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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-81808
BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
DELAWARE 22-3276290
(State of Incorporation) (I.R.S. Employer Identification No.)
1361 ALPS ROAD 07470
WAYNE, NEW JERSEY (Zip Code)
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 628-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 [ ]
As of March 23, 2001, 1,015,353 shares of Class A Common Stock, $.001 par
value, and 15,000 shares of Class B Common Stock, $.001 par value, of Building
Materials Corporation of America were outstanding. There is no trading market
for the common stock of Building Materials Corporation of America.
As of March 23, 2001, each of the additional registrants had the number of
shares outstanding which is shown on the table below. No shares were held by
non-affiliates.
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ADDITIONAL REGISTRANTS
STATE OR OTHER REGISTRATION NO./ ADDRESS, INCLUDING ZIP CODE AND
JURISDICTION OF NO. OF I.R.S. EMPLOYER TELEPHONE NUMBER, INCLUDING
EXACT NAME OF REGISTRANT INCORPORATION OR SHARES IDENTIFICATION AREA CODE, OF REGISTRANT'S
AS SPECIFIED IN ITS CHARTER ORGANIZATION OUTSTANDING NUMBER PRINCIPAL EXECUTIVE OFFICE
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Building Materials Delaware 10 333-69749-01/ 1361 Alps Road
Manufacturing Corporation 22-3626208 Wayne, New Jersey 07470
(973) 628-3000
Building Materials Delaware 10 333-69749-02/ 300 Delaware Avenue
Investment Corporation 22-3626206 Wilmington, Delaware 19801
(302) 427-5960
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PART I
ITEM 1. BUSINESS
GENERAL
Building Materials Corporation of America ("BMCA") is a leading national
manufacturer of a broad line of asphalt roofing products and accessories for the
steep slope and low slope roofing markets (previously referred to as the
residential and commercial roofing product lines). We also manufacture specialty
building products and accessories for the professional and do-it-yourself
remodeling and residential construction industries. BMCA, incorporated under the
laws of Delaware in 1994, is a 99.9%-owned subsidiary of BMCA Holdings
Corporation, which is a wholly-owned subsidiary of G-I Holdings Inc. In 1994,
BMCA acquired the operating assets and certain liabilities of GAF Building
Materials Corporation, whose name was changed to G-I Holdings Inc. Samuel J.
Heyman beneficially owns (as defined in Rule 13d-3 of the Exchange Act)
approximately 99% of G-I Holdings Inc. BMCA does business under the name "GAF
Materials Corporation."
To facilitate administrative efficiency, effective October 31, 2000, GAF
Corporation, the former indirect parent of BMCA, merged into its direct
subsidiary, G-I Holdings Inc. G-I Holdings Inc. then merged into its direct
subsidiary, G Industries Corp., which in turn merged into its direct subsidiary,
GAF Fiberglass Corporation. In that merger, GAF Fiberglass Corporation changed
its name to GAF Corporation. Effective November 13, 2000, GAF Corporation
(formerly known as GAF Fiberglass Corporation) merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the
merger to G-I Holdings Inc. G-I Holdings Inc. is now the parent of BMCA and of
BMCA's direct parent, BMCA Holdings Corporation. We refer to G-I Holdings Inc.
and any and all of its predecessor corporations, including GAF Corporation, G-I
Holdings Inc., G Industries Corp., GAF Fiberglass Corporation and GAF Building
Materials Corporation in this report as "G-I Holdings."
On January 5, 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the District of New Jersey in Newark, New Jersey due to its
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber. We refer to these claims in this report as "Asbestos Claims." G-I
Holdings, the successor to GAF Corporation by merger, is a privately-held
holding company, and we are its only operating subsidiary. We are not included
in the bankruptcy filing.
On December 22, 2000, we completed a series of transactions that included
(1) entering into a new $100 million secured credit facility with the lenders
under our existing revolving credit facility; (2) amending and restating our
existing $110 million revolving credit facility and (3) receiving consents from
holders of our outstanding senior notes to certain amendments to the indentures
under which those notes were issued. We refer to the new secured credit facility
in this report as the "New Credit Agreement" and the amended and restated
existing revolving credit facility as the "Existing Credit Agreement." As a
result of these transactions, all obligations under the New Credit Agreement and
the Existing Credit Agreement, including the obligations under the subsidiary
guarantees thereunder, and our obligations under a $7.0 million precious metal
note and approximately $3.5 million of obligations under a standby letter of
credit (which we refer to in this report collectively as the "Other
Indebtedness") are secured by a first-priority lien on substantially all of our
assets and the assets of our subsidiaries. We refer to these assets in this
report as the "Collateral." The New Credit Agreement and the Existing Credit
Agreement have been guaranteed by all of our current and future direct and
indirect domestic subsidiaries, other than BMCA Receivables Corporation. In
addition, our obligations under our outstanding senior notes are secured by a
second-priority lien on the Collateral and have been guaranteed by the
subsidiaries that guaranteed the New Credit Agreement and the Existing Credit
Agreement. In connection with these transactions, we entered into a security
agreement which grants a security interest in the Collateral in favor of the
collateral agent on behalf of the lenders under the New Credit Agreement, the
Existing Credit Agreement and the Other Indebtedness and the holders of our
outstanding senior notes. We also entered into a collateral agent agreement
which provides, among other things, for the sharing of proceeds with respect to
any foreclosure or other remedy in respect of the Collateral. See Item 7,
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"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Condition" and Note 11 to Consolidated
Financial Statements.
Our executive offices are located at 1361 Alps Road, Wayne, New Jersey
07470 and our telephone number is (973) 628-3000.
STEEP SLOPE ROOFING
We are a leading manufacturer of a complete line of premium steep slope
roofing products. Steep slope roofing product sales represented approximately
67% of our net sales in 2000. We have improved our sales mix of steep slope
roofing products in recent years by increasing our emphasis on laminated
shingles and accessory products which generally are sold at higher prices with
more attractive profit margins than our standard strip shingle products. We
believe that we are the largest manufacturer of laminated steep slope roofing
shingles and the second largest manufacturer of strip shingles in the United
States. (Statements contained in this report as to our competitive position are
based on industry information which we believe is reliable.)
Our two principal lines of steep slope roofing shingles are the
Timberline(R) series and the Sovereign(R) series. We also produce certain
specialty shingles.
The Timberline(R) Series.
The Timberline(R) series offers a premium laminated product line that adds
dramatic shadow lines and substantially improves the appearance of a roof. The
series includes:
- the Timberline(R) 25 shingle, a mid-weight laminated shingle which serves
as an economic trade-up for consumers, with a 25-year limited warranty;
- the Timberline(R) shingle, with a 30-year limited warranty, a heavyweight
laminated shingle with superior fire resistance and durability; and
- the Timberline Ultra(R) shingle, with a 40-year limited warranty, a super
heavyweight laminated shingle with the maximum durability of the
Timberline(R) series.
The Sovereign(R) Series.
The Sovereign(R)series includes:
- the standard 3-tab Sentinel(R) shingle with a 20-year limited warranty;
- the Royal Sovereign(R) shingle, a heavier 3-tab shingle with a 25-year
limited warranty, designed to capitalize on the "middle market" for
quality shingles; and
- the Marquis(R) Weathermax(R) shingle, a superior performing heavyweight
3-tab shingle with a 30-year limited warranty.
Specialty Shingles.
Our specialty asphalt shingles include:
- the Slateline(R) shingle, offering the appearance of slate and labor
savings in installation because of its larger size, with a 40-year
limited warranty;
- the Grand Sequoia(R) shingle, a premier architectural shingle with a
40-year limited warranty;
- the Country Mansion(R) shingle, a distinctive high-end architectural
shingle with a lifetime limited warranty;
- the Country Estates(TM) shingle, a versatile style, high-end
architectural shingle with a lifetime limited warranty; and
- the Grand Canyon(TM) shingle, a super heavyweight architectural shingle
with a rugged wood shake appearance with a lifetime limited warranty.
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Weather Stopper(R) Roofing System. In addition to shingles, we supply all
the components necessary to install a complete roofing system. Our Weather
Stopper(R) Roofing System begins with Weather Watch(R) and Stormguard(R)
waterproof underlayments for eaves, valleys and flashings to prevent water
seepage between the roof deck and the shingles caused by ice build-up and
wind-driven rain. Our Weather Stopper(R) Roofing System also includes
Shingle-Mate(R) glass reinforced underlayment, Timbertex(R) and Pacific
Ridge(TM) Hip and Ridge shingles, which are significantly thicker and larger
than standard hip and ridge shingles and provide dramatic accents to the slopes
and planes of a roof, and the Cobra(R) Ridge Vent, which provides attic
ventilation.
LOW SLOPE ROOFING
We manufacture a full line of modified bitumen and asphalt built-up roofing
products, liquid applied membrane systems and roofing accessories for use in the
application of low slope roofing systems. We also market thermoplastic and
elastomeric single-ply products, and in the first quarter of 2001, we began
manufacturing thermoplastic polyolefin products at our new plant in Mount
Vernon, Indiana. Low slope roofing represented approximately 26% of our net
sales in 2000. We believe that we are the second largest manufacturer of asphalt
built-up roofing products and the largest manufacturer of modified bitumen
products in the United States.
We manufacture fiberglass-based felts under the trademark GAFGLAS(R), which
are made from asphalt impregnated glass fiber mat for use as a component in
asphalt built-up roofing systems. Most of our GAFGLAS(R) products are assembled
on the roof by applying successive layers of roofing with asphalt and topped, in
some applications, with gravel. Thermal insulation may be applied beneath the
membrane. We also manufacture base sheets, flashings and other roofing
accessories for use in these systems; the TOPCOAT(R) roofing system, a
liquid-applied membrane system designed to protect and waterproof existing
roofing systems; and roof maintenance products. In addition, we market perlite
roofing insulation products, which consist of low thermal insulation that is
installed as part of a low slope roofing application below the roofing membrane,
isocyanurate foam as roofing insulation, packaged asphalt and accessories such
as vent stacks, roof insulation fasteners, cements and coatings.
We sell modified bitumen products under the Ruberoid(R) and Brai(R)
Supreme(TM) trademarks. Modified bitumen products are used primarily in
re-roofing applications or in combination with glass membranes in GAF
CompositeRoof(TM) systems. These products consist of a roofing membrane
utilizing polymer-modified asphalt, which strengthens and increases flexibility
and is reinforced with a polyester non-woven mat or a glass mat. Modified
bitumen systems provide high strength characteristics, such as weatherability,
water resistance and labor cost savings due to ease of application.
SPECIALTY BUILDING PRODUCTS AND ACCESSORIES
We manufacture and market a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries. Specialty building products and accessories represented
approximately 7% of our net sales in 2000. These products primarily consist of
steep slope attic ventilation systems and metal and fiberglass air distribution
products for the HVAC industry.
On September 29, 2000, we sold certain manufacturing and other assets
related to the Compton, California based security products division of LL
Building Products Inc. for net cash proceeds of approximately $27.1 million. In
connection with this transaction, we recorded a $17.5 million pre-tax operating
gain during 2000.
MARKETING AND SALES
We have one of the industry's largest sales forces. A staff of technical
professionals who work directly with architects, consultants, contractors and
building owners provides support to the sales force. We market our roofing and
specialty building products and accessories through our own sales force of
approximately 230 experienced, full-time employees and independent sales
representatives who operate from six regional sales offices located across the
United States. A major portion of our roofing product sales are to wholesale
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distributors who resell our products to roofing contractors and retailers. We
believe that our nationwide coverage has contributed to certain of our roofing
products being among the most recognized and requested brands in the industry.
Our Customer Advantage(TM) Program offers marketing and support services to
a nationwide network of MasterElite(TM) steep slope roofing contractors and
Authorized Installers. We view the Master Elite(TM) contractors and Authorized
Installers as an effective extension of our sales force which takes our products
directly to the homeowner. We also have established programs with approved
MasterSelect(TM), Platinum(TM) and Pride(TM) contractors to promote premium
warranty systems and service programs for our low slope roofing products.
No single customer accounted for 10% or more of our net sales in 2000,
except for The Home Depot, Inc. and American Builders & Contractors Supply
Company, Inc., which accounted for approximately 13% and 11%, respectively, of
our 2000 net sales.
RAW MATERIALS
The major raw materials required for the manufacture of our roofing
products are asphalt, mineral stabilizer, glass fiber, glass fiber mat,
polyester mat and granules. Asphalt and mineral stabilizer are available from a
large number of suppliers. We currently have contracts with several of these
suppliers and others are available as substitutes. In 2000, prices of most raw
materials other than asphalt and energy have been relatively stable, rising
moderately with general industrial prices, while the price of asphalt tends to
move in step with the price of crude oil. Energy costs increased significantly
in 2000 due to increased demand for such items.
The major raw materials required for the manufacture of our specialty
building products and accessories are steel tubes, sheet metal products,
aluminum, motors and cartons. These raw materials, other than motors, are
commodity-type products, the pricing for which is driven by supply and demand.
Prices of other raw materials used in the manufacture of specialty building
products and accessories are more closely tied to movements in inflation rates.
In 2000, substantially all of the motors used in our ventilation products were
purchased from a domestic supplier. All of these raw materials, including
motors, are available from a large number of suppliers.
Five of our roofing plants have easy access to deep water ports thereby
permitting delivery of asphalt by ship, the most economical means of transport.
Our Nashville, Tennessee plant manufactures a significant portion of our glass
fiber requirements for use in our Chester, South Carolina and Shafter,
California plants which manufacture glass fiber mat substrate. We purchase all
of our requirements for colored roofing granules from an affiliate,
International Specialty Products Inc., under a requirements contract, except for
the requirements of certain of our roofing plants which are supplied by third
parties. This contract expires on December 31, 2001, unless extended by the
parties.
SEASONAL VARIATIONS AND WORKING CAPITAL
Sales of roofing and specialty building products and accessories in the
northern regions of the United States generally decline during the winter months
due to adverse weather conditions. Generally, our inventory practice includes
increasing inventory levels in the first and second quarters in order to meet
peak season demand (June through November).
WARRANTY CLAIMS
We provide certain limited warranties covering most of our steep slope
roofing products for periods generally ranging from 20 to 40 years, although
certain of our styles provide for a lifetime limited warranty. Although terms of
warranties vary, we believe that our warranties generally are consistent with
those offered by our competitors. We also offer certain limited warranties and
guarantees of varying duration covering most of our low slope roofing products
and limited warranties covering most of our specialty building products and
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accessories for periods ranging from 5 to 10 years. From time to time, we review
the reserves established for estimated probable future warranty claims.
COMPETITION
The roofing products industry is highly competitive and includes a number
of national competitors. These competitors in the steep slope roofing and
accessories markets are Owens-Corning, Tamko, Elcor and Certainteed, and in the
low slope roofing market are Johns Manville, Firestone and Carlisle. In
addition, there are numerous regional competitors.
Competition is based largely upon products and service quality,
distribution capability, price and credit terms. We believe that we are
well-positioned in the marketplace as a result of our broad product lines in
both the steep slope and low slope markets, consistently high product quality,
strong sales force and national distribution capabilities. As a result of the
growth in demand for premium laminated shingles, a number of roofing
manufacturers, including our company, have increased their laminated shingle
production capacity in recent years. We have experienced increased competition
in this area due to these factors.
Our specialty roofing products and accessories business is highly
competitive with numerous competitors due to the breadth of the product lines we
market. Major competitors include Certainteed, Solar Group, ATCO Rubber Products
and Standex Air Distribution Products.
RESEARCH AND DEVELOPMENT
We primarily focus our research and development activities on the
development of new products, process improvements and the testing of alternative
raw materials and supplies. Our research and development activities, dedicated
to steep slope, low slope and fiberglass products, are located at technical
centers at Wayne, New Jersey and Nashville, Tennessee. Our research and
development expenditures were approximately $6.0, $6.5 and $5.9 million in 1998,
1999 and 2000, respectively.
PATENTS AND TRADEMARKS
We own or license approximately 100 domestic and 110 foreign patents or
patent applications. In addition, we own or license approximately 220 domestic
and 60 foreign trademark registrations or applications. While we believe the
patent protection covering certain of our products to be material to those
products, we do not believe that any single patent, patent application or
trademark is material to our business or operations. We believe that the
duration of the existing patents and patent licenses is consistent with our
business needs.
ENVIRONMENTAL COMPLIANCE
Since 1970, federal, state and local authorities have adopted and amended a
wide variety of federal, state and local environmental laws and regulations
relating to environmental matters. These laws and regulations affect us because
of the nature of our operations and that of our predecessor and certain of the
substances that are, or have been used, produced or discharged at our or its
plants or at other locations. We made capital expenditures of approximately
$0.6, $2.7 and $2.5 million in 1998, 1999 and 2000, respectively, relating to
environmental compliance. These expenditures are included in additions to
property, plant and equipment. We anticipate that aggregate capital expenditures
relating to environmental compliance in 2001 and 2002 will be approximately $1.0
million in each year.
The environmental laws and regulations deal with air and water emissions or
discharges into the environment, as well as the generation, storage, treatment,
transportation and disposal of solid and hazardous waste, and the remediation of
any releases of hazardous substances and materials to the environment. We
believe that our manufacturing facilities comply in all material respects with
applicable laws and regulations. Although we cannot predict whether more
burdensome requirements will be adopted in the future, we believe that any
potential liability for compliance with the laws and regulations will not
materially affect our business, liquidity or financial position.
See Item 3, "Legal Proceedings -- Environmental Litigation."
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EMPLOYEES
At December 31, 2000, we employed approximately 3,200 people worldwide,
approximately 900 of which were subject to 13 union contracts. The contracts are
effective for three- to four-year periods. During 2000, three labor contracts
expired and were renegotiated. We believe that our relations with our employees
and their unions are satisfactory.
ITEM 2. PROPERTIES
Our corporate headquarters and principal research and development
laboratories are located at a 100-acre campus-like office and research park
owned by a subsidiary of International Specialty Products Inc., at 1361 Alps
Road, Wayne, New Jersey 07470. We occupy our headquarters pursuant to our
management agreement with ISP. See Item 13, "Certain Relationships and Related
Transactions -- Management Agreement."
We own or lease the principal real properties described below. Unless
otherwise indicated, the properties are owned in fee. In addition to the
principal facilities listed below, we maintain sales offices and warehouses,
substantially all of which are in leased premises under relatively short-term
leases.
LOCATION FACILITY
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Alabama
Mobile.................................. Plant, Warehouses*
California
Fontana................................. Plant, Sales Office
Hollister............................... Plant, Plant*
Shafter................................. Plant
Stockton................................ Plant, Plant, Warehouse*
Florida
Tampa................................... Plant, Sales Office
Georgia
Atlanta................................. Administrative Offices*, Sales Office*
Savannah................................ Plant, Sales Office
Indiana
Mount Vernon............................ Plant, Plant, Sales Office
Michigan City........................... Plant
Illinois
Romeoville.............................. Sales Office*
Maryland
Baltimore............................... Plant
Massachusetts
Millis.................................. Plant, Sales Office, Warehouse*
Walpole................................. Plant*
Minnesota
Minneapolis............................. Plant, Sales Office
Mississippi
Purvis.................................. Plant
New Jersey
North Branch............................ Plant, Warehouse*
North Brunswick......................... Sales Office*, Warehouse*
Wayne................................... Headquarters*, Corporate Administrative
Offices*, Research Center*
North Carolina
Burgaw.................................. Plant
Goldsboro............................... Plant
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LOCATION FACILITY
- -------- --------
Ohio
Wadsworth............................... Plant*
Pennsylvania
Erie.................................... Plant, Sales Office, Warehouse*
Wind Gap................................ Plant
South Carolina
Chester................................. Plant
Tennessee
Nashville............................... Plant, Research Center*
Texas
Dallas.................................. Plant, Sales Office, Warehouse*
Fannett................................. Warehouse
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* Leased Property
In addition to the foregoing list, we have four manufacturing facilities in
Monroe, Georgia; Corvallis, Oregon; Port Arthur, Texas; and Albuquerque, New
Mexico that are currently closed. We believe that our plants and facilities,
which are of varying ages and are of different construction types, have been
satisfactorily maintained, are in good condition, are suitable for their
respective operations and generally provide sufficient capacity to meet
production requirements. Each plant has adequate transportation facilities for
both raw materials and finished products. In 2000, we made capital expenditures
of $61.5 million relating to plant, property and equipment.
ITEM 3. LEGAL PROCEEDINGS
Bodily Injury Claims. In connection with its formation, BMCA contractually
assumed and agreed to pay the first $204.4 million of liabilities for
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber of its parent, G-I Holdings. We frequently refer to these claims in this
report as "Asbestos Claims." As of March 30, 1997, BMCA had paid all of its
assumed asbestos-related liabilities. G-I Holdings has agreed to indemnify BMCA
against any other existing or future claims related to asbestos-related
liabilities if asserted against BMCA. In January 2001, G-I Holdings filed a
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code due to its Asbestos Claims. This proceeding is in a preliminary stage. In
light of G-I Holdings' recent bankruptcy filing, G-I Holdings may not have
sufficient assets to satisfy these indemnification obligations to us.
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 BMCA's common stock.
Such action could result in a change of control of our company. See Notes 11 and
16 to Consolidated Financial Statements. In addition, those claimants may seek
to file Asbestos Claims against our company (with 2,147 Asbestos Claims having
been filed against us as of December 31, 2000). We believe that we will not
sustain any liability in connection with these or any other asbestos-related
claims. Furthermore, 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 Asbestos Claims against BMCA. The
temporary restraining order expires on April 6, 2001. We are seeking to have
this order renewed past this date. On February 7, 2001, G-I Holdings filed a
defendant class 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. This action is in a preliminary stage and no trial date has been set
by the court. As a result, it is not possible to predict the outcome of this
litigation. While we cannot predict whether any additional Asbestos Claims will
be asserted against us, or the outcome of any litigation relating to those
claims, we believe that we have meritorious defenses to any claim that we have
asbestos-related liability, although there can be no assurances in this regard.
In addition, G-I
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Holdings has indemnified us with respect to Asbestos Claims. In light of G-I
Holdings' recent bankruptcy filing, G-I Holdings may not have sufficient assets
to satisfy these indemnification obligations to us.
Actions Relating to G-I Holdings' Bankruptcy. On February 8, 2001, a
creditors committee established in G-I Holdings' bankruptcy case filed a
complaint in the United States Bankruptcy Court for the District of New Jersey
against G-I Holdings and BMCA. 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. We believe that no basis exists for the court to grant the
relief requested. The plaintiffs also filed for interim relief absent the
granting of their requested relief described above. On February 21, 2001, G-I
Holdings moved to dismiss the complaint. On March 21, 2001, the bankruptcy court
refused to grant the requested interim relief.
