------
Prepaid (accrued) pension......................... $(1,861,000) $ 249,000
=========== ===========
</TABLE>
The Company maintains a discretionary profit sharing plan with a voluntary
401(k) option for certain of its salaried and hourly employees who vest after
meeting certain minimum age and service requirements. Profit sharing plan
expense, including the Company's 401(k) match, is comprised as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Ply Gem common stock........................ $2,636,000 $1,181,000 $1,155,000
Cash........................................ -- 170,000 677,000
---------- ---------- ----------
$2,636,000 $1,351,000 $1,832,000
========== ========== ==========
</TABLE>
NOTE 11 -- STOCK OPTION PLANS
The Company's Executive Incentive Stock Option Plan provides for the granting
of options to key employees to purchase up to 2,037,500 shares of common stock.
Option prices must be 100% of fair market value at date of grant except for an
employee who owns in excess of 10% of the common stock outstanding, in which
case the exercise price is 110% of the fair market value at date of grant.
Options are exercisable in full or in part after one year from the date of
grant and expire within ten years (within five years for an employee owning in
excess of 10% of the outstanding common stock). Shares acquired must be held
for one year.
The Senior Executive Stock Option Plan ("the Senior Plan") authorizes the
granting of either incentive or non-qualified stock options only to executives
of businesses acquired by the Company or to newly employed executives. The
Senior Plan provides for 750,000 shares of the Company's common stock to be
reserved for such issuance.
The 1989 Employee Incentive Stock Plan ("the 1989 Plan") authorizes the
granting of incentive and non-qualified stock options and awards of restricted
stock and is made available to executives and key employees of the Company. As
in the Senior Plan, option terms and holding and exercise periods may vary
except that no option may be exercised more than ten years after date of grant.
Stock awarded under the Plan will be subject to restrictions as to sale or
transfer. These restrictions may lapse or be waived based on performance,
period of service or other factors. The 1989 Plan provides for 3,500,000 shares
of the Company's common stock to be reserved for issuance.
25
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The 1994 Incentive Stock Plan ("the 1994 Plan") authorizes the granting of
incentive and non-qualified stock options and awards of restricted stock. The
terms and conditions of the 1994 Plan are similar to those as described above.
The 1994 Plan provides for 2,250,000 shares reserved for such issuance.
At December 31, 1994, approximately 1,862,000 shares were available for
future grant.
In 1991, the Company granted 250,000 shares of restricted stock to an
executive officer of the Company. The restrictions on these shares will be
released at the rate of 25,000 shares per year upon the attainment of certain
performance goals and the continued employment of the officer. The restrictions
will be lifted in the event of a change in control of the Company. The
unamortized restricted stock resulting from this stock award has been deducted
from stockholders' equity and is being amortized over ten years at the fair
market value on the dates the restrictions are released.
In 1994, the Company granted 175,000 shares of restricted stock to an
executive officer of the Company. The shares will be released at the rate of
43,750 per year upon the attainment of certain performance goals and the
continued employment of the officer. Compensation expense is charged to the
income statement at the fair market value on the dates the restrictions are
released.
For the three years ended December 31, 1994, option activity was as follows:
<TABLE>
<CAPTION>
INCENTIVE OPTION NON-QUALIFIED OPTIONS
---------------------- -----------------------
NUMBER OF OPTION NUMBER OF OPTION
SHARES PRICES SHARES PRICES
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Outstanding January 1, 1992...... 1,394,650 $5.50-14.25 2,900,250 $5.63-16.00
1992
Granted........................ 289,675 9.75 539,000 6.75- 9.75
Exercised...................... (77,880) 5.50-12.25 (64,930) 6.63-12.13
Canceled....................... (76,400) 6.63-12.25 (13,750) 6.63-12.13
--------- ----------- ---------- -----------
Outstanding December 31, 1992.... 1,530,045 5.50-14.25 3,360,570 5.63-16.00
1993
Granted........................ 323,900 10.25-10.38 792,650 10.38-12.63
Exercised...................... (198,370) 5.50-10.75 (123,320) 6.63-12.13
Canceled....................... (35,750) 6.63-12.25 (45,700) 8.38-12.13
--------- ----------- ---------- -----------
Outstanding December 31, 1993.... 1,619,825 6.63-14.25 3,984,200 5.63-16.60
1994
Granted........................ 160,970 19.13 1,428,400 17.75-25.50
Exercised...................... (796,644) 6.63-13.75 (1,875,674) 5.63-13.25
Canceled....................... (42,050) 6.63-12.25 0 --
--------- ----------- ---------- -----------
At December 31, 1994
Outstanding.................... 942,101 6.63-19.13 3,536,926 5.63-25.50
Exercisable.................... 781,131 6.63-14.25 3,026,926 5.63-21.86
--------- ----------- ---------- -----------
</TABLE>
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain of its manufacturing, distribution and office
facilities as well as some transportation and manufacturing equipment under
noncancellable leases expiring at various dates through
