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 September 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 0-23688
AMERICAN BUILDINGS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 63-0931058
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 800
State Docks Road
Eufaula, Alabama 36027
(Address of principal executive offices)
(Zip Code)
(334) 687-2032
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: November 6, 1996 - 5,311,333 shares.
<PAGE>
INDEX
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
Page Number
-----------
PART 1. Financial Information
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-
September 30, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Income-
Three months ended September 30, 1996 and 1995;
Nine months ended September 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows-
Nine months ended September 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K 10
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 0 $ 17,100
Accounts receivable, net of allowance for doubtful
accounts of $3,129 and $2,589, respectively 34,583 29,473
Inventories 16,786 15,088
Other current assets 3,571 2,829
-------- ---------
Total current assets 54,940 64,490
PROPERTY, PLANT AND EQUIPMENT, at cost 67,330 61,454
Less accumulated depreciation 38,182 35,585
-------- ---------
29,148 25,869
RESTRICTED CASH 658 4,100
DEFERRED INCOME TAXES 2,057 2,057
OTHER ASSETS, net 6,689 4,827
-------- ---------
Total assets $ 93,492 $ 101,343
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 970 $ 970
Accounts payable 28,285 23,579
Accrued liabilities 11,277 11,312
Accrued income taxes 596 1,513
-------- ---------
Total current liabilities 41,128 37,374
LONG-TERM DEBT, net of current maturities 12,434 7,760
OTHER NONCURRENT LIABILITIES 2,931 2,698
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 4,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.01 par value; 25,000 shares authorized,
6,312 shares and 6,237 shares issued
at September 30, 1996 and December 31, 1995, respectively 63 62
Additional paid-in capital 30,748 30,082
Retained earnings 32,719 24,438
-------- ---------
63,530 54,582
Less-Treasury stock, at cost (1,001 and 46 shares at
September 30, 1996 and December 31, 1995, respectively) (26,531) (1,071)
-------- ---------
Total stockholders' equity 36,999 53,511
-------- ---------
Total liabilities and stockholders' equity $ 93,492 $ 101,343
======== =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ ----------------------
1996 1995 1996 1995
------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $78,171 $ 80,182 $ 192,653 $ 210,249
COSTS AND EXPENSES:
Cost of sales 65,979 64,872 161,374 171,386
Selling, general, and administrative 6,275 7,286 17,823 19,925
------- --------- --------- ---------
72,254 72,158 179,197 191,311
OPERATING INCOME 5,917 8,024 13,456 18,938
INTEREST, NET 164 (92) (9) (16)
------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,753 8,116 13,465 18,954
PROVISION FOR INCOME TAXES 2,216 3,178 5,184 7,298
------- --------- --------- ---------
NET INCOME $ 3,537 $ 4,938 $ 8,281 $ 11,656
======= ========= ========= =========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.61 $ 0.75 $ 1.34 $ 1.78
======= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING 5,788 6,596 6,186 6,539
======= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
Nine months ended
September 30,
--------------------
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,281 $ 11,656
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,174 3,026
Gain on sale of fixed assets -- (24)
Changes in assets and liabilitites:
Accounts receivable, net (5,110) (10,372)
Inventories (1,698) 3,506
Accounts payable 4,706 2,872
Accrued liabilities and taxes (952) 6,295
Other working capital changes (742) (990)
Other, net 102 (446)
-------- --------
Total adjustments (520) 3,867
-------- --------
Net cash provided by operating activities 7,761 15,523
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash 3,442 4,491
Investment in China Joint Venture (2,940) --
Proceeds from sales of fixed assets 30 159
Proceeds from sales of nonoperating property, net 947 --
Additions to property, plant, and equipment (6,221) (8,976)
-------- --------
Net cash used for investing activities (4,742) (4,326)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Revolver 4,674 --
Long-term debt payments -- (4,539)
Proceeds from issuance of common stock 667 40
Secondary offering issuance costs -- (207)
Treasury stock repurchases (25,460) --
-------- --------
Net cash used for financing activities (20,119) (4,706)
-------- --------
NET (DECREASE) INCREASE IN CASH (17,100) 6,491
CASH AT BEGINNING OF PERIOD 17,100 4,978
-------- --------
CASH AT END OF PERIOD $ -- $ 11,469
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 344 $ 657
======== ========
Cash paid for income taxes $ 6,000 $ 6,777
======== ========
See notes to condensed consolidated financial statements.
