<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 JUNE 30, 1996 OR
-------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO __________
COMMISSION FILE NUMBER 1-4087
-------
PLY GEM INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-1727150
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 THIRD AVENUE, NEW YORK, NEW YORK 10017
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 212-832-1550
-----------------------------
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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
CLASS OUTSTANDING AT AUGUST 1, 1996
- --------------------------------------- ---------------------------------------
COMMON STOCK, PAR VALUE $.25 PER SHARE 14,118,465 SHARES
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
ASSETS JUNE 30, DECEMBER 31,
- ------ 1996 1995
----------- ------------
(UNAUDITED)
CASH AND CASH EQUIVALENTS $ 4,005 $ 8,107
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE
OF $4,174; $4,511 IN 1995 45,324 33,020
INVENTORIES 100,722 96,228
PREPAID AND DEFERRED INCOME TAXES 14,442 15,714
OTHER CURRENT ASSETS 11,944 9,194
-------- --------
TOTAL CURRENT ASSETS 176,437 162,263
PROPERTY, PLANT AND EQUIPMENT - AT COST
NET OF ACCUMULATED DEPRECIATION AND
AMORTIZATION OF $57,752; $51,573 IN 84,548 81,832
1995
PATENTS AND TRADEMARKS, NET OF
ACCUMULATED AMORTIZATION OF $9,548;
$8,971 IN 1995 14,788 15,334
OTHER INTANGIBLE ASSETS - NET 15,005 15,507
COST IN EXCESS OF NET ASSETS ACQUIRED - 22,350 23,081
NET
OTHER ASSETS 22,639 26,973
-------- --------
TOTAL ASSETS $335,767 $324,990
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 61,518 $ 52,645
ACCRUED RESTRUCTURING 2,030 4,480
CURRENT MATURITIES OF LONG-TERM DEBT 570 458
AND CAPITAL LEASES -------- --------
TOTAL CURRENT LIABILITIES 64,118 57,583
LONG-TERM DEBT 102,447 93,135
CAPITAL LEASES 7,491 7,106
OTHER LIABILITIES 20,053 22,681
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $.01 PAR VALUE;
AUTHORIZED 5,000,000 SHARES; NONE
ISSUED - -
COMMON STOCK, $.25 PAR VALUE;
AUTHORIZED 60,000,000 SHARES;
ISSUED 17,611,657; 17,463,072 IN 1995 4,403 4,366
ADDITIONAL PAID-IN CAPITAL 149,165 148,618
RETAINED EARNINGS 53,897 53,246
UNREALIZED APPRECIATION IN MARKETABLE
SECURITIES 509 -
LESS: TREASURY STOCK-AT COST
(3,332,069 SHARES; 3,015,311 IN
1995) 60,306 55,676
UNAMORTIZED RESTRICTED
STOCK AND NOTE RECEIVABLE 6,010 6,069
-------- --------
TOTAL STOCKHOLDERS' EQUITY 141,658 144,485
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $335,767 $324,990
======== ========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------
JUNE 30, JULY 1,
1996 1995
--------- ---------
<S> <C> <C>
NET SALES $212,079 $203,265
COST OF GOODS SOLD 169,385 169,116
-------- --------
GROSS PROFIT 42,694 34,149
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 32,591 30,347
-------- --------
INCOME FROM OPERATIONS 10,103 3,802
INTEREST EXPENSE (1,933) (1,770)
OTHER INCOME (EXPENSE), NET (611) (414 )
-------- --------
INCOME BEFORE INCOME TAXES 7,559 1,618
INCOME TAXES 3,402 590
-------- --------
NET INCOME $ 4,157 $ 1,028
======== ========
EARNINGS PER SHARE:
PRIMARY $ .28 $ .07
FULLY DILUTED .28 .07
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