26
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the year 2017. Certain real estate leases contain escalation clauses and
generally provide for payment of various occupancy costs. Minimum future lease
obligations on noncancellable leases in effect at December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- -----------
<S> <C> <C>
Year ending December 31,
1995............................................... $ 63,000 $14,648,000
1996............................................... 63,000 12,517,000
1997............................................... 60,000 9,157,000
1998............................................... 38,000 7,913,000
1999............................................... 9,000 6,838,000
Subsequent years through 2017...................... 7,008,000 48,220,000
---------- -----------
Net minimum lease payments........................... 7,241,000 $99,293,000
===========
Amount representing interest......................... 33,000
----------
Present value of net minimum lease payments (includ-
ing $50,000 payable within one year)................ $7,208,000
==========
</TABLE>
Rental expense for operating leases amounted to approximately $21,036,000 in
1994, $21,224,000 in 1993, and $20,146,000 in 1992.
HOOVER TREATED WOOD PRODUCTS, INC. ("HOOVER")
Hoover Treated Wood Products, Inc. ("Hoover"), a wholly-owned subsidiary of
the Company is a defendant, along with many other parties, in a number of
commercial lawsuits, including a purported class action on behalf of certain
Maryland homeowners, alleging property damage caused by alleged defects in
certain pressure treated interior wood products. Hoover has not manufactured or
sold these products since August 1988. The Company is also a defendant in some
of these suits. The number of lawsuits pending, as of December 31, 1994, as
well as the number of lawsuits filed in 1993 and 1994, have declined
significantly from earlier periods.
Many of the suits and claims have been settled. In those suits that remain
pending, direct defense costs are being paid by either insurance carriers,
under reservations of rights agreements, or out of insurance proceeds. Two
actions have proceeded to trial against Hoover and resulted in jury verdicts
against it. In one of these actions, judgment was entered in Hoover's favor by
the court after a jury verdict against it and the plaintiff's petition to
appeal the judgment entered in Hoover's favor was denied. Hoover is appealing
the other judgment and believes that it has meritorious grounds for overturning
it in whole or in part.
Hoover and the Company are engaged in litigation with their insurers
regarding coverage for these lawsuits and claims. Hoover has settled its
coverage claims with a majority of its insurers and is negotiating settlements
with others. Hoover and the Company believe they have meritorious claims for
coverage from their remaining unsettled insurers and are seeking declaratory
judgments confirming such coverage. The proceeds from settled insurance claims,
along with the proceeds from a settlement of claims by Hoover against certain
suppliers of materials used by it in the production of treated wood, are
available for the settlement of the underlying property damage actions,
including the jury verdict now on appeal. The Company believes that Hoover's
remaining coverage disputes will be resolved within the next two years on a
satisfactory basis and a sufficient amount of additional coverage will be
available to Hoover. In reaching this belief, it has analyzed Hoover's
insurance coverage, considered its history of successful settlements with
primary and excess insurers and consulted with counsel.
27
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Hoover and the Company are vigorously defending the underlying lawsuits which
cannot be resolved on a reasonable basis and believe that they have meritorious
defenses to those suits including, in the case of the Company, the defense that
it has been improperly joined, as it did not manufacture or market the Hoover
products at issue, and is not legally liable for the damage allegedly caused by
them.
In accordance with the provisions of Financial Accounting Standards Board
Interpretation No. 39, which became effective on January 1, 1994, Hoover has
recorded a receivable at December 31, 1994 (included in other assets) for $12.1
million for the estimated proceeds and recoveries related to insurance matters
discussed above and recorded an accrual for the same amount (included in other
liabilities) for its estimated cost to resolve those matters not presently
covered by existing settlements with insurance carriers and suppliers. In
estimating both this liability, which Hoover expects to discharge over the next
four years, and its anticipated additional insurance recoveries, Hoover and the
Company have considered a number of factors including: the number and exposure
posed by the pending lawsuits; the significant decline in the number of
lawsuits filed in 1993 and to date; the availability of various legal defenses,
including statutes of limitations; the existence of settlement protocols; an
agreement indemnifying Hoover as to certain past and future claims; and
Hoover's experience to date in settling with its insurance companies and the
likely availability of proceeds from additional insurance. Based on its
evaluation, the Company believes that the ultimate resolution of the lawsuits
and the insurance claims will not have a material adverse effect upon the
financial position of the Company.
