UNITED STATES
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 June 29, 2003
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-81808
BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
Delaware 22-3276290
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1361 Alps Road, Wayne, New Jersey 07470
(Address of Principal Executive Offices) (Zip Code)
(973) 628-3000
(Registrant's telephone number, including area code)
None
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
See Table of Additional Registrants Below.
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 / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES / / NO /X/
As of August 13, 2003, 1,015,010 shares of Class A Common Stock, $.001 par
value, and 15,000 shares of Class B Common Stock, $.001 par value, of the
registrant were outstanding. There is no trading market for the common stock of
the registrant. As of August 13, 2003, each of the additional registrants had
the number of shares outstanding which is shown on the table below. There is no
trading market for the common stock of the additional registrants. As of August
13, 2003, no shares of the registrant or the additional registrants were held by
non-affiliates.
ADDITIONAL REGISTRANTS
State or other Address, including zip code and
jurisdiction of Commission File No./ telephone number, including area
Exact name of registrant as incorporation or No. of Shares I.R.S. Employer code, of registrant's principal
specified in its charter organization Outstanding Identification No. executive offices
- ------------------------ ------------ ----------- ------------------ -----------------
Building Materials Delaware 10 333-69749-01/ 1361 Alps Road
Manufacturing Corporation 22-3626208 Wayne, NJ 07470
(973) 628-3000
Building Materials Delaware 10 333-69749-02/ 300 Delaware Avenue
Investment Corporation 22-3626206 Suite 303
Wilmington, DE 19801
(302) 427-5960
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Second Quarter Ended Six Months Ended
-------------------- -----------------
June 30, June 29, June 30, June 29,
2002 2003 2002 2003
-------- -------- -------- --------
(Thousands)
Net Sales............................. $369,398 $410,317 $688,651 $749,254
-------- -------- -------- --------
Costs and expenses, net:
Cost of products sold............... 251,305 284,786 481,237 530,729
Selling, general and administrative. 74,729 83,198 143,457 155,540
Gain on sale of assets.............. - (5,739) - (5,739)
-------- -------- -------- --------
Total costs and expenses, net.... 326,034 362,245 624,694 680,530
-------- -------- -------- --------
Operating income...................... 43,364 48,072 63,957 68,724
Interest expense...................... (14,004) (13,842) (27,750) (27,299)
Other expense, net.................... (2,111) (2,655) (4,395) (4,276)
-------- -------- -------- --------
Income before income taxes............ 27,249 31,575 31,812 37,149
Income tax provision.................. (9,809) (11,367) (11,452) (13,374)
-------- -------- -------- --------
Net income............................ $ 17,440 $ 20,208 $ 20,360 $ 23,775
======== ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
2
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
December 31, June 29,
2002 2003
Current Assets: --------- ---------
Cash and cash equivalents........................ $ 96,173 $ 10,435
Accounts receivable, trade, less allowance
of $1,484 and $1,539 in 2002 and 2003,
respectively............................... 21,901 31,202
Accounts receivable, other....................... 41,924 135,012
Inventories...................................... 119,482 173,470
Other current assets............................. 3,543 7,233
--------- ---------
Total Current Assets........................... 283,023 357,352
Property, plant and equipment, net................. 346,116 338,152
Excess of cost over net assets of businesses
acquired, net of accumulated amortization
of $16,370 in 2002 and 2003, respectively........ 63,294 63,294
Deferred income tax benefits....................... 15,330 2,320
Tax receivable from parent corporations............ 10,250 10,250
Other noncurrent assets............................ 25,386 24,068
--------- ---------
Total Assets....................................... $ 743,399 $ 795,436
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt............. $45,326 $ 45,532
Accounts payable................................. 73,220 91,231
Payable to related parties....................... 12,621 16,392
Accrued liabilities.............................. 50,917 58,765
Reserve for product warranty claims.............. 14,900 14,900
--------- ---------
Total Current Liabilities........................ 196,984 226,820
--------- ---------
Long-term debt less current maturities............. 545,802 544,127
--------- ---------
Reserve for product warranty claims................ 18,387 17,366
--------- ---------
Other liabilities.................................. 13,347 14,534
--------- ---------
Stockholders' Equity (Deficit):
Series A Cumulative Redeemable Convertible
Preferred Stock, $.01 par value per share; - -
400,000 shares authorized; no shares issued....
