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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 33-81808
BUILDING MATERIALS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3276290
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(973) 628-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _
As of March 24, 2000, 1,020,985 shares of Class A Common Stock, $.001 par
value, and 15,000 shares of Class B Common Stock, $.001 par value, of Building
Materials Corporation of America were outstanding. There is no trading market
for the common stock of Building Materials Corporation of America.
As of March 24, 2000, each of the additional registrants had the number of
shares outstanding which is shown on the table below. No shares were held by
non-affiliates.
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ADDITIONAL REGISTRANTS
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<CAPTION>
ADDRESS, INCLUDING ZIP
STATE OR OTHER CODE AND TELEPHONE NUMBER,
EXACT NAME OF JURISDICTION OF NO. COMMISSION FILE NO./ INCLUDING AREA CODE,
REGISTRANT AS SPECIFIED INCORPORATION OR OF SHARES I.R.S. EMPLOYER OF REGISTRANT'S PRINCIPAL
IN ITS CHARTER ORGANIZATION OUTSTANDING IDENTIFICATION NO. EXECUTIVE OFFICES
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<S> <C> <C> <C> <C>
Building Materials
Manufacturing Corporation........ Delaware 10 333-69749-01/ 1361 Alps Road
22-3626208 Wayne, NJ 07470
(973) 628-3000
Building Materials
Investment Corporation........... Delaware 10 333-69749-02/ 300 Delaware Avenue
22-3626206 Suite 303
Wilmington, DE 19801
(302) 427-5960
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ITEM 1. BUSINESS
GENERAL
Building Materials Corporation of America ("BMCA") is a leading national
manufacturer of a broad line of asphalt roofing products and accessories for the
residential and commercial roofing markets. We also manufacture specialty
building products and accessories for the professional and do-it-yourself
remodeling and residential construction industries. BMCA, incorporated under the
laws of Delaware in 1994, is, as of March 24, 2000, a 99.4%-owned subsidiary of
BMCA Holdings Corporation, which is a 97%-owned subsidiary of GAF Building
Materials Corporation. BMCA acquired the operating assets and certain
liabilities of GAF Building Materials Corporation in 1994. GAF Building
Materials Corporation is a wholly-owned subsidiary of GAF Fiberglass
Corporation, which is a wholly-owned subsidiary of G Industries Corp.
G Industries is a wholly-owned subsidiary of G-I Holdings Inc., which is a
wholly-owned subsidiary of GAF Corporation. Samuel J. Heyman, Chairman of the
Board of Directors, President and Chief Executive Officer of GAF Corporation,
G-I Holdings and GAF Fiberglass, Chairman of the Board of Directors and Chief
Executive Officer of BMCA and President and Chief Executive Officer of G
Industries, GAF Building Materials Corporation and BMCA Holdings, beneficially
owns (as defined in Rule 13d-3 of the Exchange Act) approximately 99% of GAF
Corporation. BMCA does business under the name "GAF Materials Corporation."
Effective January 1, 1999, BMCA transferred all of its investment assets
and intellectual property assets to Building Materials Investment Corporation, a
newly-formed, wholly-owned subsidiary of BMCA. In connection with this transfer,
Building Materials Investment Corporation agreed to guarantee all of BMCA's
obligations under its credit agreement and all of its senior notes. BMCA also
transferred all of its manufacturing assets, other than those located in Texas,
to Building Materials Manufacturing Corporation, another newly-formed,
wholly-owned subsidiary of BMCA. In connection with this transfer, Building
Materials Manufacturing Corporation agreed to become a co-obligor on BMCA's 8%
Senior Notes due 2007 and to guarantee BMCA's obligations under its credit
agreement and all of its other senior notes. Building Materials Manufacturing
Corporation and Building Materials Investment Corporation were incorporated in
Delaware in 1998.
On January 1, 1997, GAF Corporation, our indirect parent, completed a
series of transactions involving its subsidiaries, in which among other things,
(1) we transferred our glass fiber manufacturing facility located in Nashville,
Tennessee and certain related assets and liabilities to GAF Fiberglass
Corporation, and (2) U.S. Intec, Inc., an indirect subsidiary of GAF
Corporation, became one of our subsidiaries. In connection with these
transactions, GAF Fiberglass entered into a long-term supply agreement with us
pursuant to which GAF Fiberglass agreed to supply us with glass fiber. Effective
August 18, 1999, GAF Fiberglass, in a series of transactions, contributed to us
certain assets, including the Nashville glass fiber manufacturing facility, and
certain related liabilities. See Item 13, "Certain Relationships and Related
Transactions."
Our executive offices and the executive offices of Building Materials
Manufacturing Corporation are located at 1361 Alps Road, Wayne, New Jersey 07470
and the telephone number is (973) 628-3000. The executive offices of Building
Materials Investment Corporation are located at 300 Delaware Avenue, Suite 303,
Wilmington, Delaware 19801 and the telephone number is (302) 427-5960.
RESIDENTIAL ROOFING
We are a leading manufacturer of a complete line of premium residential
roofing products. Residential roofing product sales represented approximately
65% of our net sales in 1999. We have improved our sales mix of residential
roofing products in recent years by increasing our emphasis on laminated
shingles and accessory products which generally are sold at higher prices with
more attractive profit margins than our standard strip shingle products. We
believe that we are the largest manufacturer of laminated residential roofing
shingles and the second largest manufacturer of strip shingles in the United
States. (Statements contained in this report as to our competitive position are
based on industry information which we believe is reliable.)
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Our two principal lines of residential roofing shingles are the
Timberline(R) series and the Sovereign(R) series. We also produce certain
specialty shingles principally for regional markets.
The Timberline(R) Series. The Timberline(R) series offers a premium
laminated product line that adds dramatic shadow lines and substantially
improves the appearance of a roof. The series includes:
o the Timberline(R)25 shingle, a mid-weight laminated shingle which serves
as an economic trade-up for consumers, with a 25-year limited warranty;
o the Timberline(R) shingle, with a 30-year limited warranty, offering a
natural random wood shake appearance with superior fire resistance and
durability; and
o the Timberline Ultra(R) shingle, with a 40-year limited warranty, a super
heavyweight laminated shingle with the same design features as the
Timberline(R) 25 shingle, together with added durability.
The Sovereign(R)Series. The Sovereign(R)series includes:
o the standard 3-tab Sentinel(R)shingle with a 20-year limited warranty;
o the Royal Sovereign(R) shingle, a heavier 3-tab shingle with a 25-year
limited warranty, designed to capitalize on the "middle market" for
quality shingles; and
o the Marquis(R) Weathermax(TM) shingle, a superior performing heavyweight
3-tab shingle with a 30-year limited warranty.
Specialty Shingles. Our specialty asphalt shingles include:
o Slateline(R) and Slateline(R) Color Contrast(TM) shingles, offering the
appearance of slate, labor savings in installation because of their
larger size and a 40-year limited warranty;
o the Grand Sequoia(R)shingle, a premier architectural shingle with a
40-year limited warranty; and
o the Country Mansion(TM)shingle, a distinctive high-end architectural
shingle with a limited lifetime warranty.
Weather Stopper(TM) Roofing System. In addition to shingles, we supply all
the components necessary to install a complete roofing system. Our Weather
Stopper(TM) Roofing System begins with Weather Watch(R) and Stormguard(TM)
waterproof underlayments for eaves, valleys and flashings to prevent water
seepage between the roof deck and the shingles caused by ice build-ups and
wind-driven rains. Our Weather Stopper(TM) Roofing System also includes
Shingle-Mate(R) glass reinforced underlayment, Timbertex(R), TimberRidge(TM) and
Timberline(R) Hip and Ridge shingles, which are significantly thicker and larger
than standard hip and ridge shingles and provide dramatic accents to the slopes
and planes of a roof, and the Cobra(R) Ridge Vent, which provides attic
ventilation.
COMMERCIAL ROOFING
We manufacture a full line of modified bitumen and asphalt built-up roofing
products, liquid applied membrane systems and roofing accessories for use in the
application of commercial roofing systems. We also market thermoplastic and
elastomeric single-ply products. Commercial roofing represented approximately
27% of our net sales in 1999. We believe that we are the second largest
manufacturer of asphalt built-up roofing products and the largest manufacturer
of modified bitumen products in the United States.
We manufacture glass membranes under the trademarks GAFGLAS(R) and
Permaglas(R), which are made from asphalt impregnated glass fiber mat for use as
a component in asphalt built-up roofing systems. Most of our GAFGLAS(R) and
Permaglas(R) products are assembled on the roof by applying successive layers of
roofing membrane with asphalt and topped, in some applications, with gravel.
Thermal insulation may be applied beneath the membrane. We also manufacture base
sheets, flashings and other roofing accessories for use in these systems, the
TOPCOAT(R) roofing system, a liquid-applied membrane system designed to protect
and waterproof existing metal roofing, and roof maintenance products. In
addition, we market perlite roofing insulation products, which consist of low
thermal insulation that is installed as part of a commercial roofing application
below the roofing membrane, isocyanurate foam as roofing insulation, packaged
asphalt and accessories such as vent stacks, roof insulation fasteners, cements
and coating.
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We sell modified bitumen products under the Ruberoid(R) trademark, and U.S.
Intec sells these products under the Brai(R) trademark. Modified bitumen
products are used primarily in re-roofing applications or in combination with
glass membranes in GAF CompositeRoof(TM) systems. These products consist of a
roofing membrane utilizing polymer-modified asphalt, which strengthens and
increases flexibility and is reinforced with a polyester non-woven mat or a
glass mat. Modified bitumen systems provide high strength characteristics, such
as weatherability, water resistance and labor cost savings due to ease of
application.
SPECIALTY BUILDING PRODUCTS AND ACCESSORIES
We manufacture and market a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries. Specialty building products and accessories represented
approximately 8% of our net sales in 1999. These products primarily consist of
residential attic ventilation systems, metal and fiberglass air distribution
products for the HVAC industry and ornamental iron security products, including
doors, windows and fencing.
MARKETING AND SALES
We have one of the industry's largest sales forces. A staff of technical
professionals who work directly with architects, consultants, contractors and
building owners provide support to the sales force. We market our roofing and
specialty building products and accessories through our own sales force of
approximately 200 experienced, full-time employees and independent sales
representatives operating from six regional sales offices located across the
United States. A major portion of our roofing product sales are to wholesale
distributors who resell our products to roofing contractors and retailers. We
believe that our nationwide coverage has contributed to certain of our roofing
products being among the most recognized and requested brands in the industry.
Our Customer Advantage(TM) Program offers marketing and support services to
a nationwide network of MasterElite(TM) residential roofing contractors and
Authorized Installers. We view the Master Elite(TM) contractors and Authorized
Installers as an effective extension of our sales force which takes our products
directly to the homeowner. We also have established programs with approved
MasterSelect(TM), Platinum(TM) and Pride (TM) contractors to promote premium
warranty systems and service programs for our commercial roofing products.
No single customer accounted for 10% or more of our net sales in 1999,
except for The Home Depot, Inc. and American Builders & Contractors Supply
Company, Inc., which accounted for approximately 11% and 10%, respectively, of
our 1999 net sales.
RAW MATERIALS
The major raw materials required for the manufacture of our roofing
products are asphalt, mineral stabilizer, glass fiber, glass fiber mat,
polyester mat and granules. Asphalt and mineral stabilizer are available from a
large number of suppliers. We currently have contracts with several of these
suppliers and others are available as substitutes. Prices of most raw materials
have been relatively stable, rising moderately with general industrial prices,
while the price of asphalt tends to move in step with the price of crude oil.
The major raw materials required for the manufacture of our specialty
building products and accessories are steel tubes, sheet metal products,
aluminum motors and cartons. These raw materials, other than motors, are
commodity-type products, the pricing for which is driven by supply and demand.
Prices of other raw materials used in the manufacture of specialty building
products and accessories are more closely tied to movements in inflation rates.
In 1999, substantially all of the motors used in our ventilation products were
purchased from an overseas supplier. All of these raw materials, including
motors, are available from a large number of suppliers.
Five of our roofing plants have easy access to deep water ports thereby
permitting delivery of asphalt by ship, the most economical means of transport.
Our Nashville, Tennessee plant manufactures a significant portion of our glass
fiber requirements for use in our Chester, South Carolina plant which
manufactures glass fiber mat substrate. We purchase all of our requirements for
colored roofing granules from an affiliate, International Specialty Products
Inc., under a requirements contract, except for the requirements of our
California and Oregon roofing plants and a portion of the requirements of our
Indiana roofing plant, which
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are supplied by a third party. This contract is subject to annual renewal unless
terminated by either party to the agreement.
SEASONAL VARIATIONS AND WORKING CAPITAL
Sales of roofing and specialty building products and accessories in the
northern regions of the United States generally decline during the winter months
due to adverse weather conditions. Generally, our inventory practice includes
increasing inventory levels in the first and the second quarter in order to meet
peak season demand (June through November).
WARRANTY CLAIMS
We provide certain limited warranties covering most of our residential
roofing products for periods generally ranging from 20 to 40 years. Although
terms of warranties vary, we believe that our warranties generally are
consistent with those offered by our competitors. We also offer limited
warranties and guarantees of varying duration on our commercial roofing products
and limited warranties covering most of our specialty building products and
accessories for periods generally ranging from 5 to 10 years. From time to time,
we review the reserves established for estimated probable future warranty
claims.
COMPETITION
The roofing products industry is highly competitive and includes a number
of national competitors. These competitors in the residential roofing and
accessories markets are Owens-Corning, Tamko, Elcor and Celotex, and in the
commercial roofing market are Johns Manville, Firestone and Carlisle. In
addition, there are numerous regional competitors.
Competition is based largely upon products and service quality,
distribution capability, price and credit terms. We believe that we are well
positioned in the marketplace as a result of our broad product lines in both the
residential and commercial markets, consistently high product quality, strong
sales force and national distribution capabilities. As a result of the growth in
demand for premium laminated shingles, a number of roofing manufacturers,
including our company, have increased their laminated shingle production
capacity in recent years. We have experienced increased competition in this area
due to these factors.
Our specialty roofing products and accessories business is highly
competitive with numerous competitors due to the breadth of the product lines we
market. Major competitors include Certainteed, Solar Group, ATCO Rubber Products
and Standex Air Distribution Products.
RESEARCH AND DEVELOPMENT
We primarily focus our research and development activities on the
development of new products, process improvements and the testing of alternative
raw materials and supplies. Our research and development activities, dedicated
to residential, commercial and fiberglass products, are located at technical
centers at Wayne, New Jersey and Nashville, Tennessee. Our research and
development expenditures were approximately $5.4, $6.0 and $6.5 million in 1997,
1998 and 1999, respectively.
PATENTS AND TRADEMARKS
We own or license approximately 100 domestic and 100 foreign patents or
patent applications. In addition, we own or license approximately 250 domestic
and 80 foreign trademark registrations or applications. While we believe the
patent protection covering certain of our products to be material to those
products, we do not believe that any single patent, patent application or
trademark is material to our business or operations. We believe that the
duration of the existing patents and patent licenses is consistent with our
business needs.
ENVIRONMENTAL COMPLIANCE
Since 1970, federal, state and local authorities have adopted and amended a
wide variety of federal, state and local environmental laws and regulations
relating to environmental matters. These laws and regulations affect us because
of the nature of our operations and that of our predecessor and certain of the
substances
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that are, or have been used, produced or discharged at our or its plants or at
other locations. We made capital expenditures of approximately $1.4 million in
the aggregate in 1999 relating to environmental compliance in connection with
the two new manufacturing facilities we are building in Shafter, California and
Michigan City, Indiana. In addition, we made capital expenditures of
approximately $1.3 million in the aggregate in 1999 relating to environmental
compliance in all other locations. In 1998 and 1997, we made capital
expenditures of less than $0.6 million in each year relating to environmental
compliance. These expenditures are included in additions to property, plant and
equipment. We anticipate that aggregate capital expenditures relating to
environmental compliance in 2000 and 2001 will be approximately $2.6 and $1.2
million, respectively.
The environmental laws and regulations deal with air and water emissions or
discharges into the environment, as well as the generation, storage, treatment,
transportation and disposal of solid and hazardous waste, and the remediation of
any releases of hazardous substances and materials to the environment. We
believe that our manufacturing facilities comply in all material respects with
applicable laws and regulations. Although we cannot predict whether more
burdensome requirements will be adopted in the future, we believe that any
potential liability for compliance with the laws and regulations will not
materially affect our business, liquidity or financial position.
See Item 3, "Legal Proceedings--Environmental Litigation."
EMPLOYEES
At December 31, 1999, we employed approximately 3,500 people worldwide,
approximately 1,000 of which were subject to 14 union contracts. The contracts
are effective for three- to four-year periods. During 1999, two labor contracts
expired and were renegotiated. We believe that our relations with our employees
and their unions are satisfactory.
ITEM 2. PROPERTIES
Our corporate headquarters and principal research and development
laboratories are located at a 100-acre campus-like office and research park
owned by a subsidiary of International Specialty Products Inc., at 1361 Alps
Road, Wayne, New Jersey 07470. We occupy our headquarters pursuant to our
management agreement with ISP. See Item 13, "Certain Relationships and Related
Transactions."
We own or lease the principal real properties described below. Unless
otherwise indicated, the properties are owned in fee. In addition to the
principal facilities listed below, we maintain sales offices and warehouses,
substantially all of which are in leased premises under relatively short-term
leases.
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LOCATION FACILITY
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Alabama
Mobile.............. Plant, Warehouses*
California
Compton............. Plant*, Warehouse*
Fontana............. Plant, Sales Office
Hollister........... Plant, Plant*
Shafter............. Plant (under construction)
Stockton............ Plant, Plant, Warehouse*
Florida
Tampa............... Plant, Sales Office
Georgia
Atlanta............. Administrative Offices*; Sales Office*
Monroe.............. Plant, Warehouse*
Savannah............ Plant, Sales Office
Indiana
Mount Vernon........ Plant, Sales Office, Plant (under construction)
Michigan City....... Plant (under construction)
Illinois
Romeoville.......... Sales Office*
</TABLE>
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LOCATION FACILITY
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Maryland
Baltimore........... Plant
Massachusetts
Millis.............. Plant, Sales Office, Warehouse*
Walpole............. Plant*
Minnesota
Minneapolis......... Plant, Sales Office
Mississippi
Purvis.............. Plant
New Jersey
North Branch........ Plant, Warehouse*
North Brunswick..... Sales Office*, Warehouse*
Wayne............... Headquarters*, Corporate Administrative Offices*,
Research Center*
New Mexico
Albuquerque......... Plant
North Carolina
Burgaw.............. Plant
Goldsboro........... Plant
Ohio
Wadsworth........... Plant*
Oregon
Corvallis........... Plant
Pennsylvania
Erie................ Plant, Sales Office, Warehouse*
Wind Gap............ Plant
South Carolina
Chester............. Plant
Tennessee
Nashville........... Plant, Research Center*
Texas
Dallas.............. Plant, Sales Office, Warehouse*
Fannett............. Warehouse
Port Arthur......... Plant, Plant, Sales Office
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* Leased Property
We believe that our plants and facilities, which are of varying ages and
are of different construction types, have been satisfactorily maintained, are in
good condition, are suitable for their respective operations and generally
provide sufficient capacity to meet production requirements. Each plant has
adequate transportation facilities for both raw materials and finished products.
In 1999, we made capital expenditures of $45.3 million relating to plant,
property and equipment.
ITEM 3. LEGAL PROCEEDINGS
Bodily Injury Claims. In connection with its formation, BMCA contractually
assumed and agreed to pay the first $204.4 million of liabilities for
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber of its parent, GAF Building Materials Corporation. As of March 30, 1997,
BMCA had paid all of its assumed asbestos-related liabilities. G-I Holdings and
GAF Building Materials Corporation have jointly and severally agreed to
indemnify BMCA against any other existing or future claims related to asbestos-
related liabilities if asserted against BMCA. We frequently refer to
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber in this report as "Asbestos Claims."
GAF Corporation has advised that, as of December 31, 1999, it was defending
approximately 115,000 pending alleged Asbestos Claims, having received notice of
approximately 43,100 new Asbestos Claims during 1999. GAF has advised that the
Center for Claims Resolution ("CCR"), a non-profit organization set up to
administer and handle asbestos-related personal injury claims against the
participating companies and in
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which GAF Corporation was a member, terminated GAF's membership, effective
January 17, 2000. GAF has advised the CCR that such termination was unauthorized
and that it intends to take appropriate measures to protect its rights to pursue
claims against the CCR and its member companies arising out of this improper
termination and for other improper actions. Currently, the disputes between GAF
and the CCR are the subject of pending Alternative Dispute Proceedings.
GAF Corporation has confirmed that it has experienced a significant
increase in the rate of new Asbestos Claims, principally involving claimants
without any asbestos-related impairment, and amounts demanded to settle these
claims. GAF anticipates that these trends could well continue for the
foreseeable future, and that the percentage of Asbestos Claims filed by
individuals with no physical impairment will remain high. GAF has advised that
it expects an increasingly adverse litigation environment in particular
jurisdictions. GAF believes that these trends and the CCR's termination of GAF's
membership resulted from, or were induced by, in no small part, retaliatory
actions taken by asbestos lawyers against GAF in connection with GAF's active
support of proposed legislation currently pending in Congress to address the
national asbestos litigation crisis.
GAF Corporation has stated that it is committed to effecting a
comprehensive resolution of Asbestos Claims, and that it is exploring options to
accomplish this resolution, including the support of the proposed Congressional
legislation, but there can be no assurance that these efforts will be
successful.
We believe that we will not sustain any additional liability in connection
with asbestos-related claims. While we cannot predict whether any
asbestos-related claims will be asserted against us or our assets or the outcome
of any litigation relating to those claims, we believe that we have meritorious
defenses to any claim that could be so asserted. In addition, G-I Holdings and
GAF Building Materials Corporation have jointly and severally indemnified us
with respect to asbestos-related claims, and G-I Holdings has advised us that it
believes it has and will have sufficient resources to enable it to satisfy any
indemnification obligations. However, GAF has advised us that depending upon
whether the trends described above continue, whether other retaliatory actions
are taken, the ultimate resolution of the disputes between GAF and the CCR, and
whether the proposed legislation currently pending in Congress is enacted into
law, its financial condition could be materially adversely affected by one or
more of these factors. Should GAF Corporation or GAF Building Materials
Corporation be unable to satisfy judgments against it in asbestos-related
lawsuits, its judgment creditors might seek to enforce their judgments against
the assets of GAF Corporation, including its holdings of G-I Holdings common
stock, or GAF Building Materials Corporation, including its holdings of our
common stock. This enforcement could result in a change of control with respect
to our company. See Notes 10 and 15 to Consolidated Financial Statements.
Asbestos-in-Building Claims. GAF Corporation has also been named as a
co-defendant in asbestos-in-buildings cases for economic and property damage or
other injuries based upon an alleged present or future need to remove asbestos
containing materials from public and private buildings. We refer to the
asbestos-in-building claims in this report as the "Building Claims." Since these
actions were first initiated approximately 18 years ago, GAF Corporation has not
only successfully disposed of approximately 145 of these cases, but is a
co-defendant in only three remaining lawsuits, one of which has been dormant. No
new Building Claims were filed in 1999. BMCA has not assumed any liabilities
with respect to Building Claims, and G-I Holdings and GAF Building Materials
Corporation have jointly and severally agreed to indemnify BMCA against those
liabilities in the event any claims are asserted against it.
Insurance Matters. GAF Corporation and G-I Holdings had available, as of
December 31, 1999, to pay asbestos-related bodily injury claims aggregate
insurance coverage of approximately $84.0 million before discounting certain
coverage, which amount is reduced as asbestos-related liabilities are satisfied.
In January 1993, GAF Corporation filed an action in the United States
District Court in Philadelphia against certain product liability insurers whose
policies will or may be called upon to respond to asbestos-related bodily injury
claims. This action sought a declaratory judgment against various third-party
defendant product liability insurers to the effect that those insurers are
obligated to provide coverage for Asbestos Claims. In March 2000, GAF
Corporation reached a settlement with the final remaining insurer who was a
defendant in GAF Corporation's amended complaint and anticipates that it will
dismiss this action.
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In October 1983, GAF Corporation filed a lawsuit in Los Angeles, California
Superior Court against its past insurance carriers to obtain a judicial
determination that those carriers were obligated to defend and indemnify it for
Building Claims. GAF Corporation is seeking declaratory relief as well as
compensatory damages. This action is presently in the pre-trial pleading stage.
The parties have agreed to hold this action in abeyance until such time as they
are better able to evaluate developments as they may occur in the Building
Claims. Because this litigation is in the early stages and evidence and
interpretations of important legal questions are presently unavailable, it is
not possible to predict the future of this litigation.
In all the Building Claims, GAF Corporation's defense costs have been paid
by one of its primary carriers. While GAF Corporation expects that this primary
carrier will continue to defend and indemnify GAF Corporation, this primary
carrier has reserved its rights to later refuse to defend and indemnify GAF
Corporation and to seek reimbursement for some or all of the fees paid to defend
and resolve the Building Claims. GAF Corporation believes that it will be able
to resolve those cases for amounts within the total indemnity obligations
available from this primary carrier.
ENVIRONMENTAL LITIGATION
We, together with other companies, are a party to a variety of proceedings
and lawsuits involving environmental matters under the Comprehensive
Environmental Response Compensation and Liability Act and similar state laws, in
which recovery is sought for the cost of cleanup of contaminated sites, a number
of which are in the early stages or have been dormant for protracted periods. We
refer to these proceedings and lawsuits below as "Environmental Claims."
In connection with its formation, BMCA contractually assumed all
environmental liabilities of GAF Building Materials Corporation relating to
existing plant sites and the business of BMCA as then conducted. The estimates
referred to below reflect those environmental liabilities assumed by BMCA and
other environmental liabilities of our company. The environmental liabilities of
GAF Building Materials Corporation which were not assumed by BMCA, for which G-I
Holdings and GAF Building Materials Corporation have agreed to indemnify BMCA,
relate primarily to closed manufacturing facilities. G-I Holdings estimates
that, as of December 31, 1999, its liability in respect of the environmental
liabilities of GAF Building Materials Corporation not assumed by BMCA was
approximately $10.5 million, before insurance recoveries reflected on its
balance sheet of $8.6 million. BMCA estimates its liability as of December 31,
1999 in respect of assumed and other environmental liabilities is $0.8 million,
and expects insurance recoveries reflected on its balance sheet, as discussed
below, of $0.8 million. Insurance recoveries reflected on these balance sheets
relate to both past expenses and estimated future liabilities. We refer to these
recoveries below as "estimated recoveries".
At most sites, BMCA anticipates that liability will be apportioned among
the companies found to be responsible for the presence of hazardous substances
at the site. Although it is difficult to predict the ultimate resolution of
these claims, based on BMCA's evaluation of the financial responsibility of the
parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, BMCA estimates that its liability in respect of all
Environmental Claims, including certain environmental compliance expenses, will
be as discussed above. For information relating to other environmental
compliance expenses, see Item 1, "Business--Environmental Compliance."
