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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2005
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: 333-114041
PLY GEM HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 3089 20-0645710
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
------------------------------------------
185 Platte Clay Way
Kearney, Missouri 64060
Registrant's telephone number, including area code: 800-800-2244
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act).
Yes [_] No [X]
As of May 17, 2005, there were 100 shares of common stock, $0.01 par value,
outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2004 April 2, 2005
----------------- -------------
(Amounts in thousands, except share amounts)
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................................... $ 6,794 $ 18,481
Accounts receivable, less allowances of $7,940 and $7,969, respectively ............. 65,217 71,716
Inventories:
Raw materials .................................................................... 30,505 37,467
Work in process .................................................................. 4,260 4,655
Finished goods ................................................................... 26,731 28,159
----------- -----------
61,496 70,281
Prepaid expenses and other current assets ........................................... 9,796 11,817
Deferred income taxes ............................................................... 18,356 18,356
----------- -----------
Total current assets ........................................................... 161,659 190,651
PROPERTY AND EQUIPMENT:
Land ................................................................................ 7,257 2,014
Buildings and improvements .......................................................... 46,491 15,216
Machinery and equipment ............................................................. 105,162 107,610
----------- -----------
158,910 124,840
Less accumulated depreciation ....................................................... (11,874) (14,896)
----------- -----------
Total property and equipment, net .............................................. 147,036 109,944
OTHER ASSETS:
Goodwill ............................................................................ 585,150 584,472
Intangible assets, less accumulated amortization of $5,743 and $8,184,
respectively .................................................................... 162,657 160,216
Other ............................................................................... 47,797 42,312
----------- -----------
Total other assets ............................................................. 795,604 787,000
----------- -----------
$ 1,104,299 $ 1,087,595
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ................................................ $ 2,784 $ 1,947
Accounts payable .................................................................... 34,600 47,713
Accrued expenses and taxes .......................................................... 61,944 41,493
----------- -----------
Total current liabilities ....................................................... 99,328 91,153
Deferred income taxes ............................................................... 72,356 72,080
Other long term liabilities ......................................................... 32,401 28,447
Long-term debt, less current maturities ............................................. 704,807 704,514
STOCKHOLDERS' EQUITY:
Preferred stock $.01 par, 100 shares authorized, none issued and outstanding ........ -- --
Common stock $.01 par, 100 shares authorized, issued and outstanding ................ -- --
Additional paid-in-capital .......................................................... 175,427 175,427
Retained earnings ................................................................... 17,682 13,826
Accumulated other comprehensive income .............................................. 2,298 2,148
----------- -----------
Total Stockholders' Equity ................................................... 195,407 191,401
----------- -----------
$ 1,104,299 $ 1,087,595
=========== ===========
- ---------------------------
See accompanying notes
1
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
Combined Consolidated
-------- ------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 January 23, 2004 January 1, 2005
to February 11, to April 3, to April 2,
2004 2004 2005
---------------- -------------- --------------
(Amounts in thousands)
Net Sales ...................................... $ 40,612 $ 72,750 $ 171,735
Costs and Expenses:
Cost of products sold .......................... 33,611 57,869 137,766
Selling, general and administrative
expense ..................................... 8,345 9,304 23,042
Amortization of intangible assets .............. 201 401 2,440
--------- --------- ---------
42,157 67,574 163,248
--------- --------- ---------
Operating earnings (loss) ...................... (1,545) 5,176 8,487
Foreign currency loss .......................... -- -- (304)
Interest expense ............................... (3,684) (5,017) (14,602)
Investment income (expense) .................... 29 (11) 79
--------- --------- ---------
Income (loss) before provision
(benefit) for income taxes ................. (5,200) 148 (6,340)
Provision (benefit) for income taxes ........... (1,850) 89 (2,485)
--------- --------- ---------
Net income (loss) .............................. $ (3,350) $ 59 $ (3,855)
========= ========= =========
- ------------------------------
See accompanying notes.