Class A Common Stock, $.001 par value per share,
1,300,000 shares authorized; 1,015,010 shares
issued and outstanding......................... 1 1
Class B Common Stock, $.001 par value per share;
100,000 shares authorized; 15,000 shares
issued and outstanding......................... - -
Loan receivable from parent corporation.......... (2,648) (2,699)
Accumulated deficit.............................. (28,474) (4,713)
--------- ---------
Total Stockholders' Equity (Deficit) .......... (31,121) (7,411)
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit)................................ $ 743,399 $ 795,436
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
----------------------
June 30, June 29,
2002 2003
-------- --------
(Thousands)
Cash and cash equivalents, beginning of period......... $ 46,387 $ 96,173
-------- --------
Cash used in operating activities:
Net income........................................... 20,360 23,775
Adjustments to reconcile net income to
net cash used in operating activities:
Gain on sale of assets........................... - (5,739)
Depreciation..................................... 18,971 19,288
Amortization..................................... 952 1,016
Deferred income taxes............................ 10,927 13,010
Noncash interest charges......................... 2,494 2,573
Increase in working capital items.................... (82,322) (143,818)
Decrease in reserve for product warranty claims...... (1,875) (1,021)
Proceeds from sale of accounts receivable............ 15,300 9,612
Change in net receivable from/payable to related
parties/parent corporations........................ 5,249 3,771
Other, net........................................... 353 726
-------- --------
Net cash used in operating activities.................. (9,591) (76,807)
-------- --------
Cash used in investing activities:
Capital expenditures................................. (10,236) (15,151)
Proceeds from sale of assets......................... - 9,315
-------- --------
Net cash used in investing activities.................. (10,236) (5,836)
-------- --------
Cash used in financing activities:
Repayments of long-term debt......................... (2,801) (1,893)
Distributions to parent corporations................. (145) (15)
Loan to parent corporation........................... (57) (51)
Financing fees and expenses.......................... (221) (1,136)
-------- --------
Net cash used in financing activities.................. (3,224) (3,095)
-------- --------
Net decrease in cash and cash equivalents.............. (23,051) (85,738)
-------- --------
Cash and cash equivalents, end of period............... $ 23,336 $ 10,435
======== ========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized)................ $ 25,256 $ 24,975
Income taxes........................................ 1,450 208
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Building Materials Corporation of America ("BMCA" or the "Company")
was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings
Corporation ("BHC"), which is a wholly-owned subsidiary of G-I Holdings Inc.
("G-I Holdings"). G-I Holdings is a wholly-owned subsidiary of G Holdings Inc.
The consolidated financial statements of the Company reflect, in the opinion of
management, all adjustments necessary to present fairly the financial position
of the Company at June 29, 2003, and the results of operations and cash flows
for the periods ended June 30, 2002 and June 29, 2003. All adjustments are of a
normal recurring nature. These consolidated financial statements should be read
in conjunction with the annual consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 (the "2002 Form 10-K").
Note 1. Inventories
Inventories consist of the following:
December 31, June 29,
2002 2003
----------- --------
(Thousands)
Finished goods ....................... $ 80,911 $120,196
Work-in-process ...................... 11,850 11,003
Raw materials and supplies ........... 30,068 45,644
-------- --------
Total ................................ 122,829 176,843
Less LIFO reserve .................... (3,347) (3,373)
-------- --------
Inventories .......................... $119,482 $173,470
======== ========
Note 2. Contingencies
Asbestos Litigation Against G-I Holdings
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, G-I Holdings. As of March 30, 1997, the Company had paid
all of its assumed asbestos-related liabilities. In January 2001, G-I Holdings
filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code due to Asbestos Claims. This proceeding remains pending.
Claimants in the G-I Holdings bankruptcy, including judgment
creditors, might seek to satisfy their claims by asking the bankruptcy court to
require the sale of G-I Holdings' assets, including its holdings of BMCA
Holdings Corporation's common stock and its indirect holdings of the Company's
common stock. Such action could result in a change of control of the Company. In
addition, those creditors may seek to file Asbestos Claims against the Company
(with approximately 1,900 alleged Asbestos Claims having been filed against the
Company as of June 29, 2003). The Company believes that it will not sustain any
liability in connection with these or any other asbestos-related claims.
5
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 2. Contingencies (Continued)
On February 2, 2001, the United States Bankruptcy Court for the
District of New Jersey issued a temporary restraining order enjoining any
existing or future claimant from bringing or prosecuting an Asbestos Claim
against the Company. By oral opinion, on June 22, 2001, and written order
entered February 22, 2002, the court converted the temporary restraints into a
preliminary injunction, prohibiting the bringing or prosecution of any such
Asbestos Claim against the Company. On February 7, 2001, G-I Holdings and BMCA
filed an action in the United States Bankruptcy Court for the District of New
Jersey seeking a declaratory judgment that BMCA has no successor liability for
Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I
Holdings (the "BMCA Action"). On May 13, 2003, the United States District Court
for the District of New Jersey overseeing the G-I Holdings' Bankruptcy Court
withdrew the reference of the BMCA Action from the Bankruptcy Court, and this
matter will be heard by the District Court directly. The BMCA Action is in the
pretrial discovery stage, and as a result, it is not possible to predict its
outcome, although the Company believes its claims are meritorious. While the
Company cannot predict whether any additional Asbestos Claims will be asserted
against it, or the outcome of any litigation relating to those claims, the
Company believes that it has meritorious defenses to any claim that it has
asbestos-related liability, although there can be no assurances in this regard.
On or about February 8, 2001, a creditors' committee established in
G-I Holdings' bankruptcy case filed a complaint in the United States Bankruptcy
Court, District of New Jersey against G-I Holdings and the Company. The
complaint requests substantive consolidation of BMCA with G-I Holdings or an
order directing G-I Holdings to cause BMCA to file for bankruptcy protection.
BMCA and G-I Holdings intend to vigorously defend the lawsuit. The plaintiffs
also filed for interim relief absent the granting of their requested relief
described above. On March 21, 2001, the bankruptcy court denied plaintiffs'
application for interim relief. In November 2002, the creditors' committee,
joined in by the legal representative of future demand holders, filed a motion
for appointment of a trustee in the G-I Holdings' bankruptcy. In December 2002,
the bankruptcy court denied the motion. The creditors' committee appealed such
ruling to the United States District Court which denied such appeal on June 27,
2003. On July 25, 2003, the creditors' committee filed an appeal of the District
Court's ruling to the Third Circuit Court of Appeals, which matter remains
pending.