After considering the relevant legal issues and other pertinent factors,
BMCA believes that it will receive the estimated recoveries and the legal
expenses incurred by GAF Corporation on BMCA's behalf. We also believe that
recoveries could be well in excess of the estimated recoveries for all
Environmental Claims, although there can be no assurances in this regard. BMCA
believes it is entitled to substantially full defense and indemnity under its
insurance policies for most Environmental Claims, although BMCA's insurers have
not affirmed a legal obligation under the policies to provide indemnity for
those claims.
In March 1995, GAF Corporation commenced litigation on behalf of itself and
its predecessors, successors, subsidiaries and related corporate entities in the
United States District Court for the District of New Jersey seeking amounts
substantially in excess of the estimated recoveries. The court dismissed this
action in December 1997 for lack of federal jurisdiction, and defendant insurers
appealed the dismissal. The appeal was denied by the Third Circuit Court of
Appeals in March 1999. In June 1997, GAF Corporation
8
<PAGE>
filed a similar action against the insurers in the Superior Court of New Jersey,
Somerset County, which action is pending. While BMCA believes that its claims
are meritorious, there can be no assurance that BMCA will prevail in its efforts
to obtain amounts equal to, or in excess of, the estimated recoveries.
We believe that we will not sustain any liability for environmental
liabilities of GAF Building Materials Corporation other than those that we have
contractually assumed or that relate to the operations of our business. While we
cannot predict whether any claims for non-assumed environmental liabilities will
be asserted against us or our assets, or the outcome of any litigation relative
to those claims, we believe that we have meritorious defenses to those claims.
In addition, G-I Holdings and GAF Building Materials Corporation have jointly
and severally indemnified us with respect to those claims. G-I Holdings has
advised us that it believes it has and will have sufficient resources to enable
it to satisfy these indemnification obligations, if any. For the possible
consequences to us of the failure of G-I Holdings and GAF Building Materials
Corporation to satisfy judgments against them in environmental-related lawsuits
or otherwise, see the last paragraph of "--Bodily Injury Claims" above.
OTHER LITIGATION
Litigation is pending between us and Elk Corporation of Dallas in the
United States District Court for the Northern District of Texas relating to
certain aspects of our laminated shingles, which Elk claims infringe design and
utility patents issued to it. Elk also asserts that we have appropriated the
trade dress of Elk's product. Elk seeks injunctive relief, damages and
attorneys' fees. We have sued for a declaration that Elk's patents are invalid
and unenforceable and that our shingles do not infringe any of Elk's rights, and
have sought money damages for Elk's unfair competition. On October 10, 1997, the
court issued an opinion holding that Elk's design patent is unenforceable
because it was obtained through inequitable conduct. On February 11, 1999, the
United States Court of Appeals for the Federal Circuit affirmed the lower
court's ruling of enforceability. Elk filed a petition for rehearing on February
25, 1999, which was denied by the court, and subsequently filed a petition for a
writ of certiorari in the United States Supreme Court, which also was denied. We
believe that we will prevail on Elk's remaining claims in the United States
District Court.
On or about April 29, 1996, an action was commenced in the Circuit Court of
Mobile County, Alabama against GAF Building Materials Corporation on behalf of a
purported nationwide class of purchasers of, or current owners of, buildings
with certain asphalt shingles manufactured by GAF Building Materials
Corporation. The action alleged, among other things, that those shingles were
defective and sought unspecified damages on behalf of the purported class. On
September 25, 1998, we agreed to settle this litigation on a national,
class-wide basis for asphalt shingles manufactured between January 1, 1973 and
December 31, 1997. Following a fairness hearing, the court granted final
approval of the class-wide settlement in April 1999. Under the terms of the
settlement, we will provide property owners whose shingles were manufactured
during this period and which suffer certain damages during the term of their
original warranty period, and who file a qualifying claim, with an opportunity
to receive certain limited benefits beyond those already provided in their
existing warranty. In October and December 1998, the separate actions commenced
in 1997 in the Superior Court of New Jersey, Middlesex County, the Superior
Court of New Jersey, Passaic County and the Supreme Court of the State of New
York, County of Nassau, and in 1996 in Pointe Coupee Parish, Louisiana, on
behalf of purported classes alleging that our shingles were defective and
seeking unspecified damages, were stayed pending the outcome of the fairness
hearing on the settlement agreement in the Mobile County, Alabama action. The
Middlesex County, New Jersey and the Pointe Coupee Parish, Louisiana actions
have been dismissed in light of the final approval of the settlement agreement
in the Mobile County, Alabama action, and we expect that the remaining two
actions also will be dismissed.
In October 1998, GAF Corporation brought suit in the Superior Court of New
Jersey, Middlesex County, on behalf of itself and on our behalf, against certain
of its insurers for recovery of the defense costs in connection with the Mobile
County, Alabama class action and a declaration that the insurers are obligated
to provide indemnification for all damages paid pursuant to the settlement of
this class action and for other damages. This action is pending.
* * *
9
<PAGE>
We believe that the ultimate disposition of the cases described above under
"Environmental Litigation," "Asbestos-in-Building Claims" and "Other Litigation"
will not, individually or in the aggregate, have a material adverse effect on
our liquidity, financial position or results of operations.
TAX CLAIM AGAINST GAF CORPORATION
On September 15, 1997, GAF Corporation received a notice from the Internal
Revenue Service of a deficiency in the amount of $84.4 million (after taking
into account the use of net operating losses and foreign tax credits otherwise
available for use in later years) in connection with the formation in 1990 of
Rhone-Poulenc Surfactants and Specialties, L.P., a partnership in which GAF
Fiberglass held an interest. The claim of the IRS for interest and penalties,
after taking into account the effect on the use of net operating losses and
foreign tax credits, could result in GAF Corporation incurring liabilities
significantly in excess of the deferred tax liability of $131.4 million that it
recorded in 1990 in connection with this matter. GAF Corporation has advised us
that it believes that it will prevail in this matter, although we cannot assure
you that will be the result. We believe that the ultimate disposition of this
matter will not have a material adverse effect on our business, financial
position or results of operations. GAF, G-I Holdings and certain subsidiaries of
GAF Corporation have agreed to jointly and severally indemnify us against any
tax liability associated with the surfactants partnership, for which we would be
severally liable, together with GAF Corporation and several current and former
subsidiaries of GAF Corporation, should GAF Corporation be unable to satisfy
this liability. For the possible consequences to us of the failure of GAF
Corporation to satisfy this liability and other information relating to GAF, see
the last paragraph of "--Bodily Injury Claims" above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKETS FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
There is no trading market for BMCA's common stock. As of March 24, 2000,
there were 14 holders of record of BMCA's Class A common stock and one holder of
record of its Class B common stock. See Item 12, "Security Ownership of Certain
Beneficial Owners and Management."
ITEM 6. SELECTED FINANCIAL DATA
See page F-7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See page F-2.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Financial Condition--Market-Sensitive
Instruments and Risk Management" on page F-5.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index on page F-1 and Financial Statements and Supplementary Data on
pages F-9 to F-41.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age, position and other
information with respect to the directors and executive officers of BMCA,
Building Materials Manufacturing Corporation and Building Materials Investment
Corporation. Under the By-laws of each of these companies, each director and
executive officer continues in office until that company's next annual meeting
of stockholders and until his or her successor is elected and qualified. On July
15, 1998, ISP merged with and into its parent, ISP Holdings Inc., and ISP
Holdings changed its name to International Specialty Products Inc. As used in
this section, "ISP" refers to both companies.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Samuel J. Heyman .................. 61 Mr. Heyman has been a director and Chairman of the Board of BMCA since
Chairman of the Board and Chief its formation and Chief Executive Officer of BMCA since July 1999,
Executive Officer which position he also held from June 1996 to January 1999. Mr. Heyman
also has been Chief Executive Officer of Building Materials
Manufacturing Corporation and Building Materials Investment
Corporation since July 1999 and has been Chief Executive Officer and
President of GAF Building Materials Corporation since May 1994 and
July 1999, respectively. He has served as a director and Chairman of
the Board of ISP since its formation and has held the same offices
with GAF Corporation, G-I Holdings and certain of its subsidiaries for
more than five years. Mr. Heyman was Chief Executive Officer of ISP
from its formation to June 1999. Mr. Heyman is also the Chief
Executive Officer, Manager and General Partner of a number of closely
held real estate development companies and partnerships whose
investments include commercial real estate and a portfolio of publicly
traded securities.
William W. Collins ................ 49 Mr. Collins has been President and Chief Operating Officer of BMCA,
President and Chief Operating Building Materials Manufacturing Corporation and Building Materials
Officer Investment Corporation since February 2000 and a director of such
companies since July 1999. He was Executive Vice President and Chief
Operating Officer of the same companies from July 1999 to February
2000. Mr. Collins also was Senior Vice President-Marketing and Sales,
Residential Roofing Products of BMCA from November 1997 to July 1999
and held the same position with Building Materials Manufacturing
Corporation and Building Materials Investment Corporation from their
formation to July 1999. He was Vice President-Marketing and Sales,
Commercial Roofing Products of BMCA from March 1996 to November 1997,
Vice President-Sales, Commercial of BMCA from December 1995 to March
1996, Director of Insulation, Accessories and Cobra(R) Products of
BMCA from February 1995 to December 1995 and Director of Special
Projects of BMCA from July 1992 to February 1995. Mr. Collins also has
been a director of GAF Corporation since July 1999.
William C. Lang ................... 56 Mr. Lang has been a director and Executive Vice President, Chief
Executive Vice President, Chief Administrative Officer and Chief Financial Officer of BMCA, Building
Administrative Officer and Chief Materials Manufacturing Corporation and Building Materials Investment
Financial Officer Corporation since July 1999. He was Senior Vice President and Chief
Financial Officer of BMCA from April 1997 to July 1999 and held the
same position with Building
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Materials Manufacturing Corporation and Building Materials Investment
Corporation from their formation to July 1999. He was Senior Vice
President and Chief Financial Officer of Duane Reade, a regional drug
store chain, from 1993 to 1996.
Richard A. Weinberg ............... 40 Mr. Weinberg has been Executive Vice President, General Counsel and
Executive Vice President, General Secretary of BMCA since May 1998 and was Senior Vice President,
Counsel and Secretary General Counsel and Secretary of BMCA from May 1996 to May 1998. He
also has been Executive Vice President, General Counsel and Secretary
of Building Materials Manufacturing Corporation and Building Materials
Investment Corporation since their formation. He has served as
Executive Vice President, General Counsel and Secretary of GAF
Corporation, G-I Holdings, ISP and certain of their subsidiaries since
May 1998 and was Senior Vice President, General Counsel and Secretary
of these companies from May 1996 to May 1998. He was Vice President
and General Counsel of BMCA from September 1994 to May 1996.
Mr. Weinberg also has served as a director of GAF Corporation and
certain of its subsidiaries since February 2000 and May 1996,
respectively, and of GAF Building Materials Corporation since May
1996.
Kem Scott ......................... 51 Mr. Scott has been President and Chief Operating Officer of U.S.
Senior Vice President and General Intec, Inc., one of BMCA's subsidiaries, and Senior Vice President and
Manager, Commercial Roofing General Manager, Commercial Roofing Products of BMCA since October
Products, BMCA; President and 1998. He also has been Senior Vice President and General Manager,
Chief Operating Officer, U.S. Commercial Roofing Products of Building Materials Manufacturing
Intec, Inc. Corporation and Building Materials Investment Corporation since their
formation. From 1973 to October 1998, Mr. Scott held various executive
positions with the Carlisle group of companies, a manufacturer of
elastomeric roofing systems, including President, Carlisle Syntec Inc.
and most recently from July 1997 to October 1998, President of
Carlisle Europe.
Steven R. Olsen ................... 37 Mr. Olsen has been President and Chief Operating Officer of LL
President and Chief Operating Building Products Inc., one of BMCA's subsidiaries, since June 1999
Officer, LL Building Products and October 1998, respectively. He was Vice President, Corporate
Inc. Development and Vice President and General Manager, Accessories and
Specialty Products, of BMCA from May 1997 to October 1998 and also was
Director, Operational Planning of BMCA from December 1993 to May 1997.
Susan B. Yoss ..................... 41 Ms. Yoss has been Senior Vice President and Treasurer of BMCA,
Senior Vice President and Building Materials Manufacturing Corporation and Building Materials
Treasurer Investment Corporation since July 1999 and was Vice President and
Treasurer of the same companies from February 1998 to July 1999. She
also has been Senior Vice President and Chief Financial Officer of GAF
Corporation and certain of its subsidiaries and Senior Vice President
and Treasurer of ISP and certain of its subsidiaries since July 1999.
She was Vice President and Treasurer of ISP from February 1998 to July
1999. Ms. Yoss was Assistant Treasurer of Joseph E. Seagram & Sons,
Inc., a global beverage and entertainment company, for more than five
years until February 1998.
</TABLE>
12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the four other most highly compensated executive officers of BMCA as
of December 31, 1999, together with any person who served as BMCA's Chief
Executive Officer in 1999. The salaries and other compensation of
Messrs. Heyman and Weinberg and Ms. Yoss for services provided by them to our
company are paid by ISP in accordance with a management agreement between ISP
and our company. See Note (6) to the table below.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
-------------------------------- STOCK OPTIONS (O)/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS SARS(1) COMPENSATION
- -------------------------------- ------ -------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman ............... 1999 (6) (6) (6) (6)
Chairman of the Board and 1998 (6) (6) (6) (6)
Chief Executive Officer 1997 (6) (6) (6) (6)
William W. Collins ............. 1999 $194,750 $100,000 5,000(O) $ 15,463(2)
President and Chief 1998 168,000 69,871 3,000(O) 14,899(2)
Operating Officer 1997 148,242 57,497 8,218(O) 14,509(2)
William C. Lang ................ 1999 $242,500 $100,000 5,000(O) $ 20,871(3)
Executive Vice President, 1998 207,083 94,145 4,200(O) 17,465(3)
Chief Administrative Officer 1997 133,888(3) 87,094(3) 3,837(O)(3) 5,682(3)
and Chief Financial Officer
Kem Scott ...................... 1999 $230,000 $ 44,027 1,500(O) $ 11,449(4)
Senior Vice President and 1998 55,878(4) 25,000(4) 4,600(O)(4) 1,065(4)
General Manager, Commercial 1997 (4) (4) (4) (4)
Roofing Products, BMCA;
President and Chief Operating
Officer, U.S. Intec, Inc.
Steven R. Olsen ................ 1999 $156,000 $ 45,409 1,500(O) $ 12,037(5)
President and Chief Operating 1998 138,283 45,072 3,000(O) 14,472(5)
Officer, LL Building Products 1997 117,161 54,618 7,246(O) 8,609(5)
Inc.
Sunil Kumar .................... 1999 $158,325 -- -- $ 610,846(7)
President and Chief 1998 305,325 $250,000 $2,490,000(7) -- 1,444,887(7)
Executive Officer(7) 1997 293,550 256,238 7,609(O) 16,737(7)
</TABLE>
- ------------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
Compensation Program, except that a portion of the bonus amounts paid to
Mr. Lang in 1997 and 1998, Mr. Scott in 1999 and to Mr. Olsen in 1997
represented special bonus awards to those executive officers. The options
(O) relate to shares of redeemable convertible preferred stock of BMCA. See
"--Options/SARs".
(2) Included in "All Other Compensation" for Mr. Collins are: $11,450, $11,450
and $11,513, representing BMCA's contribution under the Capital Accumulation
Plan for Employees of GAFMC and ISP in 1999, 1998 and 1997, respectively;
$2,484, $2,122 and $1,884 for the premiums paid by BMCA for a life insurance
policy in 1999, 1998 and 1997, respectively; and $1,529, $1,327 and $1,112
for the premiums paid by BMCA for a long-term disability policy in 1999,
1998 and 1997, respectively. As of December 31, 1999, Mr. Collins was
Executive Vice President and Chief Operating Officer of BMCA, a position he
held until February 2000. In February 2000, Mr. Collins was elected
President and Chief Operating Officer of BMCA.
(3) Included in "All Other Compensation" for Mr. Lang are: $11,700, $11,200 and
$2,010, representing BMCA's contribution under the Capital Accumulation Plan
for Employees of GAFMC and ISP in 1999, 1998 and 1997, respectively; $7,267,
$4,459 and $2,583 for the premiums paid by BMCA for a life
(Footnotes continued on next page)
13
<PAGE>
(Footnotes continued from previous page)
insurance policy in 1999, 1998 and 1997, respectively; and $1,904, $1,806
and $1,089 for the premiums paid by BMCA for a long-term disability policy
in 1999, 1998 and 1997, respectively. Mr. Lang commenced employment with us
in April 1997.
(4) Included in "All Other Compensation" for Mr. Scott are: $4,632, representing
BMCA's contribution under the Capital Accumulation Plan for Employees of
GAFMC and ISP in 1999; $5,011 and $626 for the premiums paid by BMCA for a
life insurance policy in 1999 and 1998, respectively; and $1,806 and $439
for the premiums paid by BMCA for a long-term disability policy in 1999 and
1998, respectively. Mr. Scott commenced employment with us in October 1998.
(5) Included in "All Other Compensation" for Mr. Olsen are: $10,058, $12,726 and
$8,609, representing BMCA's contribution under the Capital Accumulation Plan
for Employees of GAFMC and ISP in 1999, 1998 and 1997, respectively; $754
and $660 for the premiums paid by BMCA for a life insurance policy in 1999
and 1998, respectively; and $1,225 and $1,086 for the premiums paid by BMCA
for a long-term disability policy in 1999 and 1998, respectively.
(6) The salary and other compensation of Messrs. Heyman and Weinberg and
Ms. Yoss are paid by ISP pursuant to our management agreement with ISP,
except that BMCA granted to Mr. Weinberg options to purchase 6,453 shares of
redeemable convertible preferred stock of BMCA in 1999. See
"-- Options/SARs." No allocation of compensation for services to BMCA is
made pursuant to the management agreement, except that BMCA reimbursed ISP
$133,989 under the management agreement in respect of a bonus amount earned
by Mr. Weinberg for 1997 in connection with services performed by him for
BMCA during that year. In addition, BMCA reimburses ISP, through payment of
the management fees payable under the management agreement, for the
estimated costs ISP incurs for providing the services of these officers. See
Item 13, "Certain Relationships and Related Transactions--Management
Agreement." As of December 31, 1999, Mr. Heyman was Chairman of the Board,
President and Chief Executive Officer of BMCA. He resigned from the position
of President in February 2000.
(7) Mr. Kumar resigned as our President and Chief Executive Officer, effective
June 30, 1999. Included in "All Other Compensation" for Mr. Kumar are:
$8,581, $11,450 and $11,450, representing BMCA's contribution under the
Capital Accumulation Plan for Employees of GAFMC and ISP in 1999, 1998 and
1997, respectively; $2,736, $3,316 and $3,324 for the premiums paid by BMCA
for a life insurance policy in 1999, 1998 and 1997, respectively; and
$1,237, $1,963 and $1,963 for the premiums paid by BMCA for a long-term
disability policy in 1999, 1998 and 1997, respectively. In connection with
the July 1998 merger of ISP Holdings and ISP, all options to purchase shares
of redeemable convertible preferred stock of ISP Holdings and stock
appreciation rights relating to ISP Holdings common stock, including options
and stock appreciation rights held by Mr. Kumar, were cancelled. In
consideration for this cancellation, Mr. Kumar was granted 15,000 shares of
Class A common stock of BMCA and 15,000 shares of Class B common stock of
BMCA (a portion of which were subsequently transferred to trusts for the
benefit of Mr. Kumar's children) and, subject to satisfaction of certain
future vesting requirements through December 2003 and to his remaining our
employee at such vesting periods, Mr. Kumar was entitled to receive cash
payments of $5,073,212 in the aggregate. Mr. Kumar received $598,292 and
$1,428,158 of these cash payments in 1999 and 1998, respectively. In
connection with Mr. Kumar's termination of employment, our obligation to pay
the balance of these cash payments was terminated. Included in "Restricted
Stock Awards" for 1998 is the value of the common stock granted to
Mr. Kumar as of the date of grant. In September 1999, Mr. Kumar and the
trusts for the benefit of his children contributed all of their shares of
our common stock to our parent, BMCA Holdings Corporation, for equity
interests in BMCA Holdings. See Note 5 to Consolidated Financial Statements.
OPTIONS/SARS
The following table summarizes options to acquire BMCA's redeemable
convertible preferred stock granted during 1999 to the executive officers named
in the Summary Compensation Table above and the potential realizable value of
those options held by those persons. In addition to the grants described below,
Mr. Weinberg, our Executive Vice President, General Counsel and Secretary, was
granted an option to purchase 6,453 shares of BMCA's redeemable convertible
preferred stock. This option represented 7.9% of
14
<PAGE>
the total options granted to employees in the fiscal year 1999 and had potential
realizable value at a 5% and 10% assumed annual rate of book value appreciation
of $309,366 and $761,983, respectively.
BMCA PREFERRED STOCK OPTION GRANTS IN 1999(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF BOOK
NUMBER OF SECURITIES % OF TOTAL OPTIONS VALUE APPRECIATION
UNDERLYING OPTIONS GRANTED TO EMPLOYEES ----------------------
NAME GRANTED IN FISCAL 1999 5% 10%
- --------------------- -------------------- -------------------- -------- ----------
<S> <C> <C> <C> <C>
William W. Collins... 5,000 6.1% $239,705 $ 590,404
William C. Lang...... 5,000 6.1 239,705 590,404
Kem Scott............ 1,500 1.8 71,911 177,121
Stephen R. Olsen..... 1,500 1.8 71,911 177,121
Sunil Kumar.......... 11,616 14.3 556,887 1,371,640
</TABLE>
- ------------------
(1) The BMCA preferred stock options represent options to purchase shares of
redeemable convertible preferred stock of BMCA. Each share of preferred
stock is convertible, at the holder's option, into shares of Class A common
stock of BMCA at a formula price based on Book Value (as defined in the
option agreement) as of the date of grant. The options vest over five years
from the date of grant. Dividends will accrue on the preferred stock from
the date of issuance at the rate of 6% per annum. The preferred stock is
redeemable, at BMCA's option, for a redemption price equal to the exercise
price per share plus accrued and unpaid dividends. The Class A common stock
of BMCA issuable upon conversion of the preferred stock is subject to
repurchase by BMCA under certain circumstances at a price equal to its then
current Book Value. The exercise price of the options is equal to the fair
value per share of the preferred stock at the date of grant. The options
expire nine years after the date of grant.
BMCA PREFERRED STOCK OPTIONS/GAF CORPORATION STOCK APPRECIATION RIGHTS AND
OPTIONS/SAR
EXERCISE AND VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY BMCA
UNDERLYING UNEXERCISED PREFERRED
BMCA PREFERRED OPTIONS (O)/GAF
OPTIONS(O)/GAF CORPORATION CORPORATION
SHARES ACQUIRED SARS(S) AT 12/31/99 SARS(S) AT 12/31/99
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
- -------------------------- --------------- -------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
William W. Collins........ -- -- 4,427/12,691(O) $90,882/$122,258(O)
William C. Lang........... -- -- 2,375/10,662(O) 45,769/80,500(O)
Kem Scott................. -- -- 920/5,180(O) 0/0(O)
Stephen R. Olsen.......... -- -- 3,858/8,488(O) 72,437/102,099(O)
Sunil Kumar............... 4,358 $113,648 0/0(O) --
-- -- 12,526/5,284(S) 13,254/18,502(S)
</TABLE>
- ------------------
(1) None of the options for 6,453 shares of preferred stock held by Mr. Weinberg
were exercisable at December 31, 1999. The stock appreciation rights
relating to GAF Corporation common stock represent the right to receive a
cash payment based upon the appreciation in value of the specified number of
shares of common stock of GAF Corporation over the determined initial book
value per share of common stock of GAF Corporation, adjusted for the
separation transactions, and interest on such book value at a specified
rate. The GAF Corporation stock appreciation rights vest over a five-year
period, subject to earlier vesting under certain circumstances, including in
connection with a change of control, and have no expiration date.
(2) Options for 12,118, 8,037, 0 and 10,846 shares of preferred stock were
in-the-money for Messrs. Collins, Lang, Scott and Olsen, respectively, at
December 31, 1999. None of the options for 6,453 shares of preferred stock
held by Mr. Weinberg were in-the-money at December 31, 1999.
15
<PAGE>
COMPENSATION OF DIRECTORS
The directors of BMCA do not receive any compensation for their services as
such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
We do not have a separate compensation committee. Compensation decisions
are determined by our Board of Directors, each member of which is also one of
our executive officers. Mr. Heyman is also a director and executive officer of
ISP. See Item 13, "Certain Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 24, 2000, approximately 99.4% of our outstanding Class A common
stock and all of our outstanding Class B common stock are owned of record by
BMCA Holdings Corporation. Approximately 97% of the outstanding capital stock of
BMCA Holdings is owned of record by GAF Building Materials Corporation, 1.5% of
the outstanding capital stock of BMCA Holdings is owned of record by Sunil Kumar
and 1.5% of the outstanding capital stock of BMCA Holdings is owned of record by
trusts for the benefit of Mr. Kumar's children. All of the outstanding common
stock of GAF Building Materials Corporation is owned of record by GAF Fiberglass
Corporation, which is 100%-owned by G Industries. G Industries is 100%-owned by
G-I Holdings, which in turn is 100%-owned by GAF Corporation.
The following table sets forth information with respect to the ownership of
BMCA's common stock, as of March 24, 2000, by each other person known to us to
own beneficially more than 5% of either class of BMCA's common stock outstanding
on that date, by each of our directors and by all of our executive officers and
directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF TOTAL VOTING
TITLE OF CLASS BENEFICIAL OWNER(1) OWNERSHIP CLASS POWER
- ----------------------- ---------------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Class A Common Stock... Samuel J. Heyman 1,015,010(2) 99.4% 98%
All directors and executive
officers of BMCA as a group
(7 persons) 1,015,010(2) 99.4% 98%
Class B Common Stock... Samuel J. Heyman 15,000(2) 100.0% 1.4%
All directors and executive
officers of BMCA as a group
(7 persons) 15,000(2) 100.0% 1.4%
</TABLE>
- ------------------
(1) The business address for Mr. Heyman is 1361 Alps Road, Wayne, New Jersey
07470.