Asbestos-in-Building Claims. G-I Holdings has also been named as a
co-defendant in asbestos-in-buildings cases for economic and property damage or
other injuries based upon an alleged present or future need to remove asbestos
containing materials from public and private buildings. We refer to the
asbestos-in-building claims in this report as the "Building Claims." Since these
actions were first initiated approximately 19 years ago, G-I Holdings has not
only successfully disposed of approximately 145 of these cases, but is a co-
defendant in only three remaining lawsuits, one of which has been dormant. These
actions have been stayed as to G-I Holdings pursuant to the G-I Holdings
bankruptcy case. No new Building Claims were filed in 2000. BMCA has not assumed
any liabilities with respect to Building Claims, and G-I Holdings has agreed to
indemnify BMCA against those liabilities in the event any claims are asserted
against it. For a discussion of the possible consequences to us of the failure
of G-I Holdings to satisfy judgments against it relating to Building Claims, see
"-- Bodily Injury Claims" above.
Insurance Matters. In January 1993, G-I Holdings filed an action with the
United States District Court in Philadelphia against certain product liability
insurers whose policies will or may be called upon to respond to Asbestos
Claims. This action sought a declaratory judgment against various third-party
defendant product liability insurers to the effect that those insurers are
obligated to provide coverage for Asbestos Claims. In March 2000, G-I Holdings
reached a settlement with the final remaining insurer who was a defendant in G-I
Holdings' amended complaint and has dismissed this action.
In January 2000 and May 2000, G-I Holdings filed summary actions in
Superior Court of New Jersey, Middlesex County against several of its insurers
which had indicated that the Center for Claims Resolution, a non-profit
organization set up to administer and handle asbestos-related personal injury
claims against the participating companies and in which G-I Holdings was a
member, had claimed a right to G-I Holdings' insurance proceeds to satisfy what
the CCR contends are G-I Holdings' share of settlements entered by the CCR while
G-I Holdings was a member. On March 17, 2000 and July 28, 2000, the trial court
granted summary judgment in favor of G-I Holdings, and the CCR's motions for a
stay pending appeal were denied by both the trial court and the appellate
division. All insurers in both actions have now paid the amounts in dispute to
G-I Holdings. The CCR is appealing the court's grant of summary judgment.
In October 1983, G-I Holdings filed a lawsuit in Los Angeles, California
Superior Court against its past insurance carriers to obtain a judicial
determination that those carriers were obligated to defend and indemnify it for
Building Claims. G-I Holdings is seeking declaratory relief as well as
compensatory damages. This action is presently in the pre-trial pleading stage.
The parties have agreed to hold this action in abeyance until such time as they
are better able to evaluate developments as they may occur in the Building
Claims. Because this litigation is in early stages and evidence and
interpretations of important legal questions are presently unavailable, it is
not possible to predict the future of this litigation.
In all the Building Claims, G-I Holdings' defense costs have been paid by
one of its primary carriers. While G-I Holdings expects that this primary
carrier will continue to defend and indemnify G-I Holdings, this primary carrier
has reserved its rights to later refuse to defend and indemnify G-I Holdings and
to seek reimbursement for some or all of the fees paid to defend and resolve the
Building Claims. G-I Holdings believes that it will be able to resolve those
cases for amounts within the total indemnity obligations available from this
primary carrier.
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ENVIRONMENTAL LITIGATION
We, together with other companies, are a party to a variety of proceedings
and lawsuits involving environmental matters under the Comprehensive
Environmental Response Compensation and Liability Act and similar state laws, in
which recovery is sought for the cost of cleanup of contaminated sites, a number
of which are in the early stages or have been dormant for protracted periods. We
refer to these proceedings and lawsuits below as "Environmental Claims."
In connection with its formation, BMCA contractually assumed all
environmental liabilities of G-I Holdings relating to existing plant sites and
the business of BMCA as then conducted. The estimates referred to below reflect
those environmental liabilities assumed by BMCA and other environmental
liabilities of our company. The environmental liabilities of G-I Holdings which
were not assumed by BMCA relate primarily to closed manufacturing facilities.
G-I Holdings estimates that, as of December 31, 2000, its liability in respect
of the environmental liabilities of G-I Holdings not assumed by BMCA was
approximately $9.3 million, before insurance recoveries reflected on its balance
sheet of $9.1 million. BMCA estimates its liability as of December 31, 2000 in
respect of assumed and other environmental liabilities is $1.3 million, and
expects insurance recoveries reflected on its balance sheet, as discussed below,
of $0.8 million. Insurance recoveries reflected on these balance sheets relate
to both past expenses and estimated future liabilities. We refer to these
recoveries below as "estimated recoveries."
At most sites, BMCA anticipates that liability will be apportioned among
the companies found to be responsible for the presence of hazardous substances
at the site. Although it is difficult to predict the ultimate resolution of
these claims, based on BMCA's evaluation of the financial responsibility of the
parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, BMCA estimates that its liability in respect of all
Environmental Claims, including certain environmental compliance expenses, will
be as discussed above. For information relating to other environmental
compliance expenses, see Item 1, "Business -- Environmental Compliance" above.
After considering the relevant legal issues and other pertinent factors,
BMCA believes that it will receive the estimated recoveries and the legal
expenses incurred by G-I Holdings on BMCA's behalf. We also believe that
recoveries could be well in excess of the estimated recoveries for all
Environmental Claims, although there can be no assurances in this regard. BMCA
believes it is entitled to substantially full defense and indemnity under its
insurance policies for most Environmental Claims, although BMCA's insurers have
not affirmed a legal obligation under the policies to provide indemnity for
those claims.
In March 1995, G-I Holdings commenced litigation on behalf of itself and
its predecessors, successors, subsidiaries and related corporate entities in the
United States District Court for the District of New Jersey seeking amounts
substantially in excess of the estimated recoveries. The court dismissed this
action in December 1997 for lack of federal jurisdiction, and defendant insurers
appealed the dismissal. The appeal was denied by the Third Circuit Court of
Appeals in March 1999. In June 1997, G-I Holdings filed a similar action against
the insurers in the Superior Court of New Jersey, Somerset County, which action
was removed to the United States Bankruptcy Court for the District of New Jersey
in February 2001 in conjunction with the G-I Holdings' bankruptcy case. The
action is currently pending in the bankruptcy court, although the defendant
insurers have filed a motion to remand the action to the Superior Court of New
Jersey, Somerset County. While BMCA believes that its claims are meritorious,
there can be no assurance that BMCA will prevail in its efforts to obtain
amounts equal to, or in excess of, the estimated recoveries.
We believe that we will not sustain any liability for environmental
liabilities of G-I Holdings other than those that we have contractually assumed
or that relate to the operations of our business. While we cannot predict
whether any claims for non-assumed environmental liabilities will be asserted
against us or our assets, or the outcome of any litigation relative to those
claims, we believe that we have meritorious defenses to those claims. In
addition, G-I Holdings has indemnified us with respect to those claims. In light
of G-I Holdings' recent bankruptcy filing, G-I Holdings may not have sufficient
assets to satisfy these indemnification obligations. For the possible
consequences to us of the failure of G-I Holdings to satisfy judgments against
it in environmental-related lawsuits or otherwise, see "-- Bodily Injury Claims"
above.
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OTHER LITIGATION
In November 2000, we settled litigation previously pending between us and
Elk Corporation of Dallas in the United States District Court for the Northern
District of Texas and the United States Court of Appeals for the Federal Circuit
relating to certain aspects of our laminated shingles, which Elk claimed
infringed design and utility patents issued to it. This settlement does not
require us to make any current or future payments. Elk had asserted that we had
appropriated the trade dress of Elk's product and had sought injunctive relief,
damages and attorneys' fees. We sued for a declaration that Elk's patents were
invalid and unenforceable and that our shingles did not infringe any of Elk's
rights, and had sought money damages for Elk's unfair competition. On October
10, 1997, the court issued an opinion holding that Elk's design patent was
unenforceable because it was obtained through inequitable conduct, which ruling
was affirmed on February 11, 1999 by the United States Court of Appeals for the
Federal Circuit. Elk filed a petition for rehearing on February 25, 1999, which
was denied by the court, and subsequently filed a petition for a writ of
certiorari in the United States Supreme Court, which also was denied.
On or about April 29, 1996, an action was commenced in the Circuit Court of
Mobile County, Alabama against G-I Holdings on behalf of a purported nationwide
class of purchasers of, or current owners of, buildings with certain asphalt
shingles manufactured by G-I Holdings and affiliated entities. The action
alleged, among other things, that those shingles were defective and sought
unspecified damages on behalf of the purported class. On September 25, 1998, we
agreed to settle this litigation on a national, class-wide basis for asphalt
shingles manufactured between January 1, 1973 and December 31, 1997. Following a
fairness hearing, the court granted final approval of the class-wide settlement
in April 1999. Under the terms of the settlement, we will provide property
owners whose shingles were manufactured during this period and which suffer
certain damages during the term of their original warranty period, and who file
a qualifying claim, with an opportunity to receive certain limited benefits
beyond those already provided in their existing warranty. In October and
December 1998, the separate actions commenced in 1997 in the Superior Court of
New Jersey, Middlesex County, the Superior Court of New Jersey, Passaic County
and the Supreme Court of the State of New York, County of Nassau, and in 1996 in
Pointe Coupee Parish, Louisiana, on behalf of purported classes alleging that
our shingles were defective and seeking unspecified damages, were stayed pending
the outcome of the fairness hearing on the settlement agreement in the Mobile
County, Alabama action. The Middlesex County, New Jersey, the Pointe Coupee
Parish, Louisiana and the Nassau County, New York actions have been dismissed in
light of the final approval of the settlement agreement in the Mobile County,
Alabama action, and we expect that the remaining action also will be dismissed.
In October 1998, G-I Holdings brought suit in the Superior Court of New
Jersey, Middlesex County, on our behalf, against certain of its insurers for
recovery of the defense costs in connection with the Mobile County, Alabama
class action and a declaration that the insurers are obligated to provide
indemnification for all damages paid pursuant to the settlement of this class
action and for other damages. This action is pending.
* * *
We believe that the ultimate disposition of the cases described above under
"Environmental Litigation," "Asbestos-in-Building Claims" and "Other Litigation"
will not, individually or in the aggregate, have a material adverse effect on
our liquidity, financial position or results of operations.
TAX CLAIM AGAINST G-I HOLDINGS
On September 15, 1997, G-I Holdings received a notice from the Internal
Revenue Service of a deficiency in the amount of $84.4 million (after taking
into account the use of net operating losses and foreign tax credits otherwise
available for use in later years) in connection with the formation in 1990 of
Rhone-Poulenc Surfactants and Specialties, L.P., a partnership in which G-I
Holdings held an interest. The claim of the IRS for interest and penalties,
after taking into account the effect on the use of net operating losses and
foreign tax credits, could result in G-I Holdings incurring liabilities
significantly in excess of the deferred tax liability of $131.4 million that it
recorded in 1990 in connection with this matter. G-I Holdings has advised us
that it believes that it will prevail in this matter, although we cannot assure
you of this result.
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We believe that the ultimate disposition of this matter will not have a material
adverse effect on our business, financial position or results of operations. G-I
Holdings has agreed to indemnify us against any tax liability associated with
the surfactants partnership. In light of G-I Holdings' recent bankruptcy filing,
G-I Holdings may not have sufficient assets to satisfy its indemnification
obligation to us. For the possible consequences to us of the failure of G-I
Holdings to satisfy this liability and other information relating to G-I
Holdings, see "-- Bodily Injury Claims" above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKETS FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
There is no trading market for BMCA's common stock. As of March 23, 2001,
there were two holders of record of BMCA's Class A common stock and one holder
of record of its Class B common stock. See Item 12, "Security Ownership of
Certain Beneficial Owners and Management."
ITEM 6. SELECTED FINANCIAL DATA
See page F-8.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See page F-2.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Financial Condition -- Market-Sensitive
Instruments and Risk Management" on page F-6.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index on page F-1 and Financial Statements and Supplementary Data on
pages F-10 to F-44.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age, position and other
information with respect to the directors and executive officers of BMCA. Under
BMCA's By-laws, each director and executive officer continues in office until
the company's next annual meeting of stockholders and until his or her successor
is elected and qualified. On July 15, 1998, International Specialty Products
Inc. merged with and into its parent, ISP
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Holdings Inc., and ISP Holdings changed its name to International Specialty
Products Inc. As used in this section, "ISP" refers to both companies.
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- --------------------------------
William W. Collins................... 50 Mr. Collins has been President and Chief Executive
Director, Chief Executive Officer Officer of BMCA and certain of its subsidiaries since
and President September 2000 and a director of these companies since
July 1999. He was President and Chief Operating Officer
of the same companies from February 2000 to September
2000 and was Executive Vice President and Chief
Operating Officer of these companies from July 1999 to
February 2000. Mr. Collins also was Senior Vice
President -- Marketing and Sales, Residential Roofing
Products of BMCA and certain of its subsidiaries from
November 1997 to July 1999. He was Vice
President -- Marketing and Sales, Commercial Roofing
Products of BMCA from March 1996 to November 1997, and
Vice President -- Sales, Commercial of BMCA from
December 1995 to March 1996. Since July 1999, Mr.
Collins also has been a director of G-I Holdings, a
corporation that filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy
Code in January 2001 due to its Asbestos Claims.
Richard A. Weinberg.................. 41 Mr. Weinberg has been Executive Vice President, General
Executive Vice President, General Counsel and Secretary of BMCA and its subsidiaries since
Counsel and Secretary May 1998 and was Senior Vice President, General Counsel
and Secretary of BMCA and its subsidiaries from May 1996
to May 1998. Since September 2000, he has been Chief
Executive Officer, President, General Counsel and
Secretary of G-I Holdings, a corporation that filed a
voluntary petition for reorganization under Chapter 11
of the U.S. Bankruptcy Code in January 2001 due to its
Asbestos Claims, and previously served as Executive Vice
President, General Counsel and Secretary of G-I Holdings
and its subsidiaries from May 1998 to September 2000.
Prior to that time, he held the positions of Senior Vice
President, General Counsel and Secretary of these
companies from May 1996 to May 1998. Mr. Weinberg has
served as a director of G-I Holdings since May 1996. He
also has been Executive Vice President, General Counsel
and Secretary of ISP and its subsidiaries since May 1998
and was Senior Vice President, General Counsel and
Secretary of ISP and its subsidiaries from May 1996 to
May 1998. He was Vice President and General Counsel of
BMCA from September 1994 to May 1996.
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PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- --------------------------------
David A. Harrison.................... 44 Mr. Harrison has been a director of BMCA and certain of
Director, Senior Vice its subsidiaries since September 2000. He also has been
President -- Marketing, Contractor Senior Vice President -- Marketing, Contractor Services
Services and Corporate Development and Corporate Development of BMCA and certain of its
subsidiaries since July 2000. He is also President of
GAF Materials Corporation (Canada). Mr. Harrison was
Vice President -- Corporate Marketing and Development of
BMCA and certain of its subsidiaries from November 1999
to July 2000, Vice President -- Marketing Development of
BMCA and certain of its subsidiaries from January 1997
to July 1999 and Senior Vice President -- Residential
Marketing of BMCA and certain of its subsidiaries from
April 1996 to January 1997. From July 1999 to November
1999, Mr. Harrison was Senior Vice President, Corporate
Marketing of Centex Corporation, a company in the
construction and related financial services industries.
Prior to joining BMCA, Mr. Harrison was Vice President
of Global Marketing of Armstrong World Industries Inc.
from 1994 to 1996.
Robert B. Tafaro..................... 50 Mr. Tafaro has been a director of BMCA and certain of
Director, Senior Vice President and its subsidiaries since September 2000. He also has been
General Manager -- Steep Slope Senior Vice President and General Manager -- Steep Slope
Systems Systems of BMCA and certain of its subsidiaries since
July 2000. He was Vice President -- Marketing and Sales,
Commercial Roofing Products of BMCA and certain of its
subsidiaries from November 1997 to July 2000. He was
Vice President -- Residential Marketing of BMCA from May
1997 to November 1997, Director of Residential Marketing
of BMCA from February 1997 to May 1997, and Eastern
Regional Sales Manager of BMCA and its predecessor
company from July 1993 to February 1997.
Kenneth E. Walton.................... 44 Mr. Walton has been a director of BMCA and certain of
Director, Senior Vice its subsidiaries since September 2000. He also has been
President -- Operations Senior Vice President -- Operations of BMCA and certain
of its subsidiaries since July 2000. He was Vice
President -- Residential Operations of BMCA from March
1999 to July 2000, Vice President -- Manufacturing of
U.S. Intec, Inc., a former subsidiary of BMCA, from
December 1997 to March 1999, Director of Manufacturing--
Roofing and Felt Operations of BMCA from April 1996 to
December 1997 and Plant Manager -- Mobile, Alabama
roofing facility of BMCA and its predecessor company
from May 1991 to April 1996.
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PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ---------------------- --- --------------------------------
Susan B. Yoss........................ 42 Ms. Yoss has been Senior Vice President and Treasurer of
Senior Vice President and Treasurer BMCA and its subsidiaries since July 1999 and was Vice
President and Treasurer of the same companies from
February 1998 to July 1999. Since July 1999, she also
has been Senior Vice President, Chief Financial Officer
and Treasurer of G-I Holdings, a corporation that filed
a voluntary petition for reorganization under Chapter 11
of the U.S. Bankruptcy Code in January 2001 due to its
Asbestos Claims. Ms. Yoss has served as Executive Vice
President -- Finance and Treasurer of ISP and certain of
its subsidiaries since September 2000, was Senior Vice
President and Treasurer of ISP and certain of its
subsidiaries from July 1999 to September 2000 and was
Vice President and Treasurer of ISP from February 1998
to July 1999. Ms. Yoss was Assistant Treasurer of Joseph
E. Seagram & Sons, Inc., a global beverage and
entertainment company, for more than five years until
February 1998.
John F. Rebele....................... 46 Mr. Rebele has been a director of BMCA since January
Director, Vice President and Chief 2001 and of certain of BMCA's subsidiaries since March
Financial Officer 2001. He also has been Vice President and Chief
Financial Officer of BMCA and certain of its
subsidiaries since January 2001. He was Vice
President -- Finance of BMCA and certain of its
subsidiaries from March 1998 to January 2001 and Vice
President and Controller of BMCA and certain of its
subsidiaries from February 1994 to March 1998.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the four other most highly compensated executive officers of BMCA as
of December 31, 2000, together with any person who served as BMCA's Chief
Executive Officer in 2000. The salaries and other compensation of Messrs. Heyman
and Weinberg and Ms. Yoss for services provided by them to our company are paid
by ISP in accordance with a management agreement between ISP and our company.
See Note (7) to the table below.
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION OTHER SECURITIES
--------------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(1) COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------- ------------
William W. Collins.................. 2000 $245,625 $150,000 6,500 $19,251(2)
President and Chief Executive 1999 194,750 100,000 5,000 15,463(2)
Officer 1998 168,000 69,871 3,000 14,899(2)
William C. Lang..................... 2000 $257,500 $ 15,202 5,000 $21,400(3)
Executive Vice President, 1999 242,500 100,000 5,000 20,871(3)
Chief Administrative Officer 1998 207,083 94,145 4,200 17,965(3)
and Chief Financial Officer(3)
David A. Harrison................... 2000 $207,375 $ 39,995 $48,544(4) 4,500 $ 9,722(4)
Senior Vice President -- 1999 115,578(4) 26,137(4) --(4) --(4) 11,037(4)
Marketing, Contractor Services 1998 163,250 35,482 7,171(4) 1,000 16,681(4)
and Corporate Development
Robert B. Tafaro.................... 2000 $200,999 $ 44,071 1,500 $18,057(5)
Senior Vice President and 1999 164,000 36,183 -- 15,099(5)
General Manager -- Steep Slope
Systems 1998 135,842 35,152 2,500 14,226(5)
Kenneth E. Walton................... 2000 $164,375 $ 36,800 2,000 $15,011(6)
Senior Vice
President -- Operations 1999 151,018 34,110 2,500 16,372(6)
1998 127,310 21,735 1,500 19,214(6)
Samuel J. Heyman.................... 2000 (7) (7) (7) (7)
Former Chairman of the Board, 1999 (7) (7) (7) (7)
President and Chief Executive 1998 (7) (7) (7) (7)
Officer(7)
- ---------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
Compensation Program, except that a portion of the bonus amounts paid to Mr.
Lang in 1998 and 2000, Mr. Harrison in 1999 and Mr. Tafaro in 1998
represented special bonus awards to those executive officers. The options
relate to shares of redeemable convertible preferred stock of BMCA. See
"-- Options."
(2) Included in "All Other Compensation" for Mr. Collins are: $12,150, $11,450
and $11,450, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $4,941, $2,484 and $2,122 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $2,160, $1,529 and $1,327 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively. In February 2000,
Mr. Collins was elected President and Chief Operating Officer of BMCA and in
September 2000 was elected as our President and Chief Executive Officer.
(3) Included in "All Other Compensation" for Mr. Lang are: $12,400, $11,700 and
$11,700, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $6,840, $7,267 and $4,459 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $2,160, $1,904 and $1,806 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively. Effective January
2001, Mr. Lang no longer holds the positions of Executive Vice President,
Chief Administrative Officer and Chief Financial Officer of BMCA. We have
entered into an agreement with Mr. Lang in connection with his separation
from employment with our company pursuant to which, among other things, we
will pay Mr. Lang nine months severance.
(Footnotes continued on next page)
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(Footnotes continued from previous page)
(4) Included in "Other Annual Compensation" for Mr. Harrison are $48,544 and
$7,171 in payment for moving-related expenses in 2000 and 1998,
respectively. Included in "All Other Compensation" for Mr. Harrison are:
$6,089, $9,188 and $11,450, representing BMCA's contribution under its
401(k) plan in 2000, 1999 and 1998, respectively; $1,574, $737 and $3,671
for the premiums paid by BMCA for a life insurance policy in 2000, 1999 and
1998, respectively; and $2,059, $1,112 and $1,560 for the premiums paid by
BMCA for a long-term disability policy in 2000, 1999 and 1998, respectively.
Mr. Harrison resigned from his employment with us in July 1999 and returned
in November 1999.
(5) Included in "All Other Compensation" for Mr. Tafaro are: $12,150, $11,450
and $11,283, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $3,913, $2,078 and $1,706 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $1,994, $1,571 and $1,237 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively.
(6) Included in "All Other Compensation" for Mr. Walton are: $12,150, $11,503
and $11,450, representing BMCA's contribution under its 401(k) plan in 2000,
1999 and 1998, respectively; $1,223, $3,416 and $6,594 for the premiums paid
by BMCA for a life insurance policy in 2000, 1999 and 1998, respectively;
and $1,638, $1,453 and $1,170 for the premiums paid by BMCA for a long-term
disability policy in 2000, 1999 and 1998, respectively.
(7) The salary and other compensation of Messrs. Heyman and Weinberg and Ms.