4
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(In Thousands, Except Per Share Data)
(Unaudited)
1. The condensed consolidated financial statements included herein have been
prepared by the Company, 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, although the
Company believes that the disclosures are adequate to make the information
not misleading. In the opinion of management, the condensed consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of the Company as of September 30, 1996 and the
results of its operations and cash flows for the three and nine months
ended September 30, 1996 and 1995. All such adjustments are of a normal
recurring nature. The results of operations for the three and nine months
ended September 30, 1996 are not necessarily indicative of the results to
be expected for the year ended December 31, 1996. The accounting policies
continue unchanged from December 31, 1995. For further information, refer
to the Consolidated Financial Statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
2. Inventories consisted of the following :
September 30, December 31
1996 1995
-------- --------
Raw materials $ 14,872 $ 13,846
Work in process 2,250 2,574
Finished goods 502 328
-------- --------
$ 17,624 $ 16,748
Allowance to state
inventories at LIFO cost (838) (1,660)
======== ========
$ 16,786 $ 15,088
======== ========
5
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Data)
(Unaudited) - Continued
3. Included in accrued liabilities are estimated insurance claims for the
self-insured portion of workers' compensation, property and casualty and
health insurance plans totaling $4,112 and $3,483 at September 30, 1996 and
December 31, 1995, respectively.
4. On December 7, 1994, the Company closed a $9,700 industrial revenue bond
transaction with the Industrial Development Authority ("IDA") of
Mecklenburg County, Virginia, for the purpose of financing its new
manufacturing facility located in Virginia. The bonds bear interest at a
variable rate which averaged 3.6% and 3.7% for the third quarter and first
three quarters of 1996, respectively, compared to 4.1% and 4.2% for the
third quarter and first three quarters of 1995, respectively. Additionally,
the Company pays a .25% remarketing fee on the bond balance. The bonds
mature December 1, 2004 and are subject to mandatory sinking fund
redemption of $970 per year and are subject to mandatory redemption under
certain circumstances. The Company has secured its obligation with respect
to the IDA bonds through the issuance of a letter of credit. The carrying
amount of the bonds is assumed to approximate fair value due to the bonds'
variable rate structure. The balance of the IDA bonds, including current
portion, was $8,730 at September 30, 1996 and December 31, 1995.
The balance in the restricted cash account is reduced as capital
expenditures are made related to the Virginia plant. This balance was $658
as of September 30, 1996 and $4,100 as of December 31, 1995. These funds
are invested in highly liquid short-term investments.
5. On May 10, 1995, the Company and its lenders amended its revolving credit
facility and term loans to increase the maximum borrowing under the
Revolver, lower the interest rate to prime plus 1 % or LIBOR plus 2.5% and
to reduce certain other fees associated with this facility. All cash
received by the Company is immediately applied against the outstanding
balance of the Revolver. Also as part of this agreement, the outstanding
principal ($4,167) of the term loan was repaid on that date from cash
provided by operations. The Loan Agreement, as currently in effect,
provides the Company with a $34,000 revolving credit facility. At September
30, 1996 borrowings under the Revolver were $4,674. There were no
borrowings under the Revolver at December 31, 1995.
6
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1996
Results of Operations
Quarter ended September 30, 1996 compared to Quarter ended September 30, 1995
Net sales for the quarter ended September 30, 1996 decreased 3% to $78.2 million
from $80.2 million in the same period a year ago. Gross margins were 16% in the
current quarter compared to 19% in the corresponding quarter of 1995 primarily
due to lower selling prices as a result of the Company's previously disclosed
strategy through the first half of 1996 to be market and price aggressive in
order to build backlog and better utilize expanded production capabilities.