PRIMARY 16,102 14,440
FULLY DILUTED 16,102 14,440
CASH DIVIDENDS PER SHARE $ .03 $ .03
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
PLY GEM INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
SIX MONTHS
ENDED
---------------------
JUNE 30, JULY 1,
1996 1995
---- ----
NET SALES $354,097 $366,199
COST OF GOODS SOLD 290,889 307,188
-------- --------
GROSS PROFIT 63,208 59,011
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 55,988 57,753
-------- --------
INCOME FROM OPERATIONS 7,220 1,258
INTEREST EXPENSE (3,757) (3,248)
OTHER INCOME (EXPENSE), NET (657) (986)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 2,806 (2,976)
INCOME TAXES (BENEFIT) 1,287 (1,339)
-------- --------
$ 1,519 $ (1,637)
NET INCOME (LOSS) ======== ========
EARNINGS (LOSS) PER SHARE:
PRIMARY $ .11 $ (.11)
FULLY DILUTED .11 (.11)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
PRIMARY 14,251 14,444
FULLY DILUTED 14,251 14,444
CASH DIVIDENDS PER SHARE $ .06 $ .06
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------------------
JUNE 30, JULY 1,
1996 1995
------------------ -------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ----------------------------------------
NET INCOME (LOSS) $ 1,519 $ (1,637)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 7,569 $ 6,787
PROVISION FOR DOUBTFUL ACCOUNTS 1,526 1,136
CHANGES IN ASSETS AND LIABILITIES:
- ----------------------------------------
ACCOUNTS RECEIVABLE (13,830) (2,691)
INVENTORIES (4,494) (5,398)
PREPAID AND DEFERRED INCOME TAXES 1,272 (804)
PREPAID EXPENSES AND OTHER CURRENT (2,241) (4,006)
ASSETS
ACCOUNTS PAYABLE AND ACCRUED
EXPENSES 8,873 (5,241)
RESTRUCTURING (4,294) (3,784)
OTHER 3,550 (2,069) (1,659) (15,660)
------- ------- ------- --------
NET CASH USED IN OPERATING (550) (17,297)
ACTIVITIES ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
- ----------------------------------------
ADDITIONS TO PROPERTY, PLANT AND
EQUIPMENT (8,623) (15,804)
OTHER 117 900
------- --------
NET CASH USED IN INVESTING ACTIVITIES (8,506) (14,904)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
- ----------------------------------------
PURCHASE OF TREASURY SHARES (4,630) (2,190)
NET CHANGE IN REVOLVING NOTE
BORROWINGS WITH
ORIGINAL MATURITY OF 90 DAYS OR LESS 9,460 21,785
CASH DIVIDENDS (868) (875)
OTHER 992 847
------- --------
NET CASH PROVIDED BY FINANCING 4,954 19,567
ACTIVITIES ------- --------
NET DECREASE IN CASH AND CASH (4,102) (12,634)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 8,107 14,403
BEGINNING OF PERIOD ------- --------
CASH AND CASH EQUIVALENTS AT END OF $ 4,005 $ 1,769
PERIOD ======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<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
1996 PRESENTATION.
THESE STATEMENTS INCLUDE ALL ADJUSTMENTS, CONSISTING ONLY OF NORMAL
RECURRING ACCRUALS, CONSIDERED NECESSARY FOR A FAIR PRESENTATION OF FINANCIAL
POSITION, RESULTS OF OPERATIONS AND CASH FLOWS OF THE COMPANY. 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.
IN 1996 THE COMPANY CHANGED ITS INTERIM FISCAL REPORTING PERIODS TO
CONFORM TO CALENDAR PRESENTATION. THE CHANGE HAS NO MATERIAL EFFECT ON THE
INTERIM COMPARISONS.
