================================================================================
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, 1998
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 11, 1998 -- 5,305,980 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, 1998 and December 31, 1997 2
Condensed Consolidated Statements of Income-
Three months ended September 30, 1998 and 1997;
Nine months ended September 30, 1998 and 1997 3
Condensed Consolidated Statements of Cash Flows-
Nine months ended September 30, 1998 and 1997 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 12
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 30, December 31,
1998 1997
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash (including restricted cash of $10,624 in 1997) ............................. $ 2,944 $ 16,560
Accounts receivable, net of allowance for doubtful
accounts of $3,632 and $4,375 in 1998 and 1997, respectively ................... 71,208 61,574
Inventories ...................................................................... 39,314 32,159
Other ............................................................................ 8,029 5,914
--------- ---------
Total current assets ........................................................... 121,495 116,207
PROPERTY, PLANT AND EQUIPMENT, net .................................................. 54,725 54,607
DEFERRED INCOME TAXES ............................................................... 892 892
GOODWILL, net ....................................................................... 30,752 29,669
OTHER ASSETS, net ................................................................... 9,456 8,676
--------- ---------
TOTAL ASSETS ................................................................... $ 217,320 $ 210,051
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ............................................. $ 5,215 $ 13,866
Accounts payable ................................................................. 41,788 44,958
Accrued liabilities .............................................................. 21,591 19,109
Accrued income taxes ............................................................. 2,826 1,166
--------- ---------
Total current liabilities ...................................................... 71,420 79,099
LONG-TERM DEBT, net of current maturities ........................................... 73,929 71,407
OTHER NONCURRENT LIABILITIES ........................................................ 4,467 3,749
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 4,000 shares authorized,
no shares issued and outstanding at 1998 and 1997 .............................. -- --
Common stock, $.01 par value; 25,000 shares authorized,
6,374 shares and 6,339 shares issued at 1998 and 1997, respectively ............ 64 63
Additional paid-in capital ....................................................... 31,735 31,448
Retained earnings ................................................................ 64,156 52,736
--------- ---------
95,955 84,247
Less-Treasury stock, at cost (1,069 shares at
September 30, 1998 and December 31, 1997) ....................................... (28,451) (28,451)
--------- ---------
Total stockholders' equity ..................................................... 67,504 55,796
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................................... $ 217,320 $ 210,051
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In Thousands, Except Per Share Amounts)
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES .............................................. $124,787 $ 84,888 $334,319 $221,001
COSTS AND EXPENSES:
Cost of sales ....................................... 104,308 69,632 283,046 182,706
Selling, general, and administrative ................ 9,310 7,306 28,917 20,305
-------- -------- -------- --------
113,618 76,938 311,963 203,011
OPERATING INCOME ....................................... 11,169 7,950 22,356 17,990
INTEREST EXPENSE ....................................... 1,279 131 3,789 622
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES ............... 9,890 7,819 18,567 17,368
PROVISION FOR INCOME TAXES ............................ 3,808 3,010 7,148 6,687
-------- -------- -------- --------
NET INCOME ............................................. $ 6,082 $ 4,809 $ 11,419 $ 10,681
======== ======== ======== ========
EARNINGS PER SHARE:
Basic ............................................. $ 1.15 $ 0.91 $ 2.16 $ 2.02
======== ======== ======== ========
Diluted ........................................... $ 1.08 $ 0.85 $ 2.02 $ 1.89
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ............................................. 5,297 5,280 5,286 5,300
======== ======== ======== ========
Diluted ........................................... 5,629 5,648 5,653 5,658
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
Nine months ended
September 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 11,419 $ 10,681
-------- --------
Adjustments to reconcile net income to net cash (used for)
provided by operating activities:
Depreciation and amortization ............................. 7,086 3,615
Changes in assets and liabilities:
Accounts receivable, net ............................... (10,542) (2,446)
Inventories ............................................ (6,283) (1,828)
Accounts payable ....................................... (3,844) (1,743)
Accrued liabilities and taxes .......................... 2,761 5,138
Other working capital changes .......................... (2,088) (2,314)
Other, net ............................................. (139) (5)
-------- --------
Total adjustments ................................... (13,049) 417
-------- --------
Net cash (used for) provided by operating activities (1,630) 11,098
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment ...................... (6,317) (6,705)
Investment in China Joint Venture ................................ (135) (525)
Cash settlement - Windsor Door purchase .......................... 2,536 --
Rescom ........................................................... (2,230)
Other ............................................................ -- 466
-------- --------
Net cash used for investing activities .............. (6,146) (6,764)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving credit facility .......................... (3,909) (3,503)
Long-term debt payments .......................................... (2,220) --
Purchase of treasury stock ....................................... -- 549
Proceeds from issuance of common stock ........................... -- (1,572)
Net cash (used for) provided by financing activities 289 192
-------- --------
NET DECREASE IN CASH ................................................ (5,840) (4,334)
-------- --------
(13,616) --
CASH AT BEGINNING OF PERIOD
CASH AT END OF PERIOD ............................................... $ 16,560 --
-------- --------
$ 2,944 --
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest ........................................... $ 3,501 $ 669
======== ========
Cash paid for income taxes ....................................... $ 5,698 $ 7,360
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(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, 1998 and the
results of its operations and cash flows for the three and nine months
ended September 30, 1998 and 1997. All such adjustments are of a normal
recurring nature. The results of operations for the three months and nine
months ended September 30, 1998 are not necessarily indicative of the
results to be expected for the year ended December 31, 1998. The accounting
policies continue unchanged from December 31, 1997. 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, 1997.
2. Inventories consisted of the following:
SEPTEMBER 30, DECEMBER 31,
1998 1997
----------------- ----------------
Raw materials ......... $ 26,498 $ 20,511
Work in process ....... 4,052 5,126
Finished goods ........ 9,384 7,239
----------------- ----------------
$ 39,934 $ 32,876
Allowance to state
Inventories at LIFO
cost .................. (620) (717)
================= ================
$ 39,314 $ 32,159
================= ================
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, casualty, and
health insurance plans totaling $6,084 and $5,592 at September 30, 1998 and
December 31, 1997, respectively.
4. Certain prior year amounts have been reclassified to conform with current
year presentation.
5. 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 3.8% for the third quarter and first nine
months of 1998 and 1997. 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 $6,790 at
September 30, 1998 and December 31, 1997.
6. On December 4, 1997, the Company completed the acquisition of certain net
assets of Windsor Door for approximately $59,000, including transaction
costs of $1,000. In June 1998, the Company finalized the working capital
adjustment contained in the Windsor Door purchase agreement. In connection
therewith, the Company received $2,536 in cash, which resulted in a
reduction of goodwill of $944. Concurrent with the Windsor acquisition, the
Company canceled its previous revolving credit facility and entered into a
comprehensive credit facility ("Credit Facility") with a bank. The Credit
Facility includes a $38,000 term loan facility and a revolving credit
facility with maximum borrowings of $75,000. The revolving credit facility
availability is based on borrowings outstanding as well as amounts
outstanding under Letters of Credit. At September 30, 1998, borrowings
outstanding on the revolving credit facility were $33,900. Interest is
payable at the Eurodollar rate plus 1% (6.7% at September 30, 1998) for the
entire revolver balance. The Company is required to pay a fee of .25% per
year for the unused portion of the facility and 1.125% per year on
outstanding Letters of Credit. The Credit Facility is collateralized by
substantially all of the Company's assets and requires the Company to
maintain certain financial ratio covenants on a quarterly basis.
6
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1998
Statements in this Quarterly Report on Form 10-Q concerning the Company's
business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; and product line growth together
with other statements that are not historical facts, are "forward-looking
statements" as that term is defined under the Federal Securities Laws.