EXECUTIVE COMPENSATION
In the event of a change in control of the Company, as defined, senior
management, except for the chairman, have the right to receive payments upon
termination of employment or resignation within one year. Such payments are to
be 2.75 times average annual compensation, as defined, plus in some cases 2.75
times the difference between the market and exercise price of any unexercised
stock options. At December 31, 1994, the maximum amount payable, applicable to
thirteen individuals, would be approximately $14 million.
LETTERS OF CREDIT
At December 31, 1994 $18,811,000 of letters of credit issued by the Company's
banks were outstanding, principally in connection with certain financing
transactions.
OTHER
The Company and its subsidiaries are subject to legal actions from time to
time which have arisen in the ordinary course of its business. In the opinion
of management, the resolution of these claims will not materially affect the
financial position of the Company.
NOTE 13 -- INDUSTRY SEGMENT
The Company operates predominantly in one business segment. Operations in the
Home Improvement Products business consist of the manufacture and sale of vinyl
siding, wood and vinyl-framed windows and patio doors, prefinished decorative
plywood and solid wood paneling, furniture components, various pressure-treated
wood products and the purchase and resale of a variety of other products for
the home improvement markets. One customer accounted for 14.2%, 12.2% and 11.2%
of the Company's net sales for the years ended December 31, 1994, 1993 and
1992, respectively.
28
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 14 -- QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
Net Sales.................... $163,412 $219,805 $218,997 $194,205
Gross Profit................. 26,477 46,079 46,653 34,873
Income (loss) before tax-
es(/1/)..................... (2,372) 11,376 (21,477) 524
Net Income (Loss)............ (1,305) 6,265 (13,977) 486
Per Share:
Primary.................... (.11) .40 (.95) .03
Fully Diluted.............. (.11) .40 (.95) .03
Year Ended December 31, 1993:
Net Sales.................... $146,347 $184,422 $208,966 $182,925
Gross Profit................. 26,009 35,900 40,772 35,708
Income (loss) before taxes... (3,719) 6,266 9,607 5,327
Net Income (Loss)............ (2,046) 3,447 5,260 2,989
Per Share:
Primary.................... (.19) .31 .44 .23
Fully Diluted.............. (.19) .31 .41 .23
</TABLE>
--------
(1) After nonrecurring charges of $36.3 million in the third quarter and $4.7
million in the fourth quarter. See Note 2 to the consolidated financial
statements.
Earnings (loss) per share calculations for each of the quarters presented
are based on the weighted average number of shares and common equivalent
shares outstanding during such periods. The sum of the quarters may not
necessarily be equal to the full year earnings per share amounts.
29
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 11, 1995.
ITEM 11. EXECUTIVE COMPENSATION.
The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 11, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 11, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required is incorporated by reference from the Proxy
Statement prepared with respect to the Annual Meeting of Stockholders to be
held on May 11, 1995.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
(a)(1) Financial Statements:
The list of consolidated financial statements is set forth in Part II, Item 8
of this Form 10-K and such Index to Consolidated Financial Statements is
incorporated herein by reference.
(a)(2) Financial Statement Schedules:
The financial statement schedules that are required by Part II, Item 8 of
this Form 10-K, will be filed by amendment.
(a)(3) Exhibits:
<TABLE>
<C> <S>
3(a) Registrant's By-Laws as currently in effect is incorporated by
reference herein from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1992, as amended by the
Registrant's Current Report on Form 8-K as filed with the
Securities and Exchange Commission on November 4, 1994.
3(b) Registrant's Certificate of Incorporation, and all amendments
thereto is incorporated by reference herein from the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(iii)(a) Registrant's 1989 Employee Incentive Stock Plan is incorporated
by reference herein from the Registrant's Registration
Statement on Form S-8 (Registration Number 33-28753), as
amended by the Company's Registration Statement on Form S-8
(Registration Number 33-52514).