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Item 3,"Legal Proceedings," and
Notes 5, 12 and 17 to Consolidated Financial Statements contained in the
Company's 2002 Form 10-K.
Environmental Litigation
The Company, together with other companies, is 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
6
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 2. Contingencies (Continued)
contaminated sites or remedial obligations are imposed, a number of which are
in the early stages or have been dormant for protracted periods. The Company
refers to these proceedings and lawsuits as "Environmental Claims". At most
sites, the Company anticipates that liability will be apportioned among the
companies found to be responsible for the presence of hazardous substances at
the site. The Company believes that the ultimate disposition of such matters
will not, individually or in the aggregate, have a material adverse effect on
the liquidity, financial position or results of operations of the Company.
For further information regarding environmental matters and other
litigation, reference is made to Item 3, "Legal Proceedings" contained in the
Company's 2002 Form 10-K.
Tax Claim Against G-I Holdings
The Company and certain of its subsidiaries were members of the
consolidated group (the "G-I Holdings Group") for Federal income tax purposes
that included G-I Holdings in certain prior years and, accordingly, would be
severally liable for any tax liability of the G-I Holdings Group in respect of
those prior years.
On September 15, 1997, G-I Holdings received a notice from the
Internal Revenue Service (the "IRS") 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 G-I Holdings held an
interest. G-I Holdings has advised the Company that it believes that it will
prevail in this tax matter arising out of the surfactants partnership, although
there can be no assurance in this regard. 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. On September 21, 2001,
the IRS filed a proof of claim with respect to such deficiency against G-I
Holdings in the G-I Holdings' bankruptcy. If such proof of claim is sustained,
the Company and/or certain of the Company's subsidiaries together with G-I
Holdings and several current and former subsidiaries of G-I Holdings would be
severally liable for a portion of those taxes and interest. G-I Holdings has
filed an objection to the proof of claim. If the IRS were to prevail for the
years in which the Company and/or certain of its subsidiaries were part of the
G-I Holdings Group, the Company would be severally liable for approximately
$40.0 million in taxes plus interest, although this calculation is subject to
uncertainty depending upon various factors including G-I Holdings' ability to
satisfy its tax liabilities and the application of tax credits and deductions.
7
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 3. New Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45"). FIN 45 clarifies the requirements for a guarantor's
accounting for and disclosures of certain guarantees issued and outstanding. The
provisions of FIN 45 apply to guarantee contracts that contingently require the
guarantor to make payments (in cash, financial instruments, other assets, shares
of stock or provision of services) to the guaranteed party for guarantees such
as: a financial standby letter of credit; a market value guarantee on either a
financial or nonfinancial asset owned by the guaranteed party; and a guarantee
of the collection of the scheduled contractual cash flows from financial assets
held by a special-purpose entity. FIN 45 also applies to indemnification
contracts and indirect guarantees of indebtedness of others. The requirements of
FIN 45 for the initial recognition and measurement of the liability for a
guarantor's obligations are to be applied only on a prospective basis to
guarantees issued or modified after December 31, 2002; however, the Company
provides product warranties, which are only subject to the disclosure
requirements under FIN 45. (See table below.) A subsidiary's guarantee of the
debt of its parent is not subject to the initial recognition and measurement
provisions of FIN 45 but are subject to its disclosure requirements. The Company
has adopted the disclosure requirements of FIN 45 and applied the recognition
and measurement provisions for all guarantees entered into or modified after
December 31, 2002, and noted no material effect on the financial condition or
results of operations of the Company.
The reserve for product warranty claims consists of the following for
the second quarter and six months ended June 30, 2002 and June 29, 2003,
respectively:
Second Quarter Ended Six Months Ended
-------------------- --------------------
June 30, June 29, June 30, June 29,
2002 2003 2002 2003
-------- -------- -------- --------
(Thousands)
Beginning balance................... $ 36,644 $ 33,184 $ 37,641 $ 33,287
Charged to cost of products sold.... 5,188 5,215 10,499 9,551
Deductions.......................... (6,152) (6,133) (12,375) (10,572)
Other............................... 85 - - -
-------- -------- -------- --------
Ending balance...................... $ 35,765 $ 32,266 $ 35,765 $ 32,266
======== ======== ======== ========
In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" ("SFAS No. 148"), an amendment of FASB Statement No.
123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 148
provides alternative methods of transition for any entity that voluntarily
8
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 3. New Accounting Pronouncements (Continued)
changes to the fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS No. 123 to
require prominent disclosures about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation. SFAS No. 148 also amends Accounting Principles Board Opinion No.
28 "Interim Financial Reporting" ("APB No. 28"), to require disclosures about
those effects in interim financial information beginning with the Company's
first quarter ended March 30, 2003. The Company currently accounts for its
long-term incentive units granted to certain employees under the accounting
prescribed by applying FASB Interpretation No. 28, "Accounting for Stock
Appreciation Rights and Other Variable Stock Option and Award Plans" ("FIN 28"),
which requires an entity to measure compensation as the amount by which the Book
Value of the incentive units covered by the grant exceeds the option price or
value specified of such incentive units at the date of grant. Changes, either
increases or decreases, in the Book Value of those incentive units between the
date of grant and the measurement date result in a change in the measure of
compensation for the right or award. The Company expects to continue to account
for its long-term incentive units under the accounting prescribed by FIN 28 and
has adopted the additional disclosure provisions of SFAS No. 148. Compensation
expense for such incentive units was $0.7 and $0.8 million for the second
quarter ended June 30, 2002 and June 29, 2003, respectively, and $1.4 and $1.5
million for the six months ended June 30, 2002 and June 29, 2003, respectively.