(2) The number of shares shown as being beneficially owned (as defined in
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) by
Mr. Heyman and by all directors and executive officers of BMCA as a group
attributes ownership of the shares of BMCA common stock owned by BMCA
Holdings Corporation, an indirect 97%-owned subsidiary of GAF Corporation,
to Mr. Heyman. As of March 24, 2000, Mr. Heyman beneficially owned (as
defined in Rule 13d-3 of the Exchange Act) approximately 99% of the capital
stock of GAF Corporation. In addition to Mr. Heyman, as of March 24, 2000,
Mr. Kumar beneficially owned 1.5% of each class of common stock of BMCA
Holdings Corporation. These shares of BMCA Holdings common stock are held
subject to BMCA Holdings' right to acquire them under certain circumstances.
Mr. Kumar disclaims beneficial ownership of half of these shares. Mr. Kumar
also beneficially owned, as of March 24, 2000, less than 1% of our Class A
common stock, subject to our right to acquire the shares under certain
circumstances.
16
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENTS
Pursuant to a management agreement which expires December 31, 2000,
International Specialty Products Inc. (of which our Chairman and Chief Executive
Officer, Samuel J. Heyman, beneficially owns (as defined in Rule 13d-3 of the
Exchange Act) approximately 76%) provides certain general management,
administrative, legal, telecommunications, information and facilities services
to us, including the use of our headquarters in Wayne, New Jersey. ISP charged
us $5.3 million in 1999 for providing these services. These charges consist of
management fees and other reimbursable expenses attributable to us, or incurred
by ISP for our benefit. They are based on an estimate of the costs ISP incurs to
provide such services. Effective January 1, 2000, the term of the management
agreement was extended through the end of 2000, and the management fees payable
under the agreement were increased. We also allocate a portion of the management
fees payable by us under the management agreement to separate lease payments for
the use of our headquarters. Based on the services provided by ISP in 1999 under
the management agreement, the aggregate amount payable by us to ISP under the
management agreement for 2000 is expected to be approximately $6.0 million.
Certain of our executive officers receive their compensation from ISP. ISP is
indirectly reimbursed for this compensation through payment of the management
fee and other reimbursable expenses payable under the management agreement.
As of January 1, 1997, we entered into a separate management agreement with
GAF Fiberglass under which we provided certain general management,
administrative and financial services to GAF Fiberglass. Under the management
agreement, which terminated upon the August 1999 contribution by GAF Fiberglass
to us of certain assets, including our Nashville glass fiber manufacturing
facility, and certain related liabilities, GAF Fiberglass paid to us
approximately $0.7 million as a management fee in 1999.
Due to the unique nature of the services provided under the management
agreements, comparisons with third party arrangements are difficult. However, we
believe that the terms of each of the management agreements taken as a whole are
no less favorable to us than could be obtained from an unaffiliated third party.
CERTAIN PURCHASES
We purchase all of our colored roofing granules requirements from ISP under
a requirements contract, except for the requirements of our California and
Oregon roofing plants and a portion of the requirements of our Indiana roofing
plant, which are supplied by a third party. Effective January 1, 1999, this
contract was amended to cover, among other things, purchases of colored roofing
granules by our subsidiaries. This contract is subject to annual renewal, unless
terminated by either party to the agreement. In 1999, BMCA and its subsidiaries
purchased in the aggregate approximately $57.3 million of mineral products from
ISP.
Effective August 18, 1999, GAF Fiberglass, in a series of transactions,
contributed to us certain assets, including the Nashville glass fiber
manufacturing facility, and certain related liabilities. Prior to this
contribution, GAF Fiberglass manufactured a significant portion of our glass
fiber requirements pursuant to a supply agreement on terms which we believe were
at least as favorable to us as could be obtained from an unaffiliated third
party. We purchased approximately $19.6 million of glass fiber from GAF
Fiberglass in 1999.
TAX SHARING AGREEMENT
We have entered into a tax sharing agreement dated January 31, 1994 with
GAF Corporation and G-I Holdings with respect to the payment of federal income
taxes and certain related matters. During the term of the tax sharing agreement,
which is effective for the period during which we or any of our domestic
subsidiaries is included in a consolidated federal income tax return filed by
GAF Corporation, we are obligated to pay G-I Holdings an amount equal to those
federal income taxes we would have incurred if we, on behalf of ourselves and
our domestic subsidiaries, filed our own federal income tax return. Unused tax
attributes will carry forward for use in reducing amounts payable by us to G-I
Holdings in future years, but cannot be carried back. If we ever were to leave
the GAF Corporation consolidated tax group, we would be
17
<PAGE>
required to pay to G-I Holdings the value of any tax attributes to which we
would succeed under the consolidated return regulations to the extent the tax
attributes reduced the amounts otherwise payable by us under the tax sharing
agreement. Under certain circumstances, the provisions of the tax sharing
agreement could result in us having a greater liability under the agreement than
we would have had if we and our domestic subsidiaries had filed our own separate
federal income tax return. Under the tax sharing agreement, we and each of our
domestic subsidiaries are responsible for any taxes that would be payable by
reason of any adjustment to the tax returns of GAF Corporation or its
subsidiaries for years prior to the adoption of the tax sharing agreement that
relate to our business or assets or the business or assets of any of our
domestic subsidiaries. Although, as a member of the GAF tax group, we are
severally liable for all federal income tax liabilities of the GAF tax group,
including tax liabilities not related to our business, G-I Holdings and GAF
Corporation have agreed to indemnify us and our subsidiaries for all tax
liabilities of the GAF tax group other than tax liabilities arising from our
operations and the operations of our domestic subsidiaries and tax liabilities
for tax years pre-dating the tax sharing agreement that relate to our business
or assets and the business or assets of any of our domestic subsidiaries. See
Item 3, "Legal Proceedings--Bodily Injury Claims." The tax sharing agreement
provides for analogous principles to be applied to any consolidated, combined or
unitary state or local income taxes. Under the tax sharing agreement, GAF
Corporation makes all decisions with respect to all matters relating to taxes of
the GAF tax group. The provisions of the tax sharing agreement take into account
both the federal income taxes we would have incurred if we filed our own
separate federal income tax return and the fact that we are a member of the GAF
tax group for federal income tax purposes.
INTERCOMPANY BORROWINGS
BMCA makes loans to, and borrows from, G-I Holdings and its subsidiaries
from time to time at prevailing market rates. No loans were made by BMCA to G-I
Holdings during 1999, and no loans were made to BMCA by G-I Holdings and its
subsidiaries during 1999. As of December 31, 1999, no loans were owed to BMCA by
G-I Holdings, and no loans were owed by BMCA to affiliates. In addition, BMCA
makes non-interest bearing advances to affiliates, of which $59.1 million were
outstanding at December 31, 1999. In 1999, BMCA made a distribution of
$60.0 million to its parent company. See Note 14 to Consolidated Financial
Statements.
18
<PAGE>
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
(a)(1) Financial Statements: See Index on page F-1.
(a)(2) Financial Statement Schedules: See Index on page F-1.
(a)(3) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------------------------------------------------
2.1 -- Reorganization Agreement, dated as of December 31, 1998, by and
among BMCA, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation (incorporated by
reference to Exhibit 2.1 to BMCA's Registration Statement on Form
S-4 (Registration No. 333-69749) (the "2008 Notes S-4")).
3.1 -- Amended and Restated Certificate of Incorporation of BMCA.
3.2 -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to
BMCA's Registration Statement on Form S-4 (Registration
No. 33-81808) (the "Deferred Coupon Note Registration
Statement")).
3.3 -- Certificate of Incorporation of Building Materials Manufacturing
Corporation (incorporated by referenced to Exhibit 3.3 to BMCA's
Annual Report on Form 10-K for the year ended December 31, 1998
(the "1998 Form 10-K")).
3.4 -- By-laws of Building Materials Manufacturing Corporation
(incorporated by reference to Exhibit 3.4 to the 1998 Form 10-K).
3.5 -- Certificate of Incorporation of Building Materials Investment
Corporation (incorporated by reference to Exhibit 3.5 to the 1998
Form 10-K).
3.6 -- By-laws of Building Materials Investment Corporation (incorporated
by reference to Exhibit 3.6 to the 1998 Form 10-K).
4.1 -- Indenture, dated as of December 3, 1998, between BMCA and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1
to the 2008 Notes S-4).
4.2 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of December 3, 1998, among BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.4 to
the 2008 Notes S-4).
4.3 -- Indenture, dated as of December 9, 1996, between BMCA and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1
to BMCA's Registration Statement on Form S-4 (Registration
No. 333-20859) (the "2006 Notes Registration Statement")).
4.4 -- Indenture, dated as of October 20, 1997, between BMCA and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1
to BMCA's Registration Statement on Form S-4 (Registration
No. 333-41531) (the "8% Notes Registration Statement")).
4.5 -- Indenture, dated as of July 17, 1998, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to
BMCA's Registration Statement on Form S-4 (Registration
No. 333-60633) (the "2005 Notes S-4")).
4.6 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of December 9, 1996, among BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of
New York, as trustee (incorporated by reference to Exhibit 10.7 to
the 2008 Notes S-4).
4.7 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of October 20, 1997, among BMCA, as issuer,
Building Materials Manufacturing Corporation, as co-obligor,
Building Materials Investment Corporation, as guarantor, and The
Bank of New York, as trustee (incorporated by reference to
Exhibit 10.8 to the 2008 Notes S-4).
19
<PAGE>
4.8 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of July 17, 1998, among BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of
New York, as trustee (incorporated by reference to Exhibit 10.9 to
the 2008 Notes S-4).
10.1 -- Amended and Restated Management Agreement, dated as of January 1,
1999 (the "Management Agreement"), among GAF, G-I Holdings, G
Industries, Merick Inc., GAF Fiberglass, ISP, GAF Building
Materials Corporation, GAF Broadcasting Company, Inc., BMCA and
ISP Opco Holdings Inc. (incorporated by reference to Exhibit 10.1
to the 1998 Form 10-K).
10.2 -- Amendment No. 1 to the Management Agreement (incorporated by
reference to Exhibit 10.2 to International Specialty Products Inc.
Annual Report on Form 10-K for the year ended December 31, 1999).
10.3 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by reference
to Exhibit 10.9 to BMCA's Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K")).*
10.4 -- Forms of Amendment to Option Agreement relating to Series A
Cumulative Redeemable Convertible Preferred Stock (incorporated by
reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K")).*
10.5 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Preferred Stock (incorporated by reference to
Exhibit 10.13 to the 1997 Form 10-K).*
10.6 -- BMCA Preferred Stock Option Plan (incorporated by reference to
Exhibit 4.2 to BMCA's Registration Statement on Form S-8
(Registration No. 333-60589)).*
10.7 -- Tax Sharing Agreement, dated as of January 31, 1994, among GAF,
G-I Holdings and BMCA (incorporated by reference to Exhibit 10.6
to the Deferred Coupon Note Registration Statement).
10.8 -- Reorganization Agreement, dated as of January 31, 1994, among GAF
Building Materials Corporation, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.9 to the Deferred Coupon
Notes Registration Statement).
21 -- Subsidiaries of BMCA.
23 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule for fiscal year 1999, which is submitted
electronically to the Securities and Exchange Commission for
information only.
27.2 -- Restated Financial Data Schedule for fiscal year 1998, which is
submitted electronically to the Securities and Exchange Commission
for information only.
27.3 -- Restated Financial Data Schedule for fiscal year 1997, which is
submitted electronically to the Securities and Exchange Commission
for information only.
- ------------------
* Management and/or compensation plan or arrangement.
(b) Reports on Form 8-K
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BUILDING MATERIALS CORPORATION OF
AMERICA
By: /s/ WILLIAM C. LANG
----------------------------------
William C. Lang
Executive Vice President, Chief
Administrative
Officer and Chief Financial Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------- -----------------
<S> <C> <C>
/s/ SAMUEL J. HEYMAN Chairman of the Board and Chief Executive
- ------------------------------------------ Officer; Director (Principal Executive March 30, 2000
Samuel J. Heyman Officer)
/s/ WILLIAM W. COLLINS President and Chief Operating Officer; March 30, 2000
- ------------------------------------------ Director
William W. Collins
/s/ WILLIAM C. LANG Executive Vice President, Chief
- ------------------------------------------ Administrative Officer and Chief Financial March 30, 2000
William C. Lang Officer; Director
(Principal Financial Officer)
/s/ JAMES T. ESPOSITO Vice President and Controller March 30, 2000
- ------------------------------------------ (Principal Accounting Officer)
James T. Esposito
</TABLE>
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BUILDING MATERIALS MANUFACTURING
CORPORATION
By: /s/ WILLIAM C. LANG
----------------------------------
William C. Lang
Executive Vice President, Chief
Administrative
Officer and Chief Financial Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------- -----------------
<S> <C> <C>
/s/ SAMUEL J. HEYMAN Chief Executive Officer (Principal Executive March 30, 2000
- ------------------------------------------ Officer)
Samuel J. Heyman
/s/ WILLIAM W. COLLINS President and Chief Operating Officer; March 30, 2000
- ------------------------------------------ Director
William W. Collins
/s/ WILLIAM C. LANG Executive Vice President, Chief
- ------------------------------------------ Administrative Officer and Chief Financial March 30, 2000
William C. Lang Officer; Director
(Principal Financial Officer)
/s/ JAMES T. ESPOSITO Vice President and Controller March 30, 2000
- ------------------------------------------ (Principal Accounting Officer)
James T. Esposito
</TABLE>
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BUILDING MATERIALS INVESTMENT
CORPORATION
By: /s/ WILLIAM C. LANG
-----------------------------------
William C. Lang
Executive Vice President, Chief
Administrative
Officer and Chief Financial Officer
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------- -----------------
<S> <C> <C>
/s/ SAMUEL J. HEYMAN Chief Executive Officer (Principal Executive March 30, 2000
- ------------------------------------------ Officer)
Samuel J. Heyman
/s/ WILLIAM W. COLLINS President and Chief Operating Officer; March 30, 2000
- ------------------------------------------ Director
William W. Collins
/s/ WILLIAM C. LANG Executive Vice President, Chief
- ------------------------------------------ Administrative Officer and Chief Financial March 30, 2000
William C. Lang Officer; Director
(Principal Financial Officer)
/s/ BARRY A. CROZIER Director
- ------------------------------------------ March 30, 2000
Barry A. Crozier
/s/ JAMES T. ESPOSITO Vice President and Controller March 30, 2000
- ------------------------------------------ (Principal Accounting Officer)
James T. Esposito
</TABLE>
23
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
FORM 10-K
INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS, CONSOLIDATED
FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... F-2
Selected Financial Data.................................................................................... F-7
Report of Independent Public Accountants................................................................... F-8
Consolidated Statements of Operations for the three years ended December 31, 1999.......................... F-9
Consolidated Balance Sheets as of December 31, 1998 and 1999............................................... F-10
Consolidated Statements of Cash Flows for the three years ended December 31, 1999.......................... F-11
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1999................ F-13
Notes to Consolidated Financial Statements................................................................. F-14
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)..................................................................... F-41
SCHEDULES
Consolidated Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts........................................................... S-1
</TABLE>
F-1
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Building Materials Corporation of America (the "Company"), an indirect
subsidiary of GAF Corporation ("GAF") and G-I Holdings Inc. ("G-I Holdings"),
was formed in January 1994 to acquire the operating assets and certain
liabilities of GAF Building Materials Corporation ("GAFBMC"), a parent of the
Company. See Note 1 to Consolidated Financial Statements.
RESULTS OF OPERATIONS
1999 Compared With 1998
The Company recorded net income in 1999 of $24.0 million compared with a
net loss of $9.8 million in 1998. The net income in 1999 and the net loss in
1998 included pre-tax nonrecurring charges of $2.7 million ($1.7 million
after-tax) and $27.6 million ($17.1 million after-tax), respectively, and
after-tax extraordinary losses of $1.3 million and $18.1 million, respectively.
Excluding the extraordinary losses and nonrecurring charges in both years, net
income would have been $27.0 million in 1999 compared with $25.4 million in
1998, an increase of 6.3%, with the increase primarily attributable to higher
operating income and lower interest expense, partially offset by lower
investment income.
Net sales for 1999 were $1,140.0 million, a 4.8% increase over net sales
for 1998 of $1,088.0 million. The sales growth was primarily due to the
inclusion of the LL Building Products Inc. business, acquired in June 1998, for
the full year (see Note 4 to Consolidated Financial Statements), together with
net sales gains in premium residential roofing products, partially offset by
lower net sales in commercial roofing products. The increase in net sales of
premium residential roofing products resulted from higher sales volumes and
average selling prices, while the decline in net sales of commercial roofing
products resulted from lower average selling prices.
Operating income, before the impact of nonrecurring charges, for 1999 was
$85.7 million, a 14.2% increase over the $75.1 million for 1998 and, as a
percentage of sales, improved to 7.5% in 1999 from 6.9% in 1998. The increase in
operating income in 1999 was primarily attributable to higher net sales for the
Company's premium residential roofing products, the inclusion of the LL Building
Products Inc. business, acquired in June 1998, for the full year, and a modest
improvement in commercial roofing products, primarily the result of lower
selling, general and administrative expenses and manufacturing costs.
The Company recorded pre-tax nonrecurring charges in 1999 of $2.7 million
related to the settlement of a legal matter and, in 1998, $27.6 million, of
which $20.0 million related to the settlement of a national class action lawsuit
involving asphalt shingles, and $7.6 million related to a grant to the Company's
former President and Chief Executive Officer of restricted common stock of the
Company and certain cash payments to be made over a specified period of time
(substantially all of which was earned) in connection with the termination by an
affiliate of preferred stock options and stock appreciation rights held by such
officer (see Note 5 to Consolidated Financial Statements).
Interest expense declined to $48.3 million for 1999 from $50.0 million in
1998, due primarily to a lower average interest rate, partially offset by higher
average borrowings. The lower average interest rate resulted primarily from the
refinancing of $310 million in aggregate principal amount at maturity of the
Company's 11 3/4% Senior Deferred Coupon Notes due 2004 (the "Deferred Coupon
Notes") with substantially all of the net proceeds from the issuances of
$150 million in aggregate principal amount of the Company's 7 3/4% Senior Notes
due 2005 (the "2005 Notes"), $155 million in aggregate principal amount of the
Company's 8% Senior Notes due 2008 (the "2008 Notes") and a $31.9 million Term
Loan (the "Term Loan") in July 1998, December 1998 and August 1999,
respectively. In connection with the above refinancing, the Company recorded
after-tax extraordinary losses of $1.3 million in 1999 and $18.1 million in 1998
related to premiums paid to repurchase the Deferred Coupon Notes.
Other income, net, was $5.4 million in 1999 compared with $15.9 million in
1998. The decline was principally due to $10.3 million lower investment income.
F-2
<PAGE>
1998 Compared With 1997
The Company recorded a net loss in 1998 of $9.8 million compared with net
income of $27.8 million in 1997. The net loss in 1998 reflected the impact of
$27.6 million of pre-tax nonrecurring charges ($17.1 million after-tax) and
after-tax extraordinary losses of $18.1 million. Excluding the effect of these
charges and losses, the Company's results reflected higher operating and other
income, partially offset by increased interest expense.
Net sales for 1998 were $1,088.0 million, a 15.2% increase over net sales
for 1997 of $944.6 million, principally due to increased sales in the
residential roofing products and the acquisition of the LL Building Products
Inc. business in June 1998 (see Note 4 to Consolidated Financial Statements),
partially offset by lower sales in commercial roofing products. The increase in
residential roofing sales resulted from higher unit volumes and average selling
prices, while the commercial roofing products experienced declines in both unit
volumes and average selling prices.
Operating income, before the impact of the nonrecurring charges, was
$75.1 million for 1998, a 2.6% increase over the $73.2 million recorded in 1997.
This increase in operating income was primarily attributable to improved gross
profit margins due to increased plant capacity utilization and the inclusion of
the LL Building Products Inc. business after its acquisition in June 1998.
Partially offsetting these improvements were higher distribution costs due to
rail carrier service problems in the first nine months of 1998 and higher
selling, general and administrative expenses resulting from broader marketing
efforts.
The Company recorded pre-tax nonrecurring charges in 1998 (see Note 5 to
Consolidated Financial Statements) aggregating $27.6 million, of which
$20.0 million related to the settlement of a national class action lawsuit
involving asphalt shingles manufactured between January 1, 1973 and
December 31, 1997. Under the terms of the September 1998 settlement, the Company
will provide property owners whose GAF shingles were manufactured during this
period and which suffer certain damages during the term of their original
warranty period, and who file a qualifying claim, with an opportunity to receive
certain limited benefits beyond those already provided in their existing
warranty. In July 1998, the Company recorded a pre-tax nonrecurring charge of
$7.6 million related to a grant to its President and Chief Executive Officer of
30,000 shares of restricted common stock of the Company and related cash
payments to be made over a specified period of time (substantially all of which
was earned) in connection with the termination by an affiliate of preferred
stock options and stock appreciation rights held by such officer.
Interest expense increased from $43.0 million in 1997 to $50.0 million in
1998, primarily due to higher debt levels, partially offset by a lower average
interest rate. The lower average interest rate resulted from the refinancing of
$279.7 million in aggregate principal amount at maturity of the Company's
Deferred Coupon Notes with substantially all of the net proceeds from the
issuances of the 2005 Notes and the 2008 Notes in July and December 1998,
respectively. See the discussion below under Liquidity and Financial Condition.
In connection with these transactions, the Company recorded after-tax
extraordinary losses of $18.1 million related to premiums paid to purchase the
Deferred Coupon Notes.
Other income, net, was $15.9 million in 1998 compared with $15.5 million in
1997, with the improvement due primarily to the absence of a $3.0 million
provision recorded in 1997 for estimated obligations related to product warranty
claims for a discontinued product, and lower other miscellaneous expenses,
partially offset by $4.2 million lower investment income.
LIQUIDITY AND FINANCIAL CONDITION
Net cash inflow during 1999 was $84.8 million before financing activities,
and included $82.5 million of cash generated from operations, the reinvestment
of $45.3 million for capital programs, and the generation of $48.2 million from
net sales of available-for-sale and held-to-maturity securities and other
short-term investments.
Cash invested in additional working capital (excluding the non-cash leasing
transactions described below) totaled $26.2 million during 1999, primarily
reflecting increases in accounts receivable and inventories of $11.3 and
$14.9 million, respectively, and a decrease in accrued liabilities of $11.3
million (after non-cash transactions), partially offset by a $9.9 million
increase in accounts payable. Cash from operating activities also reflected a
$48.8 million cash outflow from related party transactions (net of a
$60 million distribution to parent
F-3
<PAGE>
company), a $103.6 million cash inflow from net sales of trading securities, a
$14.3 million cash outflow for product warranty claims and $10.2 million of cash
outflow from a decrease in other assets, other liabilities and other operating
activities, including $2.2 million of capitalized software.
In connection with the construction of two new manufacturing facilities,
the Company entered into two leases for certain machinery and equipment to be
utilized at the Company's plants under construction in Michigan City, Indiana
and Shafter, California, which leases meet the criteria of operating leases
under Statement of Financial Accounting Standards ("SFAS") No. 13 "Accounting
for Leases". In connection therewith, at December 31, 1999, property, plant and
equipment, net, and accrued liabilities included $65.6 million of assets under
such leases. Such amounts will be reversed when the related plants become fully
operational, which is expected to occur in 2000. This $65.6 million increase in
accrued liabilities was offset by other reductions aggregating $10.4 million.
Net cash used in financing activities totaled $53.9 million in 1999. The
Company generated $5.6 million of proceeds from the sale of the Company's trade
receivables and $37.9 million of proceeds from the issuance of long-term debt,
including $31.9 million from the Term Loan used to refinance the remaining
amount of Deferred Coupon Notes outstanding, $3.5 million from an industrial
revenue bond and $1.8 million from a promissory note. Offsetting such cash
inflows was $36.0 million of repayments of long-term debt, principally the
repurchase of the remaining $29.9 million in aggregate principal amount of the
Deferred Coupon Notes, a $60.0 million distribution to parent company, and $2.4
million in financing fees and expenses.
As a result of the foregoing factors, cash and cash equivalents increased
by $31.0 million during 1999 to $56.0 million, excluding $32.0 million of
trading and available-for-sale securities and other short-term investments.
In August 1999, the Company entered into a new three-year bank credit
facility (the "Credit Agreement"). The terms of the Credit Agreement provide for
a $110 million revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $110 million in the aggregate. As of December 31, 1999,
$27.1 million of letters of credit and no borrowings were outstanding under the
Credit Agreement. Under the terms of the Credit Agreement, the Company is
subject to certain financial covenants, including interest coverage and leverage
ratios, along with a limitation on the amount of dividends and other restricted
payments made to affiliates. As of December 31, 1999, the Company was in
compliance with all such covenants.
Additional borrowings by the Company are subject to certain covenants
contained in the indentures relating to the 8 5/8% Senior Notes due 2006, the 8%
Senior Notes due 2007, the 2005 Notes, the 2008 Notes (collectively, the "Other
Senior Notes"), the Credit Agreement and the Term Loan.
See Note 10 to Consolidated Financial Statements for further information
regarding the debt instruments of the Company.
Upon its formation on January 31, 1994, the Company assumed the first
$204.4 million of GAFBMC's liabilities relating to then-pending cases and
previously settled asbestos-related bodily injury cases, all of which were paid
as of March 30, 1997. See Item 3, "Legal Proceedings" for further information
regarding asbestos-related matters. At December 31, 1999, the Company had total
outstanding consolidated indebtedness of $606.9 million, of which $6.1 million
matures prior to December 31, 2000, and stockholders' equity of $21.7 million.
The Company anticipates funding such obligations principally from its cash and
investments, operations and/or borrowings, which may include borrowings from
affiliates.
In March 1993, the Company sold its trade accounts receivable
("receivables") to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company repurchased the receivables sold pursuant to the 1993
agreement and sold them to a special purpose subsidiary of the Company, BMCA
Receivables Corporation, without recourse, which in turn sold them to a new
trust, without recourse, pursuant to new agreements. The new agreements provide
for a maximum of $115 million in cash to be made available to the Company based
on eligible receivables outstanding from time to time. This facility expires in
December 2001.
F-4
<PAGE>
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates. As of December 31, 1999, no loans were
owed to the Company by G-I Holdings and no loans were owed by the Company to
affiliates. In addition, the Company makes non-interest bearing advances to
affiliates, of which $59.1 million were outstanding at December 31, 1999.
The parent corporations of the Company are essentially holding companies
without independent businesses or operations and, as such, are presently
dependent upon the earnings and cash flows of their subsidiaries, principally
the Company, in order to satisfy their obligations, including asbestos-related
and other claims and certain potential tax liabilities including tax liabilities
relating to Rhone-Poulenc Surfactants & Specialties, L.P., a Delaware limited
partnership which operates, among other businesses, GAF Fiberglass Corporation's
("GFC") former surfactants chemicals business. The parent corporations of the
Company are GAF, G-I Holdings, G Industries Corp., GFC, GAFBMC and BMCA Holdings
Corporation. GAF has advised the Company that it expects to obtain funds to
satisfy such obligations from, among other things, dividends and loans from
subsidiaries, principally the Company, payments pursuant to the Tax Sharing
Agreement between GAF and the Company and proceeds from insurance recoveries.
