<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended April 1, 1995 or
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
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Commission file number 1-4087
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PLY GEM INDUSTRIES, INC
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(Exact name of registrant as specified in its charter)
Delaware 11-1727150
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Third Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 212-832-1550
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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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 28,1995
- --------------------------------------- --------------------------------------
Common stock, par value $.25 per share 14,568,269 Shares
1
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
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(Unaudited)
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 10,040 $ 14,403
Marketable securities 1,951 1,813
Accounts receivable, net of allowance
of $6,560; $6,353 in 1994 35,902 42,243
Inventories 109,639 103,089
Prepaid and deferred income taxes 18,442 17,426
Prepaid expenses and other current assets 8,198 6,257
-------- --------
Total current assets 184,172 185,231
Funds held for construction 1,053 1,048
Property, plant and equipment - at cost
net of accumulated depreciation and
amortization of $45,954; $43,846 in 1994 79,977 77,084
Patents and trademarks, net of accumulated
amortization of $8,112; $7,825 in 1994 16,183 16,464
Other intangible assets - net 16,318 16,586
Cost in excess of net assets acquired - net 24,280 24,647
Other assets 25,655 24,509
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$347,638 $345,569
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable and accrued expenses $ 53,724 $ 60,805
Short-term borrowings 35 35
Accrued restructuring 10,854 13,413
Current maturities of long-term debt and capital leases 472 480
-------- --------
Total current liabilities 65,085 74,733
Long-term debt 94,930 79,501
Capital leases 7,146 7,159
Deferred income taxes and other liabilities 22,071 22,540
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 5,000,000 shares; none issued -- --
Common stock, $.25 par value; authorized 4,343 4,324
30,000,000 shares; issued 17,370,221;
17,296,195 in 1994
Additional paid-in capital 148,173 146,967
Retained earnings 59,107 62,397
Less: Treasury stock-at cost
(2,808,795 shares; 2,745,319 in 1994) 52,163 50,954
Unamortized restricted stock 1,054 1,098
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Total stockholders' equity 158,406 161,636
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$347,638 $345,569
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</TABLE>
See accompanying notes to the financial statements.
2
<PAGE>
PLY GEM INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands Except per Share Data)
<TABLE>
<CAPTION>
Quarter Ended
-------------------
April 1, April 2,
1995 1994
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<S> <C> <C>
Net sales $160,235 $163,412
Cost of goods sold 135,806 136,935
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Gross profit 24,429 26,477
Selling, general and administrative
expenses 26,150 25,129
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Income (loss) from operations (1,721) 1,348
Amortization of goodwill and other
intangibles (823) (1,184)
Interest expense (1,478) (2,662)
Investment and other income (expense) net (572) 126
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Loss before income taxes (4,594) (2,372)
Income tax benefit (1,929) (1,067)
-------- --------
Net loss $ (2,665) $ (1,305)
========= ========
Loss per share:
Primary $ (.18) $ (.11)
Fully diluted (.18) (.11)
Weighted average number of shares
outstanding:
Primary 14,448 11,490
Fully diluted 14,448 11,490
Cash dividends per share $ .03 $ .03
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------
April 1, April 2,
1995 1994
------------------- --------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ----------------------------------------
Net loss $ (2,665) $ (1,305)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization $ 3,394 $ 3,577
Restructuring (2,559) --
Provision for doubtful accounts 207 725
Changes in assets and liabilities:
Accounts receivable 6,134 (9,861)
Inventories (6,550) (17,233)
Prepaid expenses and other
current assets (2,957) (11,404)
Accounts payable and
accrued expenses (7,081) (2,413)
Other (1,615) (11,027) 1,202 (35,407)
------- -------- -------- --------
Net cash used in operating
activities (13,692) (36,712)
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CASH FLOWS FROM INVESTING ACTIVITIES
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Additions to property, plant and
equipment (5,443) (3,311)
Other 83 183
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Net cash used in investing activities (5,360) (3,128)
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CASH FLOWS FROM FINANCING ACTIVITIES
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Purchase of treasury shares (1,209) --
Long-term borrowings 15,408 33,326
Cash dividends (440) (332)
Other 930 (2,275)
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Net cash provided by financing activities 14,689 30,719
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Net decrease in cash and cash equivalents (4,363) (9,121)
Cash and cash equivalents at beginning of period 14,403 12,499
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Cash and cash equivalents at end of period $ 10,040 $ 3,378
======== ========
</TABLE>
See accompanying notes to financial statement
4
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - The accompanying financial statements have been prepared without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Certain prior year items have been reclassified to conform to the
1995 presentation.
These statements include all adjustments, consisting only of normal recurring
accruals, considered necessary for a fair presentation of financial position and
results of operations. The financial statements included herein should be read
in conjunction with the financial statements and notes thereto included in the
latest annual report on Form 10-K.