The Company's pro forma net income under SFAS No. 123 would have been the same
as actual net income.
Note 4. Sale of Assets
In May 2003, the Company sold property in Ontario, California for net
cash proceeds of approximately $9.3 million, which resulted in a pre-tax gain of
approximately $5.7 million.
Note 5. Subsequent Events
On July 9, 2003, the Company entered into a new $350 million Senior
Secured Credit Facility (the "New Credit facility"). The initial borrowings
under the New Credit facility were primarily used to repay amounts outstanding
under its existing $210 million Secured Revolving Credit facility due August
2003, to repay the $115 million Accounts Receivable Securitization Agreement due
December 2004 and to repay the $7 million Precious Metals Note due August 2003.
The New Credit facility has a final maturity date of November 15, 2006, subject
to certain conditions, and is secured by substantially all assets of the
Company. Availability under the New Credit facility is based upon eligible
Accounts Receivable, Inventory and Property, Plant and Equipment, as defined,
and includes a sublimit for letters of credit of $100 million. The New Credit
facility bears interest at a floating rate based on the lenders' Base Rate, the
Federal Funds rate or the Eurodollar rate, each as defined.
9
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 5. Subsequent Events (Continued)
On June 30, 2003, the Company exercised an Early Buyout Option on
certain leased machinery and equipment located at its Chester, South Carolina
glass mat manufacturing facility for $19.7 million. Concurrent with entering the
New Credit facility, the Company refinanced the Chester, South Carolina
machinery and equipment with a new $19.7 million secured facility due July 2010.
The Company makes loans to, and borrows from, its parent corporations
from time to time at prevailing market rates. On July 1, 2003, the Company
loaned BMCA Holdings Corporation $37.8 million and on July 9, 2003, BMCA
Holdings Corporation loaned the Company $37.8 million.
Note 6. Guarantor Financial Information
All of the Company's subsidiaries, other than BMCA Receivables
Corporation, are guarantors under the Company's consolidated and restated $210
million Credit Agreement, the 10 1/2% Senior Notes due 2003, the 7 3/4% Senior
Notes due 2005, the 8 5/8% Senior Notes due 2006, the 8% Senior Notes due 2007
(the "2007 Notes"), and the 8% Senior Notes due 2008. These guarantees are full,
unconditional and joint and several. In addition, Building Materials
Manufacturing Corporation ("BMMC"), a wholly-owned subsidiary of the Company, is
a co-obligor on the 2007 Notes.
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 Building Materials
Investment Corporation, a wholly-owned subsidiary of the Company, for a license
fee stated as a percentage of net sales. The license agreements are for a period
of one year and are subject to automatic renewal unless either party terminates
with 60 days written notice. Also, effective January 1, 1999, BMMC sells all
finished goods to the Company at a manufacturing profit.
Presented below is condensed consolidating financial information for
the Company, the guarantor subsidiaries and the non-guarantor subsidiary. This
financial information should be read in conjunction with the Consolidated
Financial Statements and other notes related thereto. Separate financial
information for the Company, the guarantor subsidiaries and the non-guarantor
subsidiary is not included herein, because management has determined that such
information is not material to investors.
10
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Second Quarter Ended June 30, 2002
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------
Net Sales............................................... $ 335,629 $ 33,769 $ - $ 369,398
Intercompany net sales.................................. 16,901 232,748 (249,649) -
--------- --------- --------- ---------
Total net sales....................................... 352,530 266,517 (249,649) 369,398
--------- --------- --------- ---------
Cost and expenses:
Costs of products sold................................ 264,010 236,944 (249,649) 251,305
Selling, general and administrative................... 56,034 18,695 74,729
Transition service agreement (income) expense......... 25 (25) -
--------- --------- --------- ---------
Total costs and expenses.............................. 320,069 255,614 (249,649) 326,034
--------- --------- --------- ---------
Operating Income........................................ 32,461 10,903 - 43,364
Equity in earnings of subsidiaries...................... 10,949 - (10,949) -
Intercompany licensing income (expense), net............ (10,069) 10,069 -
Interest expense........................................ (9,937) (4,067) (14,004)
Other income (expense), net............................. (2,314) 203 (2,111)
--------- --------- --------- ---------
Income before income taxes.............................. 21,090 17,108 (10,949) 27,249
Income taxes............................................ (3,650) (6,159) (9,809)
--------- --------- --------- ---------
Net income.............................................. $ 17,440 $ 10,949 $ (10,949) $ 17,440
========= ========= ========= =========
11
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Second Quarter Ended June 29, 2003
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------
Net Sales............................................... $ 379,853 $ 30,464 $ - $ 410,317
Intercompany net sales.................................. 21,770 272,031 (293,801) -
--------- --------- --------- ---------
Total net sales....................................... 401,623 302,495 (293,801) 410,317
--------- --------- --------- ---------
Cost and expenses, net:
Costs of products sold................................ 312,203 266,384 (293,801) 284,786
Selling, general and administrative................... 64,894 18,304 83,198
Gain on sale of assets................................ - (5,739) (5,739)
Transition service agreement (income) expense......... 25 (25) -
--------- --------- --------- ---------
Total costs and expenses, net......................... 377,122 278,924 (293,801) 362,245
--------- --------- --------- ---------
Operating Income........................................ 24,501 23,571 - 48,072