The indentures relating to the Other Senior Notes, the Credit Agreement and the
Term Loan contain restrictions on the amount of dividends, loans and other
restricted payments, as defined therein, which may be paid by the Company. As of
December 31, 1999, after giving effect to the most restrictive of the
aforementioned restrictions, the Company could have paid dividends and other
restricted payments of up to $76.1 million. The Company does not believe that
the dependence of its parent corporations on the cash flows of their
subsidiaries should have a material adverse effect on the operations, liquidity
or capital resources of the Company. For further information, see Notes 3, 6,
10, 14 and 15 to Consolidated Financial Statements.
The Company uses capital resources to maintain existing facilities, expand
its operations and make acquisitions. In 2000, the Company expects to complete
construction of a new fiberglass roofing mat manufacturing facility in Shafter,
California and a new residential roofing shingle manufacturing facility in
Michigan City, Indiana. In addition, the Company expects to build a
manufacturing facility for a single ply commercial membrane roofing system in
2000. Funding for the Company's capital program is expected to be generated from
results of operations and leasing transactions.
The Company utilizes interest rate swap agreements ("swaps") to lower
funding costs, diversify sources of funding and manage interest rate exposure.
In June 1998, the Company terminated its outstanding swaps related to its
Deferred Coupon Notes with an aggregate ending notional principal amount of
$60.0 million, resulting in gains of $0.7 million. The gains were deferred and
amortized as a reduction of interest expense over the remaining original life of
the swaps. By utilizing swaps, the Company reduced its interest expense by $2.0,
$1.9 and $0.2 million in 1997, 1998 and 1999, respectively. See Note 10 to
Consolidated Financial Statements.
The Company does not believe that inflation has had an effect on its
results of operations during the past three years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future, or by the increase in cost of asphalt purchases used in the Company's
manufacturing process principally due to rising oil prices.
Market-Sensitive Instruments and Risk Management
The Company's investment strategy is to seek returns in excess of money
market rates on its available cash while minimizing market risks. There can be
no assurance that the Company will be successful in implementing such a
strategy. The Company invests primarily in international and domestic arbitrage
and securities of companies involved in acquisition or reorganization
transactions, including at times, common stock short positions which are offset
against long positions in securities which are expected, under certain
circumstances, to be exchanged or converted into the short positions. With
respect to its equity positions, the Company is exposed to the risk of market
loss. See Note 2 to Consolidated Financial Statements.
F-5
<PAGE>
The Company enters into financial instruments in the ordinary course of
business in order to manage its exposure to market fluctuations on its
short-term investments. The financial instruments the Company employs to reduce
market risk include hedging instruments. The counterparties to these financial
instruments are major financial institutions with high credit standings. The
amounts subject to credit risk are generally limited to the amounts, if any, by
which the counterparties' obligations exceed the obligations of the Company. The
Company controls credit risk through credit approvals, limits and monitoring
procedures. The Company does not anticipate nonperformance by counterparties to
these instruments.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
----------------- -----------------
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(MILLIONS)
<S> <C> <C> <C> <C>
Equity-related financial instruments.......................................... $178.4 $ 0 $0.9 $ 0
</TABLE>
All of the financial instruments in the above table have a maturity of less
than one year. As of December 31, 1999, equity-related financial instruments
employed by the Company to reduce market risk include long contracts valued at
$0.9 million, which are marked-to-market each month, with unrealized gains and
losses included in results of operations. As such, there is no economic cost at
December 31, 1999 to terminate these instruments and therefore the fair market
value is zero.
Year 2000 Compliance
During 1999, the Company completed a formal year 2000 program (the "Year
2000 Program") to address the potential issues relating to the inability of some
of its information technology ("IT") and non-IT equipment, including embedded
technology, to accurately read and process certain dates, including dates in the
year 2000 and afterwards (the "Year 2000 Issues"). As part of the Year 2000
Program, the Company also requested information on the Year 2000 Issues of third
parties significant to the Company's business and, accordingly, developed
contingency plans to minimize the impact of Year 2000 Issues on its business.
The costs to complete the Year 2000 Program were not material to the Company's
financial position or results of operations. To date, the Company has not
experienced any significant consequences related to Year 2000 Issues, and the
Company reasonably believes that potential undiscovered Year 2000 Issues will
not have a material effect on its business, financial condition or results of
operations.
* * *
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains both historical and
forward-looking statements. All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements within the meaning
of section 27A of the Securities Act and section 21E of the Exchange Act. These
forward-looking statements are only predictions and generally can be identified
by use of statements that include phrases such as "believe," "expect,"
"anticipate," "intend," "plan," "foresee" or other similar words or phrases.
Similarly, statements that describe the Company's objectives, plans or goals
also are forward-looking statements. The Company's operations are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement.
The forward-looking statements included herein are made only as of the date of
this Annual Report on Form 10-K and the Company undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances. No assurances can be given that projected results or events will
be achieved.
F-6
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
SELECTED FINANCIAL DATA
The following table presents the selected consolidated financial data of
the Company. As of January 1, 1997, G-I Holdings contributed all of the capital
stock of U.S. Intec, Inc. ("U.S. Intec") to BMCA. Accordingly, the Company's
historical consolidated financial statements include U.S. Intec's results of
operations from the date of its acquisition by G-I Holdings (October 20, 1995),
including sales of $21.8 and $99.0 million for the years ended December 31, 1995
and 1996, respectively, and net income (loss) of $(0.5) and $1.3 million,
respectively. See Note 1 to Consolidated Financial Statements. The results for
the year ended December 31, 1997 include the results of the Leatherback
Industries business from the date of its acquisition (March 14, 1997), including
sales of $30.2 million. The results for the year ended December 31, 1998 include
the results of the LL Building Products Inc. business from the date of its
acquisition (June 1, 1998), including net sales of $53.3 million.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales.................................................. $687.2 $852.0 $944.6 $1,088.0 $1,140.0
Operating income........................................... 45.9 61.4 73.2 47.5* 83.1*
Interest expense........................................... 24.8 32.0 43.0 50.0 48.3
Income before income taxes and extraordinary losses........ 16.5 27.9 45.7 13.5 40.2
Income before extraordinary losses......................... 10.1 17.1 27.8 8.4 25.3
Net income (loss).......................................... 10.1 17.1 27.8 (9.8) 24.0
</TABLE>
- ------------------
* After nonrecurring charges of $27.6 and $2.7 million in 1998 and 1999,
respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total working capital...................................... $ 54.6 $247.3 $283.1 $ 220.1 $ 109.9
Total assets............................................... 560.5 702.0 829.7 867.0 895.1
Long-term debt less current maturities..................... 310.3 405.7 563.9 596.9 600.7
Total stockholders' equity................................. 15.8 143.2 89.5 52.2 21.7
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Other Data:
Depreciation............................................... $ 20.3 $ 23.9 $ 25.0 $ 28.9 $ 33.0
Goodwill amortization...................................... 1.2 1.7 1.9 2.1 2.0
Capital expenditures and acquisitions...................... 54.1 25.6 82.2 134.5 45.8
</TABLE>
F-7
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited the accompanying consolidated balance sheets of Building
Materials Corporation of America (a Delaware corporation) and subsidiaries as of
December 31, 1998 and 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, appearing on
pages F-9 to F-40 of this Form 10-K, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on page S-1 of
this Form 10-K is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 24, 2000
F-8
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C>
Net sales................................................................. $944,629 $1,087,957 $1,140,039
-------- ---------- ----------
Costs and expenses:
Cost of products sold................................................... 682,855 774,339 812,697
Selling, general and administrative..................................... 186,653 236,416 239,560
Goodwill amortization................................................... 1,891 2,111 2,034
Nonrecurring charges.................................................... -- 27,563 2,650
-------- ---------- ----------
Total costs and expenses............................................. 871,399 1,040,429 1,056,941
-------- ---------- ----------
Operating income.......................................................... 73,230 47,528 83,098
Interest expense.......................................................... (43,042) (49,954) (48,317)
Other income, net......................................................... 15,462 15,895 5,440
-------- ---------- ----------
Income before income taxes and extraordinary losses....................... 45,650 13,469 40,221
Income taxes.............................................................. (17,803) (5,118) (14,882)
-------- ---------- ----------
Income before extraordinary losses........................................ 27,847 8,351 25,339
Extraordinary losses, net of income tax benefits of $11,101 and $761,
respectively............................................................ -- (18,113) (1,296)
-------- ---------- ----------
Net income (loss)......................................................... $ 27,847 $ (9,762) $ 24,043
-------- ---------- ----------
-------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-9
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
(THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 24,989 $ 55,952
Investments in trading securities....................................................... 95,134 687
Investments in available-for-sale securities............................................ 56,461 29,702
Investments in held-to-maturity securities.............................................. 6,358 --
Other short-term investments............................................................ 22,671 1,590
Accounts receivable, trade, less reserve of $4,035 and $4,019, respectively............. 24,249 22,938
Accounts receivable, other.............................................................. 55,912 62,892
Receivable from related parties......................................................... 860 59,132
Inventories............................................................................. 93,703 108,615
Other current assets.................................................................... 4,866 4,239
-------- --------
Total Current Assets.................................................................. 385,203 345,747
Property, plant and equipment, net........................................................ 332,348 410,703
Excess of cost over net assets of businesses acquired, net of accumulated amortization of
$10,891 and $12,925, respectively....................................................... 72,093 70,408
Deferred income tax benefits.............................................................. 58,974 45,561
Other assets.............................................................................. 18,410 22,693
-------- --------
Total Assets.............................................................................. $867,028 $895,112
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.................................................... $ 4,273 $ 6,149
Accounts payable........................................................................ 74,417 84,334
Payable to related party................................................................ 5,545 15,024
Accrued liabilities..................................................................... 60,665 115,828
Reserve for product warranty claims..................................................... 20,239 14,500
-------- --------
Total Current Liabilities............................................................. 165,139 235,835
-------- --------
Long-term debt less current maturities.................................................... 596,913 600,745
-------- --------
Reserve for product warranty claims....................................................... 28,393 19,814
-------- --------
Other liabilities......................................................................... 24,366 17,029
-------- --------
Commitments and Contingencies.............................................................
Stockholders' Equity:.....................................................................
Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per share;
200,000 and 400,000 shares authorized, respectively; no shares issued................. -- --
Class A Common Stock, $.001 par value per share; 1,300,000 shares authorized: 1,015,010
and 1,019,621 shares issued and outstanding, respectively............................. 1 1
Class B Common Stock, $.001 par value per share; 100,000 shares authorized; 15,000
shares issued and outstanding......................................................... -- --
Additional paid-in capital................................................................ 94,189 40,632
Accumulated deficit....................................................................... (22,089) --
Accumulated other comprehensive loss...................................................... (19,884) (18,944)
-------- --------
Total Stockholders' Equity.............................................................. 52,217 21,689
-------- --------
Total Liabilities and Stockholders' Equity................................................ $867,028 $895,112
-------- --------
-------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-10
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents, beginning of year............................... $ 124,560 $ 12,924 $ 24,989
--------- --------- ---------
Cash provided by (used in) operating activities:
Net income (loss)........................................................ 27,847 (9,762) 24,043
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Extraordinary losses.................................................. -- 18,113 1,296
Depreciation.......................................................... 25,049 28,935 32,986
Goodwill and other amortization....................................... 1,891 2,312 2,675
Deferred income taxes................................................. 17,524 4,538 14,132
Noncash interest charges.............................................. 27,222 23,877 3,321
(Increase) decrease in working capital items............................. 17,788 (15,962) (26,200)
Increase (decrease) in product warranty claims........................... (6,688) 11,651 (14,318)
Purchases of trading securities.......................................... (123,483) (189,197) (139,522)
Proceeds from sales of trading securities................................ 55,378 124,931 243,097
(Increase) decrease in other assets...................................... 1,773 282 (4,501)
Increase (decrease) in other liabilities................................. (2,482) 3,267 (2,335)
Change in net receivable from/payable to related parties................. (40,237) 42,635 (48,793)
Other, net............................................................... (7,434) 11,272 (3,404)
--------- --------- ---------
Net cash provided by (used in) operating activities........................ (5,852) 56,892 82,477
--------- --------- ---------
Cash provided by (used in) investing activities:
Capital expenditures..................................................... (51,297) (75,334) (45,322)
Acquisitions............................................................. (30,861) (59,187) (515)
Proceeds from sale of assets............................................. -- 29,019 --
Purchases of available-for-sale securities............................... (223,804) (89,324) (76,048)
Purchases of held-to-maturity securities................................. (4,591) (6,357) (2,349)
Proceeds from sales of available-for-sale securities..................... 173,547 170,055 97,400
Proceeds from held-to-maturity securities................................ 11,361 499 7,758
Proceeds from sales of other short-term investments...................... -- -- 21,421
--------- --------- ---------
Net cash provided by (used in) investing activities........................ (125,645) (30,629) 2,345
--------- --------- ---------
Cash provided by (used in) financing activities:
Proceeds (repayments) from sale of accounts receivable................... (35,332) 30,578 5,640
Increase (decrease) in short-term debt................................... 26,944 (26,944) --
(Increase) decrease in loan receivable from related party................ (6,152) 6,152 --
Proceeds from issuance of long-term debt................................. 99,916 304,019 37,943
Increase (decrease) in borrowings under revolving credit facility........ 34,000 (34,000) --
Repayments of long-term debt............................................. (3,521) (287,904) (35,954)
Distributions to parent company.......................................... (91,000) -- (60,000)
Proceeds from issuance of common stock................................... -- -- 870
Payments of asbestos claims.............................................. (3,062) -- --
Financing fees and expenses.............................................. (1,932) (6,099) (2,358)
--------- --------- ---------
Net cash provided by (used in) financing activities........................ 19,861 (14,198) (53,859)
--------- --------- ---------
Net change in cash and cash equivalents.................................... (111,636) 12,065 30,963
--------- --------- ---------
Cash and cash equivalents, end of year..................................... $ 12,924 $ 24,989 $ 55,952
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Effect on cash from (increase) decrease in working capital items*:
Accounts receivable................................................... $ 7,785 $ (40,467) $ (11,309)
Inventories........................................................... 8,108 (10,707) (14,912)
Other current assets.................................................. (2,849) 2,032 1,423
Accounts payable...................................................... 9,989 10,062 9,917
Accrued liabilities................................................... (5,245) 23,118 (11,319)
--------- --------- ---------
Net effect on cash from (increase) decrease in working capital items....... $ 17,788 $ (15,962) $ (26,200)
--------- --------- ---------
--------- --------- ---------
Cash paid during the period for:
Interest (net of amount capitalized)..................................... $ 14,259 $ 19,994 $ 44,109
Income taxes (including taxes paid pursuant to the Tax Sharing
Agreement)............................................................ 346 1,174 1,250
Acquisition of Leatherback Industries business, net of $8 cash acquired:
Fair market value of assets acquired.................................. $ 27,167
Purchase price of acquisition......................................... 25,531
---------
Liabilities assumed................................................... $ 1,636
---------
---------
Acquisition of LL Building Products Inc. business:
Fair market value of assets acquired.................................. $ 59,318
Purchase price of acquisition......................................... 43,468
---------
Liabilities assumed................................................... $ 15,850
---------
---------
</TABLE>
- ------------------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net receivables from/payables to related
parties. Working capital acquired in connection with acquisitions is reflected
in "Acquisitions". The effects of reclassifications between noncurrent and
current assets and liabilities are excluded from the amounts shown above. In
addition, the increase in receivables shown above does not reflect the cash
proceeds from the sale of certain of the Company's receivables (see Note 7);
such proceeds are reflected in cash from financing activities. See Note 1 for
a description of the non-cash contribution of certain assets, including the
glass fiber manufacturing facility located in Nashville, Tennessee, and
certain related liabilities. See Note 5 for a description of non-cash capital
contributions. See Note 9 for a description of non-cash leasing transactions.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-12
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
CAPITAL
STOCK AND ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE
CAPITAL INCOME (LOSS) DEFICIT INCOME (LOSS)
---------- ------------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C>
Balance, December 31, 1996.................................. $182,700 $ 711 $ (40,174)
Comprehensive income--year ended December 31, 1997:
Net income.............................................. -- -- 27,847 $ 27,847
---------
Other comprehensive income, net of tax:
Unrealized holding gains arising during the period, net
of income taxes of $5,043............................ -- 7,886 -- 7,886
Less: Reclassification adjustment for losses included in
net income, net of income tax effect of $1,548....... -- (2,422) -- (2,422)
--------- ---------
Change in unrealized gains on available-for-sale
securities........................................... -- 10,308 -- 10,308
Minimum pension liability adjustment.................... -- (848) -- (848)
---------
Comprehensive income...................................... $ 37,307
---------
---------
Distributions to parent company........................... (91,000) -- --
-------- --------- ---------
Balance, December 31, 1997.................................. $ 91,700 $ 10,171 $ (12,327)
Comprehensive loss--year ended December 31, 1998:
Net loss................................................ -- -- (9,762) $ (9,762)
---------
Other comprehensive income, net of tax:
Unrealized holding losses arising during the period, net
of income tax benefit of $10,409..................... -- (16,504) -- (16,504)
Less: Reclassification adjustment for gains included in
net loss, net of income tax effect of $7,064......... -- 11,526 -- 11,526
--------- ---------
Change in unrealized losses on available-for-sale
securities........................................... -- (28,030) -- (28,030)
Minimum pension liability adjustment.................... -- (2,025) -- (2,025)
---------
Comprehensive loss........................................ $ (39,817)
---------
---------
Issuance of 30,000 shares of restricted common stock...... 2,490 -- --
-------- --------- ---------
Balance, December 31, 1998.................................. $ 94,190 $ (19,884) $ (22,089)
Comprehensive income-year ended December 31, 1999:
Net income.............................................. -- -- 24,043 $ 24,043
---------
Other comprehensive income, net of tax:
Unrealized holding gains arising during the period, net
of income taxes of $1,270............................ -- 1,424 -- 1,424
Less: Reclassification adjustment for gains included in
net income, net of income tax effect
of $1,227............................................ -- 2,089 -- 2,089
--------- ---------
Change in unrealized losses on available-for-sale
securities........................................... -- (665) -- (665)
Minimum pension liability adjustment.................... -- 1,605 -- 1,605
---------
Comprehensive income...................................... $ 24,983
---------
---------
Distributions to parent company........................... (58,046) -- (1,954)
Capital contributions..................................... 3,619 -- --
Exercise of stock options................................. 870 -- --
-------- --------- ---------
Balance, December 31, 1999.................................. $ 40,633 $ (18,944) $ --
-------- --------- ---------
-------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-13
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Building Materials Corporation of America (the "Company") was formed on
January 31, 1994 and is a 99.6%-owned subsidiary of BMCA Holdings Corporation
("BHC"), which is a 97%-owned subsidiary of GAF Building Materials Corporation
("GAFBMC"), which is a wholly-owned subsidiary of GAF Fiberglass Corporation
("GFC"), which is a wholly-owned subsidiary of G Industries Corp. ("G
Industries"), which is a wholly-owned subsidiary of G-I Holdings Inc. ("G-I
Holdings"), which is a wholly-owned subsidiary of GAF Corporation ("GAF").
NOTE 1. FORMATION OF THE COMPANY
Effective as of January 31, 1994, GAFBMC transferred to the Company all of
its business and assets, other than three closed manufacturing facilities,
certain deferred tax assets and receivables from affiliates. The Company
recorded the assets and liabilities related to such transfer at GAFBMC's
historical costs. The Company contractually assumed all of GAFBMC's liabilities,
except (i) all of GAFBMC's environmental liabilities, other than environmental
liabilities relating to the Company's plant sites and its business as
then-conducted, (ii) all of GAFBMC's tax liabilities, other than tax liabilities
arising from the operations or business of the Company and (iii) all of GAFBMC's
asbestos-related liabilities, other than the first $204.4 million of such
liabilities (whether for indemnity or defense) relating to then-pending
asbestos-related bodily injury cases and previously settled asbestos-related
bodily injury cases which the Company contractually assumed and agreed to pay.
G-I Holdings and GAFBMC have agreed, jointly and severally, to indemnify the
Company from liabilities not assumed by the Company, including asbestos-related
and environmental liabilities not expressly assumed by the Company. See Note 3.
In October 1995, G-I Holdings acquired all of the outstanding shares of
U.S. Intec, Inc. ("U.S. Intec"), which manufactures commercial roofing products,
for a purchase price of $27.5 million and assumed $35.0 million of U. S. Intec's
indebtedness. As of January 1, 1997, U.S. Intec became a wholly-owned subsidiary
of the Company through a capital contribution to the Company by G-I Holdings.
Accordingly, the Company's historical consolidated financial statements include
U.S. Intec's results of operations and cash flows from the date of its
acquisition by G-I Holdings (October 20, 1995). The Company recorded the assets
and liabilities of U.S. Intec at G-I Holdings' purchase accounting basis.
On January 1, 1997, GAF effected a series of transactions involving its
subsidiaries (the "Separation Transactions") that resulted in, among other
things, (i) the approximately 83.5% of the issued and outstanding common stock
of International Specialty Products Inc. ("ISP"), an affiliate, owned by a
subsidiary of GAF, being distributed to ISP Holdings Inc., a subsidiary of GAF,
and the capital stock of ISP Holdings being distributed to the stockholders of
GAF, (ii) the Company's glass fiber manufacturing facility in Nashville,
Tennessee (the "Nashville facility"), and certain related assets and
liabilities, being transferred to GAF Fiberglass Corporation ("GFC"),
(iii) U.S. Intec becoming a subsidiary of the Company and (iv) G-I Holdings
making a contribution to the Company in December 1996 of $82.5 million in cash
and short-term investments. As a result of the Separation Transactions, ISP
Holdings and ISP are no longer direct or indirect subsidiaries of GAF, while the
Company and GFC have remained subsidiaries of GAF. On July 15, 1998, ISP merged
with and into ISP Holdings and ISP Holdings changed its name to International
Specialty Products Inc. The Company recorded the transfer of the Nashville
facility as a distribution to its indirect parent, G-I Holdings, at its net book
value. G-I Holdings then made a capital contribution to GFC equal to such net
book value.
Effective August 18, 1999, GFC, in a series of transactions, contributed
certain assets, including the Nashville facility, and certain related
liabilities to the Company. Accordingly, the Company's historical consolidated
financial statements for 1997 and 1998 have been restated to include the results
of operations, cash flows and assets and liabilities of the Nashville facility.
The Nashville facility was included in the Company's financial statements prior
to 1997. For financial reporting purposes, the contribution of the Nashville
facility was recorded by the Company at the historical cost of $9.3 million. The
increase in net income resulting from the contribution of the Nashville facility
for the years ended December 31, 1997 and 1998 was $1.7 and $0.8 million,
respectively.
F-14
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. FORMATION OF THE COMPANY--(CONTINUED)
The parent corporations of the Company are GAF, G-I Holdings, G Industries,
GFC, GAFBMC and BHC. As a result of the Separation Transactions, dividends from
ISP are not available to GAF and G-I Holdings, and loans from ISP to GAF, G-I
Holdings and the Company are prohibited by certain of ISP's debt instruments.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
All subsidiaries are consolidated and intercompany transactions have been
eliminated.
Financial Statement Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates.
Actual results could differ from those estimates. In the opinion of management,
the financial statements herein contain all adjustments necessary to present
fairly the financial position and the results of operations and cash flows of
the Company for the periods presented. The Company has a policy to review the
recoverability of long-lived assets and identify and measure any potential
impairments. The Company does not anticipate any changes in management estimates
that would have a material impact on operations, liquidity or capital resources,
subject to the matters discussed in Note 15 (Commitments and Contingencies).
Short-term Investments
For securities classified as "trading" (including short positions),
unrealized gains and losses are reflected in income. For securities classified
as "available-for-sale," unrealized gains and losses, net of income tax effect,
are included in a separate component of stockholders' equity, "Accumulated other
comprehensive loss," and were $(16.9) and $(17.6) million as of December 31,
1998 and 1999, respectively. Investments classified as "held-to-maturity"
securities are carried at amortized cost in the Consolidated Balance Sheets.
"Other income, net" includes $26.4, $21.5 and $12.8 million of net realized
and unrealized gains on securities in 1997, 1998 and 1999, respectively. The
determination of cost in computing realized gains and losses is based on the
specific identification method.
As of December 31, 1998 and 1999, the market value of the Company's equity
securities held long was $172.5 and $30.5 million, respectively, and the Company
had $144.1 and $1.5 million, respectively, of short positions in common stocks,
based on market value. As of December 31, 1998 and 1999, the market value of the
Company's held-to-maturity securities was $6.4 million and $0, respectively. The
Company enters into equity-related financial instruments with off-balance-sheet
risk as a means to manage its exposure to market fluctuations on its short-term
investments. As of December 31, 1998 and 1999, the market value of
equity-related short contracts was $143.2 million and $0, respectively, while
the value of equity-related long contracts was $35.2 and $0.9 million,
respectively, both of which are marked-to-market each month, with unrealized
gains and losses included in results of operations. The market values referred
to above are based on quotations as reported by various stock exchanges and
major broker-dealers. With respect to its investments in securities, the Company
is exposed to the risk of market loss.
"Other short-term investments" are investments in limited partnerships
which are accounted for by the equity method. Gains and losses are reflected in
"Other income, net." Liquidation of partnership interests generally require a 30
to 45 day notice period.
Cash and cash equivalents include cash on deposit and debt securities
purchased with original maturities of three months or less.
F-15
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Inventories
Inventories are stated at the lower of cost or market. The LIFO (last-in,
first-out) method is utilized to determine cost for a portion of the Company's
inventories. All other inventories are determined principally based on the FIFO
(first-in, first-out) method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed principally on the straight-line method
based on the estimated economic lives of the assets. The Company uses an
economic life of 5-25 years for land improvements, 10-40 years for buildings and
building equipment and 3-20 years for machinery and equipment, which includes
furniture and fixtures. Certain interest charges are capitalized during the
period of construction as part of the cost of property, plant and equipment.
Excess of Cost Over Net Assets of Businesses Acquired ("Goodwill")
Goodwill is amortized on the straight-line method over a period of
approximately 40 years. The Company believes that the goodwill is recoverable.
To determine if goodwill is recoverable, the Company compares the net carrying
amount to undiscounted projected cash flows of the underlying businesses to
which the goodwill pertains. If goodwill is not recoverable, the Company would
record an impairment based on the difference between the net carrying amount and
fair value.
Debt Issuance Costs
Debt issuance costs are amortized to expense over the life of the related
debt.
Software Development Costs
Included in other assets at December 31, 1998 and 1999 were $1.7 and
$3.3 million, respectively, of capitalized software development costs. Such
costs are amortized over a 5 year period. For 1998 and 1999, the Company
amortized $0.2 and $0.6 million, respectively, related to such costs.
