<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
---------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD From _________________to ___________________.
Commission file number: 0-25634
-------
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 87-0365268
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
755 BOARDMAN-CANFIELD ROAD, BOARDMAN, OHIO 44512
(Address of principal executive offices)
(330) 965-9910
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common stock, $.001 par value, 13,942,211 shares outstanding at
March 31, 1999
<PAGE> 2
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
FORM 10-Q
INDEX
Part I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -December 31, 1998 and March 31, 1999
Consolidated Statements of Operations - Three months ended
March 31, 1998 and 1999
Consolidated Statements of Cash Flows - Three months ended
March 31, 1998 and 1999
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II -- OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
PART I --FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
American Architectural Products Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
December 31 March 31
1998 1999
------------- --------------
<S> <C> <C>
Assets
Current Assets
Cash $ 88,000 $ 847,000
Accounts receivable 28,501,000 33,405,000
Inventories 32,587,000 33,702,000
Prepaid expenses and other current assets 1,078,000 3,003,000
------------- -------------
Total Current Assets 62,254,000 70,957,000
Other Assets
Property and equipment, net 80,553,000 80,263,000
Cost in excess of net assets acquired, net 31,362,000 31,161,000
Deferred financing costs, net 6,485,000 6,399,000
Deposits and other assets 6,405,000 7,303,000
------------- -------------
Total Noncurrent Assets 124,805,000 125,126,000
Total Assets $ 187,059,000 $ 196,083,000
============= =============
Liabilities & Stockholders' Equity
Current Liabilities
Revolving line-of-credit $ 12,447,000 $ 20,254,000
Accounts payable - trade 17,394,000 18,576,000
Accrued expenses 11,860,000 17,166,000
Current portion of accrued warranty obligations 2,804,000 2,811,000
Current portion of capital lease obligations 822,000 733,000
Current maturities of long-term debt - 7,500,000
Other current liabilities 1,972,000 1,972,000
------------- -------------
Total Current Liabilities 47,299,000 69,012,000
Long-Term Liabilities
Long-term debt, less current portion 132,500,000 125,000,000
Long-term capital lease obligations, less current portion 833,000 699,000
Accrued warranty obligations, less current portion 3,337,000 3,258,000
Other liabilities 4,519,000 2,688,000
------------- -------------
Total Long-Term Liabilities 141,189,000 131,645,000
------------- -------------
Total Liabilities 188,488,000 200,657,000
Stockholders' Equity:
Common stock, $.001 par, authorized 100,000,000 shares; outstanding
13,533,004 shares and 13,942,211 shares
at December 31, 1998 and March 31, 1999, respectively 14,000 14,000
Additional paid in capital 8,144,000 9,143,000
Accumulated deficit (9,587,000) (13,731,000)
------------- -------------
Total Stockholders' Equity (1,429,000) (4,574,000)
Total Liabilities & Stockholders' Equity $ 187,059,000 $ 196,083,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 4
American Architectural Products Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Unaudited)
For the Three
Months Ended March 31
1998 1999
---------------------------------
<S> <C> <C>
Net sales $ 45,608,000 $ 72,064,000
Cost of sales 36,494,000 58,997,000
---------------------------------
Gross profit 9,114,000 13,067,000
Selling expense 4,484,000 6,822,000
General and administrative expenses 4,918,000 6,002,000
---------------------------------
Income (loss) from operations (288,000) 243,000
Interest expense, net 3,323,000 4,369,000
Other expense 92,000 18,000
---------------------------------
Loss before income taxes (3,703,000) (4,144,000)
Income tax benefit (1,094,000) -
---------------------------------
Net loss $ (2,609,000) $ (4,144,000)
=================================
Net loss per share, basic and diluted $ (0.19) $ (0.30)
=================================
Weighted average shares of common
stock outstanding, basic and diluted 13,458,479 13,696,687
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 5
American Architectural Products Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
For the Three
Months Ended March 31
1998 1999
------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,609,000) $ (4,144,000)
Adjustments to reconcile net loss to cash from
operating activities
Depreciation 1,106,000 2,159,000
Amortization 471,000 592,000
Loss on sale of fixed assets - 32,000
Changes in operating assets and liabilities:
Accounts receivable, net (1,782,000) (4,904,000)
Inventories (500,000) (1,115,000)
Prepaid expenses and other current assets (315,000) (1,925,000)
Accounts payable 332,000 1,182,000
Accrued expenses 1,173,000 5,234,000
Other 250,000 (1,252,000)
------------------------------------
Net cash used in operating activities (1,874,000) (4,141,000)
------------------------------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (14,420,000) (415,000)
Sale of business 1,186,000 -
Purchase of property and equipment (1,319,000) (2,152,000)
------------------------------------
Net cash used in investing activities (14,553,000) (2,567,000)
------------------------------------
Cash flows from financing activities:
Net borrowings on line-of-credit - 7,807,000
Payments on long-term debt (175,000) -
Payments for financing costs - (117,000)
Capital lease payments (112,000) (223,000)
------------------------------------
Net cash (used in) provided by financing activities (287,000) 7,467,000
------------------------------------
Net (decrease) increase in cash and cash equivalents (16,714,000) 759,000
Cash and cash equivalents, beginning balance 40,132,000 88,000
------------------------------------
Cash and cash equivalents, ending balance $ 23,418,000 $ 847,000
====================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 6
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
American Architectural Products Corporation (the "Company") is principally
engaged in the business of manufacturing residential, commercial and
architectural windows and doors through its wholly owned subsidiaries Eagle &
Taylor Company, Forte, Inc., Western Insulated Glass, Co., Thermetic Glass,
Inc., Binnings Building Products, Inc., Danvid Window Company, American
Glassmith, Inc., Modern Window Corporation, VinylSource, Inc., Denver Window
Corporation and American Weather-Seal Company ("Weather-Seal").