Equity in earnings of subsidiaries...................... 23,256 - (23,256) -
Intercompany licensing income (expense), net............ (16,065) 16,065 -
Interest expense........................................ (10,473) (3,369) (13,842)
Other income (expense), net............................. (2,726) 71 (2,655)
--------- --------- --------- ---------
Income before income taxes.............................. 18,493 36,338 (23,256) 31,575
Income tax (provision) benefit.......................... 1,715 (13,082) (11,367)
--------- --------- --------- ---------
Net income.............................................. $ 20,208 $ 23,256 $ (23,256) $ 20,208
========= ========= ========= =========
12
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Six Months Ended June 30, 2002
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------
Net Sales............................................... $ 629,931 $ 58,720 $ - $ 688,651
Intercompany net sales.................................. 33,308 443,901 (477,209) -
--------- --------- --------- ---------
Total net sales....................................... 663,239 502,621 (477,209) 688,651
--------- --------- --------- ---------
Cost and expenses:
Costs of products sold................................ 510,229 448,217 (477,209) 481,237
Selling, general and administrative................... 107,472 35,985 143,457
Transition service agreement (income) expense......... 50 (50) -
--------- --------- --------- ---------
Total costs and expenses.............................. 617,751 484,152 (477,209) 624,694
--------- --------- --------- ---------
Operating Income........................................ 45,488 18,469 - 63,957
Equity in earnings of subsidiaries...................... 18,837 - (18,837) -
Intercompany licensing income (expense), net............ (18,898) 18,898 -
Interest expense........................................ (19,520) (8,230) (27,750)
Other income (expense), net............................. (4,691) 296 (4,395)
--------- --------- --------- ---------
Income before income taxes.............................. 21,216 29,433 (18,837) 31,812
Income taxes............................................ (856) (10,596) (11,452)
--------- --------- --------- ---------
Net income.............................................. $ 20,360 $ 18,837 $ (18,837) $ 20,360
========= ========= ========= =========
13
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Income
Six Months Ended June 29, 2003
(Thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------
Net Sales............................................... $ 692,889 $ 56,365 $ - $ 749,254
Intercompany net sales.................................. 39,943 511,907 (551,850) -
--------- --------- --------- ---------
Total net sales....................................... 732,832 568,272 (551,850) 749,254
--------- --------- --------- ---------
Cost and expenses, net:
Costs of products sold................................ 581,021 501,558 (551,850) 530,729
Selling, general and administrative................... 119,802 35,738 155,540
Gain on sale of assets................................ - (5,739) (5,739)
Transition service agreement (income) expense......... 50 (50) -
--------- --------- --------- ---------
Total costs and expenses, net......................... 700,873 531,507 (551,850) 680,530
--------- --------- --------- ---------
Operating Income........................................ 31,959 36,765 - 68,724
Equity in earnings of subsidiaries...................... 37,967 - (37,967) -
Intercompany licensing income (expense), net............ (29,313) 29,313 -
Interest expense........................................ (20,333) (6,966) (27,299)
Other income (expense), net............................. (4,487) 211 (4,276)
--------- --------- --------- ---------
Income before income taxes.............................. 15,793 59,323 (37,967) 37,149
Income tax (provision) benefit.......................... 7,982 (21,356) (13,374)
--------- --------- --------- ---------
Net income.............................................. $ 23,775 $ 37,967 $ (37,967) $ 23,775
========= ========= ========= =========
14
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)- (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
December 31, 2002
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiary inations Consolidated
------- ------------ ---------- -------- ------------
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 60 $ 96,113 $ - $ - $ 96,173
Accounts receivable, trade, net........ 8,216 13,685 - 21,901
Accounts receivable, other............. 6,294 845 34,785 41,924
Inventories............................ 78,066 41,416 - 119,482
Other current assets................... 1,575 1,968 - 3,543
-------- -------- ------- --------- --------
Total Current Assets................. 94,211 154,027 34,785 283,023
Investment in subsidiaries............... 437,856 - - (437,856) -
Intercompany loans including accrued
interest............................... 59,903 (59,903) - -
Due from (to) subsidiaries, net.......... (195,599) 192,889 2,710 -
Property, plant and equipment, net....... 36,075 310,041 - 346,116
Excess of cost over net assets of
business acquired, net................. 40,080 23,214 - 63,294
Deferred income tax benefits............. 15,330 - - 15,330
Tax receivable from parent corporations.. 10,250 - - 10,250
Other assets............................. 6,486 18,900 - 25,386
-------- -------- ------- --------- --------
Total Assets............................. $504,592 $639,168 $37,495 $(437,856) $743,399
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt... $ 34,820 $ 10,506 $ - $ - $ 45,326
Accounts payable....................... 29,249 43,971 - 73,220
Payable to related parties, net........ 2,788 9,833 - 12,621
Accrued liabilities.................... 18,802 32,115 - 50,917
Reserve for product warranty claims.... 14,900 - - 14,900
-------- -------- ------- --------- --------
Total Current Liabilities............ 100,559 96,425 - 196,984
Long-term debt less current maturities... 404,071 141,731 - 545,802
Reserve for product warranty claims...... 17,935 452 - 18,387
Other liabilities........................ 13,148 199 - 13,347
-------- -------- ------- --------- --------
Total Liabilities........................ 535,713 238,807 - 774,520