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:
(IN THOUSANDS)
BALANCE AT
DECEMBER 31, 1996 BALANCE AT
1995 ACTIVITY JUNE 30, 1996
------------ -------- -------------
CONSOLIDATION AND CLOSURE OF
FACILITIES, INCLUDING
SEVERANCE AND RELATED COSTS $7,779 $3,875 $ 3,904
OTHER, INCLUDING LEASE TERMINATION
EXPENSES AND COSTS TO EXECUTE THE
RESTRUCTURING PROGRAM 235 150 85
------ ------ -------
$8,014 $4,025 $3,989*
====== ====== =======
*THE FOLLOWING AMOUNTS ARE INCLUDED IN THE CONSOLIDATED BALANCE SHEET AT
JUNE 30, 1996 UNDER THE CAPTIONS: "ACCRUED RESTRUCTURING" ($2.1 MILLION),
"OTHER LIABILITIES" ($1.2 MILLION), "PROPERTY, PLANT AND EQUIPMENT" (REDUCTION
OF $ .2 MILLION), "INVENTORIES" (REDUCTION OF $ .4 MILLION), AND "ACCOUNTS
RECEIVABLE" (REDUCTION OF $.1 MILLION).
NOTE 3 -THE MAJOR CLASSES OF INVENTORIES WERE AS FOLLOWS:
(IN THOUSANDS)
JUNE 30 , 1996 DECEMBER 31, 1995
-------------- -----------------
FINISHED GOODS $ 56,426 $54,530
WORK IN PROCESS 12,276 12,508
RAW MATERIALS 32,020 29,190
-------- -------
$100,722 $96,228
======== =======
6
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - EARNINGS (LOSS) PER SHARE OF COMMON STOCK ARE COMPUTED BY DIVIDING NET
EARNINGS (LOSS) BY THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.
THE DILUTIVE EFFECT OF STOCK OPTIONS HAS BEEN EXCLUDED FROM THE CALCULATIONS IN
1995 AND FOR THE FIRST THREE AND SIX MONTHS OF 1996 AS THEIR EFFECT WOULD BE
ANTI-DILUTIVE. EARNINGS PER SHARE FOR THE SECOND QUARTER OF 1996 IS CALCULATED
USING THE MODIFIED TREASURY STOCK METHOD, WHICH LIMITS THE ASSUMED PURCHASE OF
TREASURY SHARES TO 20% OF THE OUTSTANDING COMMON SHARES.
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION FOR THE SIX MONTH PERIODS ARE AS
FOLLOWS:
(IN THOUSANDS)
JUNE 30, 1996 JULY 1, 1995
------------- ------------
INTEREST PAID $3,156 $3,022
INCOME TAXES PAID 387 662
NOTE 6 - THE ACCUMULATED AMORTIZATION OF COST IN EXCESS OF NET ASSETS ACQUIRED
AND OTHER INTANGIBLE ASSETS ARE $21,151,000 AT JUNE 30, 1996 AND $19,917,000 AT
DECEMBER 31, 1995.
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 JUNE 30, 1996 APPROXIMATELY $2,000,000
OF RETAINED EARNINGS WAS AVAILABLE FOR THE PAYMENT OF DIVIDENDS IN 1996.
NOTE 8- HOOVER TREATED WOOD PRODUCTS, INC. ("HOOVER"), A WHOLLY-OWNED
SUBSIDIARY OF THE COMPANY, IS A DEFENDANT IN A NUMBER OF LAWSUITS ALLEGING
DAMAGE CAUSED BY ALLEGED DEFECTS IN CERTAIN PRESSURE TREATED INTERIOR WOOD
PRODUCTS. HOOVER HAS NOT MANUFACTURED OR SOLD THESE PRODUCTS SINCE AUGUST,
1988. THE NUMBER OF LAWSUITS PENDING HAS DECLINED SIGNIFICANTLY FROM EARLIER
PERIODS. MOST OF THE SUITS HAVE BEEN RESOLVED BY DISMISSAL OR SETTLEMENT WITH
SETTLEMENTS BEING PAID OUT OF INSURANCE PROCEEDS OR OTHER THIRD PARTY
RECOVERIES. HOOVER AND THE COMPANY ARE VIGOROUSLY DEFENDING THOSE SUITS WHICH
REMAIN PENDING AND DEFENSE AND INDEMNITY COSTS ARE BEING PAID OUT OF INSURANCE
PROCEEDS AND PROCEEDS FROM A SETTLEMENT BY HOOVER WITH SUPPLIERS OF MATERIAL
USED IN THE PRODUCTION OF INTERIOR TREATED WOOD.