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for the fair presentation of
financial position and results of operations have been made. Operating results
for interim periods are not necessarily indicative of results that may be
expected for the year ended December 31, 1999. The information included in this
Form 10-Q should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the financial
statements and notes thereto of the Company for the year ended December 31, 1998
included in the annual report on Form 10-K.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
2. Inventories
The components of inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------------- ------------------
(in thousands)
<S> <C> <C>
Raw materials $ 17,368 $ 17,761
Work-in-process 3,495 3,662
Finished goods 11,724 12,279
------------------- ------------------
$ 32,587 $ 33,702
=================== ==================
</TABLE>
<PAGE> 7
3. Net Loss Per Share
Basic loss per common share amounts were computed by dividing net loss by the
weighted average number of common shares outstanding. The effect of common stock
options and warrants are not dilutive and therefore, the Company's diluted loss
per share would not differ. A summary of the basic and diluted loss per share
amounts for the three months ended March 31 is as follows:
<TABLE>
<CAPTION>
1998 1999
------------------------- ----------------------
<S> <C> <C>
Net loss $ (2,609,000) $ (4,144,000)
Shares 13,458,479 13,696,687
Basic and diluted loss per share $ (0.19) $ (0.30)
</TABLE>
The weighted average number of common shares outstanding for the three months
ended March 31, 1998 includes additional common shares issued in January 1999 in
connection with the Thermetic acquisition.
4. Comprehensive Income
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. For the three
months ended March 31, 1999, comprehensive income for the Company did not differ
from net income.
5. Income Taxes
The Company established a full valuation allowance on its income tax benefit for
the three months ended March 31, 1999.
6. Segment Information
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------------------------------------------------------------
1998 1999
-------------------------------------- ---------------------------------------
Residential Commercial Extrusion Residential Commercial Extrusion
------------ ------------- ----------- ------------- ------------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $ 41,649 $ 446 $ 3,513 $ 59,278 $ 766 $ 12,020
Intersegment revenues 351 -- -- 997 1 387
Operating profit (loss) 1,633 (452) 71 2,651 (535) 281
Total assets 105,317 11,356 16,601 140,541 12,227 37,136
</TABLE>
A reconciliation of combined operating profit for the residential, commercial
and extrusion segments to consolidated loss before income taxes is as follows:
<PAGE> 8
<TABLE>
<CAPTION>
Three months ended March 31
------------------------------------------------
1998 1999
---------------------- ---------------------
(in thousands)
<S> <C> <C>
Total profit from operating segments $ 1,252 $ 2,397
Less:
Corporate & eliminations 1,540 2,154
Other expense 92 18
Interest expense, net 3,323 4,369
====================== =====================
Loss before income taxes $ (3,703) $ (4,144)
====================== =====================
</TABLE>
7. Pending Acquisitions
In 1998, the Company entered into agreements to acquire TSG Industries, Inc.
("TSG"), NuSash of Indianapolis, Inc. and Jarar Window Systems, Inc. (together,
"NuSash"), and RC Aluminum Industries, Inc. ("RC Aluminum"), (collectively, the
"Pending Acquisitions"). TSG is a fabricator and installer of engineered glazing
systems, including glass windows, walls and doors and aluminum curtain walls for
large non-residential construction projects. NuSash distributes Weather-Seal and
other vinyl replacement windows for residential use. RC Aluminum manufactures a
wide range of non-residential fenestration products including windows, sliding
glass doors, railings and curtain walls and specializes in prestigious high-rise
development projects.
The total purchase price of the Pending Acquisitions is estimated to be $48.7
million. The cash portion of this purchase price approximates $44.3 million and
is expected to be funded through a financing transaction. The remainder of the
purchase price is expected to be financed through the issuance of stock. The
Pending Acquisitions are subject to various closing conditions, including the
obtaining of acceptable financing and the satisfactory completion of the
Company's due diligence review. There can be no assurance that such conditions
will be satisfied or that any or all of the Pending Acquisitions will be
consummated.