Forward-looking statements are subject to risks, uncertainties, and other
factors which could cause actual results to differ materially from those stated
in such statements. Such risks, uncertainties, and factors include, but are not
limited to, industry cyclicality, fluctuations in customer demand and order
patterns, the seasonal nature of the business, changes in pricing or other
actions by competitors, and general economic conditions as well as other risks
detailed in the Company's filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the year ended December 31, 1997.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1997
Net sales for the quarter ended September 30, 1998 increased 47.0% to $124.8
million from $84.9 million in the same period a year ago. Gross margins
decreased to 16.4% in the current quarter from 18.0% in the corresponding
quarter of 1997 primarily as a result of the addition of Windsor Door
("Windsor") in December 1997, which operates at lower gross margins than the
consolidated group excluding Windsor; lower margins in the Construction Products
Group, resulting from higher depreciation, the introduction of doors and
partitions in the Self-Storage Division and higher labor and burden to meet
customer schedules, and higher burden at the Polymer Coil Coaters ("PCC")
Division until the increase in production capacity is fully utilized. Backlog at
September 30, 1998 was $128.6 million, up 16.0% over backlog of $110.8 million
at September 30, 1997. Backlog excluding Windsor, was $125.1 million at
September 30, 1998, which is an increase of 12.9% over the third quarter of
1997. Selling, general and administrative expenses increased by 27.4% to $9.3
million in the third quarter of 1998 from $7.3 million in the third quarter of
1997. The increase is primarily the result of the acquisition of Windsor
(including its normal selling, general and administrative expenses as well as
amortization of the goodwill associated with the purchase) and higher commission
costs and certain other volume-related costs resulting from the higher sales
volume in the third quarter of 1998 compared to a year ago. As a percent of net
sales, these expenses improved to 7.5% in 1998 compared to 8.6% in the third
quarter of 1997. Operating income increased 40.5% to $11.2 million in the third
quarter of 1998 compared to $8.0 million in the same quarter of 1997. The
Company had interest expense of $1.3 million for the third quarter of 1998
compared to $.1 million in the corresponding quarter of last year. The increase
in interest expense resulted primarily from the Company's financing of the
Windsor acquisition in December 1997. Net income for the current quarter was
$6.1 million compared to $4.8 million in the third quarter of last year.
7
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Net sales for the nine months ended September 30, 1998 increased 51.3% to $334.3
million from $221.0 million in the same period of 1997. Gross margins decreased
to 15.3% from 17.3% a year ago, primarily as a result of the addition of
Windsor, which operates at somewhat lower margins than the rest of the Company,
as well as lower margins in the Construction Products Group caused by the
factors described in the discussion of current quarter results. Selling, general
and administrative expenses increased by 42.4% over the same period in 1997,
primarily for the reasons described in the discussion of current quarter
results. Operating income for the first nine months of 1998 increased 24.3% to
$22.4 million from $18.0 million in the same period last year. The Company had
net interest expense for the nine months ended September 30, 1998 of $3.8
million compared to $.6 million for the comparable period in 1997. This increase
in interest expense resulted primarily from the Company's financing of the
Windsor acquisition in December 1997. Net income for the first nine months of
1998 increased 6.9% to $11.4 million from $10.7 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.
Net cash (used for) provided by operating activities was ($1.6) million in the
first nine months of 1998 compared to $11.1 million in the first nine months of
1997. Net income plus depreciation and amortization was $18.5 million and $14.3
million in the same periods, respectively. The decrease for 1998 resulted
primarily from the increase in the Company's investment in working capital
required to support its higher volumes.
Net cash used for investing activities was $6.1 million for the nine months
ended September 30, 1998 compared to $6.8 million for the nine months ended
September 30, 1997. In the 1998 period, the Company invested $6.3 million in
additions to property, plant and equipment, increased its investment in its
joint venture in the People's Republic of China by $.1 million, bringing its
total capital investment in the joint venture to $4.5 million, received $2.5
million in final settlement of the working capital acquired at the time of
closing of the Windsor acquisition, and invested $2.2 million to acquire a door
distributor business for the Windsor division. In the 1997 period, the Company
invested $6.7 million in additions to property, plant and equipment and
increased its investment in its joint venture in the People's Republic of China
by $.5 million.
