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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 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
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(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: August 2, 1996 -- 5,499,583 shares.
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<PAGE>
INDEX
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
Page Number
-----------
PART 1. Financial Information
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Income --
Three months ended June 30, 1996 and 1995;
Six months ended June 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows --
Six months ended June 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 4. Submission of Matters to a Vote of Security Holders 10
ITEM 6. Exhibits and Reports on Form 8-K 10
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
1996 1995
-------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 0 $ 17,100
Accounts receivable, net of allowance
for doubtful accounts of $2,910 and
$2,589, respectively 31,575 29,473
Inventories 16,144 15,088
Other current assets 4,681 2,829
------- -------
Total current assets 52,400 64,490
PROPERTY, PLANT AND EQUIPMENT, at cost 65,790 61,454
Less accumulated depreciation 37,210 35,585
------- -------
28,580 25,869
RESTRICTED CASH 1,085 4,100
DEFERRED INCOME TAXES 2,057 2,057
OTHER ASSETS, net 7,491 4,827
------- --------
Total assets $91,613 $101,343
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 970 $ 970
Accounts payable 25,810 23,579
Accrued liabilities 8,278 11,312
Accrued income taxes 1,031 1,513
------- --------
Total current liabilities 36,089 37,374
LONG-TERM DEBT, net of current maturities 11,123 7,760
OTHER NONCURRENT LIABILITIES 2,872 2,698
STOCKHOLDERS' EQUITY
Preferred stock, $.0l par value; 4,000
shares authorized, no shares issued and
outstanding -- --
Common stock, $.0I par value; 25,000
shares authorized, 6,311 shares and
6,237 shares issued at June 30, 1996 and
December 31, 1995, respectively 63 62
Additional paid-in capital 30,735 30,082
Retained earnings 29,182 24,438
------- --------
59,980 54,582
Less-Treasury stock, at cost (681 and
46 shares at June 30, 1996 and
December 31, 1995, respectively) (18,451) (1,071)
------- --------
Total stockholders' equity 41,529 53,511
------- --------
Total liabilities and stockholders'
equity $91,613 $101,343
======= ========
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 Six months ended
June 30, June 30,
-------------------- -----------------------
1996 1995 1996 1995
-------- ------- ------ ------
<S> <C> <C> <C> <C>
NET SALES $66,302 $ 67,769 $114,482 $130,067
COSTS AND EXPENSES:
Cost of sales 54,707 54,976 95,395 106,514
Selling, general, and administrative 5,905 6,397 11,548 12,639
------- ------- -------- --------
60,612 61,373 106,943 119,153
OPERATING INCOME 5,690 6,396 7,539 10,914
INTEREST, NET 2 (9) (173) 76
------- ------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,688 6,405 7,712 10,838
PROVISION FOR INCOME TAXES 2,189 2,435 2,968 4,120
------- ------- -------- --------
NET INCOME $ 3,499 $ 3,970 $ 4,744 $ 6,718
======= ======= ======== ========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.56 $ 0.61 $ 0.74 $ 1.03
======= ======= ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING 6,248 6,512 6,391 6,511
======= ======= ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------
1996 1995
------- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,744 $ 6,718
-------- --------
Adjustments to reconcile net income to net cash used for
operating activities:
Depreciation and amortization 2,116 2,018
Changes in assets and liabilitites:
Accounts receivable, net (2,102) (5,494)
Inventories (1,056) 3,780
Accounts payable 2,231 (2,486)
Accrued liabilities and taxes (3,516) 1,620
Other working capital changes (1,853) (672)
Other, net (1,152) (16)
-------- --------
Total adjustments (5,332) (1,250)
-------- --------
Net cash (used for) provided by operating activities (588) 5,468
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash 3,015 3,113
Investment in China Joint Venture (2,460) --
Proceeds from sales of fixed assets 30 133
Proceeds from sales of nonoperating property, net 947 --
Additions to property, plant, and equipment (4,681) (5,859)
-------- --------
Net cash used for investing activities (3,149) (2,613)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolver 3,363 --
Long-term debt payments -- (4,539)
Proceeds from issuance of common stock 654 10
Treasury stock repurchase (17,380) --
-------- --------
Net cash used for financing activities (13,363) (4,529)
-------- --------
NET (DECREASE) IN CASH (17,100) (1,674)
-------- --------
CASH AT BEGINNING OF PERIOD 17,100 4,978
-------- --------
CASH AT END OF PERIOD $ -- $ 3,304
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 208 $ 528
======== ========
Cash paid for income taxes $ 3,343 $ 4,506
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
5
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 June 30, 1996 and the results
of its operations and cash flows for the three and six months ended June
30, 1996 and 1995. All such adjustments are of a normal recurring nature.