8. Subsequent Event
In the second quarter of 1999, the Company's revolving credit facility was
amended to increase the revolving loan commitment from $25 million to $35
million through August 12, 1999 to assist the Company with seasonal working
capital needs. Additionally, terms regarding certain restrictive covenants were
amended to adjust minimum availability, permitted investments and sale/leaseback
transactions.
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Results of Operations
Net Sales. Net sales for the three months ended March 31, 1999 were $72.1
million, a $26.5 million increase over the three months ended March 31, 1998.
Net sales in the residential segment increased approximately $17.2 million over
the comparable period of the prior year due in part to the inclusion of $7.4
million in sales for acquisitions not included in the prior year. Additionally,
residential sales of aluminum and wood and aluminum-clad wood windows and doors
increased 30% over the prior year period. The growth in this business is the
result of higher volumes generated by stronger customer relationships, new
customer additions and an improved product mix offering. Sales in the commercial
segment increased $0.3 million over the comparable period of 1998. Extrusion
sales were $12.4 million for the three months ended March 31, 1999, an increase
of approximately $8.9 million over the comparable period of the prior year.
Approximately $7.2 million of this increase is from acquired companies not
included in the comparable prior year period.
Gross Profit. Gross profit increased $4.0 million to $13.1 million for the three
months ended March 31, 1999 from $9.1 million for the three months ended March
31, 1998. The residential segments accounted for $3.1 million of the increase.
Acquisitions represented $0.5 million of this increase with the remaining
increase due to higher sales volumes. The extrusion segment increased $0.7
million, primarily related to acquisitions. Gross margin for the three months
ended March 31, 1999 was 18.1% compared to 20.0% for the three months ended
March 31, 1998. The decrease in gross margin reflects the lower margins
associated with the companies acquired in 1998. Although the Company has
achieved improved margins for the 1998 acquisitions in post-acquisition
operations, their margins have not yet reached the margins of the Company's core
businesses.
Selling, General & Administrative Expenses. Selling, general & administrative
expenses for the three months ended March 31, 1999 were $12.8 million compared
to $9.4 million for the comparable period in 1998. Increased selling, general
and administrative costs in the residential business account for approximately
$2.1 million of the increase, with $0.9 million related to acquired companies
not included for a comparable period in 1998 while the remainder is related to
the increased sales volume. The extrusion business experienced increased
selling, general & administrative costs of $0.5 million over the prior period,
with $0.4 million related to acquisitions not included for a comparable period
in 1998. Additionally, approximately $0.6 million of the total change relates to
increased corporate costs.
Income (Loss) from Operations. Income from operations for the three months ended
March 31, 1999 was $0.2 million, compared to loss from operations of $0.3
million for the three months ended March 31, 1998. The increase was generated
primarily from the residential businesses, offset by increased losses from
operations in the commercial business and incremental costs at the corporate
level.
Interest Expense. Net interest expense increased from $3.3 million for the three
months ended March 31, 1998 to $4.4 million for the three months ended March 31,
1999. Included in the period ended March 31, 1999 is interest related to amounts
outstanding under the $25 million credit facility and the note payable to the
former owners of Weather-Seal, which were not included for the
<PAGE> 10
comparable period in 1998.
Income Taxes. The Company established a full valuation allowance on its income
tax benefit recorded for the three months ended March 31, 1999. An income tax
benefit of $1.1 million was recorded on a loss before taxes of $3.7 million for
the three months ended March 31, 1998.
Net Loss. The Company's net loss increased $1.5 million to $4.1 million in 1999
from $2.6 million in 1998. The increase in net loss is attributable to the
factors cited above.
Liquidity and Capital Resources
Net cash used in operating activities for the three months ended March 31,
1999 was $4.1 million compared to $1.9 million for the three months ended
March 31, 1998. The increase over the prior period is impacted by increases
in working capital accounts to support the higher sales volume during the
first three months of 1999.
Net cash used in investing activities amounted to $2.6 million for the three
months ended March 31, 1999 and resulted primarily from capital expenditures for
manufacturing equipment and computer software and hardware. Net cash used in
investing activities for the three months ended March 31, 1998 was $14.6 million
of which approximately $14.4 million related to the acquisition of a business
and $1.3 million for capital expenditures, offset by $1.2 million in proceeds
from the sale of a business.
Cash flows from financing activities for the three months ended March 31, 1999
were $7.5 million and consisted primarily of $7.8 million in net borrowings on
the Company's line-of-credit for capital expenditures and working capital needs.
This was offset by payments on capital leases of $0.2 million and payments for
deferred financing costs of $0.1 million. Cash used in financing activities for
the three months ended March 31, 1998 was $0.3 million and was comprised of
payments on long-term debt and capital leases.