HOOVER AND THE COMPANY HAVE ENGAGED IN COVERAGE LITIGATION WITH THEIR
INSURERS AND HAVE SETTLED THEIR COVERAGE CLAIMS WITH A MAJORITY OF ITS
INSURERS. THE COMPANY BELIEVES THAT THE REMAINING COVERAGE DISPUTES WILL BE
RESOLVED 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 SETTLEMENTS WITH PRIMARY
AND EXCESS INSURERS AND CONSULTED WITH COUNSEL.
HOOVER HAS RECORDED A RECEIVABLE AT JUNE 30, 1996 (INCLUDED IN OTHER
ASSETS) FOR APPROXIMATELY $10.4 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.
7
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - (CONTINUED)
--------------------
IN EVALUATING THE EFFECT OF THE LAWSUITS, A NUMBER OF FACTORS HAVE BEEN
CONSIDERED, INCLUDING: THE LITIGATION HISTORY, THE SIGNIFICANT DECLINE IN THE
NUMBER OF CASES, THE AVAILABILITY OF VARIOUS LEGAL DEFENSES 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 EFFECT UPON THE FINANCIAL POSITION OF
THE COMPANY.
8
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
WHEN USED IN THIS DISCUSSION, THE WORDS "BELIEVES", "ANTICIPATES",
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO
OBLIGATION TO REPUBLISH REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS. READERS ARE ALSO URGED TO CAREFULLY REVIEW AND CONSIDER
THE VARIOUS DISCLOSURES MADE BY THE COMPANY, IN THIS REPORT, AS WELL AS THE
COMPANY'S PERIODIC REPORTS ON FORMS 10-K, 10-Q AND 8-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
RESULTS OF OPERATIONS
---------------------
THE COMPANY REPORTED SIGNIFICANTLY BETTER OPERATING RESULTS FOR THE SECOND
QUARTER OF 1996 WHEN COMPARED WITH THE SECOND QUARTER OF 1995. ON A SALES
INCREASE OF 4.3%, NET INCOME QUADRUPLED TO $4.2 MILLION UP FROM $1.0 MILLION
FOR THE SAME QUARTER A YEAR AGO. OPERATING INCOME INCREASED OVER TWO AND ONE-
HALF TIMES TO $10.1 MILLION FROM $3.8 MILLION FOR THE QUARTERLY COMPARISON
PERIODS. THE SIGNIFICANT REASONS FOR THE IMPROVEMENT ARE DISCUSSED BELOW.
NET SALES FOR THE SECOND QUARTER OF 1996 TOTALED $212.1 MILLION, AN
INCREASE OF 4.3% OVER THE SAME PERIOD IN 1995. THE SECOND QUARTER SALES GROWTH
WAS DRIVEN BY THE COMPANY'S WINDOWS, DOORS AND SIDING BUSINESSES WHICH
EXPERIENCED DOUBLE DIGIT SALES GROWTH AND IMPROVED SALES IN THE COMPANY'S
SPECIALTY WOOD BUSINESSES. APPROXIMATELY TWO-THIRDS OF THE SALES GROWTH WAS
ATTRIBUTED TO UNIT VOLUME INCREASES AND THE REMAINDER TO INCREASES IN AVERAGE
SELLING PRICES. FOR THE SIX MONTHS ENDED JUNE 30, 1996, NET SALES WERE $354.1
MILLION, AS COMPARED WITH $366.2 MILLION FOR THE CORRESPONDING PERIOD IN 1995.
APPROXIMATELY ONE-HALF OF THE DECLINE IN NET SALES WAS DUE TO THE COMPANY'S
PLANNED EXIT OR DE-EMPHASIS OF CERTAIN LOW MARGIN PRODUCTS WITH THE REMAINDER
PRIMARILY DUE TO LOWER SALES IN THE COMPANY'S DISTRIBUTION BUSINESSES.