Yoss are paid by ISP pursuant to our management agreement with ISP, except
that BMCA granted to Mr. Weinberg options to purchase 6,453 shares of
redeemable convertible preferred stock of BMCA in 1999. See "-- Options." No
allocation of compensation for services to BMCA is made pursuant to the
management agreement, except that BMCA reimbursed ISP $400,000 and $230,000
under the management agreement in respect of bonus amounts earned by Mr.
Weinberg and Ms. Yoss, respectively, for 2000 in connection with services
performed by them for BMCA during that year. In addition, BMCA reimburses
ISP, through payment of the management fees payable under the management
agreement, for the estimated costs ISP incurs for providing the services of
these officers. See Item 13, "Certain Relationships and Related
Transactions -- Management Agreement." Mr. Heyman resigned as our President
in February 2000 and as our Chief Executive Officer and Chairman of the
Board in September 2000.
OPTIONS
The following table summarizes options to acquire BMCA's redeemable
convertible preferred stock granted during 2000 to the executive officers named
in the Summary Compensation Table above and the potential realizable value of
options held by those persons.
BMCA PREFERRED STOCK OPTION GRANTS IN 2000(1)
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF BOOK VALUE
SECURITIES OPTIONS GRANTED APPRECIATION
UNDERLYING TO EMPLOYEES IN --------------------------
NAME OPTIONS GRANTED FISCAL 2000 5% 10%
- ---- --------------- --------------- ----------- -----------
William W. Collins...................... 6,500 10.5% $311,620 $767,536
William C. Lang......................... 5,000 8.1 239,708 590,412
David A. Harrison....................... 4,500 7.3 215,737 531,371
Robert B. Tafaro........................ 1,500 2.4 71,912 177,124
Kenneth E. Walton....................... 2,000 3.2 95,883 236,165
- ---------------
(1) The BMCA preferred stock options represent options to purchase shares of
redeemable convertible preferred stock of BMCA. Each share of preferred
stock is convertible, at the holder's option, into shares of Class A common
stock of BMCA at a formula price based on Book Value (as defined in the
option agreement) as of the date of grant. The options vest over five years
from the date of grant. Dividends will
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accrue on the preferred stock from the date of issuance at the rate of 6%
per annum. The preferred stock is redeemable, at BMCA's option, for a
redemption price equal to the exercise price per share plus accrued and
unpaid dividends. The Class A common stock of BMCA issuable upon conversion
of the preferred stock is subject to repurchase by BMCA under certain
circumstances at a price equal to its then current Book Value. The exercise
price of the options is equal to the fair value per share of the preferred
stock at the date of grant. The options expire nine years after the date of
grant. See Note 2 to the table below for additional information relating to
outstanding stock options.
BMCA PREFERRED STOCK OPTIONS AND OPTION EXERCISES AND VALUES AT DECEMBER 31,
2000
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
PREFERRED OPTIONS IN-THE-MONEY
AT 12/31/00 PREFERRED OPTIONS
SHARES ACQUIRED VALUE EXERCISABLE/ AT 12/31/00
NAME ON EXERCISE REALIZED UNEXERCISABLE(1)(2) EXERCISABLE/UNEXERCISABLE(3)
- ---- --------------- -------- ----------------------- ----------------------------
William W. Collins.......... -- -- 8,031/15,587 $183,941/$98,998
William C. Lang............. -- -- 4,982/13,055 94,008/77,817
David A. Harrison........... -- -- 500/4,000 0/0
Robert B. Tafaro............ -- -- 2,237/3,424 64,584/29,106
Kenneth E. Walton........... -- -- 2,452/5,334 65,340/23,864
- ---------------
(1) With respect to the stock options for 6,453 shares of preferred stock held
by Mr. Weinberg, options for 2,581 shares of preferred stock were
exercisable and options for 3,872 shares of preferred stock were
unexercisable at December 31, 2000.
(2) Effective December 31, 2000, we adopted the 2001 Long-Term Incentive Plan
which, among other things, will allow certain employees participating in the
preferred stock option program to also participate in the new incentive plan
and to elect to exchange their outstanding stock options for incentive units
under the new incentive plan.
(3) Options for 12,118, 8,037, 0, 4,161 and 4,286 shares of preferred stock were
in-the-money for Messrs. Collins, Lang, Harrison, Tafaro and Walton,
respectively, at December 31, 2000. Options for 6,453 shares of preferred
stock were in-the-money for Mr. Weinberg at December 31, 2000. The value of
these unexercised in-the-money options held by Mr. Weinberg at December 31,
2000 was $10,410 and $15,614 for exercisable and unexercisable options,
respectively.
COMPENSATION OF DIRECTORS
The directors of BMCA do not receive any compensation for their services as
such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
We do not have a separate compensation committee. Compensation decisions
are determined by our Board of Directors, each member of which is also one of
our executive officers. See Item 13, "Certain Relationships and Related
Transactions."
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 23, 2001, approximately 99.9% of our outstanding Class A common
stock and all of our outstanding Class B common stock are owned of record by
BMCA Holdings Corporation. All of the outstanding capital stock of BMCA Holdings
Corporation is owned of record by G-I Holdings.
The following table sets forth information with respect to the ownership of
BMCA's common stock, as of March 23, 2001, by each other person known to us to
own beneficially more than 5% of either class of the common stock outstanding on
that date and by all of our directors and executive officers as a group.
AMOUNT AND
NATURE OF TOTAL
BENEFICIAL PERCENT VOTING
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP OF CLASS POWER
- -------------- --------------------------------------- ---------- -------- ------
Class A Common Stock Samuel J. Heyman...................... 1,015,010(2) 99.9% 98.5%
All directors and executive officers of
BMCA as a group (7 persons)........... -- -- --
Class B Common Stock Samuel J. Heyman...................... 15,000(2) 100.0% 1.5%
All directors and executive officers of
BMCA as a group (7 persons)........... -- -- --
- ---------------
(1) The business address for Mr. Heyman is 1361 Alps Road, Wayne, New Jersey
07470.
(2) The number of shares shown as being beneficially owned (as defined in Rule
13d-3 of the Exchange Act) by Mr. Heyman attributes ownership of the shares
of BMCA common stock owned by BMCA Holdings Corporation, a wholly-owned
subsidiary of G-I Holdings, to Mr. Heyman. As of March 23, 2001, Mr. Heyman
beneficially owned (as defined in Rule 13d-3 of the Exchange Act)
approximately 99.4% of the capital stock of G-I Holdings.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
Pursuant to a management agreement, International Specialty Products Inc.
(of which Samuel J. Heyman beneficially owns (as defined in Rule 13d-3 of the
Exchange Act) approximately 79%) provides certain general management,
administrative, legal, telecommunications, information and facilities services
to us, including the use of our headquarters in Wayne, New Jersey. ISP charged
us $6.0 million in 2000 for providing these services. These charges consist of
management fees and other reimbursable expenses attributable to us, or incurred
by ISP for our benefit. They are based on an estimate of the costs ISP incurs to
provide such services. Effective January 1, 2001, the management agreement was
amended to extend the term of the agreement through March 31, 2001, to provide
for the automatic extension of the agreement for successive quarterly periods
unless the agreement is terminated by a party, and to adjust the management fees
payable under the agreement. In addition, the management agreement was amended
to provide that BMCA rather than ISP be responsible for providing management
services to G-I Holdings and certain of its subsidiaries and that G-I Holdings
pay to BMCA a management fee for these services. Based on the services provided
to G-I Holdings in 2000 under the management agreement, the aggregate amount
payable by G-I Holdings to us for services to be rendered under the management
agreement in 2001 is expected to be approximately $0.6 million. We also allocate
a portion of the management fees payable by us under the management agreement to
separate lease payments for the use of our headquarters. Based on the services
provided by ISP in 2000 to us and G-I Holdings under the management agreement,
the aggregate amount payable by us to ISP under the management agreement for
2001 is expected to be approximately $6.6 million. Certain of our executive
officers receive their compensation from ISP. ISP is indirectly reimbursed for
this compensation through payment of the management fee and other reimbursable
expenses payable under the management agreement.
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Due to the unique nature of the services provided under the management
agreement, comparisons with third party arrangements are difficult. However, we
believe that the terms of the management agreement taken as a whole are no less
favorable to us than could be obtained from an unaffiliated third party.
CERTAIN PURCHASES
We purchase all of our colored roofing granules requirements from ISP under
a requirements contract, except for the requirements of certain of our roofing
plants which are supplied by third parties. Effective January 1, 2001, this
contract was amended and restated to provide, among other things, that the
contract will expire on December 31, 2001, unless extended by the parties. In
2000, we purchased in the aggregate approximately $59.3 million of mineral
products from ISP.
TAX SHARING AGREEMENT
We entered into a tax sharing agreement dated January 31, 1994 with G-I
Holdings with respect to the payment of federal income taxes and certain related
matters. During the term of the tax sharing agreement, which is effective for
the period during which we or any of our domestic subsidiaries is included in a
consolidated federal income tax return for the consolidated group that has
included G-I Holdings as a member, we are obligated to pay G-I Holdings an
amount equal to those federal income taxes we would have incurred if we, on
behalf of ourselves and our domestic subsidiaries, filed our own federal income
tax return. Unused tax attributes will carry forward for use in reducing amounts
payable by us to G-I Holdings in future years, but cannot be carried back. If we
ever were to leave the G-I Holdings consolidated tax group, we would be required
to pay to G-I Holdings the value of any tax attributes to which we would succeed
under the consolidated return regulations to the extent the tax attributes
reduced the amounts otherwise payable by us under the tax sharing agreement.
Under certain circumstances, the provisions of the tax sharing agreement could
result in us having a greater liability under the agreement than we would have
had if we and our domestic subsidiaries had filed our own separate federal
income tax return. Under the tax sharing agreement, we and each of our domestic
subsidiaries are responsible for any taxes that would be payable by reason of
any adjustment to the tax returns of G-I Holdings or its subsidiaries for years
prior to the adoption of the tax sharing agreement that relate to our business
or assets or the business or assets of any of our domestic subsidiaries.
Although, as a member of the G-I Holdings consolidated tax group, we are
severally liable for certain federal income tax liabilities of the G-I Holdings
consolidated tax group, including tax liabilities not related to our business,
G-I Holdings has agreed to indemnify us and our subsidiaries for all tax
liabilities of the G-I Holdings consolidated tax group other than tax
liabilities arising from our operations and the operations of our domestic
subsidiaries and tax liabilities for tax years pre-dating the tax sharing
agreement that relate to our business or assets and the business or assets of
any of our domestic subsidiaries. In light of G-I Holdings' recent bankruptcy
filing, G-I Holdings may not have sufficient assets to satisfy these
indemnification obligations. See Item 3, "Legal Proceedings -- Bodily Injury
Claims." The tax sharing agreement provides for analogous principles to be
applied to any consolidated, combined or unitary state or local income taxes.
Under the tax sharing agreement, G-I Holdings makes all decisions with respect
to all matters relating to taxes of the G-I Holdings consolidated tax group. The
provisions of the tax sharing agreement take into account both the federal
income taxes we would have incurred if we filed our own separate federal income
tax return and the fact that we are a member of the G-I Holdings consolidated
tax group for federal income tax purposes.
INTERCOMPANY BORROWINGS
BMCA makes loans to, and borrows from, G-I Holdings and its subsidiaries
from time to time at prevailing market rates. As of December 31, 2000, no loans
were owed to BMCA by G-I Holdings and no loans were owed by us to affiliates. In
addition, we make non-interest bearing advances to affiliates, of which no
amount was outstanding at December 31, 2000. In 2000, we made a distribution of
$106.2 million to our parent corporations, representing the write-off of
outstanding advances to our parent corporations that we determined were
uncollectible. See Note 15 to Consolidated Financial Statements.
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PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as part of this report:
(a)(1) Financial Statements: See Index on page F-1.
(a)(2) Financial Statement Schedules: See Index on page F-1.
(a)(3) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Reorganization Agreement, dated as of December 31, 1998, by
and among BMCA, Building Materials Manufacturing Corporation
and Building Materials Investment Corporation (incorporated
by reference to Exhibit 2.1 to BMCA's Registration Statement
on Form S-4 (Registration No. 333-69749) (the "2008 Notes
S-4").
3.1 -- Amended and Restated Certificate of Incorporation of BMCA
(incorporated by reference to Exhibit 3.1 to BMCA's Form
10-K for the year ended December 31, 1999 (the "1999 Form
10-K")).
3.2 -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to
BMCA's Registration Statement on Form S-4 (Registration No.
33-81808)) (the "Deferred Coupon Note Registration
Statement").
3.3 -- Certificate of Incorporation of Building Materials
Manufacturing Corporation (incorporated by reference to
Exhibit 3.3 to BMCA's Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K")).
3.4 -- By-laws of Building Materials Manufacturing Corporation
(incorporated by reference to Exhibit 3.4 to the 1998 10-K).
3.5 -- Certificate of Incorporation of Building Materials
Investment Corporation (incorporated by reference to Exhibit
3.5 to the 1998 10-K).
3.6 -- By-laws of Building Materials Investment Corporation
(incorporated by reference to Exhibit 3.6 to the 1998 10-K).
4.1 -- Indenture, dated as of December 9, 1996, between BMCA and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.1 to BMCA's Registration Statement on Form S-4
(Registration No. 333-20859)).
4.2 -- Indenture, dated as of October 20, 1997, between BMCA and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.1 to BMCA's Registration Statement on Form S-4
(Registration No. 333-41531)).
4.3 -- Indenture, dated as of July 17, 1998, between BMCA and The
Bank of New York, as trustee (incorporated by reference to
Exhibit 4.1 to BMCA's Registration Statement on Form S-4
(Registration No. 333-60633)).
4.4 -- First Supplemental Indenture, dated as of January 1, 1999,
to Indenture dated as of December 9, 1996 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors,
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.7 of the 2008 Notes S-4).
4.5 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of December 9, 1996 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.6 -- First Supplemental Indenture, dated as of January 1, 1999,
to Indenture dated as of October 20, 1997 among BMCA, as
issuer, Building Materials Manufacturing Corporation, as
co-obligor, Building Materials Investment Corporation, as
guarantor, and The Bank of New York, as trustee
(incorporated by reference to Exhibit 10.8 of the 2008 Notes
S-4).
20
23
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.7 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of October 20, 1997 among BMCA and
Building Materials Manufacturing Corporation, as issuers,
Building Materials Investment Corporation, as guarantor, the
Additional Guarantors signatory thereto, as additional
guarantors, and The Bank of New York, as trustee.
4.8 -- First Supplemental Indenture, dated as of January 1, 1999,
to Indenture dated as of July 17, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors,
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.9 of the 2008 Notes S-4).
4.9 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of July 17, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.10 -- Indenture, dated as of December 3, 1998, between BMCA and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.1 to the 2008 Notes S-4).
4.11 -- First Supplemental Indenture dated as of January 1, 1999 to
Indenture dated as of December 3, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors,
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.4 to the 2008 Notes S-4).
4.12 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of December 3, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.13 -- Indenture, dated July 5, 2000, between BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The
Bank of New York, as trustee.
4.14 -- First Supplemental Indenture, dated as of December 4, 2000,
to the Indenture dated as of July 5, 2000, between BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.15 -- Registration Rights Agreement, dated July 5, 2000, between
BMCA and BNY Capital Markets Inc.
4.16 -- First Amendment to the Registration Rights Agreement, dated
as of December 4, 2000, to Registration Rights Agreement
dated July 5, 2000, among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials
Investment Corporation, as guarantors, and BNY Capital
Markets, Inc., as initial purchaser.
10.1 -- Amended and Restated Management Agreement, dated as of
January 1, 1999, among GAF, G-I Holdings Inc., G Industries
Corp., Merick Inc., GAF Fiberglass Corporation, ISP, GAF
Building Materials Corporation, GAF Broadcasting Company,
Inc., BMCA and ISP Opco Holdings Inc. (incorporated by
reference to Exhibit 10.1 to the 1998 10-K).
10.2 -- Amendment No. 1 to the Management Agreement, dated as of
January 1, 2000 (incorporated by reference to Exhibit 10.2
to International Specialty Products Inc. Annual Report on
Form 10-K for the year ended December 31, 1999).
10.3 -- Amendment No. 2 to the Management Agreement, dated as of
January 1, 2001 (incorporated by reference to Exhibit 10.3
to International Specialty Products Inc. Annual Report on
Form 10-K for the year ended December 31, 2000).
10.4 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by
reference to Exhibit 10.9 to BMCA's Form 10-K for the year
ended December 31, 1996).*
21
24
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.5 -- Forms of Amendment to Option Agreement relating to Series A
Cumulative Redeemable Convertible Preferred Stock
(incorporated by reference to Exhibit 10.12 to BMCA's Form
10-K for the year ended December 31, 1997 (the "1997 Form
10-K")).*
10.6 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by
reference to Exhibit 10.13 to the 1997 Form 10-K).*
10.7 -- BMCA Preferred Stock Option Plan (incorporated by reference
to Exhibit 4.2 to BMCA's Registration Statement on Form S-8
(Registration No. 333-60589)).*
10.8 -- BMCA 2001 Long-Term Incentive Plan.*
10.9 -- Tax Sharing Agreement, dated as of January 31, 1994, among
GAF, G-I Holdings Inc. and BMCA (incorporated by reference
to Exhibit 10.6 to the Deferred Coupon Note Registration
Statement).
10.10 -- Amendment to Tax Sharing Agreement, dated as of March 19,
2001, between G-I Holdings and BMCA.
10.11 -- Reorganization Agreement, dated as of January 31, 1994,
among GAF Building Materials Corporation, G-I Holdings Inc.
and BMCA (incorporated by reference to Exhibit 10.9 to the
Deferred Coupon Note Registration Statement).
10.12 -- Credit Agreement, dated as of December 4, 2000, by and among
BMCA, the lenders party thereto, and The Bank of New York,
as agent for the lenders and as Swing Line Lender (the
"Credit Agreement").
10.13 -- Amendment No. 1, dated as of December 22, 2000, to the
Credit Agreement.
10.14 -- Amendment No. 2, dated as of March 8, 2001, to the Credit
Agreement.
10.15 -- Amended and Restated Credit Agreement, dated as of December
4, 2000, by and among BMCA, the lenders party thereto, Fleet
National Bank as Documentation Agent, Bear Stearns Corporate
Lending Inc. as Syndication Agent and the Bank of New York
as Swing Line Lender and as Administration Agent with BNY
Capital Markets Inc. as Lead Arranger and Bookrunner (the
"Amended and Restated Credit Agreement").
10.16 -- Amendment No. 1, dated as of December 22, 2000, to the
Amended and Restated Credit Agreement.
10.17 -- Amendment No. 2, dated as of March 8, 2001, to the Amended
and Restated Credit Agreement.
10.18 -- Security Agreement, dated December 22, 2000, by and among
BMCA and each of the grantors party thereto and The Bank of
New York as Collateral Agent.
10.19 -- Collateral Agent Agreement, dated December 22, 2000, by and
among BMCA, such Subsidiary of BMCA a party thereto, the
1999 Administrative Agent (as defined therein), each Senior
Note Trustee (as defined therein), the 2000 Administrative
Agent (as defined therein), the Chase Manhattan Bank, Fleet
National Bank and the Bank of New York, as Collateral Agent.
10.20 -- Separation and General Release Agreement between BMCA and
William C. Lang.*
21 -- Subsidiaries of BMCA.
23.1 -- Consent of Arthur Andersen LLP.
- ---------------
* Management and/or compensation plan or arrangement
(b) Reports on Form 8-K
The Company filed a report on Form 8-K, dated October 5, 2000, reporting
events under Item 5 thereof.
22
25
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: MARCH 30, 2001 BY: /s/ WILLIAM W. COLLINS
------------------------------------
NAME: WILLIAM W. COLLINS
TITLE: CHIEF EXECUTIVE OFFICER AND
PRESIDENT
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of each
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer March 30, 2001
- --------------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ JOHN F. REBELE Vice President and Chief Financial March 30, 2001
- --------------------------------------------------- Officer and Director (Principal
John F. Rebele Financial Officer)
/s/ DAVID A. HARRISON Director March 30, 2001
- ---------------------------------------------------
David A. Harrison
/s/ ROBERT B. TAFARO Director March 30, 2001
- ---------------------------------------------------
Robert B. Tafaro
/s/ KENNETH E. WALTON Director March 30, 2001
- ---------------------------------------------------
Kenneth E. Walton
/s/ JAMES T. ESPOSITO Vice President and Controller March 30, 2001
- --------------------------------------------------- (Principal Accounting Officer)
James T. Esposito
23
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BUILDING MATERIALS INVESTMENT
CORPORATION
Date: March 30, 2001 By: /s/ WILLIAM W. COLLINS
------------------------------------
Name: William W. Collins
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM W. COLLINS President, Chief Executive Officer March 30, 2001
- --------------------------------------------------- and Director (Principal Executive
William W. Collins Officer)
/s/ BARRY A. CROZIER Director March 30, 2001
- ---------------------------------------------------
Barry A. Crozier
/s/ ARTHUR W. CLARK Director March 30, 2001
- ---------------------------------------------------
Arthur W. Clark
/s/ JOHN F. REBELE Vice President and Chief Financial March 30, 2001
- --------------------------------------------------- Officer (Principal Financial and
John F. Rebele Accounting Officer)
24
27
BUILDING MATERIALS CORPORATION OF AMERICA
FORM 10-K
INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS, CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
PAGE
----
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. F-2
Selected Financial Data..................................... F-8
Report of Independent Public Accountants.................... F-9
Consolidated Statements of Operations for the three years
ended December 31, 2000................................... F-10
Consolidated Balance Sheets as of December 31, 1999 and
2000...................................................... F-11
Consolidated Statements of Cash Flows for the three years
ended December 31, 2000................................... F-12
Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended December 31, 2000............... F-14
Notes to Consolidated Financial Statements.................. F-15
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)...................... F-44
SCHEDULES
Consolidated Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts.......... S-1
F-1
28
BUILDING MATERIALS CORPORATION OF AMERICA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Building Materials Corporate of America ("BMCA"), a subsidiary of BMCA
Holdings Corporation, was formed in January 1994 to acquire the operating assets
and certain liabilities of GAF Building Materials Corporation, whose name was
changed to G-I Holdings Inc., a parent of BMCA. See Note 1 to Consolidated
Financial Statements.
To facilitate administrative efficiency, effective October 31, 2000, GAF
Corporation, the former indirect parent of BMCA, merged into its direct
subsidiary, G-I Holdings Inc. G-I Holdings Inc. then merged into its direct
subsidiary, G Industries Corp., which in turn merged into its direct subsidiary,
GAF Fiberglass Corporation. In that merger, GAF Fiberglass Corporation changed
its name to GAF Corporation. Effective November 13, 2000, GAF Corporation
(formerly known as GAF Fiberglass Corporation) merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the
merger to G-I Holdings Inc. G-I Holdings Inc. is now the parent of BMCA and of
BMCA's direct parent, BMCA Holdings Corporation. References herein to "G-I
Holdings" mean G-I Holdings Inc. and any and all of its predecessor
corporations, including GAF Corporation, G-I Holdings Inc., G Industries Corp.,
GAF Fiberglass Corporation and GAF Building Materials Corporation.