The results of operations for the three and six months ended June 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 :
June 30, December 31,
1996 1995
-------- ------------
Raw materials $13,723 $13,846
Work in process 2,873 2,574
Finished goods 386 328
------- -------
$16,982 $16,748
Allowance to state
inventories at LIFO cost (838) (1,660)
------- -------
$16,144 $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 $3,177 and $3,483 at June 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 3.9% and 3.8% for the second quarter and first
half of 1996, respectively, compared to 4.5% and 4.3% for the second
quarter and first half 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 June 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
$1,085 as of June 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. 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 million revolving
credit facility. At June 30, 1996 borrowings under the Revolver were
$3,363. 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
JUNE 30, 1996
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995
Net sales for the quarter ended June 30, 1996 decreased 2% to $66.3 million from
$67.8 million in the same period a year ago. Gross margins declined to 17.5% in
the current quarter compared to 18.9% in the corresponding quarter of 1995
primarily as a result of lower selling prices. Backlog at June 30, 1996 was
$92.3 million, up 64% from its December 31, 1995 level and up 3% over backlog at
June 30, 1995. The Company implemented a strategy to be market and price
aggressive during the first half of 1996 in order to replenish the backlog;
effective July 1, 1996 the Company implemented a price increase. Selling,
general and administrative expenses decreased by 8% to $5.9 million in the
second quarter of 1996 from $6.4 million in the second quarter of 1995 and have
also decreased as a percent of sales. 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 declined 11% to $5.7 million in the second quarter of 1996 compared to
$6.4 million in the second quarter of 1995. The Company had negligible interest
income/expense for the second quarter of both 1996 and 1995. Net income for the
current quarter was $3.5 million compared to $4.0 million in the second quarter
of last year.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales for the six months ended June 30, 1996 decreased 12% to $114.5 million
from $130.1 million in the first half of 1995. Gross margins decreased to 16.7%
from 18.1% in the comparable period of 1995 primarily as a result of the lower
sales experienced in the first quarter of 1996 which was caused by a reduced
backlog coming into the year and the unusually severe winter weather in most US
markets causing customers to delay shipment of their orders as construction
sites were not yet ready. Operating income in the first half of 1996 decreased
31% to $7.5 million from $10.9 million for the same period last year. Net
interest for the first six months of 1996 was income of $.2 million compared to
net interest expense of $.1 million in the first half of 1995. This decrease in
interest expense resulted primarily from the repayment on May 10, 1995 of the
Company's term loan. Net income for the first six months of 1996 decreased to
$4.7 million from $6.7 million in the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations from cash flow from
operations, bank borrowings and sales of its debt and equity securities.
7
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Net cash (used for) provided by operating activities was ($.6) million in the
first half of 1996 compared to $5.5 million in the first half of 1995. The
decrease for 1996 resulted primarily from decreased operating income and an
increase in working capital necessary to support the current increasing sales
volume.
Net cash used for investing activities was $3.1 million for the six months ended
June 30, 1996 and $2.6 million for the six months ended June 30, 1995. In the
1996 period, the Company applied $3.0 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 $2.5 million during the first half of 1996 bringing its
total capital investment in the joint venture to $3.4 million. Additions to
plant, property and equipment totaled $4.7 million for the first half of 1996.