NOTE 2 - During 1994, the Company recorded a charge of approximately $29.1
million related to a restructuring program. The status of the components of the
restructuring provision at the end of the period was:
<TABLE>
<CAPTION>
(In Thousands)
Balance at
December 31, 1995 Balance at
1994 Activity April 1, 1995
------------- ------------- --------------
<S> <C> <C> <C>
Consolidation and closure of facilities, including $ 15,100 $ 2,600 $12,500
severance and related costs
Other severance and related costs 3,900 900 3,000
Abandonment of certain information systems 1,300 -- 1,300
Other, including lease termination expenses and
costs to execute the restructuring program 2,000 100 1,900
-------- -------- -------
$ 22,300 $ 3,600 $18,700
======== ======== =======
</TABLE>
NOTE 3 -The major classes of inventories were as follows:
<TABLE>
<CAPTION>
(In Thousands)
April 1, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Finished goods $ 56,578 $ 52,390
Work in process 11,300 18,002
Raw materials 41,761 32,697
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$109,639 $103,089
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</TABLE>
NOTE 4 - Loss per share of common stock are based on the weighted average number
of shares outstanding during each of the periods. Common stock equivalents were
not used because the results would be anti-dilutive.
5
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - Supplemental cash flow information for the quarterly periods are as
follows:
<TABLE>
<CAPTION>
(In Thousands)
April 1, 1995 April 2, 1994
------------- --------------
<S> <C> <C>
Interest paid $1,430 $ 994
Income taxes paid 270 1,883
</TABLE>
NOTE 6 - The accumulated amortization of cost in excess of net assets acquired
and other intangibles is $23,557,000 at April 1, 1995 and $22,975,000 at
December 31, 1994.
NOTE 7 - The Company's loan agreements with its banks require the Company to
maintain a specified leverage ratio, fixed charge ratio and tangible net worth
levels and maintain certain financial ratios, among its provisions. Under the
most restrictive of these covenants, at April 1, 1995 approximately $2,500,000
of retained earnings was available for the payment of dividends in 1995.
NOTE 8- 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 April 1, 1995, as well as
the number of lawsuits filed in 1993 and 1994, have declined significantly from
earlier periods.
Most of the suits and claims have been resolved by dismissal or settlement.
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 have engaged in litigation with some of 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 substantial 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.
6
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PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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.
7
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED APRIL 1, 1995
Results of Operations
- ---------------------
Net sales for the first quarter of 1995 were approximately $160.2 million,
down slightly from the corresponding 1994 period. The decline was primarily due
to the planned elimination of certain lower margin product lines during the
first quarter of 1995.
Gross profit, expressed as a percentage of net sales, was 15.2% for the
first quarter of 1995 compared to 16.2% for the corresponding period in 1994.
The lower margin in 1995 was primarily due to the absence of inventory wood
price gains experienced in 1994 and higher raw material prices (particularly
resin and glass) partially offset by lower conversion costs.
Selling, general and administrative expenses, as a percent of net sales,
were 16.3% for the 1995 first quarter compared to 15.4% for the corresponding
period in 1994. The increase is primarily attributable to the absence of certain
employment costs in the first quarter of 1994 associated with the creation of
new management positions in the later part of 1994 and expenses incurred in the
first quarter of 1995 associated with implementing the Company's business
process redesign programs.
The decrease in interest expense of approximately $1.2 million for the
comparison periods is primarily due to the conversion of the Company's
Subordinated Debentures in March 1994.
The net loss for the first quarter of 1995 was $2.7 million compared with a
net loss of $1.3 million for the first quarter of 1994. The higher loss
experienced during the first quarter of 1995 resulted from the factors described
above.
Liquidity and Capital Resources
- -------------------------------
The Company used $13.7 million in cash from operations during the first
quarter of 1995 compared to $36.7 million in the corresponding 1994 period. The
usage of cash is due to seasonal working capital needs. The significant
improvement is due to slower working capital growth in 1995 than during 1994.
Significant investing activities in the first quarter of 1995 include capital
expenditures of $5.4 million primarily incurred by the Company's Windows, Doors
and Siding subsidiaries. Significant first quarter 1995 financing activities
related to the net increase in revolving credit borrowings of $15.4 million used
principally to finance the working capital requirements and capital expenditures
of the Company.
The Company's current ratio was 2.8 to 1 at April 1, 1995 compared to 2.5
to 1 at December 31, 1994.
Available bank credit facilities were approximately $62 million at April 1,
1995
8
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
April 1, 1995
PART II - OTHER INFORMATION
All items are inapplicable except:
Item 1. Legal Proceedings.
See Note 8 to the consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports - Dated January 6, 1995 reporting on a Receivables Purchase
Agreement with Receivables Capital Corporation.
9
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
FORM 10-Q
April 1, 1995
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ply Gem Industries, Inc.
------------------------
(Registrant)
Date: May 16, 1995 /s/ Herbert P. Dooskin
--------------- ----------------------------
Executive Vice President
Principal Financial Officer
10
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> APRIL-01-1995
<CASH> 10,040
<SECURITIES> 1,951
<RECEIVABLES> 42,462
<ALLOWANCES> 6,560
<INVENTORY> 109,639
<CURRENT-ASSETS> 184,172
<PP&E> 125,931
<DEPRECIATION> 45,954
<TOTAL-ASSETS> 347,638
<CURRENT-LIABILITIES> 65,085
<BONDS> 102,076
<COMMON> 4,343
0
0
<OTHER-SE> 154,063
<TOTAL-LIABILITY-AND-EQUITY> 347,638
<SALES> 160,235
<TOTAL-REVENUES> 160,235
<CGS> 135,806
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 207
<INTEREST-EXPENSE> 1,478
<INCOME-PRETAX> (4,594)
<INCOME-TAX> (1,929)
<INCOME-CONTINUING> (2,665)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,665)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