RESULTS OF OPERATIONS
2000 Compared with 1999
We recorded a net loss in 2000 of $11.2 million compared with net income of
$24.0 million in 1999. The net loss in 2000 included a one-time pre-tax gain of
$17.5 million ($11.0 million after-tax), a one-time pre-tax charge of $15.0
million ($9.5 million after-tax), pre-tax losses from the sale of investment
securities of $18.1 million ($11.4 million after-tax) and an after-tax
extraordinary loss of $0.3 million. The net income in 1999 included a pre-tax
nonrecurring charge of $2.7 million ($1.7 million after-tax) and an after-tax
extraordinary loss of $1.3 million. Excluding the one-time gains and losses in
both years, the net loss for 2000 would have been $1.0 million compared with net
income of $27.0 million in 1999, with the decrease primarily the result of lower
operating income, lower investment income and higher interest expense.
Net sales for 2000 were $1,207.8 million, a 5.9% increase over net sales
for 1999 of $1,140.0 million, with the increase due to net sales gains in
premium steep slope roofing products, partially offset by slightly lower net
sales of low slope roofing products. The increase in net sales of premium steep
slope roofing products resulted from higher average selling prices and unit
volumes, while the decrease in net sales of low slope roofing products primarily
resulted from lower unit volumes, partially offset by higher average selling
prices.
Operating income for 2000 was $61.4 million compared with $85.7 million
reported in 1999, excluding one-time items in both years. Lower operating
results were primarily attributable to the higher cost of energy and raw
material purchases, principally the cost of asphalt due to high oil prices and
increased demand for asphalt by the paving industry, partially offset by higher
average selling prices for steep slope and low slope roofing products, higher
steep slope roofing products unit volumes and lower manufacturing costs.
We recorded in 2000 a $17.5 million pre-tax gain from the sale of certain
assets of the security products business of LL Building Products Inc. (see Note
4 to Consolidated Financial Statements), a pre-tax charge of $15.0 million
related to an increase in product warranty reserves (see Note 2 to Consolidated
Financial Statements), pre-tax losses from the sale of investment securities of
$18.1 million, and an after-tax extraordinary loss of $0.3 million related to
the write-off of unamortized deferred financing fees in connection with the
extinguishment of debt. In 1999, we recorded pre-tax nonrecurring charges of
$2.7 million related to the settlement of a legal matter and an after-tax
extraordinary loss of $1.3 million representing the premium paid upon the
extinguishment of debt.
Interest expense increased from $48.3 million in 1999 to $53.5 million in
2000, primarily due to higher average borrowings and a higher average interest
rate. Other expense, net was $27.6 million compared to other income, net of $5.4
million in 1999, with the decrease primarily due to the pre-tax loss of $18.1
million from the sale of investment securities, lower investment income and
higher other expenses.
F-2
29
1999 Compared with 1998
We recorded net income in 1999 of $24.0 million compared with a net loss of
$9.8 million in 1998. The net income in 1999 and the net loss in 1998 included
pre-tax nonrecurring charges of $2.7 million ($1.7 million after-tax) and $27.6
million ($17.1 million after-tax), respectively, and after-tax extraordinary
losses of $1.3 million and $18.1 million, respectively. Excluding the
extraordinary losses and nonrecurring charges in both years, net income would
have been $27.0 million in 1999 compared with $25.4 million in 1998, an increase
of 6.3%, with the increase primarily attributable to higher operating income and
lower interest expense, partially offset by lower investment income.
Net sales for 1999 were $1,140.0 million, a 4.8% increase over net sales
for 1998 of $1,088.0 million. The sales growth was primarily due to the
inclusion of the LL Building Products Inc. business, acquired in June 1998, for
the full year (see Note 4 to Consolidated Financial Statements), together with
net sales gains in premium steep slope roofing products, partially offset by
lower net sales in low slope roofing products. The increase in net sales of
premium steep slope roofing products resulted from higher sales volumes and
average selling prices, while the decline in net sales of low slope roofing
products resulted from lower average selling prices.
Operating income, before the impact of nonrecurring charges, for 1999 was
$85.7 million, a 14.2% increase over the $75.1 million for 1998 and, as a
percentage of sales, improved to 7.5% in 1999 from 6.9% in 1998. The increase in
operating income in 1999 was primarily attributable to higher net sales for our
premium steep slope roofing products, the inclusion of the LL Building Products
Inc. business, acquired in June 1998, for the full year, and a modest
improvement in low slope roofing products, primarily the result of lower
selling, general and administrative expenses and manufacturing costs.
We recorded a pre-tax nonrecurring charge in 1999 of $2.7 million related
to the settlement of a legal matter and, in 1998, a $27.6 million pre-tax charge
of which $20.0 million related to the settlement of a national class action
lawsuit involving asphalt shingles, and $7.6 million related to a grant to our
former President and Chief Executive Officer of our restricted common stock and
certain cash payments to be made over a specified period of time (substantially
all of which was earned) in connection with the termination by an affiliate of
preferred stock options and stock appreciation rights held by this officer (see
Note 5 to Consolidated Financial Statements).
Interest expense declined to $48.3 million for 1999 from $50.0 million in
1998, due primarily to a lower average interest rate, partially offset by higher
average borrowings. The lower average interest rate resulted primarily from the
refinancing of $310 million in aggregate principal amount at maturity of our
11 3/4% Senior Deferred Coupon Notes due 2004 (the "Deferred Coupon Notes") with
substantially all of the net proceeds from the issuances of $150 million in
aggregate principal amount of our 7 3/4% Senior Notes due 2005 (the "2005
Notes"), $155 million in aggregate principal amount of our 8% Senior Notes due
2008 (the "2008 Notes") and a $31.9 million bank term loan (the "Term Loan") in
July 1998, December 1998 and August 1999, respectively. In connection with the
above refinancing, we recorded after-tax extraordinary losses of $1.3 million in
1999 and $18.1 million in 1998 related to premiums paid to repurchase the
Deferred Coupon Notes.
Other income, net, was $5.4 million in 1999 compared with $15.9 million in
1998. The decline was principally due to $10.3 million lower investment income.
LIQUIDITY AND FINANCIAL CONDITION
Net cash inflow during 2000 was $70.2 million before financing activities,
and included $41.1 million of cash generated from operations, the reinvestment
of $61.5 million for capital programs, the generation of $59.0 million from net
sales of available-for-sale securities and other short-term investments and
$31.7 million from the sale of assets.
Cash invested in additional working capital (excluding the non-cash leasing
transactions described below) totaled $19.8 million during 2000, primarily
reflecting increases in other current assets and decreases in accounts payable
and accrued liabilities (after non-cash transactions) of $0.7, $26.8 and $8.8
million,
F-3
30
respectively, partially offset by decreases in accounts receivable and
inventories of $13.1 and $3.3 million, respectively. Cash from operating
activities also reflected a $45.2 million increase from related party/parent
corporation transactions (primarily due to the distribution to our parent
corporations, representing the write-off of $106.2 million of outstanding
advances to our parent corporations that we determined were uncollectible, $59.1
million of which was outstanding at December 31, 1999 and $47.1 million of which
was advanced in 2000) and a $9.3 million increase in the reserve for product
warranty claims (primarily resulting from a $15.0 million product warranty
reserve adjustment, partially offset by claim payments).
In connection with the construction of two new manufacturing facilities, in
1999 we entered into two leases for certain machinery and equipment to be
utilized at our plants in Michigan City, Indiana and Shafter, California, which
leases meet the criteria of operating leases under Statement of Financial
Accounting Standards ("SFAS") No. 13 "Accounting for Leases." In connection with
these leases, at December 31, 1999, property, plant and equipment, net and
accrued liabilities included $65.6 million of assets under these leases. These
amounts were reversed during 2000 when the manufacturing facilities became fully
operational. This $65.6 million decrease in accrued liabilities was in addition
to other reductions aggregating $8.8 million.
In connection with the construction of our new manufacturing facility in
Mount Vernon, Indiana, in December 2000 we entered into an operating lease for
certain machinery and equipment to be utilized at this plant, at a total cost of
approximately $15.5 million.
Net cash used in financing activities totaled $43.4 million in 2000. We
generated $41.0 million of proceeds from the issuance of long-term debt,
including net proceeds of $34.0 million from our 10 1/2% Senior Notes due 2003
(the "2003 Notes") which were used to repay the Term Loan and for general
corporate purposes, and the $7.0 million precious metal note due 2003 (the
"Precious Metal Note") referred to below. In addition, we borrowed an additional
$70 million under our amended and restated existing $110 million secured
revolving credit facility (the "Existing Credit Agreement"). Offsetting these
cash inflows was $38.1 million of repayments of long-term debt, principally the
repayment of the Term Loan, a $106.2 million distribution to our parent
corporations, representing the write-off of outstanding advances to our parent
corporations which we determined were uncollectible, and $10.0 million in
financing fees and expenses. See Note 15 to Consolidated Financial Statements.
Our 8 5/8% Senior Notes due 2006, our 8% Senior Notes due 2007, the 2005 Notes,
the 2008 Notes and the 2003 Notes are collectively referred to as the "Senior
Notes."
As a result of the foregoing factors, cash and cash equivalents (excluding
securities at December 31, 1999) increased by $26.8 million during 2000 to $82.7
million.
In December 2000, we entered into the new $100 million secured credit
facility (the "New Credit Agreement"), which is to be used for working capital
purposes subject to certain restrictions. The New Credit Agreement matures in
August 2003. As of December 31, 2000, there were no outstanding borrowings or
letters of credit under the New Credit Agreement. In connection with entering
into the New Credit Agreement, the maturity date of our Existing Credit
Agreement was extended for an additional year to August 2003. Our obligations
under the Existing Credit Agreement and the New Credit Agreement, as well as our
obligations under the Precious Metal Note and approximately $3.5 million of
obligations under a standby letter of credit (collectively, the "Other
Indebtedness"), aggregated $77.0 million of borrowings and $42.3 million of
letters of credit outstanding at December 31, 2000. All of those obligations are
secured by a first-priority lien on substantially all of our assets and the
assets of our subsidiaries on a pro rata basis. We refer to these assets below
as the "Collateral." The Senior Notes are secured by a second-priority lien on
the same assets for so long as the first-priority lien remains in effect,
subject to certain limited exceptions.
Under the terms of the New Credit Agreement, the Existing Credit Agreement
and the Senior Notes, we are subject to certain financial covenants, including,
among others, interest coverage, minimum consolidated EBITDA (earnings before
income taxes and extraordinary items increased by interest expense,
depreciation, goodwill and other amortization), limitations on the amount of
annual capital expenditures and indebtedness, restrictions on distributions to
our parent corporations and on incurring liens, restrictions on investments and
other payments. Dividends and other restricted payments, except for demand loans
of specified amounts, made to any parent corporation are prohibited in 2001 and
are subject to limitations, as described in those agreements, in future periods.
As of December 31, 2000, after giving effect to the most restrictive of the
F-4
31
aforementioned restrictions, we could not have paid dividends or made other
restricted payments, except for demand loans of $2 million. In addition, if a
change of control as defined in the New Credit Agreement and the Existing Credit
Agreement occurs, those agreements could be terminated and the loans under those
agreements accelerated by the holders of that indebtedness. If that event
occurred, it would cause our outstanding Senior Notes to be accelerated. As of
December 31, 2000, we were in compliance with all covenants under the New Credit
Agreement, the Existing Credit Agreement and the Senior Notes.
In connection with entering into the New Credit Agreement, we also issued a
$7.0 million Precious Metal Note in order to finance precious metals used in
certain of our manufacturing processes.
The Existing Credit Agreement and the New Credit Agreement also provide
that in the event we become the subject of any bankruptcy proceedings, the
lenders will, subject to bankruptcy court approval, refinance and consolidate in
full the indebtedness under the New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness with a new debtor-in-possession facility.
The terms and conditions of that debtor-in-possession facility would be
substantially identical to the New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness and would be in an aggregate amount equal
to the then committed amount under the New Credit Agreement plus $110 million
plus the principal amount of the Other Indebtedness. That facility would mature
on August 18, 2004 and would be secured by a first-priority security interest in
all of the Collateral.
On July 5, 2000, we issued $35 million in aggregate principal amount at
maturity of the 2003 Notes at 97.161% of the principal amount. We used the net
proceeds from this issuance to repay the Term Loan and for general corporate
purposes. In connection with entering into the New Credit Agreement, the
maturity date of these notes was extended to September 2003.
See Note 11 to Consolidated Financial Statements for further information
regarding our debt instruments.
At December 31, 2000, we had total outstanding consolidated indebtedness of
$680.6 million, of which $5.9 million matures prior to December 31, 2001, and a
stockholders' deficit of $77.9 million. We anticipate funding these obligations
principally from our cash, operations and/or borrowings, which may include
borrowings from affiliates.
In March 1993, we sold our trade accounts receivable to a trust, without
recourse, pursuant to an agreement which provided for a maximum of $75 million
in cash to be made available to us based on eligible receivables outstanding
from time to time. In November 1996, we repurchased the receivables sold
pursuant to the 1993 agreement and sold them to a special purpose subsidiary of
ours, BMCA Receivables Corporation, without recourse, which in turn sold them to
a new trust, without recourse, pursuant to new agreements. The new agreements
provide for a maximum of $115 million in cash to be made available to us based
on eligible receivables outstanding from time to time. This facility expires in
December 2001.
We make loans to, and borrow from, G-I Holdings and its subsidiaries from
time to time at prevailing market rates. As of December 31, 2000, no loans were
owed to us by G-I Holdings and no loans were owed by us to affiliates. In
addition, we make non-interest bearing advances to affiliates, of which no
amounts were outstanding at December 31, 2000. See Note 15 to Consolidated
Financial Statements.
On January 5, 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code due to its
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber. See Item 3, "Legal Proceedings" for further information regarding
asbestos-related matters. See Note 3 to Consolidated Financial Statements.
Our parent corporations, G-I Holdings and BMCA Holdings Corporation, are
essentially holding companies without independent businesses or operations. As a
result, they are presently dependent upon the earnings and cash flows of their
subsidiaries, principally our company, in order to satisfy their obligations,
including various tax and other claims and liabilities including tax liabilities
relating to Rhone-Poulenc Surfactants & Specialties, L.P., a Delaware limited
partnership, in which G-I Holdings held an interest. We do not believe that the
dependence of our parent corporations on the cash flows of their subsidiaries
should
F-5
32
have a material adverse effect on our operations, liquidity or capital
resources. For further information, see Notes 3, 7, 11, 15 and 16 to
Consolidated Financial Statements.
We use capital resources to maintain existing facilities, expand our
operations and make acquisitions. In 2000, we completed construction of a new
fiberglass roofing mat manufacturing facility in Shafter, California and a new
steep slope roofing shingle manufacturing facility in Michigan City, Indiana. We
also have completed construction of a new manufacturing facility in Mount
Vernon, Indiana for a single-ply low slope membrane roofing system. We commenced
production at that facility in the first quarter of 2001. We expect to generate
funding for our capital program from results of operations and leasing
transactions.
In response to current market conditions, to better service shifting
customer demand and to reduce costs, we closed during 2000 four manufacturing
facilities located in Monroe, Georgia; Port Arthur, Texas; Corvallis, Oregon;
and Albuquerque, New Mexico. As market growth and customer demand improves, we
may reinstate production at one or more of these manufacturing facilities in the
future. The effect of closing these facilities was not material to our results
of operations.
We utilize interest rate swap agreements to lower funding costs, diversify
sources of funding and manage interest rate exposure. In June 1998, we
terminated our outstanding swaps related to a series of notes no longer
outstanding with an aggregate ending notional principal amount of $60.0 million,
resulting in gains of $0.7 million. The gains were deferred and amortized as a
reduction of interest expense over the remaining original life of the swaps. By
utilizing swaps, we reduced our interest expense by $1.9, $0.2 and $0 million in
1998, 1999 and 2000, respectively. See Note 11 to Consolidated Financial
Statements.
We do not believe that inflation has had an effect on our results of
operations during the past three years. However, we cannot assure you that our
business will not be affected by inflation in the future, or by the increase in
cost of energy and asphalt purchases used in our manufacturing process
principally due to rising oil prices and increased demand for asphalt by the
paving industry. While 2000 net sales exceeded those of 1999, energy and asphalt
cost increases, partially offset by price increases, had a negative impact on
2000 operating income. We expect that these energy and asphalt costs will
continue to have an adverse impact on 2001 operating income as compared with the
impact of these costs on operating income on a historical basis.
Market-Sensitive Instruments and Risk Management
During 2000 and in prior years, our investment strategy was to seek returns
in excess of money market rates on our available cash while minimizing market
risks. We invested primarily in international and domestic arbitrage and
securities of companies involved in acquisition or reorganization transactions,
including, at times, common stock short positions which were offset against long
positions in securities which were expected, under certain circumstances, to be
exchanged or converted into the short positions. With respect to our equity
positions, we were exposed to the risk of market loss. See Note 2 to
Consolidated Financial Statements. We are no longer permitted to engage in such
activities under the terms of the Existing Credit Agreement and the New Credit
Agreement.
We also entered into financial instruments in the ordinary course of
business in order to manage our exposure to market fluctuations on our
short-term investments. The financial instruments we employed to reduce market
risk included hedging instruments. The counterparties to these financial
instruments were major financial institutions with high credit standings. The
amounts subject to credit risk were generally limited to the amounts, if any, by
which the counterparties' obligations exceeded our obligations. We controlled
credit risk through credit approvals, limits and monitoring procedures.
DECEMBER 31, 1999 DECEMBER 31, 2000
----------------- -----------------
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
(IN MILLIONS)
Equity-related financial instruments...................... $0.9 $0.0 $0.0 $0.0
All of the financial instruments in the above table had a maturity of less
than one year. Under the terms of the Existing Credit Agreement and the New
Credit Agreement, we are only permitted to enter into hedging
F-6
33
arrangements that protect against or mitigate the effect of fluctuations in
interest rates, foreign exchange rates or prices of commodities used in our
business.
* * *
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains both historical and
forward-looking statements. All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements within the meaning
of section 27A of the Securities Act and section 21E of the 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 similar words or
phrases. Similarly, statements that describe our objectives, plans or goals also
are forward-looking statements. Our operations are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. The forward-looking
statements included herein are made only as of the date of this Annual Report on
Form 10-K and we undertake no obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances. We cannot assure you
that projected results or events will be achieved.
F-7
34
BUILDING MATERIALS CORPORATION OF AMERICA
SELECTED FINANCIAL DATA
The following table presents the selected consolidated financial data of
the Company. As of January 1, 1997, G-I Holdings contributed all of the capital
stock of U.S. Intec, Inc. ("U.S. Intec") to BMCA. Accordingly, the Company's
historical consolidated financial statements include U.S. Intec's results of
operations from the date of its acquisition by G-I Holdings (October 20, 1995),
including net sales of $99.0 million and net income of $1.3 million for the year
ended December 31, 1996. The results for the year ended December 31, 1997
include the results of the Leatherback Industries business from the date of its
acquisition (March 14, 1997), including net sales of $30.2 million. The results
for the year ended December 31, 1998 include the results of the LL Building
Products Inc. business from the date of its acquisition (June 1, 1998),
including net sales of $53.3 million, and the results for the year ended
December 31, 2000 include the results of the LL Building Products Inc. security
products business, certain assets of which were sold in September 2000,
including net sales of $22.9 million.
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999 2000
------ ------ -------- -------- --------
(MILLIONS)
OPERATING DATA:
Net sales................................... $852.0 $944.6 $1,088.0 $1,140.0 $1,207.8
Operating income............................ 61.4 73.2 47.5* 83.1* 63.9*
Interest expense............................ 32.0 43.0 50.0 48.3 53.5
Income (loss) before income taxes and
extraordinary losses..................... 27.9 45.7 13.5 40.2 (17.2)
Income (loss) before extraordinary losses... 17.1 27.8 8.4 25.3 (10.8)
Net income (loss)........................... 17.1 27.8 (9.8) 24.0 (11.2)
- ---------------
* After non-recurring charges of $27.6 and $2.7 million in 1998 and 1999,
respectively, and a one-time charge of $15.0 million and a gain on sale of
assets of $17.5 million in 2000.
DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999 2000
------ ------ -------- -------- --------
(MILLIONS)
BALANCE SHEET DATA:
Total working capital....................... $247.3 $283.1 $ 220.1 $ 109.9 $ 129.9
Total assets................................ 702.0 829.7 867.0 895.1 771.2
Long-term debt less current maturities...... 405.7 563.9 596.9 600.7 674.7
Total stockholders' equity (deficit)........ 143.2 89.5 52.2 21.7 (77.9)
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999 2000
------ ------ -------- -------- --------
(MILLIONS)
OTHER DATA:
Depreciation................................ $ 23.9 $ 25.0 $ 28.9 $ 33.0 $ 36.4
Goodwill amortization....................... 1.7 1.9 2.1 2.0 2.0
Capital expenditures and acquisitions....... 25.6 82.2 134.5 45.8 61.5
F-8
35
BUILDING MATERIALS CORPORATION OF AMERICA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited the accompanying consolidated balance sheets of Building
Materials Corporation of America (a Delaware corporation and 99.9% owned
subsidiary of BMCA Holdings Corporation) and subsidiaries as of December 31,
1999 and 2000, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 2000. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above, appearing on
pages F-10 to F-43 of this Form 10-K, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1999 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on page S-1 of
this Form 10-K is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 28, 2001 (except with respect
to the matter discussed in Note 3,
as to which the date is March 21, 2001)
F-9
36
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1999 2000
---------- ----------- ----------
(THOUSANDS)
Net sales.............................................. $1,087,957 $1,140,039 $1,207,759
---------- ---------- ----------
Costs and expenses:
Cost of products sold................................ 774,339 812,697 893,776
Selling, general and administrative.................. 236,416 239,560 250,542
Goodwill amortization................................ 2,111 2,034 2,024
Gain on sale of assets............................... -- -- (17,505)
Warranty reserve adjustment.......................... -- -- 15,000
Nonrecurring charges................................. 27,563 2,650 --
---------- ---------- ----------
Total costs and expenses.......................... 1,040,429 1,056,941 1,143,837
---------- ---------- ----------
Operating income....................................... 47,528 83,098 63,922
Interest expense....................................... (49,954) (48,317) (53,468)
Other income (expense), net............................ 15,895 5,440 (27,640)
---------- ---------- ----------
Income (loss) before income taxes and extraordinary
losses............................................... 13,469 40,221 (17,186)
Income tax (provision) benefit......................... (5,118) (14,882) 6,359
---------- ---------- ----------
Income (loss) before extraordinary losses.............. 8,351 25,339 (10,827)
Extraordinary losses, net of income tax benefits of
$11,101, $761, and $194, respectively................ (18,113) (1,296) (330)
---------- ---------- ----------
Net income (loss)...................................... $ (9,762) $ 24,043 $ (11,157)
========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-10
37
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 55,952 $ 82,747
Investments in trading securities......................... 687 --
Investments in available-for-sale securities.............. 29,702 --
Other short-term investments.............................. 1,590 --
Accounts receivable, trade, less reserve of $4,019 and
$1,798, respectively.................................... 22,938 19,474
Accounts receivable, other................................ 62,892 51,843
Receivable from parent corporations....................... 59,132 --
Tax receivable from parent corporations................... -- 1,500
Inventories............................................... 108,615 101,702
Other current assets...................................... 4,239 3,925
-------- --------
Total Current Assets.................................... 345,747 261,191
Property, plant and equipment, net.......................... 410,703 362,464
Excess of cost over net assets of businesses acquired, net
of accumulated amortization of $12,925 and $14,346,
respectively.............................................. 70,408 65,317
Deferred income tax benefits................................ 45,561 42,897
Tax receivable from parent corporations..................... -- 7,500
Other assets................................................ 22,693 31,800
-------- --------
Total Assets................................................ $895,112 $771,169
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt...................... $ 6,149 $ 5,908
Accounts payable.......................................... 84,334 57,520
Payable to related parties................................ 15,024 10,052
Accrued liabilities....................................... 115,828 42,888
Reserve for product warranty claims....................... 14,500 14,900
-------- --------
Total Current Liabilities............................... 235,835 131,268
-------- --------
Long-term debt less current maturities...................... 600,745 674,698
-------- --------
Reserve for product warranty claims......................... 19,814 28,756
-------- --------
Other liabilities........................................... 17,029 14,312
-------- --------
Commitments and Contingencies...............................