Backlog at September 30, 1996 was $91.1 million, up 62% from its December 31,
1995 level and up 17% over backlog at September 30, 1995. A price increase was
implemented in July 1996. Approximately 40% of the backlog at September 30, 1996
is in lower-priced orders. Selling, general and administrative expenses
decreased by 14% to $6.3 million in the third quarter of 1996 from $7.3 million
in the third quarter of 1995; as a percentage of sales these expenses decreased
to 8% in the current quarter from 9% in the third quarter of 1995. This decrease
resulted from the Company's plan to mitigate the impact of reduced selling
prices by reducing costs wherever possible without adversely affecting its
long-term growth objectives. Operating income decreased 26% to $5.9 million in
the third quarter of 1996 compared to $8.0 million in the third quarter of 1995.
The Company had net interest expense for the quarter ended September 30, 1996 of
$.2 million compared to interest income of $.1 million for the comparable period
in 1995. This increase in interest expense resulted from the Company's
repurchase of its common stock which has caused it to incur borrowings under its
Revolver. There were no borrowings under the Revolver during the third quarter
of 1995. Additionally, the Company is currently earning less interest income on
the unused proceeds from its Industrial Revenue Bond transaction which is
included on the accompanying Condensed Consolidated Balance Sheets as Restricted
Cash as most of these proceeds have now been invested in the Virginia
manufacturing facility. Net income for the quarter ended September 30, 1996
declined 28% to $3.5 million compared to $4.9 million for the same period last
year.
Nine Months ended September 30, 1996 compared to Nine Months ended September 30,
1995
Net sales for the nine months ended September 30, 1996 decreased 8% to $192.7
million from $210.2 million in the same period of 1995. Gross margins decreased
to 16% from 18% a year ago as a result of the same factors described in the
discussion of the current quarter results. Operating income for the first nine
months of 1996 decreased 29% to $13.5 million from $18.9 million in the same
period last year. The Company had negligible net interest income for the nine
month periods of both years. Net income for the first nine months of 1996
decreased 29% to $8.3 million from $11.7 million in the same period last year.
7
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity and Capital Resources
The Company has historically funded its operations from cash flow from
operations, bank borrowings and sales of its debt and equity securities.
Net cash provided by operations was $7.8 million in the first nine months of
1996 compared to $15.5 million in the comparable period of 1995. The decrease
for 1996 resulted primarily from decreased operating income and a net increase
in working capital.
Net cash used for investing activities was $4.7 million for the nine months
ended September 30, 1996 and $4.3 million for the nine months ended September
30, 1995. In the 1996 period, the Company applied $3.4 million of the proceeds
of the Industrial Revenue Bonds which were included in restricted cash at the
beginning of the year to the capital expenditures made for the Virginia
manufacturing facility. The Company also increased its investment in its joint
venture in the People's Republic of China by $2.9 million during the first nine
months of 1996, bringing its total capital investment in the joint venture to
$3.8 million. Additions to plant, property and equipment totaled $6.2 million
for the first nine months of 1996. In the 1995 period, the Company applied $4.5
million of the proceeds of the Industrial Revenue Bonds to the capital
expenditures made for the Virginia manufacturing facility and spent $9.0 million
on additions to plant, property and equipment.
Net cash used for financing activities was $20.1 million for the nine months
ended September 30, 1996 and $4.7 million for the nine months ended September
30, 1995. In the 1996 period, this was primarily the result of the $25.5 million
repurchase in the open market of 954,500 shares of the Company's Common Stock
pursuant to the Board of Directors authorization to repurchase up to 1,300,000
such shares. The repurchase was made from excess cash on hand and borrowings
under the Revolver. The Company had net borrowings of $4.7 million under its
revolving credit facility during the first nine months of 1996. In 1995,
long-term debt payments of $4.5 million were funded by cash from operations. In
July, 1995 the Company completed a secondary offering of its common stock in
which certain stockholders sold 1,466,000 shares of common stock. The Company
did not receive any proceeds from the sale of these shares; however it incurred
$.2 million of expenses related to the offering.