In the second quarter of 1999, the Company's revolving credit facility was
amended to increase the revolving loan commitment from $25 million to $35
million through August 12, 1999 to assist the Company with seasonal working
capital needs. Additionally, terms regarding certain restrictive covenants were
amended to adjust minimum availability, permitted investments and sale/leaseback
transactions.
The Company believes that cash flow from operations, together with the revolving
credit facility and other financing arrangements, will be adequate to meet its
anticipated requirements for working capital, capital expenditures and debt
service requirements. However, the Pending Acquisitions described above will
require additional external financing.
Seasonality
The Company's business is seasonal since a large portion of its revenues are
driven by residential construction. Inclement weather during the winter months,
particularly in the northeast and midwest regions in the United States, usually
reduces the level of building and remodeling activity in both the home
improvement and new construction markets and, accordingly, has an adverse impact
on demand for fenestration products. Traditionally, the Company's lower sales
levels occur in the first and fourth quarters, which is generally consistent
with the seasonality of the building products industry. Because a high
percentage of manufacturing overhead and operating expenses are relatively fixed
throughout the year, operating income has historically been lower in quarters
with lower sales.
<PAGE> 11
Year 2000
Many existing computer programs use only two digits to identify a year. These
programs were designed and developed without considering the impact of the
upcoming century change. Moreover, these programs often process financial and
other data that, based on the programs' inability to distinguish between the
Year 2000 and other century-end dates, could misreport or misinterpret and
report significant errors. If not corrected, many computer applications could
fail when processing data related to the Year 2000.
The Company's analysis of the Year 2000 implications includes (i) the Company's
information technology (IT) systems such as software, hardware, operating
systems, voice and data communication, (ii) the Company's non-information
technology (non-IT) systems or embedded technology such as microprocessors
contained in various equipment, safety systems, facilities and utilities, and
(iii) the readiness of key third party suppliers.
The Company is continually assessing the impact of the Year 2000 issue and has
or intends to modify portions of its hardware and software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company has reviewed, and will continue to review, each
operating unit for the appropriate information system enhancement, with respect
to both the Year 2000 issue as well as strategic system upgrades. For acquired
businesses, this assessment begins during the acquisition process as part of the
Company's due diligence analysis.
The Company's Year 2000 program is being implemented in four phases:
(1) Inventory - Identification and validation of all systems, both IT and
non-IT, that contain microprocessors and could be affected by the Year
2000. This process was completed in the first quarter of 1999, however,
the Company continually assesses the impact of the Year 2000 issue.
(2) Evaluation - This phase consists of determining what systems are "mission
critical" and have the potential for business disruption if lost, and what
systems are Year 2000 compliant. This phase also consists of key customer
and supplier contact. Survey letters and Year 2000 strategy requests are
being distributed to "mission critical" suppliers with over 60% of the
Company's purchasing base targeted for contact. Once all of the survey
responses are returned, assessments will be made as to which suppliers are
potentially at risk. This information will be used during the development
of a contingency plan for each business unit and is expected to be
completed by mid-1999.
(3) Remediation, Implementation and Testing - The Company is making
modifications to those systems which have a Year 2000 issue. The
remediation for these select systems is not significant to the overall
operations of the Company. In addition to the Year 2000 compliance issue,
and to allow the Company to achieve its overall operating strategy,
management intends to enhance information technology by implementing an
enterprise resource planning (ERP) system for those operating units that
require significant upgrades. Each operating unit that is targeted for
this strategic upgrade was prioritized for implementation. This
prioritized list of operating units was then segregated into multiple
installation phases, with each implementation
<PAGE> 12
phase having a specific implementation timeline. The Company believes that
the first phase of implementation, including Year 2000 remediation and
testing, will be finished by September 1999. To date, the Company has
incurred $0.7 million of costs related to the ERP system and estimates
costs to complete to be $1.8 million, a decrease of $200,000 from the
previous estimate. In addition to addressing the Year 2000 issue, this
management information system is expected to provide additional benefits
well beyond Year 2000 compliance including the enhancement of the
Company's overall information technology capabilities. As a result of the
new ERP installation, certain modules of the present systems are being
modified as a component of the installation. The cost of this modification
is not significant to the operations of the Company and is expected to be
approximately $110,000, with $87,000 incurred through March 31, 1999.
(4) Contingency planning - Contingency planning will be developed following
receipt by the Company of its business partners' surveys and Year 2000
strategy requests. These plans may include, but are not limited to,
increases in inventory of finished goods, raw material or both, backup
regional suppliers and secondary trucking companies. The Company will
undertake reasonable efforts to determine the readiness of its business
partners; however, no assurance can be given to the validity or
reliability of the information obtained.