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: 1,019,621 and 1,015,514 shares issued
and outstanding, respectively........................... 1 1
Class B Common Stock, $.001 par value per share; 100,000
shares authorized; 15,000 shares issued and outstanding
Additional paid-in capital................................ 40,632 --
Accumulated deficit....................................... -- (77,866)
Accumulated other comprehensive loss...................... (18,944) --
-------- --------
Total Stockholders' Equity (Deficit).................... 21,689 (77,865)
-------- --------
Total Liabilities and Stockholders' Equity (Deficit)........ $895,112 $771,169
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-11
38
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999 2000
--------- --------- ---------
(THOUSANDS)
Cash and cash equivalents, beginning of year................ $ 12,924 $ 24,989 $ 55,952
--------- --------- ---------
Cash provided by (used in) operating activities:
Net income (loss)......................................... (9,762) 24,043 (11,157)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary losses.................................... 18,113 1,296 330
Gain on sale of assets.................................. -- -- (17,505)
Depreciation............................................ 28,935 32,986 36,350
Goodwill and other amortization......................... 2,312 2,675 2,866
Deferred income taxes................................... 4,538 14,132 (7,475)
Noncash interest charges................................ 23,877 3,321 2,648
Increase in working capital items......................... (15,962) (26,200) (19,791)
Increase (decrease) in reserve for product warranty
claims.................................................. 11,651 (14,318) 9,342
Purchases of trading securities........................... (189,197) (139,522) (980)
Proceeds from sales of trading securities................. 124,931 243,097 2,172
(Increase) decrease in other assets....................... 282 (4,501) 1,264
Increase (decrease) in other liabilities.................. 3,267 (2,335) (2,676)
Change in net receivable from/payable to related
parties/parent corporations............................. 42,635 (48,793) 45,160
Other, net................................................ 11,272 (3,404) 517
--------- --------- ---------
Net cash provided by operating activities................... 56,892 82,477 41,065
--------- --------- ---------
Cash provided by (used in) investing activities:
Capital expenditures...................................... (75,334) (45,322) (61,543)
Acquisitions.............................................. (59,187) (515) --
Proceeds from sale of assets.............................. 29,019 -- 31,702
Purchases of available-for-sale securities................ (89,324) (76,048) (882)
Purchases of held-to-maturity securities.................. (6,357) (2,349) --
Proceeds from sales of available-for-sale securities...... 170,055 97,400 58,284
Proceeds from held-to-maturity securities................. 499 7,758 --
Proceeds from sales of other short-term investments....... -- 21,421 1,590
--------- --------- ---------
Net cash provided by (used in) investing activities......... (30,629) 2,345 29,151
--------- --------- ---------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable................. 30,578 5,640 925
Decrease in short-term debt............................... (26,944) -- --
Decrease in loan receivable from parent corporations...... 6,152 -- --
Proceeds from issuance of long-term debt.................. 304,019 37,943 41,046
Increase (decrease) in borrowings under revolving credit
facility................................................ (34,000) -- 70,000
Repayments of long-term debt.............................. (287,904) (35,954) (38,056)
Distributions to parent corporations...................... -- (60,000) (106,161)
Net issuance (repurchase) of common stock................. -- 870 (1,180)
Financing fees and expenses............................... (6,099) (2,358) (9,995)
--------- --------- ---------
Net cash used in financing activities....................... (14,198) (53,859) (43,421)
--------- --------- ---------
Net change in cash and cash equivalents..................... 12,065 30,963 26,795
--------- --------- ---------
Cash and cash equivalents, end of year...................... $ 24,989 $ 55,952 $ 82,747
========= ========= =========
F-12
39
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999 2000
--------- --------- ---------
(THOUSANDS)
Supplemental Cash Flow Information:
Effect on cash from (increase) decrease in working capital
items*:
Accounts receivable..................................... $ (40,467) $ (11,309) $ 13,140
Inventories............................................. (10,707) (14,912) 3,292
Other current assets.................................... 2,032 1,423 (653)
Accounts payable........................................ 10,062 9,917 (26,814)
Accrued liabilities..................................... 23,118 (11,319) (8,756)
--------- --------- ---------
Net effect on cash from increase in working capital
items................................................. $ (15,962) $ (26,200) $ (19,791)
========= ========= =========
Cash paid during the period for:
Interest (net of amount capitalized)...................... $ 19,994 $ 44,109 $ 49,105
Income taxes (including taxes paid pursuant to the Tax
Sharing Agreement)...................................... 1,174 1,250 10,121
Acquisition of LL Building Products Inc. business:
Fair market value of assets acquired...................... $ 59,318
Purchase price of acquisition............................. 43,468
---------
Liabilities assumed....................................... $ 15,850
=========
- ---------------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net receivable from/payable to related
parties/parent corporations. Working capital acquired in connection with
acquisitions is reflected in "Acquisitions". The effects of reclassifications
between noncurrent and current assets and liabilities are excluded from the
amounts shown above. In addition, the increase in receivables shown above does
not reflect the cash proceeds from the sale of certain of the Company's
receivables (see Note 8); such proceeds are reflected in cash from financing
activities. See Note 1 for a description of the non-cash contribution of
certain assets, including the glass fiber manufacturing facility located in
Nashville, Tennessee, and certain related liabilities. See Notes 5 and 15 for
a description of non-cash capital contributions and distributions. See Note 10
for a description of non-cash leasing transactions.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-13
40
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED
CAPITAL STOCK OTHER
AND ADDITIONAL COMPREHENSIVE ACCUMULATED COMPREHENSIVE
PAID-IN CAPITAL INCOME (LOSS) DEFICIT INCOME (LOSS)
--------------- ------------- ----------- -------------
(THOUSANDS)
Balance, December 31, 1997.................................. $ 91,700 $ 10,171 $(12,327)
Comprehensive loss -- year ended December 31, 1998:
Net loss................................................ -- -- (9,762) $ (9,762)
--------
Other comprehensive income, net of tax:
Unrealized holding losses arising during the period, net
of income tax benefit of $10,409...................... -- (16,504) -- (16,504)
Less: Reclassification adjustment for gains included in
net loss, net of income tax effect of $7,064.......... -- 11,526 -- 11,526
-------- --------
Change in unrealized losses on available-for-sale
securities............................................ -- (28,030) -- (28,030)
Minimum pension liability adjustment.................... -- (2,025) -- (2,025)
--------
Comprehensive loss........................................ $(39,817)
========
Issuance of 30,000 shares of restricted common stock...... 2,490 -- --
-------- -------- --------
Balance, December 31, 1998.................................. $ 94,190 $(19,884) $(22,089)
Comprehensive income -- year ended December 31, 1999:
Net income.............................................. -- -- 24,043 $ 24,043
--------
Other comprehensive income, net of tax:
Unrealized holding gains arising during the period, net
of income taxes of $1,270............................. -- 1,424 -- 1,424
Less: Reclassification adjustment for gains included in
net income, net of income tax effect of $1,227........ -- 2,089 -- 2,089
-------- --------
Change in unrealized losses on available-for-sale
securities............................................ (665) (665)
Minimum pension liability adjustment.................... -- 1,605 -- 1,605
--------
Comprehensive income...................................... $ 24,983
========
Distributions to parent corporations...................... (58,046) -- (1,954)
Capital contributions..................................... 3,619 -- --
Exercise of stock options................................. 870 -- --
-------- -------- --------
Balance, December 31, 1999.................................. $ 40,633 $(18,944) $ --
Comprehensive income -- year ended December 31, 2000:
Net loss................................................ -- -- (11,157) $(11,157)
--------
Other comprehensive income, net of tax:
Unrealized holding gains arising during the period, net
of income taxes of $3,577............................. -- 6,091 -- 6,091
Less: Reclassification adjustment for losses included in
net loss, net of income tax effect of $6,755.......... -- (11,502) -- (11,502)
-------- --------
Change in unrealized losses on available-for-sale
securities............................................ -- 17,593 -- 17,593
Minimum pension liability adjustment.................... -- 1,351 -- 1,351
--------
Comprehensive income...................................... $ 7,787
========
Distributions to parent corporations...................... (39,452) -- (66,709)
Net repurchase of common stock............................ (1,180) -- --
-------- -------- --------
Balance, December 31, 2000.................................. $ 1 $ -- $(77,866)
======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-14
41
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Building Materials Corporation of America (the "Company") was formed on
January 31, 1994 and is a 99.9%-owned subsidiary of BMCA Holdings Corporation
("BHC"), which, as of December 31, 2000, was a 98.5%-owned subsidiary of G-I
Holdings Inc.
To facilitate administrative efficiency, effective October 31, 2000, GAF
Corporation, the former indirect parent of the Company, merged into its direct
subsidiary, G-I Holdings Inc. G-I Holdings Inc. then merged into its direct
subsidiary, G Industries Corp., which in turn merged into its direct subsidiary,
GAF Fiberglass Corporation. In that merger, GAF Fiberglass Corporation changed
its name to GAF Corporation. Effective November 13, 2000, GAF Corporation
(formerly known as GAF Fiberglass Corporation) merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the
merger to G-I Holdings Inc. G-I Holdings Inc. is now the parent of the Company
and of the Company's direct parent, BHC. References below to "G-I Holdings" mean
G-I Holdings Inc. and any and all of its predecessor corporations, including GAF
Corporation, G-I Holdings Inc., G Industries Corp., GAF Fiberglass Corporation
and GAF Building Materials Corporation.
NOTE 1. FORMATION OF THE COMPANY
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the steep slope and low slope roofing
markets. The Company also manufactures and markets specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. See Note 14.
Effective as of January 31, 1994, G-I Holdings transferred to the Company
all of its business and assets, other than three closed manufacturing
facilities, certain deferred tax assets and receivables from affiliates. The
Company recorded the assets and liabilities related to such transfer at G-I
Holdings' historical costs. The Company contractually assumed all of G-I
Holdings' liabilities, except (i) all of G-I Holdings' environmental
liabilities, other than environmental liabilities relating to the Company's
plant sites and its business as then-conducted, (ii) all of G-I Holdings' tax
liabilities, other than tax liabilities arising from the operations or business
of the Company and (iii) all of G-I Holdings' asbestos-related liabilities,
other than the first $204.4 million of such liabilities (whether for indemnity
or defense) relating to then-pending asbestos-related bodily injury cases and
previously settled asbestos-related bodily injury cases which the Company
contractually assumed and agreed to pay. G-I Holdings has agreed to indemnify
the Company from liabilities not assumed by the Company, including
asbestos-related and environmental liabilities not expressly assumed by the
Company. See Note 3.
Effective August 18, 1999, G-I Holdings, in a series of transactions,
contributed certain assets, including the Company's glass fiber manufacturing
facility in Nashville, Tennessee (the "Nashville facility"), and certain related
liabilities to the Company. Accordingly, the Company's historical consolidated
financial statements for 1998 have been restated to include the results of
operations, cash flows and assets and liabilities of the Nashville facility. For
financial reporting purposes, the contribution of the Nashville facility was
recorded by the Company at the historical cost of $9.3 million. The increase in
net income resulting from the contribution of the Nashville facility for the
year ended December 31, 1998 was $0.8 million.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
All subsidiaries are consolidated and intercompany transactions have been
eliminated.
Financial Statement Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates.
Actual results could differ from those estimates. In the
F-15
42
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
opinion of management, the financial statements herein contain all adjustments
necessary to present fairly the financial position and the results of operations
and cash flows of the Company for the periods presented. The Company has a
policy to review the recoverability of long-lived assets and identify and
measure any potential impairments. The Company does not anticipate any changes
in management estimates that would have a material impact on operations,
liquidity or capital resources, subject to the matters discussed in Note 16.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and certain debt
securities purchased with original maturities of three months or less.
Short-term Investments
For securities classified as "trading" (including short positions),
unrealized gains and losses are reflected in income. For securities classified
as "available-for-sale," unrealized gains and losses, net of income tax effect,
are included in a separate component of stockholders' equity, "Accumulated other
comprehensive loss," and were $(17.6) and $0 million as of December 31, 1999 and
2000, respectively.
"Other income (expense), net" includes $21.5, $12.8 and $(18.1) million of
net realized and unrealized gains (losses) on securities in 1998, 1999 and 2000,
respectively. The determination of cost in computing realized and unrealized
gains and losses is based on the specific identification method.
As of December 31, 1999, the market value of the Company's equity
securities held long was $30.5 million, and the Company had $1.5 million of
short positions in common stocks, based on market value. As of December 31,
1999, the market value of equity-related long contracts was $0.9 million which
have been marked-to-market each month, with unrealized gains and losses included
in results of operations. The market values referred to above are based on
quotations as reported by various stock exchanges and major broker-dealers.
As of December 31, 1999, "other short-term investments" were investments in
limited partnerships which were accounted for by the equity method. Gains and
losses were reflected in "Other income (expense), net."
Under the Company's new $100 million secured credit facility (the "New
Credit Agreement") and the Company's amended and restated existing $110 million
secured credit facility (the "Existing Credit Agreement") (see Note 11), the
Company is limited to entering into hedging arrangements that protect against or
mitigate the effect of fluctuations in interest rates, foreign exchange rates or
prices of commodities used in the Company's business.
Inventories
Inventories are stated at the lower of cost or market. The LIFO (last-in,
first-out) method is utilized to determine cost for a portion of the Company's
inventories. All other inventories are determined principally based on the FIFO
(first-in, first-out) method.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed principally on the straight-line method
based on the estimated economic lives of the assets. The Company uses an
economic life of 5 to 25 years for land improvements, 10 to 40 years for
buildings and building equipment
F-16
43
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
and 3 to 20 years for machinery and equipment, which includes furniture and
fixtures. Certain interest charges are capitalized during the period of
construction as part of the cost of property, plant and equipment.
Excess of Cost Over Net Assets of Businesses Acquired ("Goodwill")
Goodwill is amortized on the straight-line method over a period of
approximately 40 years. The Company believes that the goodwill is recoverable.
To determine if goodwill is recoverable, the Company compares the net carrying
amount to undiscounted projected cash flows of the underlying businesses to
which the goodwill pertains. If goodwill is not recoverable, the Company would
record an impairment based on the difference between the net carrying amount and
fair value.
Debt Issuance Costs
Debt issuance costs are amortized to expense over the life of the related
debt.
Software Development Costs
Included in other assets at December 31, 1999 and 2000 were $3.3 and $6.8
million, respectively, of capitalized purchased software development costs. Such
costs are amortized over a 5 year period. For 1998, 1999 and 2000, the Company
amortized $0.2, $0.6 and $0.8 million, respectively, related to such costs.
Revenue Recognition
Revenue is recognized at the time products are shipped to the customer.
Shipping and Handling Costs
Shipping and handling costs are included in "Selling, general and
administrative" expenses and amounted to $76.3, $79.1 and $84.6 million in 1998,
1999 and 2000, respectively.
Interest Rate Swaps
Gains (losses) on interest rate swap agreements ("swaps") are deferred and
amortized as a reduction (increase) of interest expense over the shorter of the
remaining life of the swaps or the remaining period to maturity of the debt
issue with respect to which the swaps were entered.
Research and Development
Research and development expenses are charged to operations as incurred and
were $6.0, $6.5 and $5.9 million in 1998, 1999 and 2000, respectively.
Warranty Claims
The Company provides certain limited warranties covering most of its steep
slope roofing products for periods generally ranging from 20 to 40 years, with
lifetime limited warranties on certain specialty shingle products. The Company
also offers certain limited warranties and guarantees of varying duration
covering most of its low slope roofing products and limited warranties covering
most of its specialty building products and accessories for periods ranging from
5 to 10 years. Income from warranty contracts related to low slope roofing
products is recognized over the life of the agreements. The Company believes
that the reserves established for estimated probable future warranty claims are
adequate.
F-17
44
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company recorded a $15.0 million warranty reserve adjustment in the
fourth quarter of 2000 based on an evaluation of claims activity for 2000. As
this adjustment was recorded for a specific alleged product defect relating to
prior production processes, it has been separately presented in the Consolidated
Statements of Operations.
Environmental Liability
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters. The Company estimates
that its liability in respect of such environmental matters, and certain other
environmental compliance expenses, as of December 31, 2000, is $1.3 million,
before reduction for insurance recoveries reflected on its balance sheet of $0.8
million. The Company's liability is reflected on an undiscounted basis. See Item
3, "Legal Proceedings -- Environmental Litigation," which is incorporated herein
by reference, for further discussion with respect to environmental liabilities
and estimated insurance recoveries.
Accumulated Other Comprehensive Income (Loss)
Comprehensive income and its components in annual and interim financial
statements include net income, unrealized gains and losses from investments in
available-for-sale securities, net of income tax effect, and minimum pension
liability adjustments. The Company has chosen to disclose comprehensive income
in the Consolidated Statements of Stockholders' Equity (Deficit).
Changes in the components of "Accumulated other comprehensive income
(loss)" for the years 1998, 1999 and 2000 are as follows:
UNREALIZED GAINS
(LOSSES) ON MINIMUM ACCUMULATED
AVAILABLE-FOR-SALE PENSION LIABILITY OTHER COMPREHENSIVE
SECURITIES ADJUSTMENT INCOME (LOSS)
-------------------- ----------------- -------------------
(THOUSANDS)
Balance, December 31, 1997............ $ 11,102 $ (931) $ 10,171
Change for the year 1998.............. (28,030) (2,025) (30,055)
-------- ------- --------
Balance, December 31, 1998............ $(16,928) $(2,956) $(19,884)
Change for the year 1999.............. (665) 1,605 940
-------- ------- --------
Balance, December 31, 1999............ $(17,593) $(1,351) $(18,944)
Change for the year 2000.............. 17,593 1,351 18,944
-------- ------- --------
Balance, December 31, 2000............ $ -- $ -- $ --
======== ======= ========
New Accounting Standard
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS No. 137
and 138, is effective for fiscal years beginning after June 15, 2000. SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company adopted SFAS No. 133 on January
1, 2001. The impact of the initial adoption of SFAS No. 133 by the Company will
not be material to the Company's results of operations or financial position.
F-18
45
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Reclassifications
Certain reclassifications have been made to conform to current year
presentation.
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS
In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of liabilities for asbestos-related
bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos
Claims") of its parent, G-I Holdings. As of March 30, 1997, the Company had paid
all of its assumed asbestos-related liabilities. See Note 1. G-I Holdings has
agreed to indemnify the Company against any other existing or future claims
related to asbestos-related liabilities if asserted against the Company. In
January 2001, G-I Holdings filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos Claims. This
proceeding is in a preliminary stage. In light of G-I Holdings' recent
bankruptcy filing, G-I Holdings may not have sufficient assets to satisfy these
indemnification obligations to the Company.
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 BHC'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. See Notes 11 and 16. In addition, those
claimants may seek to file Asbestos Claims against the Company (with 2,147
Asbestos Claims having been filed against the Company as of December 31, 2000).
The Company believes that it will not sustain any liability in connection with
these or any other asbestos-related claims. Furthermore, 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 Asbestos Claims against the Company. The temporary restraining order
expires on April 6, 2001. The Company is seeking to have this order renewed past
this date. On February 7, 2001, G-I Holdings filed a defendant class action in
the United States Bankruptcy Court for the District of New Jersey seeking a
declaratory judgment that the Company has no successor liability for Asbestos
Claims against G-I Holdings and that it is not the alter ego of G-I Holdings.
This action is in a preliminary stage and no trial date has been set by the
court. As a result, it is not possible to predict the outcome of this
litigation. 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. In addition, G-I Holdings has indemnified the Company with respect
to Asbestos Claims. In light of G-I Holdings' recent bankruptcy filing, G-I
Holdings may not have sufficient assets to satisfy these indemnification
obligations to the Company.
On February 8, 2001, a creditors committee established in G-I Holdings'
bankruptcy case filed a complaint in the United States Bankruptcy Court for the
District of New Jersey against G-I Holdings and the Company. The complaint
requests substantive consolidation of the Company with G-I Holdings or an order
directing G-I Holdings to cause the Company to file for bankruptcy protection.
The Company and G-I Holdings intend to vigorously defend the lawsuit. The
Company believes that no basis exists for the court to grant the relief
requested. The plaintiffs also filed for interim relief absent the granting of
their requested relief described above. On February 21, 2001, G-I Holdings moved
to dismiss the complaint. On March 21, 2001, the bankruptcy court refused to
grant the requested interim relief.
For a further discussion with respect to the history of the foregoing
litigation and asbestos-related matters, see Item 3, "Legal Proceedings," which
is incorporated herein by reference, and Notes 11 and 16.
F-19
46
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. ACQUISITIONS AND DISPOSITIONS
Effective June 1, 1998, the Company purchased for approximately $43.5
million substantially all of the assets of Leslie-Locke Inc. ("LL Building
Products Inc."), a wholly-owned subsidiary of Leslie Building Products Inc.,
which manufactured and marketed a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries from manufacturing facilities in Burgaw, North Carolina
and Compton, California. The acquisition was accounted for under the purchase
method of accounting. Accordingly, the purchase price was allocated to the
estimated fair values of the identifiable net assets acquired, and the excess
was recorded as goodwill. The results of the LL Building Products Inc. business,
including net sales of $53.3 million for 1998, are included from the date of
acquisition. The net effects of this acquisition were not material to 1998
results of operations.