10(iii)(b) Registrant's 1989 Senior Executive Stock Option Plan is
incorporated by reference herein from the Registrant's
Registration Statement on Form S-8 (Registration Number 33-
28752).
10(iii)(c) Registrant's Executive Incentive Stock Option Plan is
incorporated herein by reference from the Registrant's
Registration Statement on Form S-8 (Registration Number
2-84279), as amended by the Registrant's Registration Statement
on Form S-8 (Registration Number 33-52516).
10(iii)(d) Employment agreements with Herbert P. Dooskin, Joseph
Goldenberg, Monte R. Haymon, Donald Kruse and Jeffrey S.
Silverman are incorporated by reference herein from the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.
10(iii)(e) Registrant's 1994 Employee Incentive Stock Plan is incorporated
herein by reference from the Registrant's Registration
Statement on Form S-8 (Registration No. 33-55035).
10(iii)(f) Registrant's Group Profit-Sharing/401(k) Plan is incorporated
herein by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-55037).
10(iii)(g) Registrant's 1994 Incentive Compensation Plan.
11 Schedule of Computation of Net Income per Share.
21 Subsidiaries of the Registrant.
23 Consent of Independent Certified Public Accountants.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
On October 18, 1994, the Company reported on a restructuring plan to improve
profitability.
On November 4, 1994, the Company reported on an amendment to its By-laws.
On November 23, 1994, the Company reported on a plan for the Company to
purchase up to 1,000,000 shares of its common stock in the open market.
31
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Ply Gem Industries, Inc.
(Registrant)
/s/ Jeffrey S. Silverman
By: _________________________________
JEFFREY S. SILVERMAN, CHAIRMAN
(MARCH 31, 1995)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE
/s/ Jeffrey S. Silverman Chairman, Chief March 31, 1995
------------------------------------- Executive Officer
JEFFREY S. SILVERMAN (Principal
Executive Officer)
and Director
/s/ Herbert P. Dooskin Executive Vice March 31, 1995
------------------------------------- President
HERBERT P. DOOSKIN (Principal
Financial Officer)
and Director
/s/ Jerome Baum Controller March 31, 1995
-------------------------------------
JEROME BAUM
/s/ Albert Hersh Director March 31, 1995
-------------------------------------
ALBERT HERSH
/s/ Elihu H. Modlin Director March 31, 1995
-------------------------------------
ELIHU H. MODLIN
/s/ Joseph Goldenberg Director March 31, 1995
-------------------------------------
JOSEPH GOLDENBERG
32
<PAGE>
EXHIBIT 10(iii)(g)
PLY GEM INDUSTRIES, INC.
INCENTIVE COMPENSATION PLAN
Section 1. Purpose
The purpose of this Plan is to recognize and reward key employees of the
Company for the attainment of established performance goals reflecting both
annual and long-term results which further the success of the Company.
Section 2. Definitions
For Plan purposes, the following terms shall have the following
respective meanings:
(a) "Award" means a payment or payment opportunity granted to a
Participant pursuant to Section 5 of the Plan.
(b) "Board" means the Board of Directors of Ply Gem Industries, Inc.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means a committee designated by the Board and
comprised of two or more non-employee members of the Board, each of whom is an
"outside director" within the meaning of Section 162(m) of the Code.
(e) "Company" means Ply Gem Industries, Inc., including any
subsidiary and division, and any other entity in which the Company has a
significant equity interest, as determined by the Committee.
(f) "Net Profit Margin" means the quotient resulting from dividing
Net Income by Net Sales for the applicable period designated by the Committee.
(g) "Net Income" means such amount as is reported in the Company's
annual report to stockholders, but before extraordinary items and the cumulative
effect of accounting changes, for the applicable period.
(h) "Net Sales" means such amount as is reported in the Company's
annual report to stockholders, but before extraordinary items and the cumulative
effect of accounting changes, for the applicable period.
(i) "Operating Income" means such amount of income from operations
as is reported in the Company's annual report to stockholders, or comparable
amount for a subsidiary or division, for the applicable period.
(j) "Participant" means an employee of the Company designated by the
Committee to receive an Award.
(k) "Performance Period" means either, as designated by the
Committee, a single fiscal year of the Company, or three successive fiscal years
of the Company.
<PAGE>
(l) "Plan" means the Incentive Compensation Plan as set forth herein
and as may be amended from time to time pursuant to Section 14.