The Company believes the worst case scenario for suppliers would be that of some
localized disruption of services which could affect certain operating units for
a short period. While the Company's contingency plan is still being formulated,
management believes that the response will be flexible, real-time and responsive
to specific problems as they arise.
The total incremental spending by the Company relating to the Year 2000 issue is
not expected to be material to operations, liquidity or capital resources. To
date, the Company has incurred approximately $110,000 of costs and expects to
incur an additional $170,000 during the remainder of 1999 for the Year 2000
issues. The Company did not incur any expenditures related to the Year 2000
issue before 1998. This amount is exclusive of the Company's expenditures
related to the aforementioned ERP system. These costs are also exclusive of any
costs associated with any contingency plans. Implementation of the Company's
Year 2000 program is an ongoing process. Consequently, the costs estimated above
and completion dates for the various components of the plan are subject to
change.
Developments may occur that could affect the Company's estimates of the amount
of time and costs necessary to modify and test its systems for Year 2000
compliance. These developments include, but are not limited to, (i) the
availability and cost of personnel trained in this area, (ii) the ability to
locate and correct all relevant computer codes and equipment and (iii) the Year
2000 compliance success of key suppliers.
While the Company believes its planning efforts are adequate to address its Year
2000 concerns, there is still the uncertainty about the broader scope of the
Year 2000 issue as it may affect the Company and third parties that are critical
to its operations. For example, the lack of readiness by electrical and water
utilities, financial institutions, government agencies or other providers of
general infrastructure could in some geographic areas pose impediments to our
ability to carry on normal operations in the area or areas so affected.
<PAGE> 13
The Company believes that its on-going review is adequate to address its Year
2000 concerns and that the cost of its Year 2000 initiatives has not had and is
not expected to have, a material adverse effect on the Company's operating
results or financial condition. However, there can be no assurance that the
Company's systems, nor the systems of other companies with whom the Company
conducts business, will be Year 2000 compliant prior to December 31, 1999 or
that failure of any such system will not have a material adverse effect on the
Company's business, operating results and financial condition.
Forward-Looking Information
Certain statements in this Section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect the
Company's future financial position and operating results. Such statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The terms "expect," "anticipate," "intend," and "believe"
and similar words or expressions are intended to identify forward-looking
statements. These statements speak only as of the date of this report. The
statements are based on current expectations, are inherently uncertain, are
subject to risks, and should be viewed with caution. Actual results and
experience may differ materially from the forward-looking statements as a result
of many factors, including changes in economic conditions in the markets served
by the Company, increasing competition, fluctuations in raw materials and energy
prices, and other unanticipated events and conditions. It is not possible to
forsee or identify all such factors. The Company makes no commitment to update
any forward-looking statement or to disclose any facts, events or circumstances
after the date hereof that may affect the accuracy of any forward-looking
statement.
<PAGE> 14
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by changes in short term interest rates
related to its line of credit facility and a promissory note to the former
parent of an acquired company. If the market rates for short term borrowings
increased by 1%, the impact would be an interest expense increase of $70,000,
with a corresponding decrease of income before taxes of the same amount, for the
three months ended March 31, 1999. The amount was determined by considering the
impact of hypothetical interest rates on the Company's borrowing cost and
quarter-end debt balances by category.
<PAGE> 15
PART II -- OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.12d AMENDMENT NO. 4 TO CREDIT AGREEMENT dated as of April 14, 1999,
among American Architectural Products Corporation, a Delaware
corporation, Eagle & Taylor Company, a Delaware corporation.
Forte, Inc., an Ohio corporation, Western Insulated Glass, Co., an
Arizona corporation, Thermetic Glass, Inc., a Delaware
corporation, Binnings Building Products, Inc., a Delaware
corporation, Danvid Window Company, a Delaware corporation. Modern
Window Acquisition Corporation, a Delaware corporation, American
Glassmith Acquisition Corporation, a Delaware corporation,
VinylSource, Inc.,' a Delaware corporation, Weather-Seal
Acquisition Corporation, - a Delaware corporation, Eagle Window &
Door Center, Inc., a Delaware corporation, Denver Window
Acquisition Corporation, a Delaware corporation, AAPC One
Acquisition Corporation, a Delaware corporation, and AAPC Two
Acquisition Corporation, a Delaware corporation, the institutions
party hereto, and BankBoston, N.A., as agent.