Revenue Recognition
Revenue is recognized at the time products are shipped to the customer.
Interest Rate Swaps
Gains (losses) on interest rate swap agreements ("swaps") are deferred and
amortized as a reduction (increase) of interest expense over the shorter of the
remaining life of the swaps or the remaining period to maturity of the debt
issue with respect to which the swaps were entered.
Research and Development
Research and development expenses are charged to operations as incurred and
were $5.4, $6.0 and $6.5 million in 1997, 1998 and 1999, respectively.
Warranty Claims
The Company provides certain limited warranties covering most of its
residential roofing products for periods ranging from 20 to 40 years. The
Company also offers limited warranties and guarantees of varying duration on its
commercial roofing products and limited warranties covering most of its
specialty building products and accessories for periods ranging from 5 to 10
years. Income from warranty contracts related to
F-16
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
commercial roofing products is recognized over the life of the agreements. The
Company believes that the reserves established for estimated probable future
warranty claims are adequate.
The Company's 1997 Consolidated Statement of Operations includes a
provision of $3.0 million in connection with the Company's estimated obligations
related to product warranty claims for a discontinued product. See also Note 5.
Environmental Liability
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters. The Company estimates
that its liability in respect of such environmental matters, and certain other
environmental compliance expenses, as of December 31, 1999, is $0.8 million,
before reduction for insurance recoveries reflected on its balance sheet of $0.8
million. The Company's liability is reflected on an undiscounted basis. See Item
3, "Legal Proceedings--Environmental Litigation," which is incorporated herein
by reference, for further discussion with respect to environmental liabilities
and estimated insurance recoveries.
Accumulated Other Comprehensive Income
In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting comprehensive
income and its components in annual and interim financial statements. In the
Company's case, comprehensive income includes net income, unrealized gains and
losses from investments in available-for-sale securities, net of income tax
effect, and minimum pension liability adjustments. The Company has chosen to
disclose comprehensive income in the Consolidated Statements of Stockholders'
Equity.
Changes in the components of "Accumulated other comprehensive income
(loss)" for the years 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
UNREALIZED GAINS MINIMUM ACCUMULATED
(LOSSES) ON PENSION OTHER
AVAILABLE-FOR-SALE LIABILITY COMPREHENSIVE
SECURITIES ADJUSTMENT INCOME (LOSS)
------------------ ---------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Balance, December 31, 1996............................... $ 794 $ (83) $ 711
Change for the year 1997................................. 10,308 (848) 9,460
-------- -------- ---------
Balance, December 31, 1997............................... $ 11,102 $ (931) $ 10,171
Change for the year 1998................................. (28,030) (2,025) (30,055)
-------- -------- ---------
Balance, December 31, 1998............................... $(16,928) $ (2,956) $ (19,884)
Change for the year 1999................................. (665) 1,605 940
-------- -------- ---------
Balance, December 31, 1999............................... $(17,593) $ (1,351) $ (18,944)
-------- -------- ---------
-------- -------- ---------
</TABLE>
New Accounting Standard
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000, but may be adopted earlier. The Company has not
yet determined the effect of adoption of SFAS No. 133 and has not determined the
timing or method of adoption of the statement.
F-17
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Reclassifications
Certain reclassifications have been made to conform to current year
presentation.
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS
In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of liabilities for asbestos-related
bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos
Claims") of its parent, GAFBMC. As of March 30, 1997, the Company had paid all
of its assumed asbestos-related liabilities. See also Note 1. G-I Holdings and
GAFBMC have jointly and severally agreed to indemnify the Company against any
other existing or future claims related to asbestos-related liabilities if
asserted against the Company.
GAF has advised the Company that, as of December 31, 1999, it is defending
approximately 115,000 pending alleged Asbestos Claims, having received notice of
approximately 43,100 new Asbestos Claims during 1999. GAF has advised that the
Center for Claims Resolution ("CCR"), a non-profit organization set up to
administer and handle asbestos-related personal injury claims against the
participating companies and in which GAF was a member, terminated GAF's
membership, effective January 17, 2000. GAF has advised the CCR that such
termination was unauthorized and that it intends to take appropriate measures to
protect its rights to pursue claims against the CCR and its member companies
arising out of this improper termination and for other improper actions.
Currently, the disputes between GAF and the CCR are the subject of pending
Alternative Dispute Proceedings.
GAF has confirmed that it has experienced a significant increase in the
rate of new Asbestos Claims, principally involving claimants without any
asbestos-related impairment, and amounts demanded to settle these claims. GAF
anticipates that these trends could well continue for the foreseeable future,
and that the percentage of Asbestos Claims filed by individuals with no physical
impairment will remain high. GAF has advised that it expects an increasingly
adverse litigation environment in particular jurisdictions. GAF believes that
these trends and the CCR's termination of GAF's membership resulted from, or
were induced by, in no small part, retaliatory actions taken by asbestos lawyers
against GAF in connection with GAF's active support of proposed legislation
currently pending in Congress to address the national asbestos litigation
crisis.
GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims and that it is exploring options to accomplish such
resolution, including the support of the proposed Congressional legislation, but
there can be no assurance that these efforts will be successful.
The Company believes that it will not sustain any additional liability in
connection with asbestos-related claims. While the Company cannot predict
whether any asbestos-related claims will be asserted against it or its assets or
the outcome of any litigation relating to those claims, the Company believes
that it has meritorious defenses to any claim that could be so asserted. In
addition, G-I Holdings and GAFBMC have jointly and severally indemnified the
Company with respect to asbestos-related claims, and G-I Holdings has advised
the Company that it believes it has and will have sufficient resources to enable
it to satisfy any indemnification obligations. However, GAF has advised the
Company that depending upon whether the trends described above continue, whether
other retaliatory actions are taken, the ultimate resolution of the disputes
between GAF and the CCR, and whether the proposed legislation currently pending
in Congress is enacted into law, its financial condition could be materially
adversely affected by one or more of these factors. Should GAF or GAFBMC be
unable to satisfy judgments against it in asbestos-related lawsuits, its
judgment creditors might seek to enforce their judgments against the assets of
GAF, including its holdings of G-I Holdings common stock, or GAFBMC, including
its holdings of the Company's common stock. This enforcement could result in a
change of control with respect to the Company. See Notes 10 and 15 regarding the
Company's debt instruments and facilities and contingencies.
F-18
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS--(CONTINUED)
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Item 3, "Legal Proceedings," which
is incorporated herein by reference.
NOTE 4. ACQUISITIONS AND DISPOSITION
On March 14, 1997, the Company acquired the assets of the Leatherback
Industries division of Hollinee Corporation, which is engaged in the manufacture
and sale of asphalt-saturated felts and other felt and construction paper
products. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the estimated fair
values of the identifiable net assets acquired, and the excess was recorded as
goodwill. The results of the Leatherback business, including net sales of
$30.2 million for 1997, are included from the date of acquisition. The net
effects of this acquisition were not material to 1997 results of operations.
Effective June 1, 1998, the Company purchased for approximately $43.5
million substantially all of the assets of Leslie-Locke Inc. ("LL Building
Products Inc."), a wholly-owned subsidiary of Leslie Building Products Inc.,
which manufactures and markets a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries from manufacturing facilities in Burgaw, North Carolina
and Compton, California. The acquisition was accounted for under the purchase
method of accounting. Accordingly, the purchase price was allocated to the
estimated fair values of the identifiable net assets acquired, and the excess
was recorded as goodwill. The results of the LL Building Products Inc. business,
including net sales of $53.3 million for 1998, are included from the date of
acquisition. The net effects of this acquisition were not material to 1998
results of operations.
Effective December 1, 1998, the Company sold its perlite insulation
manufacturing assets to Johns Manville Corporation for net cash proceeds of
approximately $29.0 million. The pre-tax gain as a result of this sale was not
significant to the Company's results of operations. In addition, as part of the
transaction, Johns Manville and the Company entered into a long-term agreement
to supply the Company with perlite insulation products, which will enable the
Company to continue to serve its commercial roofing customers. As a result, the
sale did not have a material impact on the Company's results of operations.
NOTE 5. NONRECURRING CHARGES
The Company recorded pre-tax nonrecurring charges in the third quarter of
1998 aggregating $27.6 million, of which $20.0 million related to the settlement
of a national class action lawsuit involving asphalt shingles manufactured
between January 1, 1973 and December 31, 1997. Following a fairness hearing, the
court granted final approval of the class-wide settlement in April 1999. Under
the terms of the September 1998 settlement, the Company will provide property
owners whose GAF shingles were manufactured during this period and which suffer
certain damages during the term of their original warranty period, and who file
a qualifying claim, with an opportunity to receive certain limited benefits
beyond those already provided in their existing warranty. Two of the four
separate class actions that had been brought against GAFBMC and stayed pending
the outcome of the fairness hearing have been dismissed in light of the final
approval of the settlement agreement described above, and the Company expects
that the remaining two actions also will be dismissed.
In July 1998, the Company recorded a pre-tax nonrecurring charge of
$7.6 million related to a grant to its former President and Chief Executive
Officer of 30,000 shares of restricted common stock of the Company (a portion of
which such officer transferred to trusts for the benefit of his children) and
related cash payments to be made over a period of time (substantially all of
which was earned) in connection with the termination by an affiliate of
preferred stock options and stock appreciation rights held by such officer. Of
the $7.6 million charge, $2.5 million represented the value as of the date of
grant of the 30,000 shares of restricted common stock, and $5.1 million
represented the aggregate amount of the cash payments to which such officer was
entitled (subject to certain future vesting requirements). The shares of
restricted stock were subject to certain rights of the Company to purchase, and
of such officer and the trusts to sell to the Company, such shares at Book Value
(as defined).
F-19
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. NONRECURRING CHARGES--(CONTINUED)
Effective June 30, 1999, such officer terminated his employment with the
Company. For 1999, through the date of his termination, the net book value of
the 30,000 shares of restricted common stock held by such officer appreciated
$0.6 million. In connection with this termination, the Company's obligation to
such officer to pay an aggregate of $3.0 million (representing the balance of
the cash payments described above) was cancelled and was treated as an
additional capital contribution.
Effective September 30, 1999, the agreement between the Company and such
former officer and the trusts relating to the restricted common stock was
terminated. Such officer and the trusts contributed such stock to BHC in
consideration for equity interests in BHC. As a result of this transaction, the
$0.6 million appreciation in the net book value of the restricted common stock
described above, was treated as an additional capital contribution.
In connection with the settlement of a legal matter, the Company recorded a
nonrecurring charge of $2.7 million in September 1999. Such amount includes
legal expenses incurred to defend such action.
NOTE 6. INCOME TAXES
Income tax provision, which has been computed on a separate return basis,
consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- ------- --------
(THOUSANDS)
<S> <C> <C> <C>
Federal--deferred..................................................... $(15,032) $(4,513) $(13,682)
-------- ------- --------
State and local:
Current............................................................. (279) (580) (750)
Deferred............................................................ (2,492) (25) (450)
-------- ------- --------
Total state and local............................................ (2,771) (605) (1,200)
-------- ------- --------
Income tax provision.................................................. $(17,803) $(5,118) $(14,882)
-------- ------- --------
-------- ------- --------
</TABLE>
The differences between the income tax provision computed by applying the
statutory Federal income tax rate to pre-tax income, and the income tax
provision reflected in the Consolidated Statements of Operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- ------- --------
(THOUSANDS)
<S> <C> <C> <C>
Statutory provision................................................... $(15,978) $(4,714) $(14,077)
Impact of:
State and local taxes, net of Federal benefits...................... (1,801) (393) (780)
Nondeductible goodwill amortization................................. (564) (641) (275)
Other, net.......................................................... 540 630 250
-------- ------- --------
Income tax provision.................................................. $(17,803) $(5,118) $(14,882)
-------- ------- --------
-------- ------- --------
</TABLE>
F-20
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES--(CONTINUED)
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
(THOUSANDS)
<S> <C> <C>
Deferred tax liabilities related to property, plant and equipment...... $(16,256) $(15,475)
-------- --------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes........................... 47,507 43,335
Net operating losses not yet utilized under the Tax Sharing
Agreement......................................................... 27,723 17,701
-------- --------
Total deferred tax assets.............................................. 75,230 61,036
-------- --------
Net deferred tax assets................................................ $ 58,974 $ 45,561
-------- --------
-------- --------
</TABLE>
As of December 31, 1999, the Company had $47.8 million of net operating
loss carryforwards available to offset future taxable income, as follows:
<TABLE>
<CAPTION>
YEAR OF
EXPIRATION (THOUSANDS)
- ---------- -----------
<S> <C>
2009.... $ 1,590
2010.... 4,271
2011.... 41,982
-------
$47,843
-------
-------
</TABLE>
Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that future taxable income will more likely
than not be sufficient to utilize fully the deferred tax assets recorded.
The Company and its subsidiaries entered into a tax sharing agreement (the
"Tax Sharing Agreement") dated January 31, 1994 with GAF and G-I Holdings under
which the Company is obligated to pay G-I Holdings an amount equal to those
Federal income taxes the Company would have incurred if the Company (on behalf
of itself and its subsidiaries) filed its own Federal income tax return. Unused
tax attributes will carry forward for use in reducing amounts payable by the
Company to G-I Holdings in future years, but cannot be carried back. If the
Company were no longer a member of the GAF consolidated tax group (the "GAF
Group"), it would be required to pay to G-I Holdings the value of any tax
attributes it would succeed to under the consolidated return regulations to the
extent such attributes reduced the amounts otherwise payable by the Company
under the Tax Sharing Agreement. Under certain circumstances, the provisions of
the Tax Sharing Agreement could result in the Company having a greater liability
thereunder than it would have had if it (and its subsidiaries) had filed its own
separate Federal income tax return. Under the Tax Sharing Agreement, the Company
and each of its subsidiaries are responsible for any taxes that would be payable
by reason of any adjustment to the tax returns of GAF or its subsidiaries for
years prior to the adoption of the Tax Sharing Agreement that relate to the
business or assets of the Company or any subsidiary of the Company. Although, as
a member of the GAF Group, the Company is severally liable for all Federal
income tax liabilities of every member of the GAF Group, including tax
liabilities not related to the business of the Company, G-I Holdings and GAF
have agreed to indemnify the Company and its subsidiaries for all tax
liabilities of the GAF Group other than tax liabilities (i) arising from the
operations of the Company and its subsidiaries and (ii) for tax years pre-dating
the Tax Sharing Agreement that relate to the business or assets of the Company
and its subsidiaries. The Tax Sharing Agreement provides for analogous
principles to be applied to any consolidated, combined or unitary state or local
income taxes. Under the Tax Sharing Agreement, GAF makes all decisions with
respect to all matters relating to taxes of the GAF Group. The provisions of the
Tax Sharing Agreement take into account both the Federal income taxes the
Company would have incurred if it filed its own separate Federal income tax
return and the fact that the
F-21
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES--(CONTINUED)
Company is a member of the GAF Group for Federal income tax purposes. In
accordance with the Tax Sharing Agreement, effective January 31, 1994, tax
benefits generated by net operating losses and credits will reduce future tax
sharing payments to G-I Holdings.
On September 15, 1997, GAF received a notice from the Internal Revenue
Service (the "Service") of a deficiency in the amount of $84.4 million (after
taking into account the use of net operating losses and foreign tax credits
otherwise available for use in later years) in connection with the formation in
1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the "surfactants
partnership"), a partnership in which a subsidiary of GAF, GFC, held an
interest. The claim of the Service for interest and penalties, after taking into
account the effect on the use of net operating losses and foreign tax credits,
could result in GAF incurring liabilities significantly in excess of the
deferred tax liability of $131.4 million that it recorded in 1990 in connection
with this matter. GAF has advised the Company that it believes that it will
prevail in this matter, although there can be no assurance in this regard.
However, if GAF is unsuccessful in challenging its tax deficiency notice, the
ability of GAF to satisfy its tax obligation would be dependent on the cash
flows of the Company and GFC. The Company believes that the ultimate disposition
of this matter will not have a material adverse effect on its business,
financial position or results of operations. GAF, G-I Holdings and certain
subsidiaries of GAF have agreed to jointly and severally indemnify the Company
against any tax liability associated with the surfactants partnership, which the
Company would be severally liable for, together with GAF and several current and
former subsidiaries of GAF, should GAF be unable to satisfy such liability. See
Note 3.
NOTE 7. SALE OF ACCOUNTS RECEIVABLE
In March 1993, the Company sold its trade accounts receivable
("receivables") to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company entered into new agreements, pursuant to which it sold the
receivables to a special purpose subsidiary of the Company, BMCA Receivables
Corporation, without recourse, which in turn sold them to a new trust, without
recourse. The new agreements provide for a maximum of $115 million in cash to be
made available to the Company based on eligible receivables outstanding from
time to time. This facility expires in December 2001. The excess of accounts
receivable sold over the net proceeds received is included in "Accounts
receivable, other." The effective cost to the Company varies with LIBOR and is
included in "Other income, net" and amounted to $5.1, $5.1 and $5.5 million in
1997, 1998 and 1999, respectively.
NOTE 8. INVENTORIES
At December 31, 1998 and 1999, $10.2 and $8.9 million, respectively, of
inventories were valued using the LIFO method. Inventories consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
------- --------
(THOUSANDS)
<S> <C> <C>
Finished goods................................................................... $58,266 $ 68,878
Work-in-process.................................................................. 8,488 13,974
Raw materials and supplies....................................................... 27,635 27,462
------- --------
Total.......................................................................... 94,389 110,314
Less LIFO reserve................................................................ (686) (1,699)
------- --------
Inventories...................................................................... $93,703 $108,615
------- --------
------- --------
</TABLE>
F-22
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
(THOUSANDS)
<S> <C> <C>
Land and land improvements...................................................... $ 27,154 $ 29,005
Buildings and building equipment................................................ 59,158 67,220
Machinery and equipment......................................................... 237,362 300,846
Construction in progress........................................................ 80,268 115,458
-------- --------
Total......................................................................... 403,942 512,529
Less accumulated depreciation and amortization.................................. (71,594) (101,826)
-------- --------
Property, plant and equipment, net.............................................. $332,348 $410,703
-------- --------
-------- --------
</TABLE>
Included in the net book value of machinery and equipment at December 31,
1998 and 1999 was $12,468 and $10,508, respectively, for assets under capital
leases.
During 1999, in connection with the construction of two new manufacturing
facilities, the Company entered into two leases for certain machinery and
equipment, which leases meet the criteria of operating leases under SFAS No. 13
"Accounting for Leases." In connection therewith, at December 31, 1999,
property, plant, and equipment, net, and accrued liabilities included
$65.6 million of assets under such leases. Such amounts will be reversed when
the manufacturing facilities become fully operational, which is expected to
occur in 2000. These leases require quarterly rental payments and are for a
ten-year period expiring in December 2009.
NOTE 10. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
(THOUSANDS)
<S> <C> <C>
11 3/4% Senior Deferred Coupon Notes due 2004................................... $ 28,273 $ --
7 3/4% Senior Notes due 2005.................................................... 149,401 149,493
8 5/8% Senior Notes due 2006.................................................... 99,604 99,654
8% Senior Notes due 2007........................................................ 99,343 99,418
8% Senior Notes due 2008........................................................ 154,165 154,249
Term Loan due 2004.............................................................. -- 31,850
Industrial revenue bonds with various interest rates and maturity dates to
2019.......................................................................... 19,625 23,125
Obligations on equipment loans.................................................. 3,248 2,225
Obligations under capital leases (Note 15)...................................... 46,814 43,787
Other notes payable............................................................. 713 3,093
-------- --------
Total......................................................................... 601,186 606,894
Less current maturities......................................................... (4,273) (6,149)
-------- --------
Long-term debt less current maturities.......................................... $596,913 $600,745
-------- --------
-------- --------
</TABLE>
In August 1999, the Company entered into a $31.9 million bank term loan
maturing on July 1, 2004 (the "Term Loan"). The Term Loan bears interest at a
floating rate based on the bank's base rate, the federal funds rate, or LIBOR,
at the option of the Company. Under the Term Loan, the principal amount
outstanding will convert, subject to the satisfaction of certain conditions, no
later than July 6, 2000, to senior notes with a maturity date of December 1,
2008. The senior notes will bear interest at a rate that will be set at the
time of conversion. The Company used all of the net proceeds of the Term Loan to
purchase, and subsequently cancel, the remaining $29.9 million in aggregate
F-23
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. LONG-TERM DEBT--(CONTINUED)
principal amount of the Company's outstanding 11 3/4% Senior Deferred Coupon
Notes due 2004 (the "Deferred Coupon Notes"). The redemption price was 105.875%
of the principal amount outstanding, and the premium was recorded as an
extraordinary loss, net of tax, of approximately $1.3 million.
On December 3, 1998, the Company issued $155 million in aggregate principal
amount of 8% Senior Notes due 2008 (the "2008 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $147.1 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary loss of $8.8 million.
On July 17, 1998, the Company issued $150 million in aggregate principal
amount of 7 3/4% Senior Notes due 2005 (the "2005 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $132.6 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary loss of $9.3 million.
In October 1997, the Company issued $100 million in aggregate principal
amount of 8% Senior Notes due 2007 (the "2007 Notes"). In December 1996, the
Company issued $100 million in aggregate principal amount of 8 5/8% Senior Notes
due 2006 (the "2006 Notes"). Holders of the 2005 Notes, the 2007 Notes, the 2008
Notes and the 2006 Notes have the right under the indentures governing such
notes to require the Company to purchase the 2005 Notes, the 2007 Notes, the
2008 Notes and the 2006 Notes (collectively, the "Other Senior Notes") at a
price of 101% of the principal amount thereof, and the Company has the right to
redeem the Other Senior Notes at a price of 101% of the principal amount
thereof, plus, in each case, the Applicable Premium (as defined therein),
together with any accrued and unpaid interest, in the event of a Change of
Control (as defined therein).
The indentures relating to the Other Senior Notes, the Credit Agreement
(see below) and the Term Loan contain covenants that, among other things, limit
the ability of the Company and its subsidiaries to pay certain dividends or make
certain other restricted payments and restricted investments, incur liens,
engage in transactions with affiliates, and agree to certain additional
limitations on dividends and other payment restrictions affecting subsidiaries.
As of December 31, 1999, after giving effect to the most restrictive of the
aforementioned restrictions, the Company could have paid dividends and made
other restricted payments of up to $76.1 million. Additional borrowings by the
Company are subject to certain covenants contained in the indentures relating to
the Other Senior Notes, the Credit Agreement and the Term Loan.
In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ("swaps") with banks, with an aggregate ending
notional principal amount of $142.0 million and a final maturity of July 1,
1999, all of which were terminated as of June 28, 1998. In 1997, the Company
terminated swaps with an aggregate ending notional principal amount of $82.0
million, resulting in gains totaling $2.1 million. In June 1998, the Company
terminated swaps with an aggregate ending notional principal amount of $60.0
million, resulting in gains of $0.7 million. The gains were deferred and were
amortized as a reduction of interest expense over the remaining original life of
the swaps. As a result of the swaps, the effective interest cost to the Company
of the portion of the Deferred Coupon Notes covered by the swaps varied at a
fixed spread over LIBOR.
In August 1999, the Company entered into a new three-year bank credit
facility (the "Credit Agreement"). The terms of the Credit Agreement provide for
a $110 million revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $110 million in the aggregate. As of December 31, 1999,
$27.1 million of letters of credit and no borrowings were outstanding under the
Credit Agreement. Under the terms of the Credit Agreement, the Company is
subject to certain financial covenants, including interest coverage and leverage
ratios, along with a limitation on the amount of dividends and other restricted
payments made to affiliates. Additionally, if a change of control (as defined in
the Credit Agreement) occurs, the Credit Agreement could be terminated and the
loans thereunder accelerated by the lenders party thereto, an event which could
also cause the Company's outstanding senior notes
F-24
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. LONG-TERM DEBT--(CONTINUED)
to be accelerated. As of December 31, 1999, the Company was in compliance with
all such covenants. The Credit Agreement replaced a previous bank credit
facility which provided up to $75 million in total borrowings and outstanding
letters of credit.
In December 1995, the Company consummated a $40 million sale-leaseback of
certain equipment located at its Chester, South Carolina roofing facility, in a
transaction accounted for as a capital lease, and the gain has been deferred.
The lessor was granted a security interest in certain equipment at the Chester
facility. The lease term extends to December 2005. In December 1994, the Company
consummated a $20.4 million sale-leaseback of certain equipment located at its
Baltimore, Maryland roofing facility, in a transaction accounted for as a
capital lease, and the gain has been deferred. The lessor was granted a security
interest in the land, buildings and certain equipment at the Baltimore facility.
The lease term extends to December 2004. In December 1993, the Company obtained
a loan of $7.3 million, which is secured by manufacturing equipment located at
its Dallas plant. The loan is being repaid over a seven-year period and has a
fixed interest rate. The Company has four industrial revenue bond issues
outstanding, which bear interest at short-term floating rates. Interest rates on
the foregoing obligations ranged between 3.80% and 5.20% as of December 31,
1999.
The Company believes that the fair value of its non-public indebtedness
approximates the book value of such indebtedness, because the interest rates on
substantially all such indebtedness are at floating short-term rates. With
respect to the Company's publicly traded debt securities, the Company has
obtained estimates of the fair values from an independent source believed to be
reliable. The estimated fair value of the Company's indebtedness at December 31,
1998 and 1999 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
(THOUSANDS)
<S> <C> <C>
Deferred Coupon Notes................................................. $ 28,838 $ --
2005 Notes............................................................ 147,160 136,039
2006 Notes............................................................ 101,347 94,671
2007 Notes............................................................ 99,095 89,973
2008 Notes............................................................ 154,751 139,210
</TABLE>
The aggregate maturities of long-term debt as of December 31, 1999 for the
next five years are as follows:
<TABLE>
<CAPTION>
(THOUSANDS)
----------
<S> <C>
2000.................................................................. $ 6,149
2001.................................................................. 5,946
2002.................................................................. 14,988
2003.................................................................. 20,235
2004.................................................................. 31,850
</TABLE>
In the above table, maturities for the year 2002 include $11.7 million
related to the Baltimore manufacturing facility capital lease. Maturities for
the year 2003 include $20.2 million related to the Chester glass mat
manufacturing facility capital lease.
F-25
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS
Eligible, full-time employees of the Company are covered by various benefit
plans, as described below.
Defined Contribution Plan
The Company provides a defined contribution plan for eligible employees.
The Company contributes up to 7% of participants' compensation and also
contributes fixed amounts, ranging from $50 to $750 per year depending on age,
to the accounts of participants who are not covered by a Company-provided
postretirement medical benefit plan. The aggregate contributions by the Company
were $3.5, $4.2 and $4.4 million for 1997, 1998 and 1999, respectively.
U.S. Intec provides a defined contribution plan for eligible employees.