GROSS PROFIT, EXPRESSED AS A PERCENTAGE OF SALES, WAS 20.1% IN THE SECOND
QUARTER OF 1996 COMPARED WITH 16.8% FOR THE SAME PERIOD IN 1995. GROSS PROFIT
DOLLARS INCREASED $8.5 MILLION OR 25% FOR THE COMPARISON PERIOD. GROSS PROFIT
FOR THE FIRST HALF OF 1996 WAS 17.9% COMPARED WITH 16.1% IN 1995. THE
SIGNIFICANT IMPROVEMENT WAS PRIMARILY ATTRIBUTABLE TO LOWER RAW MATERIAL COSTS,
PARTICULARLY PVC RESIN AND GLASS, IMPROVED MANUFACTURING EFFICIENCIES AND
PROCESS IMPROVEMENTS.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, AS A PERCENTAGE OF SALES,
FOR THE 1996 SECOND QUARTER WAS 15.4% COMPARED WITH 14.9% FOR THE CORRESPONDING
PERIOD IN 1995. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FOR THE FIRST
HALF OF 1996 WERE ESSENTIALLY FLAT COMPARED TO THE FIRST HALF OF 1995.
9
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
RESULTS OF OPERATIONS - (CONTINUED)
-----------------------------------
THE COMPANY'S EFFECTIVE TAX RATE IN THE SECOND QUARTER OF 1996 WAS 45.0%,
WHICH COMPARES WITH 36.5% IN THE SECOND QUARTER OF 1995. THE LOWER EFFECTIVE
RATE FOR THE SECOND QUARTER OF 1995 RESULTS FROM THE REVISION OF THE COMPANY'S
ESTIMATE OF THE EFFECTIVE TAX RATE EXPECTED TO BE APPLICABLE FOR THE FULL YEAR.
THE EFFECTIVE TAX RATE FOR THE FIRST HALF OF 1995 AND 1996 WAS APPROXIMATELY
THE SAME.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
THE COMPANY USED $.6 MILLION IN CASH FROM OPERATIONS DURING THE FIRST HALF
OF 1996 COMPARED TO $17.3 MILLION IN THE CORRESPONDING 1995 PERIOD. THE
SIGNIFICANT IMPROVEMENT IS DUE TO IMPROVED OPERATING RESULTS AND IMPROVED
MANAGEMENT OF WORKING CAPITAL.
SIGNIFICANT INVESTING ACTIVITIES IN THE FIRST HALF OF 1996 INCLUDE CAPITAL
EXPENDITURES OF $8.6 MILLION PRIMARILY INCURRED BY THE COMPANY'S WINDOWS, DOORS
AND SIDING SUBSIDIARIES. SIGNIFICANT FIRST HALF OF 1996 FINANCING ACTIVITIES
RELATED TO THE NET INCREASE IN REVOLVING CREDIT BORROWINGS OF $9.5 MILLION USED
PRINCIPALLY TO FINANCE THE CAPITAL EXPENDITURES OF THE COMPANY.
THE COMPANY'S CURRENT RATIO OF 2.8 TO 1 AT JUNE 30, 1996 WAS SUBSTANTIALLY
THE SAME AS IT WAS AT THE END OF 1995.
THE COMPANY HAS A REVOLVING CREDIT FACILITY WITH A SYNDICATE OF ELEVEN
BANKS WHICH PROVIDES FINANCING THROUGH FEBRUARY 1999. AVAILABILITY UNDER THIS
FACILITY WAS APPROXIMATELY $48 MILLION AT JUNE 30, 1996.
THE COMPANY ANTICIPATES THAT INTERNALLY GENERATED FUNDS FROM OPERATIONS,
EXISTING CASH BALANCES AND THE COMPANY'S EXISTING CREDIT FACILITY SHOULD BE
SUFFICIENT TO SATISFY ITS CASH REQUIREMENTS FOR THE NEXT OPERATING CYCLE.
10
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
JUNE 30, 1996
PART II - OTHER INFORMATION
ALL ITEMS ARE INAPPLICABLE EXCEPT:
ITEM 1. LEGAL PROCEEDINGS.