Effective December 1, 1998, the Company sold its perlite insulation
manufacturing assets to Johns Manville Corporation for net cash proceeds of
approximately $29.0 million. The pre-tax gain as a result of this sale was not
significant to the Company's results of operations. In addition, as part of the
transaction, Johns Manville and the Company entered into a long-term agreement
to supply the Company with perlite insulation products, which will enable the
Company to continue to serve its low slope roofing customers. As a result, the
sale did not have a material impact on the Company's results of operations.
On September 29, 2000, the Company sold certain manufacturing and other
assets related to the Compton, California based security products business of LL
Building Products Inc. for net cash proceeds of approximately $27.1 million,
which resulted in a pre-tax gain of $17.5 million. The security products
business did not have a material impact on the Company's results of operations.
NOTE 5. NONRECURRING CHARGES
The Company recorded pre-tax nonrecurring charges in the third quarter of
1998 aggregating $27.6 million, of which $20.0 million related to the settlement
of a national class action lawsuit involving asphalt shingles manufactured
between January 1, 1973 and December 31, 1997. Following a fairness hearing, the
court granted final approval of the class-wide settlement in April 1999. Under
the terms of the September 1998 settlement, the Company will provide property
owners whose shingles were manufactured during this period and which suffer
certain damages during the term of their original warranty period, and who file
a qualifying claim, with an opportunity to receive certain limited benefits
beyond those already provided in their existing warranty. Three of the four
separate class actions that had been brought against G-I Holdings and stayed
pending the outcome of the fairness hearing have been dismissed in light of the
final approval of the settlement agreement described above, and the Company
expects that the remaining action also will be dismissed.
In July 1998, the Company recorded a pre-tax nonrecurring charge of $7.6
million related to a grant to its former President and Chief Executive Officer
of 30,000 shares of restricted common stock of the Company (a portion of which
such officer transferred to trusts for the benefit of his children) and related
cash payments to be made over a period of time (substantially all of which was
earned) in connection with the termination by an affiliate of preferred stock
options and stock appreciation rights held by such officer. Of the $7.6 million
charge, $2.5 million represented the value as of the date of grant of the 30,000
shares of restricted common stock, and $5.1 million represented the aggregate
amount of the cash payments to which such officer was entitled (subject to
certain future vesting requirements). The shares of restricted stock were
subject to certain rights of the Company to purchase, and of such officer and
the trusts to sell to the Company, such shares at Book Value (as defined).
Effective June 30, 1999, such officer terminated his employment with the
Company. For 1999 through the date of his termination, the net book value of the
30,000 shares of restricted common stock held by such officer appreciated $0.6
million. In connection with this termination, the Company's obligation to such
officer to pay an aggregate of $3.0 million (representing the balance of the
cash payments described above) was cancelled and was treated as an additional
capital contribution.
F-20
47
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. NONRECURRING CHARGES -- (CONTINUED)
Effective September 30, 1999, the agreement between the Company and such
former officer and the trusts relating to the restricted common stock was
terminated. Such officer and the trusts contributed such stock to BHC in
consideration for equity interests in BHC. As a result of this transaction, the
$0.6 million appreciation in the net book value of the restricted common stock
described above, was treated as an additional capital contribution.
In connection with the settlement of a legal matter, the Company recorded a
nonrecurring charge of $2.7 million in September 1999. Such amount includes
legal expenses incurred to defend such action.
NOTE 6. MANUFACTURING FACILITIES SHUTDOWN
In response to current market conditions, to better service shifting
customer demand and to reduce costs, the Company closed during 2000 four
manufacturing facilities located in Monroe, Georgia; Port Arthur, Texas;
Corvallis, Oregon; and Albuquerque, New Mexico. As of December 31, 2000, the net
book value of the assets at these facilities was $31.2 million. As market growth
and customer demand improves, the Company may reinstate production at one or
more of these manufacturing facilities in the future. The effect of closing
these facilities was not material to the Company's results of operations.
NOTE 7. INCOME TAX (PROVISION) BENEFIT
Income tax (provision) benefit, which has been computed on a separate
return basis, consists of the following:
YEAR ENDED DECEMBER 31,
------------------------------
1998 1999 2000
------- -------- -------
(THOUSANDS)
Federal -- deferred.................................. $(4,513) $(13,682) $ 5,423
------- -------- -------
State and local:
Current............................................ (580) (750) (1,116)
Deferred........................................... (25) (450) 2,052
------- -------- -------
Total state and local........................... (605) (1,200) 936
------- -------- -------
Income tax (provision) benefit....................... $(5,118) $(14,882) $ 6,359
======= ======== =======
The differences between the income tax (provision) benefit computed by
applying the statutory Federal income tax rate to pre-tax income and the income
tax (provision) benefit reflected in the Consolidated Statements of Operations
are as follows:
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1999 2000
------- -------- ------
(THOUSANDS)
Statutory (provision) benefit......................... $(4,714) $(14,077) $6,015
Impact of:
State and local taxes, net of Federal benefits...... (393) (780) 608
Nondeductible goodwill amortization................. (641) (275) (185)
Other, net.......................................... 630 250 (79)
------- -------- ------
Income tax (provision) benefit........................ $(5,118) $(14,882) $6,359
======= ======== ======
F-21
48
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAX (PROVISION) BENEFIT -- (CONTINUED)
The components of the net deferred tax assets are as follows:
DECEMBER 31,
-------------------
1999 2000
-------- -------
(THOUSANDS)
Deferred tax liabilities related to property, plant and
equipment................................................. $(15,475) $(9,449)
-------- -------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes................ 43,335 42,154
Net operating losses not yet utilized under the Tax
Sharing Agreement...................................... 17,701 10,192
-------- -------
Total deferred tax assets................................. 61,036 52,346
-------- -------
Net deferred tax assets..................................... $ 45,561 $42,897
======== =======
As of December 31, 2000, the Company had $27.5 million of net operating
loss carryforwards available to offset future taxable income, as follows:
YEAR OF
EXPIRATION (THOUSANDS)
- ---------- -----------
2011................................................... $27,545
=======
Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that future taxable income will more likely
than not be sufficient to utilize fully the deferred tax assets recorded.
As of December 31, 2000, included in current assets is a tax receivable
from parent corporations of $1.5 million and included in long-term assets is a
tax receivable from parent corporations of $7.5 million representing amounts
paid to G-I Holdings under the Tax Sharing Agreement (as defined below), as
amended, which the Company will apply under the Tax Sharing Agreement against
future tax sharing payments due G-I Holdings over the next two years based on
current income estimates.
The Company entered into a tax sharing agreement (the "Tax Sharing
Agreement") dated January 31, 1994 with G-I Holdings with respect to the payment
of federal income taxes and certain related matters. During the term of the Tax
Sharing Agreement, which is effective for the period during which the Company or
any of its domestic subsidiaries is included in a consolidated federal income
tax return for the consolidated group that has included G-I Holdings as a member
(the "G-I Holdings Group"), the Company is obligated to pay G-I Holdings an
amount equal to those federal income taxes it would have incurred if the
Company, on behalf of itself and its domestic subsidiaries, filed its own
federal income tax return. Unused tax attributes will carry forward for use in
reducing amounts payable by the Company to G-I Holdings in future years, but
cannot be carried back. If the Company ever were to leave the G-I Holdings
Group, it would be required to pay to G-I Holdings the value of any tax
attributes to which it would succeed under the consolidated return regulations
to the extent the tax attributes reduced the amounts otherwise payable by the
Company under the Tax Sharing Agreement. Under certain circumstances, the
provisions of the Tax Sharing Agreement could result in the Company having a
greater liability under the agreement than it would have had if it and its
domestic subsidiaries had filed its own separate federal income tax return.
Under the Tax Sharing Agreement, the Company and each of its domestic
subsidiaries are responsible for any taxes that would be payable by reason of
any adjustment to the tax returns of G-I Holdings or its subsidiaries for years
prior to the adoption of the Tax Sharing Agreement that relate to the Company's
business or assets or the business or assets of any of its domestic
subsidiaries. Although, as a member of the G-I Holdings Group, the Company is
severally liable for certain federal income tax liabilities of the G-I Holdings
Group, including tax liabilities not related to its business, G-I Holdings has
agreed to indemnify the Company and its subsidiaries for all tax liabilities of
the
F-22
49
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAX (PROVISION) BENEFIT -- (CONTINUED)
G-I Holdings Group other than tax liabilities arising from the Company's
operations and the operations of its domestic subsidiaries and tax liabilities
for tax years pre-dating the Tax Sharing Agreement that relate to the Company's
business or assets and the business or assets of any of its domestic
subsidiaries. In light of G-I Holdings' recent bankruptcy filing, G-I Holdings
may be not have sufficient assets to satisfy these indemnification obligations.
For the possible consequences of the failure of G-I Holdings to satisfy these
indemnification obligations, see Note 3. The Tax Sharing Agreement provides for
analogous principles to be applied to any consolidated, combined or unitary
state or local income taxes. Under the Tax Sharing Agreement, G-I Holdings makes
all decisions with respect to all matters relating to taxes of the G-I Holdings
Group. The provisions of the Tax Sharing Agreement take into account both the
federal income taxes the Company would have incurred if it filed its own
separate federal income tax return and the fact that the Company is a member of
the G-I Holdings Group for federal income tax purposes.
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. The claim of the IRS for interest and penalties, after taking into
account the effect on the use of net operating losses and foreign tax credits,
could result in G-I Holdings incurring liabilities significantly in excess of
the deferred tax liability of $131.4 million that it recorded in 1990 in
connection with this matter. G-I Holdings has advised the Company that it
believes that it will prevail in this matter, 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. G-I Holdings has agreed to indemnify the
Company against any tax liability associated with the surfactants partnership.
In light of G-I Holdings' recent bankruptcy filing, G-I Holdings may not have
sufficient assets to satisfy its indemnification obligation to the Company. For
the possible consequences to the Company of the failure of G-I Holdings to
satisfy this liability and other information relating to G-I Holdings, see Note
3.
NOTE 8. SALE OF ACCOUNTS RECEIVABLE
In March 1993, the Company sold its trade accounts receivable
("receivables") to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company entered into new agreements, pursuant to which it sold the
receivables to a special purpose subsidiary of the Company, BMCA Receivables
Corporation, without recourse, which in turn sold them to a new trust, without
recourse. The new agreements provide for a maximum of $115 million in cash to be
made available to the Company based on eligible receivables outstanding from
time to time. This facility expires in December 2001. The excess of accounts
receivable sold over the net proceeds received is included in "Accounts
receivable, other." BMCA Receivables Corporation is not a guarantor under the
Company's debt obligations. See Notes 11 and 17. The effective cost to the
Company varies with LIBOR and is included in "Other income (expense), net" and
amounted to $5.1, $5.5 and $6.9 million in 1998, 1999 and 2000, respectively.
F-23
50
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. INVENTORIES
At December 31, 1999 and 2000, $8.9 and $11.2 million, respectively, of
inventories were valued using the LIFO method. Inventories consist of the
following:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Finished goods......................................... $ 68,878 $ 61,606
Work-in process........................................ 13,974 16,938
Raw materials and supplies............................. 27,462 27,743
-------- --------
Total............................................. 110,314 106,287
Less LIFO reserve...................................... (1,699) (4,585)
-------- --------
Inventories............................................ $108,615 $101,702
======== ========
NOTE 10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
DECEMBER 31,
----------------------
1999 2000
--------- ---------
(THOUSANDS)
Land and land improvements........................... $ 29,005 $ 32,603
Buildings and building equipment:.................... 67,220 75,299
Machinery and equipment.............................. 300,846 369,102
Construction in progress............................. 115,458 20,776
--------- ---------
Total........................................... 512,529 497,780
Less accumulated depreciation and amortization....... (101,826) (135,316)
--------- ---------
Property, plant and equipment, net................... $ 410,703 $ 362,464
========= =========
Included in the net book value of machinery and equipment at December 31,
1999 and 2000 was $10,508 and $8,863, respectively, for assets under capital
leases.
During 1999, in connection with the construction of two new manufacturing
facilities, the Company entered into two leases for certain machinery and
equipment, which leases meet the criteria of operating leases under SFAS No. 13
"Accounting for Leases." In connection therewith, at December 31, 1999,
property, plant, and equipment, net, and accrued liabilities included $65.6
million of assets under such leases. Such amounts were reversed during 2000 when
the manufacturing facilities became fully operational. These leases require
quarterly rental payments and are for a ten-year period expiring in December
2009.
F-24
51
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
10 1/2% Senior Notes due 2003.......................... $ -- $ 34,235
7 3/4% Senior Notes due 2005........................... 149,493 149,584
8 5/8% Senior Notes due 2006........................... 99,654 99,704
8% Senior Notes due 2007............................... 99,418 99,492
8% Senior Notes due 2008............................... 154,249 154,334
Borrowings under Existing Credit Agreement............. -- 70,000
Term Loan due 2004..................................... 31,850 --
Industrial revenue bonds with various interest rates
and maturity dates to 2029........................... 23,125 23,060
Obligations on equipment loans......................... 2,225 28
Precious Metal Note due 2003........................... -- 7,002
Obligations under capital leases (Note 16)............. 43,787 39,966
Other notes payable.................................... 3,093 3,201
-------- --------
Total............................................. 606,894 680,606
Less current maturities................................ (6,149) (5,908)
-------- --------
Long-term debt less current maturities................. $600,745 $674,698
======== ========
On July 5, 2000, the Company issued $35 million in aggregate principal
amount of 10 1/2% Senior Notes due 2002 at 97.161% of the principal amount, the
maturity date of which was extended to September 2003 (the "2003 Notes") in
connection with the Company entering into the New Credit Agreement in December
2000 (see below). The Company used the net proceeds from the issuance of the
2003 Notes to repay a $31.9 million bank term loan due 2004 (the "Term Loan")
with the remaining net proceeds used for general corporate purposes. In
connection with the extinguishment of such debt, unamortized deferred financing
fees of approximately $0.3 million, net of tax, were written-off as an after-tax
extraordinary loss. The net proceeds of the Term Loan had been used, in 1999, to
purchase, and subsequently cancel, the remaining $29.9 million in aggregate
principal amount of the Company's outstanding 11 3/4% Senior Deferred Coupon
Notes due 2004 (the "Deferred Coupon Notes"). The redemption price was 105.875%
of the principal amount outstanding, and the premium was recorded as an
after-tax extraordinary loss, net of tax, of approximately $1.3 million.
On December 3, 1998, the Company issued $155 million in aggregate principal
amount of 8% Senior Notes due 2008 (the "2008 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $147.1 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary loss of $8.8 million.
On July 17, 1998, the Company issued $150 million in aggregate principal
amount of 7 3/4% Senior Notes due 2005 (the "2005 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $132.6 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary loss of $9.3 million.
F-25
52
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
In October 1997, the Company issued $100 million in aggregate principal
amount of 8% Senior Notes due 2007 (the "2007 Notes"). In December 1996, the
Company issued $100 million in aggregate principal amount of 8 5/8% Senior Notes
due 2006 (the "2006 Notes"). Holders of the 2003 Notes, the 2005 Notes, the 2006
Notes, the 2007 Notes and the 2008 Notes (collectively, the "Senior Notes") have
the right under the indentures governing such notes to require the Company to
purchase the 2003 Notes, the 2005 Notes, the 2006 Notes, the 2007 Notes and the
2008 Notes at a price of 101% of the principal amount thereof, and the Company
has the right to redeem the Senior Notes at a price of 101% of the principal
amount thereof, plus, in each case, the Applicable Premium (as defined therein),
together with any accrued and unpaid interest, in the event of a Change of
Control (as defined therein).
In August 1999, the Company entered into the Existing Credit Agreement. In
December 2000, the Existing Credit Agreement was amended to extend its maturity
until August 2003. The terms of the Existing Credit Agreement provide for a $110
million secured revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $110 million in the aggregate. The Existing Credit
Agreement bears interest at a floating rate (9.39% on December 31, 2000) based
on the lenders' base rate, the federal funds rate or the Eurodollar rate. As of
December 31, 2000, $70 million of borrowings and $38.8 million of letters of
credit were outstanding under the Existing Credit Agreement.
In December 2000, the Company entered into a the New Credit Agreement,
which is to be used for working capital purposes subject to certain
restrictions. The New Credit Agreement matures in August 2003 and bears interest
at rates similar to the Existing Credit Agreement. As of December 31, 2000,
there were no outstanding borrowings or letters of credit under the New Credit
Agreement. Obligations under the Existing Credit Agreement and the New Credit
Agreement, as well as obligations under the Precious Metal Note (defined below)
and approximately $3.5 million of obligations under a standby letter of credit
(collectively, the "Other Indebtedness"), aggregating $77.0 million of
borrowings and $42.3 million of letters of credit outstanding at December 31,
2000, are secured by a first-priority lien on substantially all of the Company's
assets and the assets of its subsidiaries (collectively, the "Collateral") on a
pro rata basis. The Senior Notes are secured by a second-priority lien on the
Collateral for so long as the first-priority lien remains in effect, subject to
certain limited exceptions.
Under the terms of the New Credit Agreement, the Existing Credit Agreement
and the Senior Notes, the Company is subject to certain financial covenants,
including, among others, interest coverage, minimum consolidated EBITDA
(earnings before income taxes and extraordinary items increased by interest
expenses, depreciation, goodwill and other amortization), limitations on the
amount of annual capital expenditures and indebtedness, restrictions on
distributions to the Company's parent corporations and on incurring liens,
restrictions on investments and other payments. Dividends and other restricted
payments, except for demand loans of specified amounts, made to any parent
corporation are prohibited in 2001 and are subject to limitations, as described
in those agreements, in future periods. As of December 31, 2000, after giving
effect to the most restrictive of the aforementioned restrictions, the Company
could not have paid dividends or made other restricted payments, except for
demand loans of $2 million. In addition, if a change of control as defined in
the New Credit Agreement and the Existing Credit Agreement occurs, those
agreements could be terminated and the loans thereunder accelerated by the
holders of that indebtedness, an event that would cause the Company's
outstanding Senior Notes to be accelerated. As of December 31, 2000, the Company
was in compliance with all covenants under the New Credit Agreement, the
Existing Credit Agreement and the Senior Notes.
In connection with entering into the New Credit Agreement, the Company
issued a $7.0 million note (the "Precious Metal Note") due August 2003 to
finance precious metals used in certain of the Company's manufacturing
processes.
F-26
53
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
The Existing Credit Agreement and the New Credit Agreement also provide
that in the event the Company shall become the subject of any bankruptcy
proceedings, the lenders will, subject to bankruptcy court approval, refinance
and consolidate in full the indebtedness under the New Credit Agreement, the
Existing Credit Agreement and the Other Indebtedness with a new
debtor-in-possession facility (the "DIP Facility") on terms and conditions
substantially identical to the New Credit Agreement, the Existing Credit
Agreement and the Other Indebtedness, as applicable, in an aggregate amount
equal to the then committed amount under the New Credit Agreement plus $110
million plus the principal amount of the Other Indebtedness. The DIP Facility
would mature on August 18, 2004 and would be secured by a first-priority
security interest in all of the Collateral.
In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ("swaps") with banks, with an aggregate ending
notional principal amount of $142.0 million and a final maturity of July 1,
1999, all of which were terminated as of June 28, 1998. In June 1998, the
Company terminated swaps with an aggregate ending notional principal amount of
$60.0 million, resulting in gains of $0.7 million. The gains were deferred and
were amortized as a reduction of interest expense over the remaining original
life of the swaps. As a result of the swaps, the effective interest cost to the
Company of the portion of the Deferred Coupon Notes covered by the swaps varied
at a fixed spread over LIBOR.
In December 1995, the Company consummated a $40 million sale-leaseback of
certain equipment located at its Chester, South Carolina glass mat manufacturing
facility, in a transaction accounted for as a capital lease, and the gain has
been deferred. The lessor was granted a security interest in certain equipment
at the Chester facility. The lease term extends to December 2005. In December
1994, the Company consummated a $20.4 million sale-leaseback of certain
equipment located at its Baltimore, Maryland roofing facility, in a transaction
accounted for as a capital lease, and the gain has been deferred. The lessor was
granted a security interest in the land, buildings and certain equipment at the
Baltimore facility. The lease term extends to December 2004. The Company has
four industrial revenue bond issues outstanding, which bear interest at
short-term floating rates. Interest rates on the foregoing obligations ranged
between 4.20% and 4.75% as of December 31, 2000.
The Company believes that the fair value of its non-public indebtedness
approximates the book value of such indebtedness, because the interest rates on
substantially all such indebtedness are at floating short-term rates. With
respect to the Company's publicly traded debt securities, the Company has
obtained estimates of the fair values from an independent source believed to be
reliable. The estimated fair values of the Company's indebtedness at December
31, 1999 and 2000 are as follows:
DECEMBER 31,
-------------------
1999 2000
-------- -------
(THOUSANDS)
2005 Notes.............................................. $136,039 $47,867
2006 Notes.............................................. 94,671 31,905
2007 Notes.............................................. 89,973 31,837
2008 Notes.............................................. 139,210 49,387
The aggregate maturities of long-term debt as of December 31, 2000 for the
next five years are as follows:
(THOUSANDS)
-----------
2001..................................................... $ 5,908
2002..................................................... 15,009
2003..................................................... 125,244
2004..................................................... --
2005..................................................... 150,000
F-27
54
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. LONG-TERM DEBT -- (CONTINUED)
In the above table, maturities for the year 2002 include $11.7 million
related to the Baltimore manufacturing facility capital lease. Maturities for
the year 2003 include $35 million related to the 2003 Notes, $70 million related
to the Existing Credit Agreement and $20.2 million related to the Chester glass
mat manufacturing facility capital lease. Maturities for the year 2005 include
$150 million related to the 2005 Notes.
NOTE 12. BENEFIT PLANS
Eligible, full-time employees of the Company are covered by various benefit
plans, as described below.
Defined Contribution Plan
The Company provides a defined contribution plan for eligible employees.
The Company contributes up to 7% of participants' compensation and also
contributes fixed amounts, ranging from $50 to $750 per year depending on age,
to the accounts of participants who are not covered by a Company-provided
postretirement medical benefit plan. The aggregate contributions by the Company
were $4.2, $4.4 and $4.9 million for 1998, 1999 and 2000, respectively.
U.S. Intec, Inc., a wholly-owned subsidiary of the Company as of December
31, 2000, provided a defined contribution plan for eligible employees. U.S.
Intec, Inc. contributed a discretionary matching contribution equal to 100% of
each participant's eligible contributions each year up to a maximum of $750 for
each participant. Such contributions by U.S. Intec, Inc. were $0.1, $0.2 and
$0.1 million for 1998, 1999 and 2000, respectively.
Defined Benefit Plans
The Company provides noncontributory defined benefit retirement plans for
certain hourly and salaried employees (the "Retirement Plans"). Benefits under
these plans are based on stated amounts for each year of service. In 1998, the
Company acquired LL Building Products Inc. which has pension plans for its
hourly and salaried employees. The LL Building Products Inc. plans were
curtailed in 1998. The Company's funding policy is consistent with the minimum
funding requirements of ERISA.