U.S. Intec may contribute a discretionary matching contribution equal to 100% of
each participant's eligible contributions each year up to a maximum of $750 for
each participant. Such contributions by U.S. Intec were $0.1, $0.1 and
$0.2 million for 1997, 1998 and 1999, respectively.
Defined Benefit Plans
The Company provides noncontributory defined benefit retirement plans for
certain hourly and salaried employees (the "Retirement Plans"). Benefits under
these plans are based on stated amounts for each year of service. In 1998, the
Company acquired LL Building Products Inc. which has pension plans for its
hourly and salaried employees. The LL Building Products Inc. plans were
curtailed in 1998. The Company's funding policy is consistent with the minimum
funding requirements of ERISA.
The Company's net periodic pension cost for the Retirement Plans included
the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(THOUSANDS)
<S> <C> <C> <C>
Service cost.................................................. $ 658 $ 754 $ 804
Interest cost................................................. 754 842 949
Expected return on plan assets................................ (1,034) (1,296) (1,270)
Amortization of unrecognized prior service cost............... 30 31 31
Amortization of net losses from earlier periods............... -- -- 107
------- ------- -------
Net periodic pension cost..................................... $ 408 $ 331 $ 621
------- ------- -------
------- ------- -------
</TABLE>
F-26
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS--(CONTINUED)
The following tables set forth, for the years 1998 and 1999,
reconciliations of the beginning and ending balances of the benefit obligation,
fair value of plan assets, funded status, amounts recognized in the Consolidated
Balance Sheets and changes in accumulated other comprehensive income (loss)
related to the Retirement Plans:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
(THOUSANDS)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year............................... $11,817 $17,865
Service cost.......................................................... 754 804
Interest cost......................................................... 842 1,243
Actuarial losses (gains).............................................. 492 (1,739)
Benefits paid......................................................... (450) (572)
------- -------
Benefit obligation at end of year..................................... $13,455 $17,601
------- -------
------- -------
Change in plan assets:
Fair value of plan assets at beginning of year........................ $11,472 $16,248
Actual return on plan assets.......................................... (237) 1,920
Employer contributions................................................ 757 752
Benefits paid......................................................... (450) (572)
------- -------
Fair value of plan assets at end of year.............................. $11,542 $18,348
------- -------
------- -------
Reconciliation of funded status:
Funded status......................................................... $(1,913) $ 746
Unrecognized prior service cost....................................... 277 247
Unrecognized actuarial losses......................................... 2,956 1,351
------- -------
Net amount recognized in Consolidated Balance Sheets.................. $ 1,320 $ 2,344
------- -------
------- -------
Amounts recognized in Consolidated Balance Sheets:
Prepaid (accrued) benefit cost........................................ $(1,913) $ 746
Intangible asset...................................................... 277 247
Accumulated other comprehensive loss.................................. 2,956 1,351
------- -------
Net amount recognized................................................. $ 1,320 $ 2,344
------- -------
------- -------
Change for the year in accumulated other comprehensive (income) loss:
Change in intangible asset............................................ $ 30 $ 30
Change in additional minimum liability................................ 1,995 (1,635)
------- -------
Total................................................................. $ 2,025 $(1,605)
------- -------
------- -------
</TABLE>
In determining the projected benefit obligation, the weighted average
assumed discount rate was 7% and 7.75% for 1998 and 1999, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 1998 and 1999.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1997, 1998 and 1999.
F-27
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS--(CONTINUED)
Book Value Appreciation Unit Plan
A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vest over five years.
Upon exercise, employees were entitled to receive a cash payment based on the
increase in Book Value (as defined in the plan). This plan was terminated in
1999 with all eligible employees receiving their respective vested cash
payments. Expense accrued under this plan was $0.4, $1.3 and $1.2 million for
1997, 1998 and 1999, respectively.
Postretirement Medical and Life Insurance
The Company generally does not provide postretirement medical and life
insurance benefits, although it subsidizes such benefits for certain employees
and certain retirees. Such subsidies were reduced or ended as of January 1,
1997.
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
(THOUSANDS)
<S> <C> <C> <C>
Service cost.................................................................. $ 98 $ 104 $ 114
Interest cost................................................................. 554 467 476
Amortization of unrecognized prior service cost............................... (88) (88) (88)
Amortization of net gains from earlier periods................................ (186) (240) (209)
----- ----- -----
Net periodic postretirement benefit cost...................................... $ 378 $ 243 $ 293
----- ----- -----
----- ----- -----
</TABLE>
The following table sets forth, for the years 1998 and 1999,
reconciliations of the beginning and ending balances of the postretirement
benefit obligation, funded status and amounts recognized in the Consolidated
Balance Sheets related to postretirement medical and life insurance benefits:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
(THOUSANDS)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year.............................. $ 7,926 $ 7,135
Service cost......................................................... 104 114
Interest cost........................................................ 467 476
Actuarial (gains) losses............................................. (905) (1,179)
Benefits paid........................................................ (457) (523)
-------- --------
Benefit obligation at end of year.................................... $ 7,135 $ 6,023
-------- --------
-------- --------
Change in plan assets:
Fair value of plan assets at beginning of year....................... $ -- $ --
Employer contributions............................................... 457 523
Benefits paid........................................................ (457) (523)
-------- --------
Fair value of plan assets at end of year............................. $ -- $ --
-------- --------
-------- --------
Reconciliation of funded status:
Funded status........................................................ $ (7,135) $ (6,023)
Unrecognized prior service cost...................................... (702) (614)
Unrecognized actuarial losses........................................ (3,431) (4,400)
-------- --------
Net amount recognized in Consolidated Balance Sheets
as accrued benefit cost........................................... $(11,268) $(11,037)
-------- --------
-------- --------
</TABLE>
F-28
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS--(CONTINUED)
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1999 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $700 to $1,000 per year. For retirees over age
65, this subsidy may be replaced by participation in a managed care program.
With respect to retirees who were formerly hourly employees, most such retirees
are subject to a $5,000 per person lifetime maximum benefit. Subject to such
lifetime maximum, an 11% and 6% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 2000
for such retirees under and over age 65, respectively. To the extent that the
lifetime maximum benefits have not been reached, the foregoing rates were
assumed to decrease gradually to an ultimate rate of 7% and 6%, respectively, by
the year 2003 and remain at that level thereafter. The weighted average assumed
discount rate used in determining the accumulated postretirement benefit
obligation was 7% and 7.75% for 1998 and 1999, respectively.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1998 and 1999 by $90,000 and $76,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic postretirement benefit cost for the years 1998 and 1999 by
$6,000 and $5,000, respectively. A decrease of one percentage point in each year
would decrease the accumulated postretirement benefit obligation as of December
31, 1998 and 1999 by $80,000 and $68,000, respectively, and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the years 1998 and 1999 by $6,000 and $5,000, respectively.
NOTE 12. PREFERRED STOCK OPTION PLAN
On January 1, 1996, the Company established a plan to issue options to
certain employees to purchase shares of redeemable convertible preferred stock
("Preferred Stock") of the Company, exercisable at a price of $100 per share.
Each share of Preferred Stock is convertible, at the holder's option, into
shares of common stock of the Company at a formula price based on Book Value (as
defined in the option agreement) as of the date of grant. The options vest
rateably over five years and expire after nine years. Dividends will accrue on
the Preferred Stock from the date of issuance at the rate of 6% per annum. The
Preferred Stock is redeemable, at the Company's option, for a redemption price
equal to $100 per share plus accrued and unpaid dividends. The Preferred Stock,
and common stock issuable upon conversion of Preferred Stock into common stock,
is subject to repurchase by the Company under certain circumstances, at a price
equal to current Book Value (as defined in the option agreement). The exercise
price of the options to purchase Preferred Stock was equal to the estimated fair
value per share of the Preferred Stock at the date of grant. The options
exercised in 1999 were converted into 4,611 shares of common stock. No expense
is recorded in connection with the Preferred Stock options.
The following is a summary of transactions pertaining to the plan:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(NUMBER OF SHARES)
<S> <C> <C> <C>
Outstanding, January 1................................................. 23,290 102,595 140,052
Granted................................................................ 84,953 57,073 81,405
Exercised.............................................................. -- -- (8,704)
Forfeited.............................................................. (5,648) (19,616) (44,942)
------- ------- -------
Outstanding, December 31............................................... 102,595 140,052 167,811
------- ------- -------
------- ------- -------
Options exercisable, December 31....................................... 4,278 20,663 45,337
------- ------- -------
------- ------- -------
</TABLE>
F-29
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13. BUSINESS SEGMENT INFORMATION
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the residential and commercial roofing
markets. The Company also manufactures and markets specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. The residential roofing product line
primarily consists of premium laminated shingles, strip shingles and certain
specialty shingles principally for regional markets. Sales of residential
roofing products represented approximately 65% of the Company's net sales in
1999. The Company's commercial roofing product line includes a full line of
modified bitumen products, asphalt built-up roofing, liquid applied membrane and
roofing accessories. Sales of commercial roofing products and accessories
represented approximately 27% of the Company's net sales in 1999. Sales of the
specialty building products and accessories product line represented
approximately 8% of the Company's net sales in 1999.
In 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for companies
to report information about operating segments in annual financial statements,
based on the approach that management utilizes to organize the segments within
the Company for management reporting and decision making. In accordance with the
provisions of SFAS No. 131, the Company aggregates the residential and
commercial product lines into one operating segment, since they have similar
economic characteristics and are similar in each of the following areas:
(i) the nature of the products and services are similar in that they perform the
same function--the protection and covering of residential and commercial roofs;
(ii) the nature of the production processes are similar; (iii) the type or class
of customer for their products and services are similar; (iv) the residential
and commercial products have the same distribution channels, whereby the main
customers are wholesalers or distributors; and (v) regulatory requirements are
generally the same for both the residential and commercial product lines. The
specialty building products and accessories product line did not meet
quantitative thresholds in 1999 to be considered as a reportable segment.
Net revenues included sales to The Home Depot, Inc. in 1999 and American
Builders & Contractors Supply Co., Inc. in 1998 and 1999, which accounted for
approximately 11%, and 11% and 10%, respectively, of the Company's net sales. No
other customer accounted for as much as 10% of net sales in 1998 or 1999.
NOTE 14. RELATED PARTY TRANSACTIONS
Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating and
financing transactions between the Company and its affiliates:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -------
(THOUSANDS)
<S> <C> <C>
Receivable from (payable to):
GAF/G-I Holdings/G Industries.......................................... $ 251 $53,007
GAFBMC................................................................. 1,168 221
GFC.................................................................... (559) 5,904
------ -------
Receivable from related parties........................................ $ 860 $59,132
------ -------
------ -------
Payable to related party--ISP............................................ $5,545 $15,024
------ -------
------ -------
</TABLE>
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates (between 5.82% and 5.96% during 1998).
The highest amount of loans made by the Company to G-I Holdings during 1998 and
1999 was $6.2 million and $0, respectively. No loans were made to the Company by
G-I Holdings and its subsidiaries during 1998 and 1999. In addition, the Company
advances funds on a non-interest bearing basis to GAF, G-I Holdings and their
subsidiaries. The net balance of such advances as of December 31, 1998 and 1999
was $0.9 and $59.1 million, respectively. During 1998 and 1999, the Company made
distributions of $0 and $60.0 million, respectively, to its parent company.
F-30
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14. RELATED PARTY TRANSACTIONS--(CONTINUED)
Mineral Products: The Company and its subsidiaries purchase all of their
colored roofing granules requirements (except for the requirements of its
California and Oregon roofing plants and a portion of the requirements of its
Indiana roofing plant, which are supplied by a third party) from ISP under a
requirements contract. This contract is subject to annual renewal unless
terminated by either party to such agreement. Such purchases by the Company and
its subsidiaries totaled $51.1, $62.6 and $57.3 million for 1997, 1998 and 1999,
respectively. The amount payable to ISP at December 31, 1998 and 1999 for such
purchases was $4.9 and $2.9 million, respectively.
Management Agreements: The Company is a party to a Management Agreement
with ISP (the "Management Agreement"), which expires December 31, 2000, pursuant
to which ISP provides certain general management, administrative, legal,
telecommunications, information and facilities services to the Company
(including the use of the Company's headquarters in Wayne, New Jersey). Charges
to the Company by ISP for providing such services aggregated $4.8, $4.3 and
$5.3 million for 1997, 1998 and 1999, respectively. Such charges consist of
management fees and other reimbursable expenses attributable to, or incurred by
ISP for the benefit of, the Company. Effective January 1, 2000, the term of the
Management Agreement was extended through the end of 2000, and the management
fees payable thereunder were increased. The Company and ISP also allocate a
portion of the management fees payable by the Company under the Management
Agreement to separate lease payments for the use of BMCA's headquarters. Based
on the services provided by ISP to the Company in 1999 under the Management
Agreement, the aggregate amount payable by the Company to ISP under the
Management Agreement for 2000 is expected to be approximately $6.0 million.
Certain of the Company's executive officers receive their compensation from ISP,
with ISP being indirectly reimbursed therefore by virtue of the management fee
and other reimbursable expenses payable under the Management Agreement.
Tax Sharing Agreement: See Note 6.
NOTE 15. COMMITMENTS AND CONTINGENCIES
The discussions as to legal matters involving the Company contained in
Item 3, "Legal Proceedings--Environmental Litigation" and--"Other Litigation"
are incorporated herein by reference.
GAF, G-I Holdings, G Industries, GFC, GAFBMC, and BHC are presently
dependent upon the earnings and cash flows of their subsidiaries, principally
the Company, in order to satisfy their net obligations, including the
asbestos-related liability (discussed in Note 3), various tax and other
liabilities (net of certain insurance receivables), including tax liabilities
relating to the surfactants partnership (discussed in Note 6) and advances
payable to the Company (discussed in Note 14). GAF has advised the Company that
it expects to obtain funds to satisfy such obligations from, among other things,
dividends and loans from subsidiaries (principally the Company), as to which
there are restrictions under the indentures relating to the Other Senior Notes,
the Credit Agreement and the Term Loan, from payments pursuant to the Tax
Sharing Agreement between GAF and the Company and from proceeds from insurance
recoveries. During the twelve months ending December 31, 2000, the Company
expects to make distributions and/or advances to its parent to satisfy the
obligations discussed above. The Company does not believe that the dependence of
its parent corporations on the cash flows of their subsidiaries should have a
material adverse effect on the operations, liquidity or capital resources of the
Company. See Notes 3, 6 and 10.
The leases for certain property, plant and equipment at certain of the
Company's roofing facilities are accounted for as capital leases (see Note 10).
The Company is also a lessee under operating leases principally for warehouses,
production machinery and equipment, and transportation and computer equipment.
Rental expense on operating leases was $9.2, $11.0 and $15.5 million for 1997,
1998 and 1999, respectively. Future minimum
F-31
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 15. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
lease payments for properties which were held under long-term noncancellable
leases as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS)
<S> <C> <C>
2000.................................................................... $ 7,463 $14,291
2001.................................................................... 8,108 11,758
2002.................................................................... 17,558 10,203
2003.................................................................... 21,406 9,413
2004.................................................................... -- 8,942
Thereafter.............................................................. -- 40,094
------- -------
Total minimum payments.................................................. 54,535 $94,701
-------
-------
Less interest included above............................................ 10,748
-------
Present value of net minimum lease payments............................. $43,787
-------
-------
</TABLE>
NOTE 16. GUARANTOR FINANCIAL INFORMATION
Effective January 1, 1999, Building Materials Corporation of America (the
"Company" or "Parent Company") transferred all of its investment assets and
intellectual property assets to Building Materials Investment Corporation
("BMIC"), a newly-formed, wholly-owned subsidiary. In connection with this
transfer, BMIC agreed to guarantee all of the Company's obligations under the
Company's then existing bank credit facility and the Other Senior Notes. The
Company also transferred all of its manufacturing assets, other than those
located in Texas, to Building Materials Manufacturing Corporation ("BMMC"),
another newly-formed, wholly-owned subsidiary. In connection with this transfer,
BMMC agreed to become a co-obligor on the 2007 Notes and to guarantee the
Company's obligations under the then existing credit facility, the Deferred
Coupon Notes and the Other Senior Notes. In addition, in August 1999, BMIC and
BMMC guaranteed the Company's obligations under the Credit Agreement and the
Term Loan. The guarantees of BMIC and BMMC are full, unconditional and joint and
several.
In addition, in connection with the above transactions, the Company and
BMMC entered into license agreements, effective January 1, 1999, for the right
to use intellectual property, including patents, trademarks, know-how, and
franchise rights owned by BMIC for a license fee stated as a percentage of net
sales. The license agreements are for a period of one year and can be terminated
with 60 days written notice. Also, effective January 1, 1999, BMMC will sell all
finished goods to the Company at a manufacturing profit.
Presented below is condensed consolidating financial information for BMIC
and BMMC, prepared on a basis which retroactively reflects the formation of such
companies, as discussed above, for all periods presented. This financial
information should be read in conjunction with the Consolidated Financial
Statements and other notes related thereto. Separate financial information for
BMIC and BMMC is not included herein because management has determined that such
information is not material to investors.
F-32
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $793,566 $ -- $151,063 $ -- $944,629
Intercompany net sales......................... 2,683 516,315 64,699 (583,697) --
-------- -------- -------- ---------- --------
Total net sales................................ 796,249 516,315 215,762 (583,697) 944,629
-------- -------- -------- ---------- --------
Costs and expenses:
Cost of products sold........................ 606,405 489,950 170,197 (583,697) 682,855
Selling, general and administrative.......... 128,153 26,365 32,135 186,653
Goodwill amortization........................ 641 1,250 1,891
-------- -------- -------- ---------- --------
Total costs and expenses.................. 735,199 516,315 203,582 (583,697) 871,399
-------- -------- -------- ---------- --------
Operating income............................... 61,050 -- 12,180 -- 73,230
Equity in earnings of subsidiaries............. 13,839 (13,839) --
Interest expense, net.......................... (26,258) (6,068) (10,716) (43,042)
Other income (expense), net.................... (11,830) 27,292 15,462
-------- -------- -------- ---------- --------
Income before income taxes..................... 36,801 21,224 1,464 (13,839) 45,650
Income taxes................................... (8,954) (8,278) (571) (17,803)
-------- -------- -------- ---------- --------
Net income..................................... $ 27,847 $ 12,946 $ 893 $ (13,839) $ 27,847
-------- -------- -------- ---------- --------
-------- -------- -------- ---------- --------
</TABLE>
F-33
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents, beginning of year............. $ 2 $ 122,584 $ 1,974 $ 124,560
--------- ---------- ------- ----------
Cash provided by (used in) operating activities:
Net income............................................... 14,008 12,946 893 27,847
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation........................................ 3,062 16,802 5,185 25,049
Goodwill amortization............................... 641 1,250 1,891
Deferred income taxes............................... 17,524 17,524
Noncash interest charges............................ 27,222 27,222
(Increase) decrease in working capital items........... 29,743 (16,518) 4,563 17,788
Increase in product warranty claims.................... (3,732) (2,956) (6,688)
Purchases of trading securities........................ (123,483) (123,483)
Proceeds from sales of trading securities.............. 55,378 55,378
(Increase) decrease in other assets.................... 3,735 (1,924) (38) 1,773
Increase (decrease) in other liabilities............... (3,504) 1,022 (2,482)
Change in net receivable from/payable to related
parties............................................. 46,456 (94,360) 7,667 (40,237)
Other, net............................................. 3,749 (7,807) (3,376) (7,434)
--------- ---------- ------- ----------
Net cash provided by (used in) operating activities...... 138,904 (158,966) 14,210 (5,852)
--------- ---------- ------- ----------
Cash provided by (used in) investing activities:
Capital expenditures................................... (5,436) (30,502) (15,359) (51,297)
Acquisitions........................................... (30,861) (30,861)
Purchases of available-for-sale securities............. (223,804) (223,804)
Purchases of held-to-maturity securities............... (4,591) (4,591)
Proceeds from sales of available-for-sale securities... 173,547 173,547
Proceeds from held-to-maturity securities.............. 11,361 11,361
--------- ---------- ------- ----------
Net cash used in investing activities.................... (36,297) (73,989) (15,359) (125,645)
--------- ---------- ------- ----------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable............ (35,332) (35,332)
Increase in short-term debt............................ 26,944 26,944
Increase in loan receivable from related party......... (6,152) (6,152)
Proceeds from issuance of debt......................... 99,916 99,916
Increase in borrowings under revolving credit
facility............................................ 34,000 34,000
Repayments of long-term debt........................... (1,028) (2,493) (3,521)
Distributions to parent company........................ (91,000) (91,000)
Payments of asbestos claims............................ (3,062) (3,062)
Financing fees and expenses............................ (1,932) (1,932)
--------- ---------- ------- ----------
Net cash provided by (used in) financing activities...... (102,574) 122,435 -- 19,861
--------- ---------- ------- ----------
Net change in cash and cash equivalents.................. 33 (110,520) (1,149) (111,636)
--------- ---------- ------- ----------
Cash and cash equivalents, end of year................... $ 35 $ 12,064 $ 825 $ 12,924
--------- ---------- ------- ----------
--------- ---------- ------- ----------
</TABLE>
F-34
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $885,364 $ -- $202,593 $ -- $1,087,957
Intercompany net sales......................... 3,413 569,469 72,188 (645,070) --
-------- -------- -------- ---------- ----------
Total net sales................................ 888,777 569,469 274,781 (645,070) 1,087,957
-------- -------- -------- ---------- ----------
Costs and expenses:
Cost of products sold........................ 657,018 535,930 226,461 (645,070) 774,339
Selling, general and administrative.......... 155,184 33,539 47,693 236,416
Goodwill amortization........................ 641 1,470 2,111
Nonrecurring charges......................... 27,563 27,563
-------- -------- -------- ---------- ----------
Total costs and expenses.................. 840,406 569,469 275,624 (645,070) 1,040,429
-------- -------- -------- ---------- ----------
Operating income (loss)........................ 48,371 -- (843) -- 47,528
Equity in loss of subsidiaries................. (755) 755 --
Interest expense, net.......................... (26,535) (11,280) (12,139) (49,954)
Other income (expense), net.................... (7,150) 23,114 (69) 15,895
-------- -------- -------- ---------- ----------
Income (loss) before income taxes and
extraordinary losses......................... 13,931 11,834 (13,051) 755 13,469
Income tax (provision) benefit................. (5,580) (4,497) 4,959 (5,118)
-------- -------- -------- ---------- ----------
Income (loss) before extraordinary losses...... 8,351 7,337 (8,092) 755 8,351
Extraordinary losses, net of income tax
benefits..................................... (18,113) (18,113)
-------- -------- -------- ---------- ----------
Net income (loss).............................. $ (9,762) $ 7,337 $ (8,092) $ 755 $ (9,762)
-------- -------- -------- ---------- ----------
-------- -------- -------- ---------- ----------
</TABLE>
F-35
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 3 $ 21,748 $ 3,238 $ -- $ 24,989
Investments in trading securities................. 95,134 95,134
Investments in available-for-sale securities...... 56,461 56,461
Investments in held-to-maturity securities........ 6,358 6,358
Other short-term investments...................... 22,671 22,671
Accounts receivable, trade........................ 24,249 24,249
Accounts receivable, other........................ 52,806 1,440 1,666 55,912
Receivable from related parties................... 860 860
Inventories....................................... 44,886 19,164 29,653 93,703
Other current assets.............................. 125 3,615 1,126 4,866
-------- -------- ---------- ---------- --------
Total Current Assets........................... 98,680 226,591 59,932 -- 385,203
Investment in subsidiaries.......................... 249,825 (249,825) --
Intercompany loans including accrued interest....... 140,298 (140,298) --
Due from (to) subsidiaries, net..................... (19,694) 35,297 (15,603) --
Property, plant and equipment, net.................. 34,620 185,535 112,193 332,348
Excess of cost over net assets of businesses
acquired, net..................................... 19,380 52,713 72,093
Deferred income tax benefits........................ 58,974 58,974
Other assets........................................ 14,844 3,229 337 18,410
-------- -------- ---------- ---------- --------
Total Assets........................................ $596,927 $450,652 $ 69,274 $ (249,825) $867,028
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.............. $ 1,170 $ 3,016 $ 87 -- $ 4,273
Accounts payable.................................. 22,688 36,052 15,677 74,417
Payable to related party.......................... 1,128 4,203 214 5,545
Accrued liabilities............................... 20,257 26,953 13,455 60,665
Reserve for product warranty claims............... 19,139 1,100 20,239
-------- -------- ---------- ---------- --------
Total Current Liabilities...................... 64,382 70,224 30,533 -- 165,139
Long-term debt less current maturities.............. 433,929 162,765 219 596,913
Reserve for product warranty claims................. 24,159 4,234 28,393
Other liabilities................................... 22,240 2,126 24,366
-------- -------- ---------- ---------- --------
Total Liabilities................................... 544,710 232,989 37,112 -- 814,811
-------- -------- ---------- ---------- --------
Total Stockholders' Equity, net..................... 52,217 217,663 32,162 (249,825) 52,217
-------- -------- ---------- ---------- --------
Total Liabilities and Stockholders' Equity.......... $596,927 $450,652 $ 69,274 $ (249,825) $867,028
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
</TABLE>
F-36
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents, beginning of year................ $ 35 $ 12,064 $ 825 $ 12,924
--------- ---------- -------- ----------
Cash provided by (used in) operating activities:
Net income (loss)........................................... (9,007) 7,337 (8,092) (9,762)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Extraordinary losses................................... 18,113 18,113
Depreciation........................................... 3,383 18,573 6,979 28,935
Goodwill and other amortization........................ 641 201 1,470 2,312
Deferred income taxes.................................. 4,538 4,538
Noncash interest charges............................... 23,877 23,877
(Increase) decrease in working capital items.............. (37,888) 37,025 (15,099) (15,962)
Increase (decrease) in product warranty claims............ 13,220 (1,569) 11,651
Purchases of trading securities........................... (189,197) (189,197)
Proceeds from sales of trading securities................. 124,931 124,931
(Increase) decrease in other assets....................... (482) 560 204 282
Increase in other liabilities............................. 1,487 1,780 3,267
Change in net receivable from/payable to related