Net cash used for financing activities was $5.8 million for the nine months
ended September 30, 1998 compared to $4.3 million for the nine months ended
September 30, 1997. In 1998, this was primarily the result of net Revolver
repayments of $3.9 million and scheduled long-term debt repayments of $2.2
million. At December 31, 1997, the Company had restricted cash of $10.6 million
which represented
8
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
funds held by its prior lender to collateralize letters of credit which had been
issued by that lender until replacement letters of credit could be issued by its
new lender. During the first nine months of 1998, all of this collateral was
returned to the Company as the replacement letters of credit were issued and the
Revolver was reduced accordingly. The Company also borrowed approximately $4.5
million under the Revolver to finance its operating needs during the nine months
ended September 30, 1998. Net cash used for financing activities in the 1997
period was primarily the result of net Revolver repayments of $3.5 million and
treasury stock purchases of $1.6 million for 56,000 shares of the Company's
Common Stock pursuant to the Board of Directors' authorization.
At September 30, 1998, the Company's outstanding debt (including current
portion) was $79.1 million, consisting primarily of $38.0 million of borrowings
outstanding under its Term loan, $33.9 million of borrowings under the revolving
portion of its credit facility and $6.8 million of Industrial Revenue Bonds
which are subject to mandatory sinking fund requirements of approximately $1.0
million per year through December 1, 2004.
The Company currently has budgeted an aggregate of $11.6 million for capital
expenditures in 1998, consisting of $2.0 million for the new technical and
business systems, $.4 million to complete the Virginia manufacturing facility
and $9.2 million primarily for machinery and equipment at its other existing
facilities, including the Windsor facilities purchased in December 1997, of
which $6.3 million was spent in the first nine months of 1998. The Company
expects to be able to fund these expenditures from cash provided by operations
and borrowings under its Credit Facility described below. There can be no
assurance that budgeted capital expenditures will be made as planned or that
additional capital expenditures will not be required.
In December 1997, the Company purchased certain net assets of Windsor Door
("Windsor") for $59.0 million, including transaction costs of $1.0 million.
Pursuant to the terms of the purchase agreement, the purchase price was subject
to further adjustment once a final determination was made for the amount of
working capital transferred as of the date of closing. The Company received cash
of $2.5 million during the second quarter of 1998 in settlement of the working
capital acquired upon the Windsor acquisition bringing the adjusted purchase
price to $56.5 million. The transaction was accounted for as a purchase and the
cost of the acquisition was allocated to the assets and liabilities based on
their estimated respective fair values. The adjusted total cost of the
acquisition, which was financed by proceeds from the Company's Credit Facility,
exceeded the fair value of net assets acquired by $28.8 million, which was
assigned to goodwill and is being amortized over forty years.
Concurrent with the purchase of Windsor in December 1997, the Company replaced
its previous revolving credit facility with a revolving credit and term loan
facility ("Credit Facility") with Canadian Imperial Bank of Commerce ("CIBC"),
as administrative agent, and certain other lenders. The Credit Facility included
a $40 million term loan facility and a revolving credit facility ("Revolver")
with maximum borrowings of $75 million, including a $30 million letter of credit
sub-facility and a $5 million swingline sub-facility. On December 4, 1997, the
full amount of the term loan was borrowed to finance
9
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
part of the Windsor acquisition. The term loan requires semiannual principal
payments commencing July 1998 of $2 million to $9 million, with a final payment
due January 2003. Also on December 4, 1997, $19.0 million of the Revolver was
borrowed to finance the balance of the Windsor acquisition and $10.6 million of
the Revolver was borrowed to cash collateralize outstanding letters of credit
which had been issued by the Company's prior lender until replacement letters of
credit could be issued by CIBC. As of September 30, 1998 all of this cash
collateral had been returned to the Company. The Credit Facility expires on
January 3, 2003 and bears interest at a rate equal to, at the option of the
Company, either: (1) in the case of Eurodollar loans, the sum of the interest
rate in the London interbank market for loans in an amount substantially equal
to the amount of borrowing and for the period of borrowing selected by the
Company plus a margin of between one-half percent and one and one-half percent,
depending on the Company's consolidated leverage and interest coverage ratios
(as defined in the credit agreement) or (2) the higher of (a) CIBC's prime or
base rate or (b) one-half percent plus the latest overnight federal funds rate.