The Company's net periodic pension cost for the Retirement Plans included
the following components:
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1999 2000
------- ------- -------
(THOUSANDS)
Service cost.......................................... $ 754 $ 804 $ 751
Interest cost......................................... 842 949 1,066
Expected return on plan assets........................ (1,296) (1,270) (1,583)
Amortization of unrecognized prior service cost....... 31 31 33
Amortization of net losses from earlier periods....... -- 107 14
------- ------- -------
Net periodic pension cost............................. $ 331 $ 621 $ 281
======= ======= =======
F-28
55
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
The following tables set forth, for the years 1999 and 2000,
reconciliations of the beginning and ending balances of the benefit obligation,
fair value of plan assets, funded status, amounts recognized in the Consolidated
Balance Sheets and changes in accumulated other comprehensive (income) loss
related to the Retirement Plans:
DECEMBER 31,
------------------
1999 2000
------- -------
(THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $17,865 $17,601
Service cost.............................................. 804 751
Interest cost............................................. 1,243 1,379
Amendments................................................ -- 50
Actuarial losses (gains).................................. (1,739) 1,073
Benefits paid............................................. (572) (638)
------- -------
Benefit obligation at end of year......................... $17,601 $20,216
======= =======
Change in plan assets:
Fair value of plan assets at beginning of year............ $16,248 $18,348
Actual return on plan assets.............................. 1,920 3,100
Employer contributions.................................... 752 2,625
Benefits paid............................................. (572) (638)
------- -------
Fair value of plan assets at end of year.................. $18,348 $23,435
======= =======
Reconciliation of funded status:
Funded status............................................. $ 746 $ 3,219
Unrecognized prior service cost........................... 247 264
Unrecognized actuarial losses............................. 1,351 473
------- -------
Net amount recognized in Consolidated Balance Sheets...... $ 2,344 $ 3,956
======= =======
Amounts recognized in Consolidated Balance Sheets:
Prepaid benefit cost...................................... $ 746 $ 3,956
Intangible asset.......................................... 247 --
Accumulated other comprehensive loss...................... 1,351 --
------- -------
Net amount recognized..................................... $ 2,344 $ 3,956
======= =======
Change for the year in accumulated other comprehensive
(income) loss:
Change in intangible asset................................ $ 30 $ 247
Change in additional minimum liability.................... (1,635) (1,598)
------- -------
Total..................................................... $(1,605) $(1,351)
======= =======
In determining the projected benefit obligation, the weighted average
assumed discount rate was 7.75% and 7.50% for 1999 and 2000, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 1999 and 2000.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1998, 1999 and 2000.
F-29
56
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
Book Value Appreciation Unit Plan
A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vest over five years.
Upon exercise, employees were entitled to receive a cash payment based on the
increase in Book Value (as defined in the plan). This plan was terminated in
1999 with all eligible employees receiving their respective vested cash
payments. Expense accrued under this plan was $1.3 and $1.2 million for 1998 and
1999, respectively.
Postretirement Medical and Life Insurance
The Company generally does not provide postretirement medical and life
insurance benefits, although it subsidizes such benefits for certain employees
and certain retirees. Such subsidies were reduced or ended as of January 1,
1997.
Net periodic postretirement benefit cost included the following components:
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999 2000
----- ----- -----
(THOUSANDS)
Service cost............................................... $ 104 $ 114 $ 92
Interest cost.............................................. 467 476 354
Amortization of unrecognized prior service cost............ (88) (88) (94)
Amortization of net gains from earlier periods............. (240) (209) (271)
----- ----- -----
Net periodic postretirement benefit cost................... $ 243 $ 293 $ 81
===== ===== =====
The following table sets forth, for the years 1999 and 2000,
reconciliations of the beginning and ending balances of the postretirement
benefit obligation, funded status and amounts recognized in the Consolidated
Balance Sheets related to postretirement medical and life insurance benefits:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Change in benefit obligation:
Benefit obligation at beginning of year................... $ 7,135 $ 6,023
Service cost.............................................. 114 92
Interest cost............................................. 476 354
Amendments................................................ -- (122)
Actuarial gains........................................... (1,179) (1,098)
Benefits paid............................................. (523) (404)
-------- --------
Benefit obligation at end of year......................... $ 6,023 $ 4,845
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year............ $ -- $ --
Employer contributions.................................... 523 404
Participant contributions................................. -- 104
Benefits paid............................................. (523) (508)
-------- --------
Fair value of plan assets at end of year.................. $ -- $ --
======== ========
F-30
57
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. BENEFIT PLANS -- (CONTINUED)
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Reconciliation of funded status:
Funded status............................................. $ (6,023) (4,845)
Unrecognized prior service cost........................... (614) (642)
Unrecognized actuarial gains.............................. (4,400) (5,227)
-------- --------
Net amount recognized in Consolidated Balance Sheets as
accrued benefit cost................................... $(11,037) $(10,714)
======== ========
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
2000 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $700 to $1,000 per year. For retirees over age
65, this subsidy may be replaced by participation in a managed care program.
With respect to retirees who were formerly hourly employees, most such retirees
are subject to a $5,000 per person lifetime maximum benefit. Subject to such
lifetime maximum, a 9% and 6% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 2000
for such retirees under and over age 65, respectively. To the extent that the
lifetime maximum benefits have not been reached, the foregoing rates were
assumed to decrease gradually to an ultimate rate of 4.5% and 6%, respectively,
by the year 2009 and remain at that level thereafter. The weighted average
assumed discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% and 7.50% for 1999 and 2000, respectively.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1999 and 2000 by $76,000 and $33,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic postretirement benefit cost for the years 1999 and 2000 by
$5,000 and $2,400, respectively. A decrease of one percentage point in each year
would decrease the accumulated postretirement benefit obligation as of December
31, 1999 and 2000 by $68,000 and $31,000, respectively, and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the years 1999 and 2000 by $5,000 and $2,400, respectively.
NOTE 13. PREFERRED STOCK OPTION PLAN
On January 1, 1996, the Company established a plan to issue options to
certain employees to purchase shares of redeemable convertible preferred stock
("Preferred Stock") of the Company, exercisable at a price of $100 per share.
Each share of Preferred Stock is convertible, at the holder's option, into
shares of common stock of the Company at a formula price based on Book Value (as
defined in the option agreement) as of the date of grant. The options vest
rateably over five years and expire after nine years. Dividends will accrue on
the Preferred Stock from the date of issuance at the rate of 6% per annum. The
Preferred Stock is redeemable, at the Company's option, for a redemption price
equal to $100 per share plus accrued and unpaid dividends. The Preferred Stock,
and common stock issuable upon conversion of Preferred Stock into common stock,
is subject to repurchase by the Company under certain circumstances, at a price
equal to current Book Value (as defined in the option agreement). The exercise
price of the options to purchase Preferred Stock was equal to the estimated fair
value per share of the Preferred Stock at the date of grant. The options
exercised in 1999 and 2000 were converted into 4,611 and 1,868 shares of common
stock. During 1998 and 1999 no expense was recorded in connection with the
Preferred Stock options.
F-31
58
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. PREFERRED STOCK OPTION PLAN -- (CONTINUED)
The following is a summary of transactions pertaining to the plan:
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1999 2000
------- ------- -------
(NUMBER OF SHARES)
Outstanding, January 1................................ 102,595 140,052 167,811
Granted............................................... 57,073 81,405 61,700
Exercised............................................. -- (8,704) (3,653)
Forfeited............................................. (19,616) (44,942) (27,749)
------- ------- -------
Outstanding, December 31.............................. 140,052 167,811 198,109
------- ------- -------
Options exercisable, December 31...................... 20,663 45,337 66,405
======= ======= =======
Effective December 31, 2000, the Company adopted the 2001 Long-Term
Incentive Plan which allows certain employees participating in the preferred
stock option program to also participate in the 2001 Long-Term Incentive Plan.
Under the provisions of the 2001 Long-Term Incentive Plan, a $1.4 million charge
was recorded in 2000.
NOTE 14. BUSINESS SEGMENT INFORMATION
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the steep slope and low slope roofing
markets. The Company also manufactures and markets specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. The steep slope roofing product line
primarily consists of premium laminated shingles, strip shingles, and certain
specialty shingles principally for regional markets. Sales of steep slope
roofing products represented approximately 67% of the Company's net sales in
2000. The Company's low slope roofing product line includes a full line of
modified bitumen products, asphalt built-up roofing, liquid applied membrane,
and roofing accessories. Sales of low slope roofing products and accessories
represented approximately 26% of the Company's net sales in 2000. Sales of the
specialty building products and accessories product line represented
approximately 7% of the Company's net sales in 2000.
The Company aggregates the steep slope and low slope product lines into one
operating segment since they have similar economic characteristics and are
similar in each of the following areas: (i) the nature of the products and
services are similar in that they perform the same function -- the protection
and covering of steep slope and low slope roofs; (ii) the nature of the
production processes are similar; (iii) the type or class of customer for their
products and services are similar; (iv) the steep slope and low slope products
have the same distribution channels, whereby the main customers are wholesalers
or distributors; and (v) regulatory requirements are generally the same for both
the steep slope and low slope product lines. The specialty building products and
accessories product line did not meet quantitative thresholds in 2000 to be
considered as a reportable segment.
Net revenues in 1999 and 2000, respectively, included sales to The Home
Depot, Inc. and American Builders & Contractors Supply Co., of approximately
11%, 13%, and 10% and 11%, respectively, of the Company's net sales. No other
customer accounted for as much as 10% of net sales in 1999 or 2000.
F-32
59
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. RELATED PARTY TRANSACTIONS
Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating and
financing transactions between the Company and its affiliates:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(THOUSANDS)
Receivable from G-I Holdings........................... $ 59,132 $ --
======== ========
Tax receivable from parent corporations................ -- $ 9,000
======== ========
Payable to ISP......................................... $(15,024) $(10,052)
======== ========
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates (between 5.82% and 5.96% during 1998);
however, no loans to G-I Holdings were made during 1999 and 2000. In addition,
no loans were made to the Company by G-I Holdings and its subsidiaries during
1999 and 2000. Loans to any parent corporation are subject to limitations as
outlined in the New Credit Agreement, the Existing Credit Agreement and the
Senior Notes. The Company advances funds on a non-interest bearing basis to G-I
Holdings and its subsidiaries. The net balance of such advances as of December
31, 1999 and 2000 was $59.1 and $0 million, respectively. During 1999 and 2000,
the Company made distributions of $60.0 and $106.2 million, respectively, to its
parent corporations. The distribution of $106.2 million in 2000 represents the
write-off of outstanding advances to the Company's parent corporations during
1999 and 2000 that the Company determined were uncollectible. Included in
current assets is a tax receivable from parent corporations of $1.5 million and
included in long-term assets is a tax receivable from parent corporations of
$7.5 million representing amounts paid to G-I Holdings under the Tax Sharing
Agreement. See Note 7.
Mineral Products: The Company and its subsidiaries purchase all of their
colored roofing granules requirements from ISP under a requirements contract,
except for the requirements of certain of their roofing plants which are
supplied by third parties. Effective January 1, 2001, this contract was amended
and restated to provide, among other things, that the contract will expire on
December 31, 2001, unless extended by the parties. Such purchases by the Company
and its subsidiaries totaled $62.6, $57.3 and $59.3 million for 1998, 1999 and
2000, respectively. The amount payable to ISP at December 31, 1999 and 2000 for
such purchases was $2.9 and $7.6 million, respectively.
Management Agreement: The Company is a party to a Management Agreement
with ISP (the "Management Agreement") pursuant to which ISP provides certain
general management, administrative, legal, telecommunications, information and
facilities services to the Company (including the use of the Company's
headquarters in Wayne, New Jersey). Charges to the Company by ISP for providing
such services aggregated $4.3, $5.3 and $6.0 million for 1998, 1999 and 2000,
respectively. Such charges consist of management fees and other reimbursable
expenses attributable to, or incurred by ISP for the benefit of the Company. The
payable to ISP for management fees as of December 31, 1999 and 2000 was $4.1 and
$1.0 million, respectively. Effective January 1, 2001, the Management Agreement
was amended to extend the term of the agreement through March 31, 2001, to
provide for the automatic extension of the agreement for successive quarterly
periods unless the agreement is terminated by a party, and to adjust the
management fees payable thereunder. In addition, the Management Agreement was
amended to provide that the Company rather than ISP be responsible for providing
management services to G-I Holdings and certain of its subsidiaries and that G-I
Holdings pay to the Company a management fee for such services. Based on the
services provided to G-I Holdings in 2000 under the Management Agreement, the
aggregate amount payable by G-I Holdings to the Company for services to be
rendered under the Management Agreement in 2001 is expected to be approximately
$0.6 million. The Company and ISP also allocate a portion of the management fees
payable by the Company under the Management Agreement to separate lease payments
for the use of the Company's headquarters. Based on the services provided by ISP
to the Company and G-I Holdings in 2000
F-33
60
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. RELATED PARTY TRANSACTIONS -- (CONTINUED)
under the Management Agreement, the aggregate amount payable by the Company to
ISP under the Management Agreement for 2001, is expected to be approximately
$6.6 million. Certain of the Company's executive officers receive their
compensation from ISP. ISP is indirectly reimbursed for this compensation
through payment of the management fee and other reimbursable expenses payable
under the Management Agreement.
Tax Sharing Agreement: See Note 7.
NOTE 16. COMMITMENTS AND CONTINGENCIES
The discussions as to legal matters involving the Company contained in Item
3, "Legal Proceedings -- Environmental Litigation" and "-- Other Litigation" are
incorporated herein by reference.
G-I Holdings and BHC are presently dependent upon the earnings and cash
flows of their subsidiaries, principally the Company, in order to satisfy their
obligations, including various tax and other claims and liabilities (net of
certain insurance receivables) including tax liabilities relating to the
surfactants partnership (discussed in Note 7). G-I Holdings has advised the
Company that it expects to obtain funds to satisfy G-I Holdings' operating
expenses from, among other things, loans from subsidiaries (principally the
Company). See Notes 3, 7 and 15.
On January 5, 2001, G-I Holdings filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos
Claims. The Company is not included in such bankruptcy filing. There are
restrictions under the indentures relating to the Senior Notes, the Existing
Credit Agreement and the New Credit Agreement on payments by the Company to its
parents.
During the twelve months ended December 31, 2001, the Company expects to
make distributions and/or advances to its parents to satisfy the obligations
discussed above only to the extent permitted by the Existing Credit Agreement,
the New Credit Agreement and the Senior Notes. The Company does not believe that
the dependence of its parent corporations on the cash flows of their
subsidiaries should have a material adverse effect on the operations, liquidity
or capital resources of the Company. See Notes 3, 7 and 11.
The leases for certain property, plant and equipment at certain of the
Company's glass mat and roofing facilities are accounted for as capital leases
(see Note 11). The Company is also a lessee under operating leases principally
for warehouses, production machinery and equipment, and transportation and
computer equipment. Rental expense on operating leases was $11.0, $15.5 and
$18.7 million for 1998, 1999 and 2000, respectively. Future minimum lease
payments for properties which were held under long-term noncancellable leases as
of December 31, 2000 were as follows:
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS)
2001.................................................... $ 8,108 $ 15,665
2002.................................................... 17,558 14,733
2003.................................................... 21,406 14,196
2004.................................................... -- 13,900
2005.................................................... -- 13,636
Thereafter.............................................. -- 43,361
------- --------
Total minimum payments.................................. 47,072 $115,491
========
Less interest included above............................ 7,106
-------
Present value of net minimum lease payments............. $39,966
=======
F-34
61
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION
In connection with the Company entering into the New Credit Agreement, all
of the Company's subsidiaries, other than BMCA Receivables Corporation (see Note
8), became guarantors under the New Credit Agreement, the Existing Credit
Agreement and the Senior Notes. 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.
In January 2001, certain subsidiaries of the Company were merged into BMMC.
Presented below is condensed consolidating financial information for the
Company, the guarantor subsidiaries and the non-guarantor subsidiary prepared on
a basis which retroactively reflects the formation of such companies for all
periods presented. This financial information should be read in conjunction with
the Consolidated Financial Statements and other notes related thereto. Separate
financial information for the Company's guarantor subsidiaries and non-guarantor
subsidiary is not included herein because management has determined that such
information is not material to investors.