SEE NOTE 8 TO THE CONSOLIDATED FINANCIAL STATEMENTS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(A) THE ANNUAL MEETING OF STOCKHOLDERS OF PLY GEM INDUSTRIES, INC. WAS
HELD ON MAY 10, 1996.
(B) THE DIRECTORS NAMED IN THE PROXY STATEMENT CONSTITUTING THE ENTIRE
BOARD OF DIRECTORS WERE ELECTED TO ONE YEAR TERMS EXPIRING IN 1996, AS
FOLLOWS:
FOR WITHHELD
--- --------
HERBERT P. DOOSKIN 12,546,929 602,705
JOSEPH GOLDENBERG 12,546,769 602,865
ALBERT HERSH 12,550,402 599,232
WILLIAM LILLEY 12,551,897 597,737
ELIHU H. MODLIN 12,540,525 609,109
JEFFREY S. SILVERMAN 12,545,988 603,646
DANA R. SNYDER 12,551,269 598,365
THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT FOR PLY GEM
INDUSTRIES, INC. DATED APRIL 15, 1996 WAS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO REGULATION 14A OF THE ACT AND IS INCORPORATED
HEREIN BY REFERENCE.
ITEM 5. OTHER INFORMATION
ON AUGUST 2, 1995, THE COMPANY ENGAGED THE INVESTMENT BANKING FIRM BEAR,
STEARNS & CO. INC. TO EXPLORE STRATEGIC ALTERNATIVES FOR THE INTENT OF
MAXIMIZING SHAREHOLDERS VALUE, INCLUDING THE POSSIBLE SALE OF THE COMPANY. ON
JULY 16, 1996 THE COMPANY ANNOUNCED THE CONCLUSION OF THE BEAR, STEARNS & CO.
INC. ENGAGEMENT WITH RESPECT TO THE AFORESAID.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS: EXHIBIT 11 - SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
(B) REPORTS - NO REPORTS ON FORM 8-K WERE FILED DURING THE QUARTER ENDED
JUNE 30, 1996.
11
<PAGE>
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 1996
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: AUGUST 12, 1996 /S/ HERBERT P. DOOSKIN
---------------------------- -----------------------
EXECUTIVE VICE PRESIDENT
PRINCIPAL FINANCIAL OFFICER
12
<PAGE>
EXHIBIT 11
PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
QUARTER ENDED JUNE 30,
1996
------------------------
FULLY
PRIMARY DILUTED
----------- -----------
Weighted average number of common shares
outstanding during year............. 14,179,000 14,179,000
Excess of weighted average number of
shares
issuable upon exercise of employee
stock options over 20% of shares
outstanding at end of quarter....... 1,923,000 1,923,000
----------- -----------
Weighted average number of shares....... 16,102,000 16,102,000
=========== ===========
Proceeds available to repay debt:
From exercise of options,
including tax
benefits, at average market $29,562,000
price........................
From exercise of options,
including tax
benefits, at quarter-end
market price................. $30,508,000
----------- -----------
$29,562,000 $30,508,000
----------- -----------
Interest saved, net of taxes............ 302,000 312,000
Net income as reported.................. 4,157,000 4,157,000
----------- -----------
Adjusted net income..................... $ 4,459,000 $ 4,469,000
=========== ===========
Per share............................... $.28 $.28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,005
<SECURITIES> 0
<RECEIVABLES> 49,498
<ALLOWANCES> 4,174
<INVENTORY> 100,722
<CURRENT-ASSETS> 176,437
<PP&E> 142,300
<DEPRECIATION> 57,752
<TOTAL-ASSETS> 335,767
<CURRENT-LIABILITIES> 64,118
<BONDS> 109,938
0
0
<COMMON> 4,403
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 335,767
<SALES> 354,097
<TOTAL-REVENUES> 354,097
<CGS> 290,889
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,526
<INTEREST-EXPENSE> 3,757
<INCOME-PRETAX> 2,806
<INCOME-TAX> 1,287
<INCOME-CONTINUING> 1,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,519
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