parties................................................ 26,828 5,913 9,894 42,635
Other, net................................................ 3,702 9,016 (1,446) 11,272
--------- ---------- -------- ----------
Net cash provided by (used in) operating activities......... 48,412 14,359 (5,879) 56,892
--------- ---------- -------- ----------
Cash provided by (used in) investing activities:
Capital expenditures...................................... (4,799) (49,898) (20,637) (75,334)
Acquisitions.............................................. (59,187) (59,187)
Proceeds from sale of assets.............................. 29,019 29,019
Purchases of available-for-sale securities................ (89,324) (89,324)
Purchases of held-to-maturity securities.................. (6,357) (6,357)
Proceeds from sales of available-for-sale securities...... 170,055 170,055
Proceeds from held-to-maturity securities................. 499 499
--------- ---------- -------- ----------
Net cash provided by (used in) investing activities......... (63,986) 24,975 8,382 (30,629)
--------- ---------- -------- ----------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable............... 30,578 30,578
Decrease in short-term debt............................... (26,944) (26,944)
Decrease in loan receivable from related party............ 6,152 6,152
Proceeds from issuance of debt............................ 304,019 304,019
Decrease in borrowings under revolving credit
facility............................................... (34,000) (34,000)
Repayments of long-term debt.............................. (285,108) (2,706) (90) (287,904)
Financing fees and expenses............................... (6,099) (6,099)
--------- ---------- -------- ----------
Net cash used in financing activities....................... 15,542 (29,650) (90) (14,198)
--------- ---------- -------- ----------
Net change in cash and cash equivalents..................... (32) 9,684 2,413 12,065
--------- ---------- -------- ----------
Cash and cash equivalents, end of year...................... $ 3 $ 21,748 $ 3,238 $ 24,989
--------- ---------- -------- ----------
--------- ---------- -------- ----------
</TABLE>
F-37
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $920,692 $ -- $219,347 $ -- $1,140,039
Intercompany net sales......................... 7,230 655,041 76,271 (738,542) --
-------- -------- -------- ---------- ----------
Total net sales................................ 927,922 655,041 295,618 (738,542) 1,140,039
-------- -------- -------- ---------- ----------
Costs and expenses:
Cost of products sold........................ 702,957 595,022 253,260 (738,542) 812,697
Selling, general and administrative.......... 157,372 40,440 41,748 239,560
Goodwill amortization........................ 641 1,393 2,034
Transition service agreement (income)
expense................................... (500) 500 --
Nonrecurring charges......................... 2,650 2,650
-------- -------- -------- ---------- ----------
Total costs and expenses.................. 863,120 635,962 296,401 (738,542) 1,056,941
-------- -------- -------- ---------- ----------
Operating income (loss)........................ 64,802 19,079 (783) -- 83,098
Equity in loss of subsidiaries................. 23,370 (23,370) --
Intercompany licensing income (expense), net... (27,622) 27,622 --
Interest expense, net.......................... (26,565) (9,662) (12,090) (48,317)
Other income (expense), net.................... (7,489) 12,929 5,440
-------- -------- -------- ---------- ----------
Income (loss) before income taxes and
extraordinary losses......................... 26,496 49,968 (12,873) (23,370) 40,221
Income tax (provision) benefit................. (1,157) (18,488) 4,763 -- (14,882)
-------- -------- -------- ---------- ----------
Income (loss) before extraordinary losses...... 25,339 31,480 (8,110) (23,370) 25,339
Extraordinary losses, net of income tax
benefits..................................... (1,296) (1,296)
-------- -------- -------- ---------- ----------
Net income (loss).............................. $ 24,043 $ 31,480 $ (8,110) $ (23,370) $ 24,043
-------- -------- -------- ---------- ----------
-------- -------- -------- ---------- ----------
</TABLE>
F-38
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................... $ 81 $ 53,184 $ 2,687 $ -- $ 55,952
Investments in trading securities ........... 687 687
Investments in available-for-sale
securities ............................... 29,702 29,702
Other short-term investments................. 1,590 1,590
Accounts receivable, trade................... 1,590 21,348 22,938
Accounts receivable, other................... 57,200 348 5,344 62,892
Receivable from related parties.............. 59,132 59,132
Inventories.................................. 52,903 23,210 32,502 108,615
Other current assets......................... 1,208 2,199 832 4,239
-------- -------- -------- ---------- --------
Total Current Assets...................... 172,114 110,920 62,713 -- 345,747
Investment in subsidiaries..................... 273,195 (273,195) --
Intercompany loans including accrued
interest..................................... 166,762 (166,762) --
Due from (to) subsidiaries, net................ (146,942) 161,660 (14,718) --
Property, plant and equipment, net............. 32,821 256,542 121,340 410,703
Excess of cost over net assets of businesses
acquired, net................................ 18,739 51,669 70,408
Deferred income tax benefits................... 45,561 45,561
Other assets................................... 15,454 6,901 338 22,693
-------- -------- -------- ---------- --------
Total Assets................................... $577,704 $536,023 $ 54,580 $ (273,195) $895,112
-------- -------- -------- ---------- --------
-------- -------- -------- ---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt......... $ 2,333 $ 3,729 $ 87 $ -- $ 6,149
Accounts payable............................. 41,799 28,146 14,389 84,334
Payable to related party..................... 12,382 2,583 59 15,024
Accrued liabilities.......................... 19,695 87,228 8,905 115,828
Reserve for product warranty claims.......... 13,400 1,100 14,500
-------- -------- -------- ---------- --------
Total Current Liabilities................. 89,609 121,686 24,540 235,835
Long-term debt less current maturities......... 435,398 165,194 153 600,745
Reserve for product warranty claims............ 16,127 3,687 19,814
Other liabilities.............................. 14,881 2,148 17,029
-------- -------- -------- ---------- --------
Total Liabilities.............................. 556,015 286,880 30,528 -- 873,423
-------- -------- -------- ---------- --------
Total Stockholders' Equity, net................ 21,689 249,143 24,052 (273,195) 21,689
-------- -------- -------- ---------- --------
Total Liabilities and Stockholders' Equity .... $577,704 $536,023 $ 54,580 $ (273,195) $895,112
-------- -------- -------- ---------- --------
-------- -------- -------- ---------- --------
</TABLE>
F-39
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
--------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents, beginning of year............. $ 3 $ 21,748 $ 3,238 $ 24,989
--------- ---------- ------- ----------
Cash provided by (used in) operating activities:
Net income (loss)........................................ 673 31,480 (8,110) 24,043
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Extraordinary losses................................ 1,296 1,296
Depreciation........................................ 2,628 21,752 8,606 32,986
Goodwill and other amortization..................... 1,282 1,393 2,675
Deferred income taxes............................... 14,131 14,131
Noncash interest charges............................ 3,321 3,321
Decrease in working capital items...................... (2,248) (14,782) (9,170) (26,200)
Decrease in product warranty claims.................... (13,771) (547) (14,318)
Purchases of trading securities........................ (139,522) (139,522)
Proceeds from sales of trading securities.............. 243,097 243,097
Increase in other assets............................... (828) (3,672) (1) (4,501)
Increase (decrease) in other liabilities............... (2,357) 22 (2,335)
Change in net receivable from/payable to related
parties............................................. 53,715 (127,932) 25,424 (48,793)
Other, net............................................. (3,054) (349) (3,403)
--------- ---------- ------- ----------
Net cash provided by operating activities................ 57,842 7,367 17,268 82,477
--------- ---------- ------- ----------
Cash provided by (used in) investing activities:
Capital expenditures................................... (829) (27,255) (17,238) (45,322)
Acquisitions........................................... (515) (515)
Purchases of available-for-sale securities............. (76,048) (76,048)
Purchases of held-to-maturity securities............... (2,349) (2,349)
Proceeds from sales of available-for-sale securities... 97,400 97,400
Proceeds from held-to-maturity securities.............. 7,758 7,758
Proceeds from sales of other short-term investments.... 21,421 21,421
--------- ---------- ------- ----------
Net cash provided by (used in) investing activities...... (829) 20,927 (17,753) 2,345
--------- ---------- ------- ----------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable............ 5,640 5,640
Proceeds from issuance of long-term debt............... 31,850 6,093 37,943
Repayments of long-term debt........................... (32,937) (2,951) (66) (35,954)
Distributions to parent company........................ (60,000) (60,000)
Proceeds from issuance of common stock................. 870 870
Financing fees and expenses............................ (2,358) (2,358)
--------- ---------- ------- ----------
Net cash provided by (used in) financing activities...... (56,935) 3,142 (66) (53,859)
--------- ---------- ------- ----------
Net change in cash and cash equivalents.................. 78 31,436 (551) 30,963
--------- ---------- ------- ----------
Cash and cash equivalents, end of year................... $ 81 $ 53,184 $ 2,687 $ 55,952
--------- ---------- ------- ----------
--------- ---------- ------- ----------
</TABLE>
F-40
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1998 BY QUARTER 1999 BY QUARTER
------------------------------------ ------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $212.4 $286.2 $313.6 $275.7 $262.9 $310.5 $312.8 $253.8
Cost of products sold.............. 156.2 201.0 219.6 197.5 190.2 216.8 219.2 186.4
------ ------ ------ ------ ------ ------ ------ ------
Gross profit....................... $ 56.2 $ 85.2 $ 94.0 $ 78.2 $ 72.7 $ 93.7 $ 93.6 $ 67.4
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)*........... $ 7.5 $ 26.0 $ (.9) $ 14.8 $ 15.7 $ 30.4 $ 25.5 $ 11.5
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Interest expense................... $ 12.7 $ 12.8 $ 12.4 $ 12.1 $ 11.9 $ 12.9 $ 12.3 $ 11.2
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes
and extraordinary losses......... $ 5.1 $ 17.3 $ (6.7) $ (2.3) $ 3.3 $ 24.6 $ 13.7 $ (1.4)
Income tax (provision) benefit..... (2.0) (6.7) 2.7 0.9 (1.2) (9.1) (5.0) 0.4
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before extraordinary
losses........................... 3.1 10.6 (4.0) (1.4) 2.1 15.5 8.7 (1.0)
Extraordinary losses............... -- -- (9.3) (8.8) -- -- (1.3) --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss).................. $ 3.1 $ 10.6 $(13.3) $(10.2) $ 2.1 $ 15.5 $ 7.4 $ (1.0)
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
- ------------------
* The operating loss for the third quarters of 1998 and 1999 reflect $27.6 and
2.7 million, respectively, of nonrecurring charges. See Note 5 to Consolidated
Financial Statements.
F-41
<PAGE>
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1997
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1997 EXPENSES DEDUCTIONS OTHER 1997
- --------------------------------------------------- ---------- ---------- ---------- ------ ------------
<S> <C> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets To Which
They Apply:
Allowance for doubtful accounts............... $ 1,974 $ 2,224 $ 1,530(a) $ 84(c) $ 2,752(b)
Allowance for discounts....................... 22,468 80,989 88,443 4,389(c) 19,403
Reserve for inventory market valuation........ 2,509 821 1,824 -- 1,506
</TABLE>
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1998 EXPENSES DEDUCTIONS OTHER 1998
- --------------------------------------------------- ---------- ---------- ---------- ------ ------------
<S> <C> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets To Which
They Apply:
Allowance for doubtful accounts............... $ 2,752 $ 1,419 $ 486 $ 350(c) $ 4,035(b)
Allowance for discounts....................... 19,403 91,569 87,109 -- 23,863
Reserve for inventory market valuation........ 1,506 1,458 918 500(c) 2,546
</TABLE>
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1999 EXPENSES DEDUCTIONS OTHER 1999
- --------------------------------------------------- ---------- ---------- ---------- ------ ------------
<S> <C> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets To Which
They Apply:
Allowance for doubtful accounts............... $ 4,035 $ 484 $ 500 $ -- $ 4,019
Allowance for discounts....................... 23,863 96,645 97,280 (33) 23,195
Reserve for inventory market valuation........ 2,546 2,794 3,623 -- 1,717
</TABLE>
- ------------------
Notes:
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balances at December 31, 1997, 1998 and 1999 primarily reflect a reserve
for receivables sold to a trust (see Note 7 to Consolidated Financial
Statements).
(c) Represents balance acquired through acquisitions.
S-1
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------------------------------------------------
2.1 -- Reorganization Agreement, dated as of December 31, 1998, by and
among BMCA, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation (incorporated by
reference to Exhibit 2.1 to BMCA's Registration Statement on Form
S-4 (Registration No. 333-69749) (the "2008 Notes S-4")).
3.1 -- Amended and Restated Certificate of Incorporation of BMCA.
3.2 -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to
BMCA's Registration Statement on Form S-4 (Registration
No. 33-81808) (the "Deferred Coupon Note Registration
Statement")).
3.3 -- Certificate of Incorporation of Building Materials Manufacturing
Corporation (incorporated by referenced to Exhibit 3.3 to BMCA's
Annual Report on Form 10-K for the year ended December 31, 1998
(the "1998 Form 10-K")).
3.4 -- By-laws of Building Materials Manufacturing Corporation
(incorporated by reference to Exhibit 3.4 to the 1998 Form 10-K).
3.5 -- Certificate of Incorporation of Building Materials Investment
Corporation (incorporated by reference to Exhibit 3.5 to the 1998
Form 10-K).
3.6 -- By-laws of Building Materials Investment Corporation (incorporated
by reference to Exhibit 3.6 to the 1998 Form 10-K).
4.1 -- Indenture, dated as of December 3, 1998, between BMCA and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1
to the 2008 Notes S-4).
4.2 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of December 3, 1998, among BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.4 to
the 2008 Notes S-4).
4.3 -- Indenture, dated as of December 9, 1996, between BMCA and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1
to BMCA's Registration Statement on Form S-4 (Registration
No. 333-20859) (the "2006 Notes Registration Statement")).
4.4 -- Indenture, dated as of October 20, 1997, between BMCA and The Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1
to BMCA's Registration Statement on Form S-4 (Registration
No. 333-41531) (the "8% Notes Registration Statement")).
4.5 -- Indenture, dated as of July 17, 1998, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to
BMCA's Registration Statement on Form S-4 (Registration
No. 333-60633) (the "2005 Notes S-4")).
4.6 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of December 9, 1996, among BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of
New York, as trustee (incorporated by reference to Exhibit 10.7 to
the 2008 Notes S-4).
4.7 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of October 20, 1997, among BMCA, as issuer,
Building Materials Manufacturing Corporation, as co-obligor,
Building Materials Investment Corporation, as guarantor, and The
Bank of New York, as trustee (incorporated by reference to
Exhibit 10.8 to the 2008 Notes S-4).
<PAGE>
4.8 -- First Supplemental Indenture, dated as of January 1, 1999, to
Indenture, dated as of July 17, 1998, among BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of
New York, as trustee (incorporated by reference to Exhibit 10.9 to
the 2008 Notes S-4).
10.1 -- Amended and Restated Management Agreement, dated as of January 1,
1999 (the "Management Agreement"), among GAF, G-I Holdings, G
Industries, Merick Inc., GAF Fiberglass, ISP, GAF Building
Materials Corporation, GAF Broadcasting Company, Inc., BMCA and
ISP Opco Holdings Inc. (incorporated by reference to Exhibit 10.1
to the 1998 Form 10-K).
10.2 -- Amendment No. 1 to the Management Agreement (incorporated by
reference to Exhibit 10.2 to International Specialty Products Inc.
Annual Report on Form 10-K for the year ended December 31, 1999).
10.3 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by reference
to Exhibit 10.9 to BMCA's Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K")).*
10.4 -- Forms of Amendment to Option Agreement relating to Series A
Cumulative Redeemable Convertible Preferred Stock (incorporated by
reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K")).*
10.5 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Preferred Stock (incorporated by reference to
Exhibit 10.13 to the 1997 Form 10-K).*
10.6 -- BMCA Preferred Stock Option Plan (incorporated by reference to
Exhibit 4.2 to BMCA's Registration Statement on Form S-8
(Registration No. 333-60589)).*
10.7 -- Tax Sharing Agreement, dated as of January 31, 1994, among GAF,
G-I Holdings and BMCA (incorporated by reference to Exhibit 10.6
to the Deferred Coupon Note Registration Statement).
10.8 -- Reorganization Agreement, dated as of January 31, 1994, among GAF
Building Materials Corporation, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.9 to the Deferred Coupon
Notes Registration Statement).
21 -- Subsidiaries of BMCA.
23 -- Consent of Arthur Andersen LLP.
27.1 -- Financial Data Schedule for fiscal year 1999, which is submitted
electronically to the Securities and Exchange Commission for
information only.
27.2 -- Restated Financial Data Schedule for fiscal year 1998, which is
submitted electronically to the Securities and Exchange Commission
for information only.
27.3 -- Restated Financial Data Schedule for fiscal year 1997, which is
submitted electronically to the Securities and Exchange Commission
for information only.
- ------------------
* Management and/or compensation plan or arrangement.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BUILDING MATERIALS CORPORATION OF AMERICA
(Pursuant to Section 245 of the General Corporation Law of Delaware)
---------------------------------------
Building Materials Corporation of America, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), does
hereby certify as follows:
1. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware on January 31, 1994. The Corporation was formerly
known as GAF Newco Inc.
2. The Certificate of Incorporation is hereby amended and restated to read
in its entirety as follows:
"FIRST: The name of the Corporation is Building Materials
Corporation of America.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, City of Wilmington, County of
New Castle, State of Delaware. The name of the registered agent of the
Corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is One Million Eight Hundred
Thousand (1,800,000) shares, consisting of:
(a) One Million Four Hundred Thousand (1,400,000) shares of common
stock, par value $.001 per share (hereinafter referred to as
"Common Stock"), and which shares shall be divided into two
classes, consisting of One Million Three Hundred Thousand
(1,300,000) shares of Class A Common Stock (hereinafter
referred to as "Class A Common Stock") and One Hundred Thousand
(100,000) shares of Class B Common Stock (hereinafter referred
to as "Class B Common Stock"); and
<PAGE>
(b) Four Hundred Thousand (400,000) shares of preferred stock, par
value $.01 per share (hereinafter referred to as "Preferred
Stock").
A. PREFERRED STOCK: Shares of Preferred Stock may be issued from time
to time in one or more series, as may from time to time be determined by
the Board of Directors, each of said series to be distinctly designated.
All shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which dividends,
if any, thereon shall be cumulative, if made cumulative. The voting powers
and the preferences and relative, participating, optional and other special
rights of each series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph C of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(a) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of the
Board of Directors;
(b) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of
such dividends to the dividends payable on any other class or
classes or series of the same or other classes of stock and
whether such dividends shall be cumulative or non-cumulative;
(c) The right, if any, of the holders of Preferred Stock of such
series to convert the same into, or exchange the same for, shares
of any other class or classes or of any series of the same or any
other class or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
2
<PAGE>
(d) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices, including,
without limitation, cash, property, or rights (including
securities of the Corporation or any other corporation), and the
time or times at which, and the terms and conditions on which,
Preferred Stock of such series may be redeemed;
(e) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up of the Corporation;
(f) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series;
and
(g) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing, include the right, voting as a series by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under
such other circumstances and on such conditions as the Board of
Directors may determine.
B. COMMON STOCK
1. After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the provisions
of Paragraph A of this Article FOURTH), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the provisions of
Paragraph A of this Article FOURTH), and subject further to any other
conditions which may be fixed in accordance with the provisions of
Paragraph A of this Article FOURTH, then and not otherwise the holders of
Common Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors, provided that so long as any
shares of Class B Common Stock shall be outstanding, the holders of such
Class B Common Stock shall be entitled to receive, when and as declared by
the Board of Directors from time to time, out of any funds legally
available therefor, dividends in such amounts as the Board of Directors
shall determine at the time of any such declaration before dividends of any
kind may be declared upon the Class A Common Stock.
3
<PAGE>
2. After distribution in full of the preferential amount,
if any (fixed in accordance with the provisions of Paragraph A of this
Article FOURTH), to be distributed to the holders of Preferred Stock in the
event of voluntary or involuntary liquidation, dissolution or winding-up of
the Corporation, the holders of the Common Stock, subject to the rights, if
any, of the holders of Preferred Stock to participate therein (fixed in
accordance with Paragraph A of the Article FOURTH), shall be entitled to
receive, ratably in proportion to the number of shares of Common Stock held
by them (and not ratably in proportion to the number of shares of each
class of such Common Stock), all the remaining assets of the Corporation,
tangible and intangible, of whatever kind, as are available for
distribution to stockholders.
C. OTHER PROVISIONS
1. No holder of any of the shares of any class or series
of stock or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued stock
of any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of indebtedness,
debentures or other securities convertible into or exchangeable for stock
of the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or
securities convertible into or exchangeable for stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to a
resolution of the Board of Directors to such persons, firms, corporations
or associations, whether such holders or others, and upon such terms, as
may be deemed advisable by the Board of Directors in the exercise of its
sole discretion.
2. The relative powers, preferences and rights of each
series of Preferred Stock in relation to the powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in Paragraph A of this
Article FOURTH, and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any
4
<PAGE>
of them; provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to Paragraph A of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
3. Subject to the provisions of subparagraph 2 of this
Paragraph C, shares of any series of Preferred Stock may be issued from
time to time as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be fixed by the Board
of Directors.
4. Shares of Common Stock of either class may be issued
from time to time as the Board of Directors of the Corporation shall
determine and on such terms and for such consideration as shall be fixed by
the Board of Directors.
5. The authorized amount of shares of Common Stock or of
either class of Common Stock or of Preferred Stock, without a class or
series vote, may be increased or decreased from time to time by the
affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.
FIFTH: In furtherance and not in limitation of the powers
conferred by law, subject to any limitations contained elsewhere in this
Certificate of Incorporation, By-laws of the Corporation may be adopted,
amended or repealed by a majority of the Board of Directors of the
Corporation, but any By-laws adopted by the Board of Directors may be
amended or repealed by the stockholders entitled to vote thereon. Election
of directors need not be by written ballot.
SIXTH: (a) A director of the Corporation shall not be
personally liable either to the Corporation or to any stockholder for
monetary damages for breach of fiduciary duty as a director, except (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, or (ii) for acts or omissions which are not in good faith or
which involve intentional misconduct or knowing violation of the law, or
(iii) for any matter in respect of which such director shall be liable
under Section 174 of Title 8 of the General Corporation Law of the State of
Delaware or any amendment thereto or successor provision thereto, or (iv)
for any transaction from which the director shall have derived an improper
personal benefit. Neither amendment nor repeal of this paragraph (a) nor
the adoption of any provision of the Certificate of Incorporation
5
<PAGE>
inconsistent with this paragraph (a) shall eliminate or reduce the effect
of this paragraph (a) in respect of any matter occurring, or any cause of
action, suit or claim that, but for this paragraph (a) of this Article,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative in nature, by reason of the fact
that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding to the full extent permitted by law,
and the Corporation may adopt By-laws or enter into agreements with any
such person for the purpose of providing for such indemnification."
3. This Amended and Restated Certificate of Incorporation was duly adopted
in accordance with Sections 242 and 245 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned has duly executed this Amended
and Restated Certificate of Incorporation on this 23rd day of December, 1999.
/s/ William C. Lang
-------------------------------
William C. Lang
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
6
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF BUILDING MATERIALS CORPORATION OF AMERICA
-----------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-----------------------
We, the undersigned, Senior Vice President and Secretary, respectively,
of Building Materials Corporation of America (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "General Corporation Law"), in accordance with the provisions of
Section 151 thereof, do hereby certify that the Board of Directors of the
Corporation duly adopted the following resolutions by unanimous consent dated as
of August 15, 1996:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation of the Corporation, this Board of Directors hereby
creates and authorizes the issuance of a series of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share, and hereby
fixes the designation, dividend rate, redemption provisions, voting powers,
rights on liquidation, dissolution or winding up, and other preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations, or restrictions thereof, as follows:
1. Designation. The Preferred Stock created and authorized hereby shall
be designated as the "Series A Cumulative Redeemable Convertible Preferred
Stock" (the "Series A Preferred Stock"). The number of shares of Series A
Preferred Stock shall be 50,000. The liquidation preference of the Series A
Preferred Stock shall be $100 per share (the "Liquidation Preference").
2. Dividends.
(a) Each holder of a share of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the funds of the Corporation legally available therefor pursuant to the General
Corporation Law (the "Legally Available Funds"), cumulative cash dividend
payments of $2.00 per share for each full Quarterly Dividend Period (as defined
in Section 2(f) hereof) that such share of Series A preferred Stock is
outstanding; provided, if a share of Series A Preferred Stock is not outstanding
for a full Quarterly Dividend Period, the dividend payment per share in respect
of such partial Quarterly Dividend Period shall be equal to $2.00 multiplied by
a fraction, the number of which is the number of days such share was outstanding
(but not more than 30 days for any calendar month fully occurring in such
portion), and the denominator of which is 90. Such dividends, if and to the
extent declared, shall be payable quarterly in arrears on January 1, April 1,
July 1 and October 1 of each year (each, a "Dividend Payment Date"); provided
that if any such date is not a Business Day (as defined in Section 2(f) hereof),
then the applicable dividend shall be payable, if and to the extend declared, on
the next succeeding Business Day. Such dividends shall be fully cumulative.
(b) Dividends shall accrue (whether or not declared or paid) on each
share of Series A Preferred Stock from the date on which such share is issued.
(c) Quarterly dividends, if and to the extent declared, shall be
paid to the holders of record of shares of Series A Preferred Stock as they
appear on the stock register of the Corporation on the record date therefor,
which record date shall be the December 15, March 15, June 15 and September 15
immediately preceding the Dividend Payment Date relating thereto.
<PAGE>
(d) If dividends are not paid in full, or not declared in full and
sums set apart for the payment thereof, on the Series A Preferred Stock and any
Capital Stock (as defined in Section 2(f) hereof) of the Corporation ranking on
a parity with the Series A Preferred Stock as to the payment of dividends, all
dividends declared upon shares of Series A Preferred Stock and shares of such
other stock shall be declared pro rata so that in all cases the amount of
dividends declared per share on the Series A Preferred Stock and such other
stock shall bear to each other the same ratio that accumulated, unpaid dividends
per share on the Series A Preferred Stock and such other stock shall bear to
each other. Except as provided in the preceding sentence, unless full cumulative
dividends on the Series A Preferred Stock have been paid or declared in full and
sums set aside for the payment thereof, no dividends shall be declared or paid
or set aside for payment, or other distribution made, on any Capital Stock of
the Corporation ranking on a parity with or junior to the Series A Preferred
Stock as to the payment of dividends, nor shall any such stock be purchased,
redeemed or otherwise acquired, except as provided in Section 2(e) hereof, for
any consideration (or any payment made to or available for a sinking fund for
the redemption of any such stock).
(e) Except as provided in Section 2(d) hereof, the Corporation may
not pay cash dividends or make cash distributions on, or repurchase, redeem or
otherwise acquire (except in exchange for shares of Capital Stock ranking junior
to the Series A Preferred Stock as to the payment of dividends and as to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation or options, rights or warrants to acquire such shares) any of its
Capital Stock other than Capital Stock ranking senior to the Series A Preferred
Stock as to the payment of dividends, if, at such date, there are accumulated,
unpaid dividends on the Series A Preferred Stock; provided that the Corporation
may purchase outstanding shares of Common Stock and Series A Preferred Stock
from the holders thereof in accordance with the terms and conditions of the
Option Agreements (as defined in Section 2(f)).