10.12e AMENDMENT NO. 5 TO CREDIT AGREEMENT dated as of May 13, 1999,
among American Architectural Products Corporation, a Delaware
corporation, Eagle & Taylor Company, a Delaware corporation,
Forte, Inc., an Ohio corporation, Western Insulated Glass, Co., an
Arizona corporation, Thermetic Glass, Inc., a Delaware
corporation, Binnings Building Products, Inc., a Delaware
corporation, Danvid Window Company, a Delaware corporation, Modern
Window Corporation, formerly known as Modern Window Acquisition
Corporation, a Delaware corporation, American Glassmith, Inc.,
formerly known as American Glassmith Acquisition Corporation, a
Delaware corporation, VinylSource, Inc., a Delaware corporation,
American Weather-Seal Company, formerly known as Weather-Seal
Acquisition Corporation, a Delaware corporation, Eagle Window &
Door Center, Inc., a Delaware corporation, Denver Window Company,
formerly known as Denver Window Acquisition Corporation, a
Delaware corporation, AAPC One Acquisition Corporation, a Delaware
corporation, and AAPC Two Acquisition Corporation, a Delaware
corporation, the institutions party to the Credit Agreement, and
BankBoston, N.A as agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the period.
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
Date: May 14, 1999 /s/ Frank J. Amedia
-----------------------
Frank J. Amedia
President & Chief Executive Officer
/s/ Richard L. Kovach
-------------------------
Richard L. Kovach
Chief Financial Officer
<PAGE> 1
Exhibit 10.12d
AMENDMENT NO. 4
TO
CREDIT AGREEMENT
AMENDMENT NO. 4 TO CREDIT AGREEMENT (the "AMENDMENT"), dated as of
April 14, 1999, among American Architectural Products Corporation, a Delaware
corporation, Eagle & Taylor Company, a Delaware corporation, Forte, Inc., an
Ohio corporation, Western Insulated Glass, Co., an Arizona corporation,
Thermetic Glass, Inc., a Delaware corporation, Binnings Building Products, Inc.,
a Delaware corporation, Danvid Window Company, a Delaware corporation. Modern
Window Acquisition Corporation, a Delaware corporation, American Glassmith
Acquisition Corporation, a Delaware corporation, VinylSource, Inc., a Delaware
corporation, Weather-Seal Acquisition Corporation, a Delaware corporation, Eagle
Window & Door Center, Inc., a Delaware corporation, Denver Window Acquisition
Corporation, a Delaware corporation, AAPC One Acquisition Corporation, a
Delaware corporation, and AAPC Two Acquisition Corporation, a Delaware
corporation (the "BORROWERS"), the institutions party hereto (the "LENDERS"),
and BankBoston, N.A., in its capacity as contractual representative for itself
and the other Lenders (the "AGENT") under that certain Credit Agreement, dated
as of June 9, 1998, as amended, by and among the Borrowers, the Lenders and the
Agent (the "CREDIT AGREEMENT"). Defined terms used herein and not otherwise
defined herein shall have the meaning given to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agent have entered into the
Credit Agreement; and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed to amend
the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrowers, the Lenders and the Agent agree as
follows:
1. Amendment to the Credit Agreement. Effective as of the date first
above written and subject to the execution of this Amendment by the parties
hereto and the satisfaction of the conditions precedent set forth in Section 2
below, the Credit Agreement shall be and hereby is amended as follows:
1.1. Section 7.3(S) is hereby amended and restated as follows:
"(S) Limitation on Revolving Credit Availability. The Borrowers shall
not permit the Revolving Credit Availability to be less than Ten
Million Dollars ($10,000,000.00) between April 30, 1999 and June 1,
1999, and, after June I, 1999, at any time between April 15 and June I
or between October 15 and December 1 of any year thereafter.
<PAGE> 2
2. Conditions Precedent. This Amendment shall become effective as of
the date above written, if, and only if, the Agent has received duly executed
originals of this Amendment from the Borrowers, the Required Lenders and the
Agent.
3. Representations and Warranties of the Borrowers. The Borrowers
hereby represent and warrant as follows:
(a) This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrowers hereby
reaffirm all representations and warranties made in the Credit Agreement, and to
the extent the same are not amended hereby, agree that all such representations
and warranties shall be deemed to have been remade as of the date of delivery of
this Amendment, unless and to the extent that any such representation and
warranty is stated to relate solely to an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date.
4. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness of Section I hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) The Credit Agreement, as amended hereby, and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.
(c) Except as expressly provided herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Agent or the Lenders, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.
6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
7. Counterparts. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
on the date first above written.
AMERICAN ARCHITECTURAL BANKBOSTON, N.A., individually
PRODUCTS CORPORATION and as Agent
EAGLE AND TAYLOR COMPANY By: /s/ W.J. Sherald
--------------------------
Title: Vice President
FORTE, INC.
WESTERN INSULATED GLASS, CO.
THERMETIC GLASS, INC.
BINNINGS BUILDING PRODUCTS, INC.
DANVID WINDOW COMPANY
MODERN WINDOW ACQUISITION
CORPORATION
AMERICAN GLASSMITH ACQUISITION
CORPORATION
VINYLSOURCE, INC.
WEATHER-SEAL ACQUISITION
CORPORATION
EAGLE WINDOW & DOOR CENTER, INC.