The Company has budgeted approximately $11.7 million in capital expenditures in
1996 consisting of $5.5 million in existing facilities, primarily for machinery
and equipment, $3.5 million to increase capacity at its Polymer Coil Coaters
facility, and $2.7 million to complete the Virginia manufacturing facility
expansion and the Eufaula office expansion. The Company expects to be able to
fund its capital expenditures with cash provided by operations, the Industrial
Revenue Bonds for the Virginia facility, and from borrowings under its revolving
credit facility.
8
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
At September 30, 1996 the Company's outstanding debt (including current portion)
was $8.7 million of Industrial Revenue Bonds which are subject to mandatory
sinking fund requirements of approximately $1.0 million per year through
December 1, 2004 and $4.7 million outstanding under the revolving credit
facility. At September 30, 1996, the Company had $11.0 million of outstanding
letters of credit. The Company had $8.7 million in debt (including current
portion) outstanding at December 31, 1995, all of which was the Industrial
Revenue Bonds. There were no borrowings under the revolving credit facility at
that date.
On July 15, 1996, the Board of Directors authorized the Company to repurchase up
to an additional 500,000 shares of its Common Stock in the open market, making a
total of 1,300,000 shares authorized for repurchase. As of September 30, 1996
and November 7, 1996, the Company had repurchased 1,000,500 of these shares.
On May 10, 1995 the Company's revolving credit and term loan agreement was
amended to increase the maximum borrowings under the Revolver, lower the
interest rate on the Revolver to prime plus 1% or LIBOR plus 2.5% and reduce
certain fees associated with the facility. Also as of that date, the term loans
($4.2 million) were repaid from cash from operations. The Loan Agreement, as
currently in effect, provides the Company with a $34 million revolving credit
facility. Borrowings under the Revolver are subject to certain borrowing base
limitations based on eligible accounts receivable and inventory less amounts
outstanding under letters of credit.
The Company believes that cash generated from operations and borrowings under
the revolving credit facility will be sufficient to meet its foreseeable working
capital and capital expenditure needs. There can be no assurance that liquidity
would not be impacted by a decline in general economic conditions and higher
interest rates which would affect the Company's ability to obtain external
financing.
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form
8-K during the three months ended September
30, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BUILDINGS COMPANY
Date November 11, 1996 /s/ Robert T. Ammerman
----------------------- --------------------------------
Robert T. Ammerman
Chief Executive Officer
Date November 11, 1996 /s/ R. Charles Blackmon, Jr.
----------------------- --------------------------------
R. Charles Blackmon, Jr.
Executive Vice President,
Chief Financial Officer
11
EXHIBIT 11
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------- --------------------
1996 1995 1996 1995
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income $3,537 $4,938 $8,281 $11,656
====== ====== ====== =======
Weighted average common and common equivalent
shares outstanding 5,450 6,233 5,829 6,229
Add - Dilutive effect of outstanding options (as
determined by the application of the treasury
stock method) 338 363 357 310
------ ------ ------ -------
Weighted average common and common equivalent
shares outstanding 5,788 6,596 6,186 6,539
====== ====== ====== =======
Primary earnings per share:
Net income $ 0.6 $ 0.75 $ 1.34 $ 1.78
====== ====== ====== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 37712
<ALLOWANCES> 3129
<INVENTORY> 16786
<CURRENT-ASSETS> 54940
<PP&E> 67330
<DEPRECIATION> 38182
<TOTAL-ASSETS> 93492
<CURRENT-LIABILITIES> 41128
<BONDS> 12434
0
0
<COMMON> 63
<OTHER-SE> 36936
<TOTAL-LIABILITY-AND-EQUITY> 93492
<SALES> 192653
<TOTAL-REVENUES> 192653
<CGS> 161374
<TOTAL-COSTS> 179197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 749
<INTEREST-EXPENSE> (9)
<INCOME-PRETAX> 13465
<INCOME-TAX> 5184
<INCOME-CONTINUING> 8281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8281
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 0
</TABLE>