In the 1995 period, the Company applied $3.1 million of the proceeds of the
Industrial Revenue Bonds to the capital expenditures made for the Virginia
manufacturing facility. Additions to plant, property and equipment were $5.9
million in the 1995 period.
Net cash used for financing activities was $13.4 million for the six months
ended June 30, 1996 and $4.5 million for the six months ended June 30, 1995. In
1996, this was primarily the result of the $17.4 million repurchase in the open
market of 634,500 shares of the Company's Common Stock pursuant to the Board of
Directors authorization to repurchase up to 800,000 such shares. The repurchase
was made from excess cash on hand and proceeds from the revolver. The Company
borrowed $3.4 million under its revolving credit facility during the first half
of 1996. In 1995, long-term debt payments were funded by cash from operations.
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.
At June 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 $3.4 million outstanding under the revolving credit facility. At June
30, 1996, the Company had $11.3 million of outstanding letters of credit. The
Company had $8.7 million in debt (including current portion) outstanding at
December 31, 1995, all of
8
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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. At June 30, 1996 and August
2, 1996, the Company had repurchased 680,500 and 811,500 of these shares,
respectively.
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 working capital and
capital expenditure needs for the foreseeable future. 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 4. Submission of Matters to a Vote of Security Holders
a. The Annual Meeting of Stockholders was held on April 25, 1996.
b. Not Applicable.
c. The following persons, comprising the entire Board of Directors,
were elected at the Annual Meeting pursuant to the following vote
tabulations:
VOTES FOR VOTES WITHHELD
--------- --------------
Robert T. Ammerman 4,383,292 104,366
William L. Selden 4,383,292 104,366
Harold Levy 4,466,892 20,766
Douglas L. Newhouse 4,386,492 101,166
Ralph S. Saul 4,466,492 21,166
Robert F. Shapiro 4,466,892 20,766
Kendrick R. Wilson, III 4,466,892 20,766
ITEM 6. Exhibits and Reports on Form 8-K
a. Statement re: Computation of earnings per share (Exhibit 11)
b. The Company did not file any reports on Form 8-K during the three
months ended June 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 August 8, 1996 /s/ ROBERT T. AMMERMAN
---------------- ------------------------------------------
Robert T. Ammerman
Chief Executive Officer
Date August 8, 1996 /s/ R. CHARLES BLACKMON, JR.
---------------- ------------------------------------------
R. Charles Blackmon, Jr.
Executive Vice President,
Chief Financial Officer
11
<PAGE>
EXHIBIT 11
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- ------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income $3,499 $3,970 $4,744 $6,718
====== ====== ====== ======
Weighted average common and common equivalent
shares outstanding 5,869 6,228 6,024 6,227
Add - Dilutive effect of outstanding options (as determined
by the application of the treasury stock method) 379 284 367 284
------ ------ ------ ------
Weighted average common and common equivalent
shares outstanding 6,248 6,512 6,391 6,511
====== ====== ====== ======
Primary earnings per share:
Net income $ 0.56 $ 0.61 $ 0.74 $ 1.03
====== ====== ====== ======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 34,485
<ALLOWANCES> 2,910
<INVENTORY> 16,144
<CURRENT-ASSETS> 52,400
<PP&E> 65,790
<DEPRECIATION> 37,210
<TOTAL-ASSETS> 91,613
<CURRENT-LIABILITIES> 36,089
<BONDS> 11,123
0
0
<COMMON> 63
<OTHER-SE> 41,466
<TOTAL-LIABILITY-AND-EQUITY> 91,613
<SALES> 114,482
<TOTAL-REVENUES> 114,482
<CGS> 95,395
<TOTAL-COSTS> 106,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 442
<INTEREST-EXPENSE> (173)
<INCOME-PRETAX> 7,712
<INCOME-TAX> 2,968
<INCOME-CONTINUING> 4,744
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,744
<EPS-PRIMARY> .74
<EPS-DILUTED> 0
</TABLE>