DENVER WINDOW ACQUISITION
CORPORATION
AAPC ONE ACQUISITION CORPORATION
AAPC TWO ACQUISITION CORPORATION
By: /s/ Richard L. Kovach
--------------------------------------------
(on behalf of the above-listed parties)
Name: Richard L. Kovach
Title: CFO
-3-
<PAGE> 1
Exhibit 10.12e
EXECUTION COPY
AMENDMENT NO. 5
TO
CREDIT AGREEMENT
AMENDMENT NO. 5 TO CREDIT AGREEMENT (the "AMENDMENT"), dated as of May
13, 1999, among American Architectural Products Corporation, a Delaware
corporation, Eagle & Taylor Company, a Delaware corporation, Forte, Inc., an
Ohio corporation, Western Insulated Glass, Co., an Arizona corporation,
Thermetic Glass, Inc., a Delaware corporation, Binnings Building Products, Inc.,
a Delaware corporation, Danvid Window Company, a Delaware corporation, Modern
Window Corporation, formerly known as Modern Window Acquisition Corporation, a
Delaware corporation, American Glassmith, Inc., formerly known as American
Glassmith Acquisition Corporation, a Delaware corporation, VinylSource, Inc., a
Delaware corporation, American Weather-Seal Company, formerly known as
Weather-Seal Acquisition Corporation, a Delaware corporation, Eagle Window &
Door Center, Inc., a Delaware corporation, Denver Window Company, formerly known
as Denver Window Acquisition Corporation, a Delaware corporation, AAPC One
Acquisition Corporation, a Delaware corporation, and AAPC Two Acquisition
Corporation, a Delaware corporation (the "BORROWERS"), the institutions party to
the Credit Agreement (the "LENDERS"), and BankBoston, N.A., in its capacity as
contractual representative for itself and the other Lenders (the "AGENT") under
that certain Credit Agreement, dated as of June 9, 1998, as amended, by and
among the Borrowers, the Lenders and the Agent (the "CREDIT AGREEMENT"). Defined
terms used herein and not otherwise defined herein shall have the meaning given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agent have entered into the
Credit Agreement; and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed to amend
the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrowers, the Lenders and the Agent agree as
follows:
1. Amendment to the Credit Agreement. Effective as of the date first
above written, unless otherwise specified herein, and subject to the execution
of this Amendment by the parties hereto and the satisfaction of the conditions
precedent set forth in Section 2 below, the Credit Agreement shall be and hereby
is amended as follows:
1.1 Section 1.1 is hereby amended as follows:
(a) The definition of "Aggregate Revolving Loan Commitment" is hereby
amended and restated as follows:
<PAGE> 2
"AGGREGATE REVOLVING LOAN COMMITMENT means the aggregate of the
Revolving Loan Commitments of all the Lenders, as reduced from time to
time pursuant to the terms hereof. The initial Aggregate Revolving Loan
Commitment is Twenty-Five Million and 00/100 Dollars ($25,000,000.00);
provided, however, that the Aggregate Revolving Loan Commitment for the
period beginning May 13, 1999 and ending August 13, 1999 shall equal
Thirty-Five Million and 00/100 Dollars ($35,000,000.00).
(b) The following are hereby inserted alphabetically into Section 1.1:
"BANKBOSTON LEASING RESERVE" means $1,800,000."
"ELIGIBLE BANKBOSTON LEASING RESERVE" means an amount equal to fifty
percent (50%) of the aggregate dollar amount of leases entered into
between BankBoston Leasing and the Borrowers; provided, however, that,
for purposes of this Agreement, the Eligible BankBoston Leasing Reserve
shall not exceed the BankBoston Leasing Reserve."
(c) The definition of "Borrowing Base" is hereby amended to insert
after the phrase "eighty-five percent (85%) of the Gross Amount of the
Borrowers' Eligible Receivables" the phrase "minus the Eligible
BankBoston Leasing Reserve,"
(d) The definition of "Revolving Loan Commitment" is hereby amended to
delete therefrom the period contained at the end thereof and substitute
therefor the following:
"; provided, however, that, during the period beginning May 13, 1999
and ending August 13, 1999, notwithstanding the amounts set forth on
Exhibit A or on any such assignment and acceptance agreement, the
Revolving Loan Commitments in the aggregate shall equal $35,000,000 and
the Lenders shall share such increase in the Aggregate Revolving Loan
Commitment equally."
1.2 Section 7.3(C) is hereby amended to insert therein the following
clause (v):
"(v) Liens in favor of BankBoston Leasing securing assets equaling
$1,800,000 in value."
1.3 Section 7.3(D)(vii) is hereby amended and restated as follows and
shall be deemed to have been effective as of April 14, 1999:
"(vii) Investments in TM Window and Door Company not exceeding
$3,850,000 in the aggregate; provided, however, that such Investments
shall be reduced to $3,350,000 in the aggregate by September 30, 1999."