(m) "RONA" means the quotient resulting from dividing Operating
Income, by the average of applicable net assets, as determined by the Committee,
for the applicable period.
Section 3. Administration
(a) The Committee shall have full power and authority to construe,
interpret and administer the Plan and to make rules and regulations subject to
the provisions of the Plan. All decisions, actions, determinations and
interpretations of the Committee shall be made in its sole discretion and shall
be final, conclusive and binding on all parties.
(b) No member of the Committee shall be personally liable by reason
of any contract or other instrument executed by him, or on his behalf, in his
capacity as a member of the Committee or for any mistake of judgment made in
good faith. To the extent permitted by law, the Company shall indemnify and hold
harmless each member of the Committee and each other officer, employee or
director of the Company to whom any duty or power relating to the administration
of the Plan has been delegated, against any cost or expense (including counsel
and related fees) or liability (including any sum paid in settlement of a claim
with approval of the Committee) arising out of any act or omission in connection
with the Plan unless arising out of such person's own fraud, gross negligence,
willful misconduct or bad faith.
Section 4. Eligibility for Participation
(a) The Committee shall select Participants from among officers and
other key employees of the Company. No member of the Committee or other
non-employee member of the Board shall participate in the Plan.
(b) The Committee may also grant an Award to a person (or his or her
beneficiary or estate) who has terminated employment with the Company prior to
the end of a Performance Period based on the terms of the Award or the
Committee's determination that the person is deserving of such an Award.
Section 5. Determination and Payments of Award
(a) For each Performance Period, the Committee shall, in its
discretion, establish target award levels and respective performance measure(s)
which are to be attained for the applicable Award(s). The performance measures
used shall be Net Profit Margin, Net Income, Net Sales, Operating Income, and
RONA, either solely or in combination, as established in the discretion of the
Committee. The Committee shall have the right to reduce or eliminate Awards
otherwise payable under the Plan.
(b) Following the conclusion of the applicable Performance Period,
the Committee shall authorize the payment of Awards to Participants. However, an
Award payment to any one Participant for a fiscal year Performance Period shall
not exceed five percent (5%) of Operating Income for such year and an Award
payment to any one Participant for a three-year Performance Period shall not
exceed two percent (2%) of cumulative Operating Income for such period.
(c) Awards may be paid in cash, shares of Common Stock or a
combination and payments may be deferred pursuant to Section 7, all as
determined by the Committee.
<PAGE>
Section 6. Withholding Tax
The Company shall deduct from any payments under the Plan, a sufficient
amount to cover withholding of any federal, state or local taxes required by
law.
Section 7. Payment Deferrals
The Committee may require or permit Participants to elect to defer the
payment of Awards under such rules and procedures as it may establish under the
Plan, including providing for the payment or crediting of interest on the
deferred amounts or the payment or crediting of dividend equivalents if deferred
amounts are denominated in Common Stock equivalents.
Section 8. Transferability and Exercisability
Awards and rights to deferred payments, granted under the Plan shall not
be transferable or assignable other than by will or the laws of descent and
distribution.
Section 9. Other Benefit and Compensation Programs
Unless otherwise specifically determined by the Committee, settlements
of Awards received by Participants under the Plan shall not be deemed a part of
a Participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Company benefit plan, severance program or
severance pay law of any country, or benefits that may be provided pursuant to a
contractual obligation of the Company. Further, the Company may adopt other
compensation programs, plans or arrangements as it deems appropriate or
necessary.
Section 10. Unfunded Plan
Unless otherwise determined by the Committee, the Plan and any deferred
amounts under Section 7 hereof, shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company and any participant or
other person. To the extent any person holds any rights by virtue of a grant
awarded under the Plan, such rights (unless otherwise determined by the
Committee) shall be no greater than the rights of an unsecured general creditor
of the Company.
Section 11. Future Rights
No person shall have any claim or rights to be granted an award under
the Plan, and no participant shall have any rights under the Plan to be retained
in the employ of the Company. Likewise, participation in the Plan will not in
any way affect the Company's right to terminate the employment of the
participant at any time with or without cause. Participation in the Plan with
respect to any Performance Period shall not affect the Committee's right to
include or exclude any person for participation with respect to any other
Performance Period.
<PAGE>
Section 12. Governing Law
The validity, construction and effect of the Plan and any actions taken
or relating to the Plan shall be determined in accordance with the laws of the
State of New York and applicable federal law.