(f) The following terms shall have the meanings set forth below:
"Book Value" shall mean, as of any date of determination, (x) shareholder's
equity of the Corporation as of that date determined in accordance with
generally accepted accounting principles, but adding back (A) the charge to
shareholder's equity relating to the assumption by the Corporation of certain
asbestos-related liabilities of GAF Building Materials Corporation in connection
with the Corporation's formation, (B) the reduction in shareholder's equity
resulting from purchases of the capital stock of GAF Corporation ("GAF") by
persons who participated in promoting the management buy-out of GAF in March
1989 (the "Acquisition") (predecessor cost basis adjustment) and (C) any amounts
reflecting the liquidation preferences of any outstanding preferred stock of the
Corporation and excluding, to the extent occurring after December 31, 1995, (1)
nonrecurring non-operating losses and charges to stockholder's equity and
nonrecurring non-operating gains and increases in stockholder's equity,
including any further charge relating to asbestos-related liabilities and any
increase in stockholder's equity attributable to a public offering of capital
stock of the Corporation, (2) net gains or losses in respect of dispositions of
assets by the Corporation other than in the ordinary course of business, and (3)
any charges relating to amortization of goodwill and other intangibles arising
from the Acquisition divided by (y) 1,000,000. Any adjustments to Book Value
shall include the tax effects, if any, associated therewith. If the Series A
Preferred Stock or Common Stock are converted or exchanged for other securities
or property pursuant to a recapitalization, stock split, combination,
reorganization, merger, exchange or similar transaction, or if a sale of all or
substantially all of the Common Stock of the Corporation shall occur or be
pending, Book Value shall be modified by the Board of Directors in such manner
as is reasonable under the circumstances. All determinations by the Board of
Directors hereunder shall be made in good faith and shall be binding and
conclusive.
"Business Day" means any day other than a Saturday, a Sunday or any other
day on which commercial banking institutions in the City of New York are
authorized by law to be closed.
<PAGE>
"Capital Stock" of any person means any and all shares, interests,
participations or other equivalents (however designated) of equity interests in
such person.
"Common Stock" means the Corporation's common stock, par value $.001 per
share, and any securities or property into which the Corporation's Common Stock
may be converted or exchange pursuant to a recapitalization, stock split,
combination, reorganization, merger, exchange or similar transaction.
"Corporation" means the party named as such in the preamble to this
Certificate.
"Option Agreements" means option agreements between the Corporation and
employees of the Corporation or U.S. Intec, Inc. relating to the Series A
Preferred Stock.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or agency, department or instrumentality thereof.
"Quarterly Dividend Period" means the applicable period from January 1,
through the next March 31, from April 1 through the next June 30, from July 1
through the next September 30 or from October 1 through the next December 31.
3. Redemption.
(a) The Series A Preferred Stock shall be redeemable, at any time in
whole or from time to time in part, out of Legally Available Funds, at the
option of the Corporation, upon giving notice as provided in Section 3(b)
hereof, at the Liquidation Preference thereof plus accumulated but unpaid
dividends to the date of redemption.
(b) At least 30 days but not more than 60 days prior to the date
fixed for the redemption of shares of the Series A Preferred Stock pursuant to
Section 3(a) hereof (each a "Redemption Date"), written notice of such
redemption shall be mailed to each holder of record of shares of Series A
Preferred Stock to be redeemed in a postage prepaid envelope addressed to such
holder at his mailing address as shown on the records of the Corporation;
provided, however, that no failure of any holder of Series A Preferred Stock to
receive such notice nor any defect therein shall affect the validity of the
proceeding for the redemption of the shares of Series A Preferred Stock, to be
redeemed. Each such notice shall state (i) the Redemption Date; (ii) the number
of shares of Series A Preferred Stock to be redeemed and, if fewer than all of
the shares held by such holder are to be redeemed from such holder, the number
of shares to be redeemed from such holder; (iii) the cash redemption price being
paid; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed shall cease to accrue on the Redemption Date. On or after
the Redemption Date, each holder of shares of Series A Preferred Stock to be
redeemed shall present and surrender his certificate or certificates for such
shares to the Corporation at the place designated in such notice and thereupon
the redemption price of such shares shall be paid to the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. In case fewer than all of the shares
represented by such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after the Redemption Date (unless
default shall be made by the Corporation in payment of the redemption price) all
dividends on the shares of Series A Preferred Stock designated for redemption in
such notice shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price thereof, without interest, upon the surrender of certificates representing
the same, shall cease and terminate and such shares shall not thereafter be
transferred (except with the written consent of the Corporation) on the books of
the Corporation and such shares shall not be deemed to be outstanding for any
purpose whatsoever.
<PAGE>
(c) If fewer than all of the shares of Series A Preferred Stock are
to be redeemed, the Board of Directors of the Corporation shall select the
shares to be redeemed on such basis as the Board of Directors shall determine in
its sole discretion. The Board of Directors shall not be required to redeem
shares of Series A Preferred Stock on a pro rata basis. The Board of Directors
may elect to redeem shares of Series A Preferred Stock held by one holder or
group of holders and elect not to redeem shares of Series A Preferred Stock held
by other holders. Regardless of the method used, the calculation of the number
of shares to be redeemed shall be based upon whole shares, such that the
Corporation shall in no event be required to issue fractional shares of Series A
Preferred Stock or cash in lieu thereof. In the event a method requiring
proration is used, the number of shares to be redeemed from a holder shall be
rounded downward to the nearest whole number of shares. The holders of Series A
Preferred Stock shall have no right to request the Corporation to redeem such
shares at any time, and the Corporation shall have no obligation to honor any
such request if made.
4. Voting Rights. The holders of Series A Preferred Stock shall be
entitled to one vote for each share held on all matters to be voted on by the
stockholders of the Corporation and shall vote together with the holders of
Common Stock and the holders of any other class of stock entitled to vote in
such manner. The holders of Series A Preferred Stock shall not, except as
required by law, be entitled to vote as a separate class. Without limiting the
generality of the preceding sentence, a class vote or the consent of the holders
of the outstanding shares of Series A Preferred Stock as a separate class shall
not be required in connection with: (i) the creation of any class or series of
Capital Stock of the Corporation; (ii) any merger, consolidation or transfer of
all or substantially all the assets of the Corporation or other transaction
involving the Corporation and a third party in which the Corporation is the
survivor or in which the Corporation is not the survivor and in which the Series
A Preferred Stock shall (a) remain outstanding as an equivalent security of the
survivor with no adverse change to the powers, preferences or special rights
provided for in this Certificate or (B) be redeemed for an amount per share
equal to the Liquidation Preference plus accrued and unpaid dividends; or (iii)
any increase in the total number of authorized or issued shares of Capital Stock
of any class, including without limitation Series A Preferred Stock.
5. Priority of Series A Preferred Stock in Event of Liquidation,
Dissolution or Winding Up. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of the Series A Preferred Stock shall be entitled to
receive, out of the remaining net assets of the Corporation, an amount per share
in cash equal to the Liquidation Preference plus all dividends accrued and
unpaid on each such share up to the date fixed for distribution before any
distribution shall be made to the holders of any Capital Stock of the
Corporation ranking junior to the Series A Preferred Stock as to the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets distributable among the holders of Series A Preferred
Stock and any Capital Stock of the Corporation ranking on a parity with the
Series A Preferred Stock as to the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series A Preferred Stock and such other
stock of all preferential amounts payable to all such holders, then the assets
thus distributable shall be distributed ratably among the holders of the Series
A Preferred Stock and any Capital Stock of the Corporation ranking on a parity
with the Series A Preferred Stock as to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation in proportion to the
respective amounts that would be payable per share if such assets were
sufficient to permit payment in full. Except as otherwise provided in this
Section 5, holders of Series A Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation. For the purposes of this Section 5, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, securities or
other consideration) of all or substantially all the property or assets of the
Corporation, nor the consolidation or merger of the Corporation with one or more
<PAGE>
other corporations, shall be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary.
6. Conversion.
(a) The holders of shares of Series A Preferred Stock shall have the
right, at any time or from time to time, at their option, to convert all or any
portion of such shares into shares of Common Stock on the following basis: Each
share of Series A Preferred Stock shall be convertible into the number of shares
of Common Stock equal to 100 divided by 115% of Book Value as of December 31,
1995. The Corporation may, at its option, pay to any holder cash in lieu of any
fractional share of Common Stock issuable upon conversion of shares of Series A
Preferred Stock.
(b) In the case of a redemption pursuant to Section 3 hereof of any
shares of Series A Preferred Stock, the right of conversion under this Section 6
shall cease and terminate, as to the shares to be redeemed, at the close of
business on the second day preceding the date fixed for such redemption, unless
default shall be made in the payment of the Redemption Price for the shares to
be so redeemed.
(c) In order to convert shares of Series A Preferred Stock into
shares of Common Stock pursuant to the right of conversion set forth in Section
6(a), the holder thereof shall surrender the certificate or certificates
representing Series A Preferred Stock, duly endorsed to the Corporation or in
blank, at the principal office of the Corporation and shall give written notice
the Corporation that such holder elects to convert the same. Within five
business days, the Corporation shall deliver at said office to such holder of
Series A Preferred Stock a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Shares of
Series A Preferred Stock shall be deemed to have been converted as of the date
of the surrender of such shares for conversion as provided above, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date. Upon conversion of only a portion of the number of shares
covered by a certificate representing shares of Series A Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to the
holder of the certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of Series A
Preferred Stock representing the unconverted portion of the certificate so
surrendered, which new certificate shall entitle the holder thereof to the
rights of the shares of Series A Preferred Stock represented thereby to the same
extent as if the certificate theretofore covering such unconverted shares had
not been surrendered for conversion.
(d) The issuance of certificates for shares of Common Stock upon the
conversion of shares of Series A Preferred Stock shall be made without charge to
the converting stockholder for any original issue or transfer tax in respect of
the issuance of such certificates and any such tax shall be paid by the
Corporation.
(e) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of Series A Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series A Preferred Stock at the time outstanding.
The Corporation shall take at all times such corporate action as shall be
necessary in order that the Corporation may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the conversion of Series A
Preferred Stock in accordance with the provisions hereof, free from all taxes,
liens, charges and security interests with respect to the issue thereof. The
Corporation will, at its expense, use its best efforts to cause such shares to
be listed (subject to issuance or notice of issuance) on all stock exchanges, if
any, on which the Corporation's Common Stock may become listed.
<PAGE>
7. Cancellation of Reacquired Series A Preferred Stock. Shares of
Series A Preferred Stock which have been issued and reacquired in any manner,
including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the status of
authorized and unissued shares of preferred stock undesignated as to series and
may be redesignated and reissued as part of any series of preferred stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed on its behalf, this 26th day of August, 1996.
Building Materials Corporation of America
By: /s/ James P. Rogers
----------------------------------
James P. Rogers
Senior Vice President
ATTEST:
/s/ Richard A. Weinberg
- --------------------------------------
Richard A. Weinberg,
Secretary
(Corporate Seal)
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATION OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
------------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994. The
Corporation was formerly known as GAF Newco Inc.
THIRD: The Certificate of Designations (the "Certificate of
Designations") of Series A Cumulative Redeemable Convertible Preferred Stock,
par value $.01 per share (the "Preferred Stock"), of the Corporation was filed
with the Secretary of State of the State of Delaware on August 27, 1996.
FOURTH: No shares of Preferred Stock have been issued.
FIFTH: The Board of Directors of the Corporation has duly adopted the
following resolution amending the Certificate of Designation, by unanimous
consent dated as of December 19, 1996:
RESOLVED, that pursuant to authority expressly granted to the Board of
Directors by the Certificate of Incorporation, the definition of
"Book Value" contained in Section 2(f) as the Certificate of
Designation shall be amended to read as follows:
"Book Value" shall mean, as of December 31, 1995, (x) the combined
shareholder's equity of the Corporation and U.S. Intec, Inc. as of that
date determined in accordance with generally accepted accounting
principles and treating U.S. Intec Holdings as a wholly-owned
subsidiary of the Corporation after December 31, 1996, but adding back
(A) the charge to shareholder's equity relating to the assumption by
the Corporation of certain asbestos-related liabilities of GAF Building
Materials Corporation in connection with the Corporation's formation,
(B) the reduction in shareholder's equity resulting from purchases of
the capital stock of GAF Corporation ("GAF") by persons who
participated in promoting the management buy-out of GAF in March 1989
(the "Acquisition") (predecessor cost basis adjustment) and (C) any
amounts reflecting the liquidation preferences of any outstanding
preferred stock of the Corporation and excluding, to the extent
occurring after December 31, 1995, (1) non-recurring non-operating
<PAGE>
losses and charges to stockholder's equity and non-recurring
non-operating gains and increases in stockholder's equity, including
any further charge relating to asbestos-related liabilities and any
increase in stockholder's equity attributable to a public offering of
capital stock of the Corporation, (2) net gains or losses in respect of
disposition of assets by the Corporation other than in the ordinary
course of business, and (3) any charges relating to amortization of
goodwill and other intangibles arising from the Acquisition divided by
(y) 1,000,000. Any adjustments to Book Value shall include the tax
effects, if any, associated therewith.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed this 24th day of December 1996.
BUILDING MATERIALS CORPORATION OF AMERICA
By: /s/Richard A. Weinberg
-------------------------------------
Richard A. Weinberg
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
---------------------------------------------
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
---------------------------------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994.
THIRD: The Certificate of Designations of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share (the
"Certificate of Designations") of the Corporation was filed with the Secretary
of State of the State of Delaware on August 27, 1996.
FOURTH: The defined term "Book Value" contained in this Section 2(f) of
the Certification of Designations has been amended by:
(i) deleting the first sentence thereof and replacing it with the
following new sentence:
"'Book Value' shall mean, as of any date of determination, (x) the sum
of (i) shareholder's equity of the Corporation (of, in the case of Book Value as
of December 31, 1995, the combined shareholder's equity of the Corporation and
U.S. Intec, Inc.) as of that date determined in accordance with generally
accepted accounting principles and treating U.S. Intec Holdings Inc. as a
wholly-owned subsidiary of the Corporation after December 31, 1995 and (ii) the
cumulative operating profit (or loss) of the Nashville, Tennessee fiberglass
manufacturing facility (the "Nashville Facility") of GAF Fiberglass Corporation
("GAF Fiberglass") during the period commencing January 1, 1997 through the date
of determination, and adding back (A) the charge to shareholder's equity
relating to the assumption by the Corporation of certain asbestos-related
liabilities of GAF Building Materials Corporation in connection with the
Corporation's formation, (B) the reduction in shareholder's equity resulting
from purchases of the capital stock of GAF Corporation ("GAF") by persons who
participated in promoting the management buy-out of GAF in March 1989 (the
"Acquisition") (predecessor cost basis adjustment) and (C) any amounts
reflecting the liquidation preferences of any outstanding preferred stock of the
Corporation and excluding, to the extent occurring after December 31, 1995, (1)
nonrecurring non-operating losses and nonrecurring non-operating gains,
including any further charge relating to asbestos-related liabilities, (2) net
gains or losses in respect of dispositions of assets by the Corporation other
than in the ordinary course of business, and (3) any charges relating to
amortization of goodwill and other intangibles arising from the Acquisition
divided by (y) in the case of Book Value as of December 31, 1995, 1,000,000 and,
in the case of all other calculations of Book Value, the number of shares of
Common Stock of the Corporation outstanding on the date of determination."; and
(ii) by adding the following phrases after the phrase "exchange or
similar transaction," in the penultimate sentence thereof, "if GAF Fiberglass
becomes a direct or indirect subsidiary of the Corporation, if the Corporation
<PAGE>
directly or indirectly acquires the Nashville Facility".
FIFTH: Written consent to the adoption of this amendment to the
Certificate of Designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by a duly authorized officer thereof on this 13th day of May 1997.
/s/ Richard A. Weinberg
-------------------------------------
Name: Richard A. Weinberg
Title: Senior Vice President
and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
--------------------
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
--------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994.
THIRD: The Certificate of Designations of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share (the
"Certificate of Designations") of the Corporation was filed with the Secretary
of State of the State of Delaware on August 27, 1996.
FOURTH: Section 1 of the Certificate of Designations is hereby amended
to read in its entirety as follows:
"1. Designation. The Preferred Stock created and authorized hereby
shall be designated as the "Series A Cumulative Redeemable Convertible
Preferred Stock" (the "Series A Preferred Stock"). The number of shares
of Series A Preferred Stock shall be 100,000. The liquidation
preference of the Series A Preferred Stock shall be $100 per share (the
"Liquidation Preference")."
FIFTH: Written consent to the adoption of this amendment to the
Certificate of designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by a duly authorized officer thereof on this 6th day of August, 1997.
/s/ Richard A. Weinberg
---------------------------------
Name: Richard A. Weinberg
Title: Senior Vice President
and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
-------------------------------------
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
-------------------------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994.
THIRD: The Certificate of Designations of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share (the
"Certificate of Designations") of the Corporation was filed with the Secretary
of State of the State of Delaware on August 27, 1996.
FOURTH: Section 2(a) of the Certificate of Designations has been
amended to delete the phrase "$2.00 per share" from the fourth and eighth lines
thereof and to replace it with the phrase "$1.50 per share".
FIFTH: The defined term "Book Value" contained in Section 2(f) of the
Certification of Designations has been amended by:
(i) deleting the first two sentences thereof and replacing them with
the following:
"'Book Value' shall mean, as of any date of determination, (x) the sum
of (i) the combined shareholder's equity of the Corporation and U.S. Intec, Inc.
as of December 31, 1995 determined in accordance with generally accepted
accounting principles, (ii) the cumulative consolidated net income or loss of
the Corporation (treating U.S. Intec Holdings Inc. as a wholly-owned subsidiary
of the corporation for all periods) for the period January 1, 1996 through the
date of determination and (iii) the cumulative operating income (or loss), net
of an amount equal to imputed income taxes on such operating income calculated
at the same tax rate as is accrued as an expense by the Corporation in its
income statement for the applicable period, of GAF Fiberglass Corporation ("GAF
Fiberglass") for the period January 1, 1997 through the date of determination,
and adding back (A) the charge to shareholder's equity relating to the
assumption by the Corporation of certain asbestos-related liabilities of GAF
Building Materials Corporation in connection with the Corporation's formation
and (B) the reduction in shareholder's equity resulting from purchases of the
capital stock of GAF Corporation ("GAF") by persons who participated in
promoting the management buy-out of GAF in March 1989 (the "Acquisition")
(predecessor cost basis adjustment), and excluding, to the extent occurring
after December 31, 1995, (1) nonrecurring non-operating losses and nonrecurring
non-operating gains, including any further charge relating to asbestos-related
liabilities, (2) net gains or losses in respect of dispositions of assets by the
Corporation other than in the ordinary course of business, (3) any dividends or
distributions paid to the holders of the Corporation's capital stock, (4) any
capital contributions made to the Corporation by its stockholders, (5) any
amounts received by the Corporation for shares of its capital stock (including
from the exercise of options or warrants to purchase
<PAGE>
capital stock or from the conversion into capital stock of convertible debt or
convertible preferred stock) and (6) any charges relating to amortization of
goodwill and other intangibles arising from the Acquisition divided by (y)
1,000,010. There shall be deducted from Book Value an amount equal to a 15% per
annum charge on the aggregate capital contributions made to the Corporation by
its stockholders during the period commencing October 1, 1997, and ending with
the date of determination (the "Period"), amounts received by the Corporation
during the Period for shares of its capital stock and, to the extent not
actually charged to the Corporation, on the outstanding principal amount of
loans and other advances made to the Corporation by affiliates (excluding
subsidiaries of the Corporation) during the Period. There shall be added to Book
Value a 15% per annum credit on the aggregate dividends or distributions made by
the Corporation to its stockholders during the Period and, to the extent not
actually charged to the borrower, on the outstanding principal amount of loans
and other advances made by the Corporation to affiliates (excluding subsidiaries
of the Corporation) during the Period. Any adjustments to Book Value (including
the 15% charge and credit referred to in the preceding two sentences) shall
include the tax effects, if any, associated therewith."; and
(ii) by adding the following at the end thereof:
"The 'Nashville Facility' shall mean the Nashville, Tennessee
manufacturing facility of GAF Fiberglass."
FIFTH: Written consent to the adoption of this amendment to the
Certificate of Designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by a duly authorized officer thereof on this 9th day of March 1998.
BUILDING MATERIALS CORPORATION OF AMERICA
By: /s/ Richard A. Weinberg
---------------------------------------------
Name: Richard A. Weinberg
Title: Senior Vice President and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
-----------------------------------
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 242 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
-----------------------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994. The
Corporation was formerly known as "GAF Newco Inc."
THIRD: The Certificate of Designations (the "Certificate of
Designations") of Series A Cumulative Redeemable Convertible Preferred Stock,
par value $.01 per share (the "Preferred Stock"), of the Corporation was filed
with the Secretary of State of the State of Delaware on August 27, 1996.
FOURTH: The defined term "Common Stock" in Section 2(f) of the
Certificate of Designation shall be amended and restated to read in its entirety
as follows:
"'Common Stock' means the Corporation's Class A common stock, par value
$.01 per share, and any securities or property into which the Common Stock may
be converted or exchanged pursuant to a recapitalization, stock split,
combination, reorganization, merger, exchange or similar transaction."
FIFTH: Written consent to the adoption of this amendment to the
Certificate of Designations has been given in accordance with Section 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed this fifteenth day of July, 1998.
BUILDING MATERIALS
CORPORATION OF AMERICA
By /s/ Richard A. Weinberg
------------------------------
Richard A. Weinberg
Executive Vice President,
Secretary and General
Counsel
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $ .01 PER SHARE
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
It is hereby certified that:
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994. The
Corporation was formerly known as GAF Newco Inc.
THIRD: The Certificate of Designations of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $ .01 per share (the
"Certificate of Designations") of the Corporation was filed with the Secretary
of State of the State of Delaware on August 27, 1996.
FOURTH: Section 1 of the Certificate of Designations is hereby amended
to read in its entirety as follows:
"1. Designation. The Preferred Stock created and authorized hereby
shall be designated as the "Series A Cumulative Redeemable Convertible
Preferred Stock" (the "Series A Preferred Stock"). The number of shares
of Series A Preferred Stock shall be Two Hundred Thousand (200,000).
The liquidation preference of the Series A Preferred Stock shall be
$100.00 per share (the "Liquidation Preference")."
FIFTH: Written consent to the adoption of this amendment to the
Certificate of Designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by a duly authorized officer thereof on this 1st day of October 1998.
/s/ Richard A. Weinberg
--------------------------------
RICHARD A. WEINBERG
Executive Vice President,
General Counsel & Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $ .01 PER SHARE
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
It is hereby certified that:
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on January 31, 1994. The
Corporation was formerly known as GAF Newco Inc.
THIRD: The Certificate of Designations of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $ .01 per share (the
"Certificate of Designations") of the Corporation was filed with the Secretary
of State of the State of Delaware on August 27, 1996.
FOURTH: Section 1 of the Certificate of Designations is hereby amended
to read in its entirety as follows:
"1. Designation. The Preferred Stock created and authorized hereby shall
be designated as the "Series A Cumulative Redeemable Convertible Preferred
Stock" (the "Series A Preferred Stock"). The number of shares of Series A
Preferred Stock shall be Four Hundred Thousand (400,000). The liquidation
preference of the Series A Preferred Stock shall be $100.00 per share (the
"Liquidation Preference")."
FIFTH: The defined term "Common Stock" in Section 2(f) of the
Certificate of Designations is hereby amended to read in its entirety as
follows:
" "Common Stock" means the Corporation's Class A common stock, par value
$.001 per share, and any securities or property into which the Common
Stock may be converted or exchanged pursuant to a recapitalization, stock
split, combination, reorganization, merger, exchange or similar
transaction."
SIXTH: Written consent to the adoption of this amendment to the
Certificate of Designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by a duly authorized officer thereof on this 28th day of September 1999.
/s/ Richard A. Weinberg
-----------------------------
RICHARD A. WEINBERG
Executive Vice President, General
Counsel & Secretary
<PAGE>
EXHIBIT 21
BUILDING MATERIALS CORPORATION OF AMERICA
-----------------------------------------
LIST OF SUBSIDIARIES
--------------------
STATE OF
COMPANY INCORPORATION
- ------- -------------
BMCA Goldsboro, Inc. Delaware
BMCA Insulation Products Inc. Delaware
BMCA Receivables Corporation Delaware
BMCA Sales (Barbados) Inc. Barbados
BMC Warehousing Inc. Delaware
Building Materials Investment Corporation Delaware
Building Materials Manufacturing Corporation Delaware
GAF Kalamazoo Acquisition Corp. Delaware
GAF Leatherback Corp. Delaware
GAF Materials Corporation (Canada) Delaware
GAF Premium Products Inc. Delaware
Wind Gap Real Property Acquisition Corp. Delaware
GAF Real Properties, Inc. Delaware
GAFTECH Corporation Delaware
LL Building Products Inc. Delaware
Ductwork Manufacturing Corporation Delaware
Pequannock Valley Claim Service Company, Inc. Delaware
South Ponca Realty Corp. Delaware
TOPCOAT, Inc. Delaware
U.S. Intec Holdings Inc. Delaware
U.S. Intec, Inc. Texas
Exterior Technologies Inc. Texas
Intec Marine Inc. Texas
USI Materials Inc. Delaware
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 24, 2000, included in this Form 10-K, into Building
Materials Corporation of America's previously filed Registration Statement on
Form S-8 File No. 333-60589.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999
ANNUAL REPORT ON FORM 10-K OF BUILDING MATERIALS CORPORATION OF AMERICA AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 927314
<NAME> BUILDING MATERIALS CORPORATION OF AMERICA
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0
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<TABLE> <S> <C>
<ARTICLE> 5
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<NAME> BUILDING MATERIALS CORPORATION OF AMERICA
<MULTIPLIER> 1,000
<S> <C>
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<TOTAL-REVENUES> 1,087,957
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 49,954
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<INCOME-TAX> 5,118
<INCOME-CONTINUING> 8,351
<DISCONTINUED> 0
<EXTRAORDINARY> (18,113)
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<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 927314
<NAME> BUILDING MATERIALS CORPORATION OF AMERICA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 12,924
<SECURITIES> 223,848
<RECEIVABLES> 13,643
<ALLOWANCES> 2,752
<INVENTORY> 72,739
<CURRENT-ASSETS> 416,239
<PP&E> 259,680
<DEPRECIATION> 64,126
<TOTAL-ASSETS> 829,677
<CURRENT-LIABILITIES> 133,131
<BONDS> 563,946
0
0
<COMMON> 1
<OTHER-SE> 89,543
<TOTAL-LIABILITY-AND-EQUITY> 829,677
<SALES> 944,629
<TOTAL-REVENUES> 944,629
<CGS> 682,855
<TOTAL-COSTS> 682,855
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,042
<INCOME-PRETAX> 45,650
<INCOME-TAX> 17,803
<INCOME-CONTINUING> 27,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,847
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