Total Stockholders' Equity (Deficit)..... (31,121) 400,361 37,495 (437,856) (31,121)
-------- -------- ------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit) ................... $504,592 $639,168 $37,495 $(437,856) $743,399
======== ======== ======= ========= ========
15
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)- (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Balance Sheet
June 29, 2003
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor Elim-
Company Subsidiaries Subsidiary inations Consolidated
------- ------------ ---------- -------- ------------
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 13 $ 10,422 $ - $ - $ 10,435
Accounts receivable, trade, net........ 11,062 20,140 - 31,202
Accounts receivable, other............. 5,271 843 128,898 135,012
Inventories............................ 115,189 58,281 - 173,470
Other current assets................... 3,483 3,750 - 7,233
-------- -------- -------- --------- --------
Total Current Assets................. 135,018 93,436 128,898 357,352
Investment in subsidiaries............... 569,996 - - (569,996) -
Intercompany loans including accrued
interest............................... 53,249 (53,249) - -
Due from (to) subsidiaries, net.......... (307,055) 304,286 2,769 -
Property, plant and equipment, net....... 36,990 301,162 - 338,152
Excess of cost over net assets of
business acquired, net................. 40,080 23,214 - 63,294
Deferred income tax benefits............. 2,320 - - 2,320
Tax receivable from parent corporations.. 10,250 - - 10,250
Other assets............................. 6,386 17,682 - 24,068
-------- -------- -------- --------- --------
Total Assets............................. $547,234 $686,531 $131,667 $(569,996) $795,436
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt... $ 34,966 $ 10,566 $ - $ - $ 45,532
Accounts payable....................... 42,312 48,919 - 91,231
Payable to related parties, net........ 2,820 13,572 - 16,392
Accrued liabilities.................... 24,103 34,662 - 58,765
Reserve for product warranty claims.... 14,900 - - 14,900
-------- -------- -------- --------- --------
Total Current Liabilities............ 119,101 107,719 - 226,820
Long-term debt less current maturities... 404,184 139,943 - 544,127
Reserve for product warranty claims...... 17,021 345 - 17,366
Other liabilities........................ 14,339 195 - 14,534
-------- -------- -------- --------- --------
Total Liabilities........................ 554,645 248,202 - 802,847
Total Stockholders' Equity (Deficit)..... (7,411) 438,329 131,667 (569,996) (7,411)
-------- -------- -------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit) ................... $547,234 $686,531 $131,667 $(569,996) $795,436
======== ======== ======== ========= ========
16
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)- (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2002
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
-------- ------------ ---------- ------------
Cash and cash equivalents, beginning of period...... $ 133 $ 46,254 $ - $ 46,387
-------- --------- -------- --------
Cash provided by (used in) operating activities:
Net income........................................ 1,523 18,837 20,360
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation.................................... 1,220 17,751 18,971
Amortization.................................... - 952 952
Deferred income taxes........................... 10,927 - 10,927
Noncash interest charges........................ 1,797 697 2,494
(Increase) decrease in working capital items...... (16,605) 1,042 (66,759) (82,322)
Increase (decrease) in product warranty claims.... (2,115) 240 (1,875)
Proceeds from sale of accounts receivable......... 15,300 - 15,300
Change in net receivable from/payable to
related parties/parent corporations............. (11,746) (49,764) 66,759 5,249
Other, net........................................ 645 (292) 353
-------- --------- -------- --------
Net cash provided by (used in) operating activities. 946 (10,537) - (9,591)
-------- --------- -------- --------
Cash used in investing activities:
Capital expenditures.............................. (651) (9,585) (10,236)
-------- --------- -------- --------
Net cash used in investing activities............... (651) (9,585) - (10,236)
-------- --------- -------- --------
Cash used in financing activities:
Repayments of long-term debt...................... - (2,801) (2,801)
Distributions to parent corporations.............. (145) (145)
Loan to parent corporation........................ (57) - (57)
Financing fees and expenses....................... (221) - (221)
-------- --------- -------- --------
Net cash used in financing activities............... (423) (2,801) - (3,224)
-------- --------- -------- --------
Net decrease in cash and cash equivalents........... (128) (22,923) - (23,051)
-------- --------- -------- --------
Cash and cash equivalents, end of period............ $ 5 $ 23,331 $ - $ 23,336
======== ========= ======== ========
17
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)- (Continued)
Note 6. Guarantor Financial Information - (Continued)
Building Materials Corporation of America
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 29, 2003
(Thousands)
(Unaudited)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Consolidated
------- ------------ ---------- ------------
Cash and cash equivalents, beginning of period...... $ 60 $ 96,113 $ - $ 96,173
------- --------- -------- --------
Cash provided by (used in) operating activities:
Net income (loss)................................. (14,192) 37,967 23,775
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Gain on sale of assets.......................... - (5,739) (5,739)
Depreciation.................................... 1,323 17,965 19,288
Amortization.................................... - 1,016 1,016
Deferred income taxes........................... 13,010 - 13,010
Noncash interest charges........................ 1,909 664 2,573
Increase in working capital items................. (32,101) (17,604) (94,113) (143,818)
Decrease in product warranty claims............... (914) (107) (1,021)
Proceeds from sale of accounts receivable......... 9,612 - 9,612
Change in net receivable from/payable to
related parties/parent corporations............. 23,969 (114,311) 94,113 3,771