-2-
<PAGE> 3
1.4 Section 7.3(J) is hereby amended to insert immediately at the end
thereof the following:
"provided, however, that American Weather-Seal Company shall be allowed
to enter into such a lease for its manufacturing facilities, excluding
all personal property located therein, in Ottawa, Ohio and such lease
shall not constitute Indebtedness for purposes of the limitation set
forth in Section 7.3(a)(vii)(4); provided further, that one-hundred
percent (100%) of the proceeds resulting from the aforementioned
transaction, aside from costs and commissions related to the closing of
such transaction, are applied to reduce the outstanding Obligations
under this Agreement."
1.5 Section 7.3(S) is hereby amended and restated as follows and shall
be deemed to have been effective as of April 14, 1999:
"(S) Limitation on Revolving Credit Availability. The Borrowers shall
not permit the Revolving Credit Availability to be less than (i) Three
Million Five Hundred Thousand Dollars ($3,500,000.00) between April 30,
1999 and May 17, 1999, and (ii) Ten Million Dollars ($10,000,000)
between May 18, 1999 through June 1, 1999 and at any time between April
15 and June 1 or between October 15 and December 1 of any year
thereafter.
2. Conditions Precedent. This Amendment shall become effective as of
the date above written, if, and only if, the Agent has received (i) an amendment
fee, on behalf of the Lenders which execute this Amendment, equal to $62,500 in
same day funds, (ii) duly executed originals of this Amendment from the
Borrowers, the Required Lenders and the Agent, (iii) evidence that all amounts
due and payable to Sidley & Austin for services rendered in connection with the
Credit Agreement and all Amendments thereto have been paid in full in same day
funds, (iv) evidence from the Borrowers or the United States Trust Company of
New York that the holders of the Senior Notes have consented, under the terms of
the Senior Notes, to the increase in the Aggregate Revolving Loan Commitment set
forth herein, and (v) copies of amended and restated promissory notes executed
by the Borrowers.
3. Representations and Warranties of the Borrowers. The Borrowers
hereby represent and warrant as follows:
(a) This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Borrowers hereby
reaffirm all representations and warranties made in the Credit Agreement, and to
the extent the same are not amended hereby, agree that all such
-3-
<PAGE> 4
representations and warranties shall be deemed to have been remade as of the
date of delivery of this Amendment, unless and to the extent that any such
representation and warranty is stated to relate solely to an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date.
4. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Credit Agreement,"
"hereunder," "hereof," "herein" or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) The Credit Agreement, as amended hereby, and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.
(c) Except as expressly provided herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Agent or the Lenders, nor constitute a waiver of any
provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.
6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
7. Counterparts. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-4-
<PAGE> 5
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
on the date first above written.
AMERICAN ARCHITECTURAL BANKBOSTON, N.A., individually
PRODUCTS CORPORATION and as Agent
EAGLE AND TAYLOR COMPANY By: /s/ W. J. Sherald
--------------------------
Title: Vice President
FORTE, INC.
WESTERN INSULATED GLASS, CO.
THERMETIC GLASS, INC.
BINNINGS BUILDING PRODUCTS, INC.
DANVID WINDOW COMPANY
MODERN WINDOW CORPORATION
AMERICAN GLASSMITH, INC.
VINYLSOURCE, INC.
AMERICAN WEATHER-SEAL
COMPANY
EAGLE WINDOW & DOOR CENTER, INC.
DENVER WINDOW COMPANY
AAPC ONE ACQUISITION CORPORATION
AAPC TWO ACQUISITION CORPORATION
By: /s/ Frank J. Amedia
------------------------------
(on behalf of the above-listed parties)
Name: Frank J. Amedia
Title: President & CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN ARCHITECTURAL PRODUCTS CORPORATION
AS OF MARCH 31, 1999 AND FOR THE THREE MONTHS ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,791,000
<SECURITIES> 0
<RECEIVABLES> 34,189,000
<ALLOWANCES> 1,070,000
<INVENTORY> 33,702,000
<CURRENT-ASSETS> 70,957,000
<PP&E> 92,893,000
<DEPRECIATION> 12,630,000
<TOTAL-ASSETS> 196,083,000
<CURRENT-LIABILITIES> 69,012,000
<BONDS> 125,000,000
0
0
<COMMON> 14,000
<OTHER-SE> (4,588,000)
<TOTAL-LIABILITY-AND-EQUITY> 196,083,000
<SALES> 72,064,000
<TOTAL-REVENUES> 72,064,000
<CGS> 58,997,000
<TOTAL-COSTS> 58,997,000
<OTHER-EXPENSES> 12,824,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,369,000
<INCOME-PRETAX> (4,144,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,144,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,144,000)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