At September 30, 1998 all borrowings under the Credit Facility of $71.9 million
were at the Eurodollar rate of 6.7%. Interest is payable quarterly in the case
of base rate loans and on maturity dates or every three months, whichever is
shorter, in the case of Eurodollar loans. The Company is required to pay a fee
of .25% per year for the unused portion of the Credit Facility and 1.125% per
year on outstanding letters of credit. At September 30, 1998 there were $9.3
million of outstanding letters of credit, including a $6.9 million letter of
credit in favor of the Trustee for the IDA bonds. The Credit Facility is
guaranteed by all of the Company's domestic subsidiaries and collateralized by
substantially all of the Company's assets, and requires the Company to maintain
certain financial ratio covenants. The Credit Facility limits the Company's
ability to incur debt, to sell or dispose of assets, to create or incur liens,
to make additional acquisitions, to pay dividends, to purchase or redeem the
Company's stock and to merge or consolidate with any other entity and provides
the lender with the right to require the payment of all amounts outstanding
under the Credit Facility if a change in control of the Company occurs.
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.
YEAR 2000 COMPLIANCE
The Company is currently in the process of evaluating and implementing changes
to computer programs necessary to address the year 2000 issue. This issue
affects computer systems that have date sensitive programs that may not properly
recognize the year 2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail, resulting in business
interruption.
The Company began a capital project approximately two years ago to replace both
its business systems and technical systems and is now in the implementation
phase of an enterprise resource planning system
10
<PAGE>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
to replace its business systems, and is nearing completion of the development
phase of its new technical system. These new systems are year 2000 compliant and
the Company expects them to be fully implemented by June 30, 1999.
The year 2000 issue is expected to affect the systems of various entities with
which the Company interacts, including the Company's builder/dealers, suppliers,
and vendors. The Company has initiated communications with its significant
suppliers and vendors to ascertain their year 2000 compliance and risk. There
can be no assurance that the systems of other companies on which the Company's
systems rely will be timely converted, or that a failure by another company's
systems to be year 2000 compliant would not have a material adverse effect on
the Company. To the extent possible the Company will be developing contingency
plans designed to allow continued operation in the event of a failure of the
Company's or third party's systems.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
11.0 Computation of Earnings Per Share
27.0 Financial Data Schedule
(b) The Company did not file any reports on form 8-K
during the three months ended September 30, 1998.
12
<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 13, 1998 /s/ ROBERT T. AMMERMAN
----------------- ---------------------------------
Robert T. Ammerman
Chief Executive Officer
Date November 13, 1998 /s/ R. CHARLES BLACKMON, JR.
----------------- ---------------------------------
R. Charles Blackmon, Jr.
Executive Vice President
Chief Financial Officer
13
<TABLE>
<CAPTION>
AMERICAN BUILDINGS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(In Thousands, Except Per Share Data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income ................................................... $ 6,082 $ 4,809 $11,419 $10,681
======= ======= ======= =======
Weighted Average Shares Outstanding - Basic .................. 5,297 5,280 5,286 5,300
Add - Dilutive effect of outstanding options (as determined
by the application of the treasury stock method) ........ 332 368 367 358
------- ------- ------- -------
Weighted Average Shares Outstanding - Diluted ................ 5,629 5,648 5,653 5,658
======= ======= ======= =======
Earnings per share:
Basic .................................................... $ 1.15 $ 0.91 $ 2.16 $ 2.02
======= ======= ======= =======
Diluted .................................................. $ 1.08 $ 0.85 $ 2.02 $ 1.89
======= ======= ======= =======
</TABLE>
14
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2944
<SECURITIES> 0
<RECEIVABLES> 74840
<ALLOWANCES> 3632
<INVENTORY> 39314
<CURRENT-ASSETS> 121495
<PP&E> 104805
<DEPRECIATION> 50080
<TOTAL-ASSETS> 217320
<CURRENT-LIABILITIES> 71420
<BONDS> 73929
0
0
<COMMON> 64
<OTHER-SE> 67440
<TOTAL-LIABILITY-AND-EQUITY> 217320
<SALES> 334319
<TOTAL-REVENUES> 334319
<CGS> 283046
<TOTAL-COSTS> 311963
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 145
<INTEREST-EXPENSE> 3789
<INCOME-PRETAX> 18567
<INCOME-TAX> 7148
<INCOME-CONTINUING> 11419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11419
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 2.02
</TABLE>