Other, net........................................ 575 151 726
------- --------- -------- --------
Net cash provided by (used in) operating activities. 3,191 (79,998) - (76,807)
------- --------- -------- --------
Cash used in investing activities:
Capital expenditures.............................. (2,241) (12,910) (15,151)
Proceeds from sale of assets...................... - 9,315 9,315
------- --------- -------- --------
Net cash used in investing activities............... (2,241) (3,595) - (5,836)
------- --------- -------- --------
Cash used in financing activities:
Repayments of long-term debt...................... - (1,893) (1,893)
Distributions to parent corporations.............. (15) - (15)
Loan to parent corporation........................ (51) - (51)
Financing fees and expenses....................... (931) (205) (1,136)
------- --------- -------- --------
Net cash used in financing activities............... (997) (2,098) - (3,095)
------- --------- -------- --------
Net decrease in cash and cash equivalents........... (47) (85,691) - (85,738)
------- --------- -------- --------
Cash and cash equivalents, end of period............ $ 13 $ 10,422 $ - $ 10,435
======= ========= ======== ========
18
BUILDING MATERIALS CORPORATION OF AMERICA
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - Second Quarter 2003 Compared With
Second Quarter 2002
We recorded net income in the second quarter of 2003 of $20.2 million
compared with net income of $17.4 million in the second quarter of 2002. The
increase in net income for the second quarter of 2003 of $2.8 million was
attributable to a $3.7 million after-tax gain ($5.7 million pre-tax) on the sale
of property in Ontario, California (see Note 4 to Consolidated Financial
Statements), offset by lower operating income.
Net sales for the second quarter of 2003 were $410.3 million, an
11.1% increase over second quarter of 2002 net sales of $369.4 million. Higher
net sales were primarily due to higher unit volumes and higher average selling
prices of both residential and commercial roofing products.
Operating income in the second quarter of 2003 was $48.1 million
compared with $43.4 million in the second quarter of 2002, with the increase in
operating income primarily attributable to the $5.7 million pre-tax gain on sale
of property. Operating results were positively affected by higher net sales of
both residential and commercial roofing products offset by higher raw material
costs, principally asphalt due to higher crude oil prices and limited asphalt
availability, together with a sales volume related increase in selling, general
and administrative expenses.
Interest expense for the second quarter of 2003 decreased to $13.8
million from $14.0 million for the same period in 2002, primarily due to a lower
average interest rate. Other expense net was $2.7 million for the second quarter
of 2003 compared with $2.1 million for the same period in 2002.
Results of Operations - Six Months 2003 Compared With
Six Months 2002
We recorded net income of $23.8 million for the first six months of
2003 compared with net income of $20.4 million for the first six months of 2002.
The increase in net income for the first six months of 2003 of $3.4 million was
attributable to the $3.7 million after-tax gain on sale of property and lower
interest expense and other expenses, offset by lower operating income.
Net sales for the first six months of 2003 were $749.3 million, an
8.8% increase over the first six months of 2002 net sales of $688.7 million.
Higher net sales were primarily due to higher unit volumes and higher average
selling prices of both residential and commercial roofing products.
Operating income for the first six months of 2003 was $68.7 million
compared with $64.0 million for the first six months of 2002, with the increase
in operating income primarily attributable to the $5.7 million pre-tax gain on
19
BUILDING MATERIALS CORPORATION OF AMERICA
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
sale of property. Operating results were positively affected by higher net sales
of both residential and commercial roofing products offset by higher raw
material costs, principally asphalt due to higher crude oil prices and limited
asphalt availability, together with a sales volume related increase in selling,
general and administrative expenses.
Interest expense for the first six months of 2003 decreased to $27.3
million from $27.7 million for the same period in 2002, primarily due to a lower
average interest rate. Other expense net was $4.3 million for the first six
months of 2003 compared with $4.4 million for the same period in 2002.
Liquidity and Financial Condition
Net cash outflow during the first six months of 2003 was $82.6
million, before financing activities, and included the use of $76.8 million of
cash for operations and the reinvestment of $15.1 million for capital programs,
which was offset in part by $9.3 million of proceeds from the sale of assets.
Cash invested in additional working capital totaled $143.8 million
during the first six months of 2003, primarily reflecting seasonal increases in
accounts receivable of $112.0 million, including a $103.7 million increase in
the receivable from the third party which purchases certain of our trade
accounts receivable, and $54.0 million in inventories, partially offset by a
$25.9 million increase in accounts payable and accrued liabilities. The net cash
used for operating activities also included $9.6 million of net proceeds from
the sale of accounts receivable to a third party in connection with our Accounts
Receivable Securitization Agreement and a $3.8 million net increase in the net
payable to related parties/parent corporations.
Net cash used in financing activities totaled $3.1 million during the
first six months of 2003, reflecting $1.9 million in repayments of long-term
debt,$0.1 million of distributions and loans to our parent corporations, and
$1.1 million in financing fees and expenses.
In May 2003, we sold property in Ontario, California for net cash
proceeds of approximately $9.3 million, which resulted in a pre-tax gain of
approximately $5.7 million.
As a result of the foregoing factors, cash and cash equivalents
decreased by $85.7 million during the first six months of 2003 to $10.4 million.