F-35
62
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
Net sales......................................... $885,364 $202,593 $ -- $1,087,957
Intercompany net sales............................ 3,413 641,657 (645,070) --
-------- -------- --------- ----------
Total net sales.............................. 888,777 844,250 (645,070) 1,087,957
-------- -------- --------- ----------
Costs and expenses:
Cost of products sold........................... 657,018 762,391 (645,070) 774,339
Selling, general and administrative............. 155,184 81,232 236,416
Goodwill amortization........................... 641 1,470 2,111
Nonrecurring charges............................ 27,563 27,563
-------- -------- --------- ----------
Total costs and expenses..................... 840,406 845,093 (645,070) 1,040,429
-------- -------- --------- ----------
Operating income (loss)........................... 48,371 (843) -- 47,528
Equity in loss of subsidiaries.................... (755) 755 --
Interest expense, net............................. (26,535) (23,419) (49,954)
Other income (expense), net....................... (7,150) 23,045 15,895
-------- -------- --------- ----------
Income (loss) before income taxes and
extraordinary losses............................ 13,931 (1,217) 755 13,469
Income tax (provision) benefit.................... (5,580) 462 (5,118)
-------- -------- --------- ----------
Income (loss) before extraordinary losses......... 8,351 (755) 755 8,351
-------- -------- --------- ----------
Extraordinary losses, net of income tax benefits
of $11,101...................................... (18,113) (18,113)
-------- -------- --------- ----------
Net income (loss)................................. $ (9,762) $ (755) $ 755 $ (9,762)
======== ======== ========= ==========
F-36
63
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
Net sales......................................... $920,692 $219,347 $ -- $1,140,039
Intercompany net sales............................ 7,230 731,312 (738,542) --
-------- -------- --------- ----------
Total net sales.............................. 927,922 950,659 (738,542) 1,140,039
-------- -------- --------- ----------
Costs and expenses:
Cost of products sold........................... 702,957 848,282 (738,542) 812,697
Selling, general and administrative............. 157,372 82,188 239,560
Goodwill amortization........................... 641 1,393 2,034
Transition service agreement (income) expense... (500) 500 --
Nonrecurring charges............................ 2,650 2,650
-------- -------- --------- ----------
Total costs and expenses..................... 863,120 932,363 (738,542) 1,056,941
-------- -------- --------- ----------
Operating income.................................. 64,802 18,296 -- 83,098
Equity in earnings of subsidiaries................ 23,370 (23,370) --
Intercompany licensing income (expense), net...... (27,622) 27,622 --
Interest expense, net............................. (26,565) (21,752) (48,317)
Other income (expense), net....................... (7,489) 12,929 5,440
-------- -------- --------- ----------
Income (loss) before income taxes and
extraordinary losses............................ 26,496 37,095 (23,370) 40,221
Income tax (provision) benefit.................... (1,157) (13,725) (14,882)
-------- -------- --------- ----------
Income (loss) before extraordinary losses......... 25,339 23,370 (23,370) 25,339
Extraordinary losses, net of income tax benefits
of $761......................................... (1,296) (1,296)
-------- -------- --------- ----------
Net income (loss)................................. $ 24,043 $ 23,370 $ (23,370) $ 24,043
======== ======== ========= ==========
F-37
64
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
PARENT GUARANTOR
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------
Net sales....................................... $ 999,809 $ 207,950 $ -- $1,207,759
Intercompany net sales.......................... 11,111 817,219 (828,330) --
---------- ---------- --------- ----------
Total net sales............................ 1,010,920 1,025,169 (828,330) 1,207,759
---------- ---------- --------- ----------
Costs and expenses:
Cost of products sold......................... 798,142 923,964 (828,330) 893,776
Selling, general and administrative........... 165,231 85,311 250,542
Goodwill amortization......................... 641 1,383 2,024
Transition service agreement (income)
expense.................................... (100) 100
Gain on sale of assets........................ (17,505) (17,505)
Warranty reserve adjustment................... 15,000 15,000
---------- ---------- --------- ----------
Total costs and expenses................... 978,914 993,253 (828,330) 1,143,837
---------- ---------- --------- ----------
Operating income................................ 32,006 31,916 -- 63,922
Equity in earnings of subsidiaries.............. 12,189 (12,189) --
Intercompany licensing income (expense), net.... (29,994) 29,994
Interest expense, net........................... (27,728) (25,740) (53,468)
Other expense, net.............................. (10,818) (16,822) (27,640)
---------- ---------- --------- ----------
Income (loss) before income taxes and
extraordinary losses.......................... (24,345) 19,348 (12,189) (17,186)
Income tax (provision) benefit.................. 13,518 (7,159) 6,359
---------- ---------- --------- ----------
Income (loss) before extraordinary losses....... (10,827) 12,189 (12,189) (10,827)
Extraordinary losses, net of income tax benefits
of $194....................................... (330) (330)
---------- ---------- --------- ----------
Net income (loss)............................... $ (11,157) $ 12,189 $ (12,189) $ (11,157)
========== ========== ========= ==========
F-38
65
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------- ------------ ---------- ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 81 $ 55,871 $ -- $ -- $ 55,952
Investments in trading securities...... 687 687
Investments in available-for-sale
securities.......................... 29,702 29,702
Other short-term investments........... 1,590 1,590
Accounts receivable, trade, net........ 1,590 21,348 22,938
Accounts receivable, other............. 4,992 5,692 52,208 62,892
Receivable from parent corporations.... 59,132 59,132
Inventories............................ 52,903 55,712 108,615
Other current assets................... 1,208 3,031 4,239
-------- -------- -------- --------- --------
Total Current Assets................ 119,906 173,633 52,208 -- 345,747
Investment in subsidiaries............... 325,211 (325,211) --
Intercompany loans including accrued
interest............................... 171,176 (166,762) (4,414) --
Due from (to) subsidiaries, net.......... (151,164) 146,942 4,222 --
Property, plant and equipment, net....... 32,821 377,882 410,703
Excess of cost over net assets of
businesses acquired, net............... 18,739 51,669 70,408
Deferred income tax benefits............. 45,561 45,561
Other assets............................. 15,454 7,239 22,693
-------- -------- -------- --------- --------
Total Assets............................. $577,704 $590,603 $ 52,016 $(325,211) $895,112
======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt... $ 2,333 $ 3,816 $ -- $ -- $ 6,149
Accounts payable....................... 41,799 42,535 84,334
Payable to related party............... 12,382 2,642 15,024
Accrued liabilities.................... 19,695 96,133 115,828
Reserve for product warranty claims.... 13,400 1,100 14,500
-------- -------- -------- --------- --------
Total Current Liabilities........... 89,609 146,226 -- -- 235,835
Long-term debt less current maturities... 435,398 165,347 600,745
Reserve for product warranty claims...... 16,127 3,687 19,814
Other liabilities........................ 14,881 2,148 17,029
-------- -------- -------- --------- --------
Total Liabilities................... 556,015 317,408 -- -- 873,423
-------- -------- -------- --------- --------
Total Stockholders' Equity, net.......... 21,689 273,195 52,016 (325,211) 21,689
-------- -------- -------- --------- --------
Total Liabilities and Stockholders'
Equity................................. $577,704 $590,603 $ 52,016 $(325,211) $895,112
======== ======== ======== ========= ========
F-39
66
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
--------- ------------ ---------- ------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents............ $ 9,741 $ 73,006 $ -- $ -- $ 82,747
Accounts receivable, trade, net...... 19,474 19,474
Accounts receivable, other........... 5,027 2,947 43,869 51,843
Tax receivable from parent
corporations...................... 1,500 1,500
Inventories.......................... 52,041 49,661 101,702
Other current assets................. 1,022 2,903 3,925
--------- --------- --------- --------- --------
Total Current Assets.............. 69,331 147,991 43,869 -- 261,191
Investment in subsidiaries............. 356,726 (356,726) --
Intercompany loans including accrued
interest............................. 188,945 (184,531) (4,414) --
Due from (to) subsidiaries, net........ (190,285) 186,322 3,963 --
Property, plant and equipment, net..... 28,425 334,039 362,464
Excess of cost over net assets of
businesses acquired, net............. 18,099 47,218 65,317
Deferred income tax benefits........... 42,897 42,897
Tax receivable from parent
corporations......................... 7,500 7,500
Other assets........................... 16,026 15,774 31,800
--------- --------- --------- --------- --------
Total Assets........................... $ 537,664 $ 546,813 $ 43,418 $(356,726) $771,169
========= ========= ========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term
debt................................... $ 153 $ 5,755 $ -- $ -- $ 5,908
Accounts payable..................... 19,600 37,920 57,520
Payable to related party............. 7,522 2,530 10,052
Accrued liabilities.................. 21,627 21,261 42,888
Reserve for product warranty
claims................................. 13,400 1,500 14,900
--------- --------- --------- --------- --------
Total Current Liabilities......... 62,302 68,966 -- -- 131,268
Long-term debt less current
maturities........................... 514,880 159,818 674,698
Reserve for product warranty claims.... 24,248 4,508 28,756
Other liabilities...................... 14,099 213 14,312
--------- --------- --------- --------- --------
Total Liabilities................. 615,529 233,505 -- -- 849,034
--------- --------- --------- --------- --------
Total Stockholders' Equity (Deficit),
net.................................. (77,865) 313,308 43,418 (356,726) (77,865)
--------- --------- --------- --------- --------
Total Liabilities and Stockholders'
Equity (Deficit).................. $ 537,664 $ 546,813 $ 43,418 $(356,726) $771,169
========= ========= ========= ========= ========
F-40
67
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
--------- ------------ ---------- ------------
Cash and cash equivalents, beginning of year....... $ 35 $ 12,889 $ -- $ 12,924
--------- --------- ------ ---------
Cash provided by (used in) operating activities:
Net loss......................................... (9,007) (755) (9,762)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary losses.......................... 18,113 18,113
Depreciation.................................. 3,383 25,552 28,935
Goodwill and other amortization............... 641 1,671 2,312
Deferred income taxes......................... 4,538 4,538
Noncash interest charges...................... 23,877 23,877
(Increase) decrease in working capital items..... (34,741) 21,926 (3,147) (15,962)
Increase (decrease) in product warranty claims... 13,220 (1,569) 11,651
Purchases of trading securities.................. (189,197) (189,197)
Proceeds from sales of trading securities........ 124,931 124,931
(Increase) decrease in other assets.............. (482) 764 282
Increase in other liabilities.................... 1,487 1,780 3,267
Change in net receivable from/payable to related
parties....................................... 23,681 15,807 3,147 42,635
Other, net....................................... 3,702 7,570 11,272
--------- --------- ------ ---------
Net cash provided by operating activities.......... 48,412 8,480 -- 56,892
--------- --------- ------ ---------
Cash provided by (used in) investing activities:
Capital expenditures............................. (4,799) (70,535) (75,334)
Acquisitions..................................... (59,187) (59,187)
Proceeds from sale of assets..................... 29,019 29,019
Purchases of available-for-sale securities....... (89,324) (89,324)
Purchases of held-to-maturity securities......... (6,357) (6,357)
Proceeds from sales of available-for-sale
securities.................................... 170,055 170,055
Proceeds from held-to-maturity securities........ 499 499
--------- --------- ------ ---------
Net cash provided by (used in) investing
activities....................................... (63,986) 33,357 -- (30,629)
--------- --------- ------ ---------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable...... 30,578 30,578
Decrease in short-term debt...................... (26,944) (26,944)
Decrease in loan receivable from parent
corporations.................................. 6,152 6,152
Proceeds from issuance of long-term debt......... 304,019 304,019
Decrease in borrowings under revolving credit
facility...................................... (34,000) (34,000)
Repayments of long-term debt..................... (285,108) (2,796) (287,904)
Financing fees and expenses...................... (6,099) (6,099)
--------- --------- ------ ---------
Net cash provided by (used in) financing
activities....................................... 15,542 (29,740) -- (14,198)
--------- --------- ------ ---------
Net change in cash and cash equivalents............ (32) 12,097 -- 12,065
--------- --------- ------ ---------
Cash and cash equivalents, end of year............. $ 3 $ 24,986 $ -- $ 24,989
========= ========= ====== =========
F-41
68
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
-------- ------------ ------------ ------------
Cash and cash equivalents, beginning of year...... $ 3 $ 24,986 $ -- $ 24,989
-------- --------- ------- ---------
Cash provided by (used in) operating activities:
Net income...................................... 673 23,370 24,043
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Extraordinary losses......................... 1,296 1,296
Depreciation................................. 2,628 30,358 32,986
Goodwill and other amortization.............. 1,282 1,393 2,675
Deferred income taxes........................ 14,132 14,132
Noncash interest charges..................... 3,321 3,321
Decrease in working capital items............... (921) (23,952) (1,327) (26,200)
Decrease in product warranty claims............. (13,771) (547) -- (14,318)
Purchases of trading securities................. (139,522) (139,522)
Proceeds from sales of trading securities....... 243,097 243,097
Increase in other assets........................ (828) (3,673) (4,501)
Increase (decrease) in other liabilities........ (2,358) 23 (2,335)
Change in net receivable from/payable to related
parties...................................... 52,388 (102,508) 1,327 (48,793)
Other, net...................................... (3,404) (3,404)
-------- --------- ------- ---------
Net cash provided by operating activities......... 57,842 24,635 -- 82,477
-------- --------- ------- ---------
Cash provided by (used in) investing activities:
Capital expenditures............................ (829) (44,493) (45,322)
Acquisitions.................................... (515) (515)
Purchases of available-for-sale securities...... (76,048) (76,048)
Purchases of held-to-maturity securities........ (2,349) (2,349)
Proceeds from sales of available-for-sale
securities................................... 97,400 97,400
Proceeds from held-to-maturity securities....... 7,758 7,758
Proceeds from sales of other short-term
investments.................................. 21,421 21,421
-------- --------- ------- ---------
Net cash provided by (used in) investing
activities...................................... (829) 3,174 -- 2,345
-------- --------- ------- ---------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable..... 5,640 5,640
Proceeds from issuance of long-term debt........ 31,850 6,093 37,943
Repayments of long-term debt.................... (32,937) (3,017) (35,954)
Distributions to parent corporations............ (60,000) (60,000)
Proceeds from issuance of common stock.......... 870 870
Financing fees and expenses..................... (2,358) (2,358)
-------- --------- ------- ---------
Net cash provided by (used in) financing
activities...................................... (56,935) 3,076 -- (53,859)
-------- --------- ------- ---------
Net change in cash and cash equivalents........... 78 30,885 -- 30,963
-------- --------- ------- ---------
Cash and cash equivalents, end of year............ $ 81 $ 55,871 $ -- $ 55,952
======== ========= ======= =========
F-42
69
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. GUARANTOR FINANCIAL INFORMATION -- (CONTINUED)
BUILDING MATERIALS CORPORATION OF AMERICA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
NON-
PARENT GUARANTOR GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARY CONSOLIDATED
--------- ------------ ------------ ------------
Cash and cash equivalents, beginning of year..... $ 81 $ 55,871 $ -- $ 55,952
--------- --------- ------ ---------
Cash provided by (used in) operating activities:
Net income (loss).............................. (23,346) 12,189 -- (11,157)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Extraordinary losses........................ 330 330
Gain on sale of assets...................... (17,505) (17,505)
Depreciation................................ 2,878 33,472 36,350
Goodwill and other amortization............. 1,480 1,386 2,866
Deferred income taxes....................... (7,475) (7,475)
Noncash interest charges.................... 1,922 726 2,648
(Increase) decrease in working capital items... (20,947) (7,183) 8,339 (19,791)
Increase in product warranty claims............ 8,121 1,221 9,342
Purchases of trading securities................ (980) (980)
Proceeds from sales of trading securities...... 2,172 2,172
(Increase) decrease in other assets............ 3,025 (1,761) 1,264
Decrease in other liabilities.................. (741) (1,935) (2,676)
Change in net receivable from/payable to
related parties/parent corporations......... 75,226 (21,727) (8,339) 45,160
Other, net..................................... 2,565 (2,048) 517
--------- --------- ------ ---------
Net cash provided by (used in) operating
activities..................................... 43,038 (1,973) -- 41,065
--------- --------- ------ ---------
Cash provided by (used in) investing activities:
Capital expenditures........................... (1,047) (60,496) (61,543)
Proceeds from sale of assets................... 31,702 31,702
Purchases of available-for-sale securities..... (882) (882)
Proceeds from sales of available-for-sale
securities.................................. 58,284 58,284
Proceeds from sales of other short-term
investments................................. 1,590 1,590
--------- --------- ------ ---------
Net cash provided by (used in) investing
activities..................................... (1,047) 30,198 -- 29,151
--------- --------- ------ ---------
Cash provided by (used in) financing activities:
Repayments from sale of accounts receivable.... 925 925
Proceeds from issuance of long-term debt....... 41,046 41,046
Increase in borrowings under revolving credit
facility.................................... 70,000 70,000
Repayments of long-term debt................... (34,198) (3,858) (38,056)
Distributions to parent corporations........... (106,161) (106,161)
Net repurchase of common stock................. (1,180) (1,180)
Financing fees and expenses.................... (2,763) (7,232) (9,995)
--------- --------- ------ ---------
Net cash used in financing activities............ (32,331) (11,090) -- (43,421)
--------- --------- ------ ---------
Net change in cash and cash equivalents.......... 9,660 17,135 -- 26,795
--------- --------- ------ ---------
Cash and cash equivalents, end of year........... $ 9,741 $ 73,006 $ -- $ 82,747
========= ========= ====== =========
F-43
70
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
1999 BY QUARTER 2000 BY QUARTER
--------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS)
Net sales........................ $262.9 $310.5 $312.8 $253.8 $289.8 $325.8 $330.9 $261.3
Cost of products sold............ 190.2 216.8 219.2 186.4 214.4 230.3 242.5 206.7
------ ------ ------ ------ ------ ------ ------ ------
Gross profit..................... $ 72.7 $ 93.7 $ 93.6 $ 67.4 $ 75.4 $ 95.5 $ 88.4 $ 54.6
====== ====== ====== ====== ====== ====== ====== ======
Operating income (loss)*......... $ 15.7 $ 30.4 $ 25.5 $ 11.5 $ 14.8 $ 28.6 $ 39.6 $(19.1)
====== ====== ====== ====== ====== ====== ====== ======
Interest expense................. $ 11.9 $ 12.9 $ 12.3 $ 11.2 $ 12.4 $ 12.5 $ 13.4 $ 15.1
====== ====== ====== ====== ====== ====== ====== ======
Income (loss) before income taxes
and extraordinary losses....... $ 3.3 $ 24.6 $ 13.7 $ (1.4) $ 1.2 $ 13.8 $ 23.5 $(55.7)
Income tax (provision) benefit... (1.2) (9.1) (5.0) 0.4 (0.5) (5.1) (8.7) 20.6
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
extraordinary losses........... 2.1 15.5 8.7 (1.0) 0.7 8.7 14.8 (35.1)
Extraordinary losses............. -- -- (1.3) -- -- -- (0.3) --
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)................ $ 2.1 $ 15.5 $ 7.4 $ (1.0) $ 0.7 $ 8.7 $ 14.5 $(35.1)
====== ====== ====== ====== ====== ====== ====== ======
- ---------------
* The operating income for the third quarter of 1999 and 2000 reflect a $2.7
million non-recurring charge and a $17.5 million gain on sale of assets,
respectively. The operating income in the fourth quarter of 2000 reflects a
$15.0 million one-time charge related to a provision for warranty claims. See
Notes 2, 4 and 5 to Consolidated Financial Statements.
F-44
71
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1998
(THOUSANDS)
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1998 EXPENSES DEDUCTIONS OTHER 1998
- ----------- ---------- ---------- ---------- ----- ------------
Valuation and Qualifying Accounts Deducted
from Assets To Which They Apply:
Allowance for doubtful accounts........... $ 2,752 $ 1,419 $ 486(a) $ 350(c) $ 4,035(b)
Allowance for discounts................... 19,403 91,569 87,109 -- 23,863
Reserve for inventory market valuation.... 1,506 1,458 918 500(c) 2,546
YEAR ENDED DECEMBER 31, 1999
(THOUSANDS)
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1999 EXPENSES DEDUCTIONS OTHER 1999
- ----------- ---------- ---------- ---------- ----- ------------
Valuation and Qualifying Accounts Deducted
from Assets To Which They Apply:
Allowance for doubtful accounts........... $ 4,035 $ 484 $ 500(a) $ -- $ 4,019(b)
Allowance for discounts................... 23,863 96,645 97,280 (33) 23,195
Reserve for inventory market valuation.... 2,546 2,794 3,623 -- 1,717
YEAR ENDED DECEMBER 31, 2000
(THOUSANDS)
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 2000 EXPENSES DEDUCTIONS OTHER 2000
- ----------- ---------- ---------- ---------- ----- ------------
Valuation and Qualifying Accounts Deducted
from Assets To Which They Apply:
Allowance for doubtful accounts........... $ 4,019 $ 413 $ 2,634(a) $ -- $ 1,798(b)
Allowance for discounts................... 23,195 110,291 107,683 -- 25,803
Reserve for inventory market valuation.... 1,717 658 1,083 (289) 1,003
- ---------------
Notes:
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balances at December 31, 1998, 1999 and 2000 primarily reflect a reserve
for receivables sold to a trust (see Note 8 to Consolidated Financial
Statements).
(c) Represents balance acquired through acquisitions.
S-1
72
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Reorganization Agreement, dated as of December 31, 1998, by
and among BMCA, Building Materials Manufacturing Corporation
and Building Materials Investment Corporation (incorporated
by reference to Exhibit 2.1 to BMCA's Registration Statement
on Form S-4 (Registration No. 333-69749) (the "2008 Notes
S-4").
3.1 -- Amended and Restated Certificate of Incorporation of BMCA
(incorporated by reference to Exhibit 3.1 to BMCA's Form
10-K for the year ended December 31, 1999 (the "1999 Form
10-K")).
3.2 -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to
BMCA's Registration Statement on Form S-4 (Registration No.
33-81808)) (the "Deferred Coupon Note Registration
Statement").
3.3 -- Certificate of Incorporation of Building Materials
Manufacturing Corporation (incorporated by reference to
Exhibit 3.3 to BMCA's Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K")).
3.4 -- By-laws of Building Materials Manufacturing Corporation
(incorporated by reference to Exhibit 3.4 to the 1998 10-K).
3.5 -- Certificate of Incorporation of Building Materials
Investment Corporation (incorporated by reference to Exhibit
3.5 to the 1998 10-K).
3.6 -- By-laws of Building Materials Investment Corporation
(incorporated by reference to Exhibit 3.6 to the 1998 10-K).
4.1 -- Indenture, dated as of December 9, 1996, between BMCA and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.1 to BMCA's Registration Statement on Form S-4
(Registration No. 333-20859)).
4.2 -- Indenture, dated as of October 20, 1997, between BMCA and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.1 to BMCA's Registration Statement on Form S-4
(Registration No. 333-41531)).
4.3 -- Indenture, dated as of July 17, 1998, between BMCA and The
Bank of New York, as trustee (incorporated by reference to
Exhibit 4.1 to BMCA's Registration Statement on Form S-4
(Registration No. 333-60633)).
4.4 -- First Supplemental Indenture, dated as of January 1, 1999,
to Indenture dated as of December 9, 1996 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 10.7 of the 2008 Notes S-4).
4.5 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of December 9, 1996 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.6 -- First Supplemental Indenture, dated as of January 1, 1999,
to Indenture dated as of October 20, 1997 among BMCA, as
issuer, Building Materials Manufacturing Corporation, as
co-obligor, Building Materials Investment Corporation, as
guarantor and The Bank of New York, as trustee (incorporated
by reference to Exhibit 10.8 of the 2008 Notes S-4).
4.7 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of October 20, 1997 among BMCA and
Building Materials Manufacturing Corporation, as issuers,
Building Materials Investment Corporation, as original
guarantor, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
73
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.8 -- First Supplemental Indenture, dated as of January 1, 1999,
to Indenture dated as of July 17, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors,
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 10.9 of the 2008 Notes S-4).
4.9 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of July 17, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.10 -- Indenture, dated as of December 3, 1998, between BMCA and
The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.1 to the 2008 Notes S-4).
4.11 -- First Supplemental Indenture dated as of January 1, 1999 to
Indenture dated as of December 3, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as guarantors,
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.4 to the 2008 Notes S-4).
4.12 -- Second Supplemental Indenture, dated as of December 4, 2000,
to Indenture dated as of December 3, 1998 among BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.13 -- Indenture, dated July 5, 2000, between BMCA, as issuer,
Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The
Bank of New York, as trustee.
4.14 -- First Supplemental Indenture, dated as of December 4, 2000,
to the Indenture dated as of July 5, 2000, between BMCA, as
issuer, Building Materials Manufacturing Corporation and
Building Materials Investment Corporation, as original
guarantors, the Additional Guarantors signatory thereto, as
additional guarantors, and The Bank of New York, as trustee.
4.15 -- Registration Rights Agreement, dated July 5, 2000, between
BMCA and BNY Capital Markets Inc.
4.16 -- First Amendment to the Registration Rights Agreement, dated
as of December 4, 2000, to Registration Rights Agreement
dated July 5, 2000, among BMCA, as issuer, Building
Materials Manufacturing Corporation and Building Materials
Investment Corporation, as guarantors and BNY Capital
Markets, Inc., as initial purchaser.
10.1 -- Amended and Restated Management Agreement, dated as of
January 1, 1999, among GAF, G-I Holdings Inc., G Industries
Corp., Merick Inc., GAF Fiberglass Corporation, ISP, GAF
Building Materials Corporation, GAF Broadcasting Company,
Inc., BMCA and ISP Opco Holdings Inc. (incorporated by
reference to Exhibit 10.1 to the 1998 10-K).
10.2 -- Amendment No. 1 to the Management Agreement, dated as of
January 1, 2000 (incorporated by reference to Exhibit 10.2
to International Specialty Products Inc. Annual Report on
Form 10-K for the year ended December 31, 1999).
10.3 -- Amendment No. 2 to the Management Agreement, dated as of
January 1, 2001 (incorporated by reference to Exhibit 10.3
to International Specialty Products Inc. Annual Report on
Form 10-K for the year ended December 31, 2000).
10.4 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by
reference to Exhibit 10.9 to BMCA's Form 10-K for the year
ended December 31, 1996).*
10.5 -- Forms of Amendment to Option Agreement relating to Series A
Cumulative Redeemable Convertible Preferred Stock
(incorporated by reference to Exhibit 10.12 to BMCA's Form
10-K for the year ended December 31, 1997 (the "1997 Form
10-K")).*
10.6 -- Form of Option Agreement relating to Series A Cumulative
Redeemable Convertible Preferred Stock (incorporated by
reference to Exhibit 10.13 to the 1997 Form 10-K).*
74
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.7 -- BMCA Preferred Stock Option Plan (incorporated by reference
to Exhibit 4.2 to BMCA's Registration Statement on Form S-8
(Registration No. 333-60589)).*
10.8 -- BMCA 2001 Long-Term Incentive Plan.*
10.9 -- Tax Sharing Agreement, dated as of January 31, 1994, among
GAF, G-I Holdings Inc. and BMCA (incorporated by reference
to Exhibit 10.6 to the Deferred Coupon Note Registration
Statement).
10.10 -- Amendment to Tax Sharing Agreement, dated as of March 19,
2001, between G-I Holdings and BMCA.
10.11 -- Reorganization Agreement, dated as of January 31, 1994,
among GAF Building Materials Corporation, G-I Holdings Inc.
and BMCA (incorporated by reference to Exhibit 10.9 to the
Deferred Coupon Note Registration Statement).
10.12 -- Credit Agreement, dated as of December 4, 2000, by and among
BMCA, the lenders party thereto, and The Bank of New York,
as agent for the lenders and as Swing Line Lender (the
"Credit Agreement").
10.13 -- Amendment No. 1, dated as of December 22, 2000, to the
Credit Agreement.
10.14 -- Amendment No. 2, dated as of March 8, 2001, to the Credit
Agreement.
10.15 -- Amended and Restated Credit Agreement, dated as of December
4, 2000, by and among BMCA, the lenders party thereto, Fleet
National Bank as Documentation Agent, Bear Stearns Corporate
Lending Inc. as Syndication Agent and the Bank of New York
as Swing Line Lender and as Administration Agent with BNY
Capital Markets Inc. as Lead Arranger and Bookrunner (the
"Amended and Restated Credit Agreement").
10.16 -- Amendment No. 1, dated as of December 22, 2000, to the
Amended and Restated Credit Agreement.
10.17 -- Amendment No. 2, dated as of March 8, 2001, to the Amended
and Restated Credit Agreement.
10.18 -- Security Agreement, dated December 22, 2000, by and among
BMCA and each of the grantors party thereto and The Bank of
New York as Collateral Agent.
10.19 -- Collateral Agent Agreement, dated December 22, 2000, by and
among BMCA, such Subsidiary of BMCA a party thereto, the
1999 Administrative Agent (as defined therein), each Senior
Note Trustee (as defined therein), the 2000 Administrative
Agent (as defined therein), the Chase Manhattan Bank, Fleet
National Bank and the Bank of New York, as Collateral Agent.
10.20 -- Separation and General Release Agreement between BMCA and
William C. Lang.*
21 -- Subsidiaries of BMCA.
23.1 -- Consent of Arthur Andersen LLP.
- ---------------
* Management and/or compensation plan or arrangement