Section 13. Successors and Assigns
The Plan shall be binding on all successors and assigns of a
Participant, including, without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the particpant's creditors.
Section 14. Amendment or Termination
The Committee may from time to time amend or terminate the Plan,
provided that no amendment shall increase the maximum amount payable to a
Participant for a Performance Period as specified in Section 5; and further
provided that no amendment will cause an Award to become subject to the tax
deduction limitation contained in section 162(m) of the Code.
Section 15. Effective Date
The Plan shall become effective upon its approval by the stockholders of
the Company. Such approval shall constitute the effectiveness of Awards granted
by the Committee prior to such approval for purposes of qualifying such Awards
for the performance-based exemption provided under section 162(m) of the Code.
<PAGE>
EXHIBIT 11
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1993 1992
----------------------- -----------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding
during year................... 10,814,000 10,814,000 10,562,483 10,562,483
Excess of weighted average
number of shares issuable upon
exercise of employee stock
options over 20% of shares
outstanding at end of year.... 3,403,000 3,403,000 2,502,741 2,502,741
----------- ----------- ----------- -----------
Weighted average number of
shares........................ 14,217,000 14,217,000 13,065,224 13,065,224
----------- ----------- ----------- -----------
Proceeds available to repay
debt:
From exercise of options,
including tax benefits, at
average market price........ $31,541,000 $22,046,854
From exercise of options,
including tax benefits, at
year-end market price....... $28,379,000 $20,230,728
Other........................ 1,360,000 1,360,000 1,538,000 1,538,000
----------- ----------- ----------- -----------
32,901,000 29,739,000 23,584,854 21,768,728
----------- ----------- ----------- -----------
Interest saved................. 1,513,000 1,368,000 1,347,335 1,258,344
Other.......................... 198,000 187,000 187,119 184,298
----------- ----------- ----------- -----------
1,711,000 1,555,000 1,534,454 1,442,642
----------- ----------- ----------- -----------
Increase to income, net of tax-
es............................ 1,112,000 1,011,000 1,012,740 952,144
Net income as reported......... 9,650,000 9,650,000 6,305,756 6,305,756
----------- ----------- ----------- -----------
Adjusted net income............ $10,762,000 $10,661,000 $ 7,318,496 $ 7,257,900
----------- ----------- ----------- -----------
Per share...................... $.76 $.75 $.56 $.56
</TABLE>
<PAGE>
EXHIBIT 21
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
(SUBSIDIARIES)
<TABLE>
<CAPTION>
PARENT CORPORATION SUBSIDIARY AND STATE OF INCORPORATION
------------------ -------------------------------------
<S> <C>
Ply Gem Industries, Inc. Allied Plywood Corporation (Delaware)
Continental Wood Preserves, Inc. (Michigan)
Great Lakes Window, Inc. (Ohio)
Goldenberg Group, Inc. (California)
Hoover Treated Wood Products, Inc. (Delaware)
Richwood Building Products, Inc. (Delaware)
Sagebrush Sales, Inc. (New Mexico)
SNE Enterprises, Inc. (Delaware)
Studley Products, Inc. (New York)
Variform, Inc. (Missouri)
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 24, 1995, accompanying the
consolidated financial statements included in the Annual Report of Ply Gem
Industries, Inc. on Form 10-K for the year ended December 31, 1994. We hereby
consent to the incorporation by reference of said report in the Registration
Statements of PlyGem Industries, Inc. on Form S-8 (Registration Nos. 33-28753;
33-52514; 33-28752; 2-84279; 33-52516; 33-55035; and 33-55037).
Grant Thornton LLP
New York, New York
March 30, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of the Company and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 14,403
<SECURITIES> 1,813
<RECEIVABLES> 48,596
<ALLOWANCES> 6,353
<INVENTORY> 103,089
<CURRENT-ASSETS> 185,231
<PP&E> 120,930
<DEPRECIATION> 43,846
<TOTAL-ASSETS> 345,569
<CURRENT-LIABILITIES> 74,733
<BONDS> 86,660
<COMMON> 4,324
0
0
<OTHER-SE> 157,312
<TOTAL-LIABILITY-AND-EQUITY> 345,569
<SALES> 796,419
<TOTAL-REVENUES> 796,419
<CGS> 642,337
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 874
<INTEREST-EXPENSE> 7,479
<INCOME-PRETAX> (11,949)
<INCOME-TAX> (3,418)
<INCOME-CONTINUING> (8,531)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,531)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