On July 9, 2003, we entered into a new $350 million Senior Secured
Credit facility, which we refer to as the New Credit facility. The initial
borrowings under the New Credit facility were primarily used to repay amounts
outstanding under our existing $210 million Secured Revolving Credit facility
due August 2003, to repay our $115 million Accounts Receivable Securitization
Agreement due December 2004 and to repay our $7 million Precious Metals Note due
August 2003. The New Credit facility has a final maturity date of November 15,
2006, subject to certain conditions, and is secured by substantially all of our
20
BUILDING MATERIALS CORPORATION OF AMERICA
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
assets. Availability under the New Credit facility is based upon eligible
Accounts Receivable, Inventory and Property, Plant and Equipment, as defined,
and includes a sublimit for letters of credit of $100 million. The New Credit
facility bears interest at a floating rate based on the lenders' Base Rate, the
Federal Funds rate or the Eurodollar rate, each as defined.
On June 30, 2003, we exercised an Early Buyout Option on certain
leased machinery and equipment located at our Chester, South Carolina glass mat
manufacturing facility for $19.7 million. Concurrent with entering the New
Credit facility, we refinanced the Chester, South Carolina machinery and
equipment with a new $19.7 million secured facility due July 2010.
We make loans to, and borrow from, our parent corporations from time
to time at prevailing market rates. On July 1, 2003, we loaned BMCA Holdings
Corporation $37.8 million and on July 9, 2003, BMCA Holdings Corporation loaned
us $37.8 million.
See Note 2 to Consolidated Financial Statements for information
regarding contingencies.
In May 2003, we entered into a long-term contract with a subsidiary
of International Specialty Products Inc. ("ISP"), an affiliate, to purchase
substantially all of our colored roofing granules and algae-resistant granules
requirements, except for the requirements of certain of our roofing plants that
are supplied by third parties.
We have contracts with two different asphalt terminal suppliers where
asphalt imported from Venezuela or other suppliers is stored prior to its use at
our plants. These asphalt terminals are located at the Ports of Tampa, Florida
and Savannah, Georgia and are used to service our plants at those sites. We are
obligated to pay these suppliers for use of these terminals under these
contracts through 2008 and 2005, respectively. Monthly pricing is fixed and
includes capital improvements made at each asphalt terminal by its owner.
During the first six months of 2003, the petroleum industry strike in
Venezuela continued to adversely impact the asphalt supply and pricing for the
U.S. roofing industry; however, during the second quarter of 2003, these
pressures started to ease. Given the current improvement in asphalt supply
conditions, we do not anticipate any future disruption in the supply of asphalt,
although no assurances can be provided in that regard.
* * *
Forward-looking Statements
This Quarterly Report on Form 10-Q contains both historical and
forward-looking statements. All statements other than statements of historical
21
BUILDING MATERIALS CORPORATION OF AMERICA
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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 Securities Exchange
Act of 1934. 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 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 statements.
The forward-looking statements included herein are made only as of the date of
this Quarterly Report on Form 10-Q and the Company undertakes no obligation to
publicly update any forward-looking statements to reflect subsequent events or
circumstances. No assurances can be given that projected results or events will
be achieved.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations in the 2002 Form 10-K for a
discussion of "Market-Sensitive Instruments and Risk Management". There were no
material changes in such information as of June 29, 2003 and there was no
hedging activity in the quarter ended June 29, 2003.
Item 4. CONTROLS AND PROCEDURES
Our management, with the participation of the Chief Executive Officer
and Chief Financial Officer, conducted an evaluation of the effectiveness of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this report. Based on
this evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, our disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on
a timely basis, information required to be disclosed by us in the reports filed,
furnished or submitted under the Exchange Act.
There have not been any changes in our internal control over
financial reporting during the fiscal quarter to which this report relates that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
22
BUILDING MATERIALS CORPORATION OF AMERICA
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As of June 29, 2003, 1,900 alleged asbestos-related bodily injury
claims relating to the inhalation of asbestos fiber are pending against Building
Materials Corporation of America. See Note 2 to Consolidated Financial
Statements above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Credit Agreement, dated as of July 9, 2003, by and among
BMCA, the Initial Lenders, Initial Issuing Bank and Swing
Line Bank (as defined therein), Citicorp USA, Inc., as
collateral monitoring agent and administrative agent,
Citigroup Global Markets Inc., as lead arranger and book
manager, Deutsche Bank Securities Inc., as syndication
agent and The CIT Group/Business Credit, Inc., Congress
Financial Corporation and JP Morgan Chase Bank as
co-documentation agents (the "Credit Agreement").
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
(b) The registrants filed a news release on Form 8-K dated April 25, 2003
regarding results of operations for the quarterly period ended March
30, 2003.
23
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
BUILDING MATERIALS CORPORATION OF AMERICA
BUILDING MATERIALS MANUFACTURING CORPORATION
DATE: August 13, 2003 BY: /s/John F. Rebele
--------------- ----------------------------------------
John F. Rebele
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
DATE: August 13, 2003 BY: /s/James T. Esposito
--------------- ----------------------------------------
James T. Esposito
Vice President and Controller
(Principal Accounting Officer)
24
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant listed below has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
BUILDING MATERIALS INVESTMENT CORPORATION
DATE: August 13, 2003 BY: /s/John F. Rebele
--------------- ------------------------------------
John F. Rebele
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
25