2
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Combined Consolidated
-------- ------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 January 23, 2004 January 1, 2005
to February 11, to April 3, to April 2,
2004 2004 2005
---------------- ---------------- ---------------
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................ $ (3,350) $ 59 $ (3,855)
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization expense .................... 1,373 1,736 6,618
Write-off of inventory ................................... -- 1,934 --
Non-cash interest expense, net ........................... 26 71 1,188
Loss on foreign currency transactions .................... -- -- 304
Deferred income taxes .................................... (1,710) -- 10
CHANGES IN OPERATING ASSETS AND
LIABILITIES, NET OF EFFECTS FROM
ACQUISITIONS:
Accounts receivable, net ................................. 1,869 (15,330) (6,548)
Inventories .............................................. (3,224) 599 (8,837)
Prepaid expenses and other current assets ................ (260) (645) (2,147)
Accounts payable ......................................... 7,765 8,176 13,113
Accrued expenses and taxes ............................... (1,339) (3,647) (20,369)
Other .................................................... 498 4,541 164
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ............................... 1,648 (2,506) (20,359)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ..................................... (718) (1,057) (2,526)
Change in restricted cash ................................ 1,118 (4,570) --
Acquisitions, net of cash acquired ....................... -- (550,866) --
Other .................................................... (5) 459 --
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ............................... 395 (556,034) (2,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ............................. -- 432,000 35,500
Payments on long-term debt ............................... (89) (4,928) (909)
Net transfers to Nortek, Inc. ............................ (7,362) -- --
Equity contribution ...................................... -- 136,725 --
--------- --------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ............................... (7,451) 563,797 34,591
Impact of exchange rate movements on cash ................ -- -- (19)
--------- --------- ---------
Net (decrease) increase in cash and
cash equivalents ...................................... (5,408) 5,257 11,687
Cash and cash equivalents at the beginning
of the period.......................................... 8,517 -- 6,794
--------- --------- ---------
Cash and cash equivalents at the
end of the period ..................................... $ 3,109 $ 5,257 $ 18,481
========= ========= =========
- ------------------------------
See accompanying notes.
3
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Ply
Gem Holdings, Inc. ("Ply Gem" or "The Company") and the combined financial
statements of Ply Gem Industries, Inc. and CWD Windows and Doors ("Ply Gem
Industries, Inc.") have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by U.S. generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the period from January 1, 2005 through April 2, 2005 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2005.
The condensed consolidated balance sheet at December 31, 2004 has been derived
from the audited consolidated financial statements of Ply Gem Holdings, Inc. at
that date but does not include all of the information and footnotes required by
U.S. generally accepted accounting principles for complete financial statements.
The Company's fiscal quarters are based on periods ending on the last Saturday
of the last week in the quarter. Therefore the financial results of certain
fiscal quarters will not be exactly comparable to the prior and subsequent
fiscal quarters.
Ply Gem Holdings, Inc., a wholly owned subsidiary of Ply Gem Investment
Holdings, Inc., was incorporated on January 23, 2004 for the purpose of
acquiring Ply Gem Industries, Inc. from Nortek (the "Ply Gem Acquisition"). The
Ply Gem Acquisition was completed on February 12, 2004, as Nortek sold Ply Gem
Industries, Inc., to Ply Gem Holdings, Inc., an affiliate of Caxton-Iseman
Capital, Inc., pursuant to the terms of the Stock Purchase Agreement among Ply
Gem Investment Holdings, Inc., Nortek, Inc., and WDS LLC dated as of December
19, 2003, as amended (the "Purchase Agreement"). Prior to February 12, 2004, the
date of the Ply Gem Acquisition, Ply Gem Holdings, Inc. had no operations and
Ply Gem Industries, Inc. was wholly owned by a subsidiary of WDS LLC, which was
a wholly owned subsidiary of Nortek, Inc. (collectively with subsidiaries
"Nortek").
On August 27, 2004 Ply Gem Industries, Inc. acquired all of the outstanding
shares of capital stock of MWM Holding, Inc., ("MWM Holding"), in accordance
with a stock purchase agreement entered into among Ply Gem Industries, Inc., MWM
Holding, Inc., and the selling stockholders (the "MW Acquisition"). The
accompanying financial statements include the operating results of MWM Holding
from August 27, 2004, the date of acquisition.
The accompanying financial statements include the consolidated results of
operations for the period from January 23, 2004 to April 3, 2004 and January 1,
2005 to April 2, 2005, and consolidated financial position for Ply Gem Holdings,
Inc. and Subsidiaries as of April 2, 2005 and December 31, 2004, and the
combined results of operations of Ply Gem Industries, Inc. for the period from
January 1, 2004 to February 11, 2004. The periods presented for 2004 provide the
combined operating results of Ply Gem Industries, Inc. from the beginning of the
year, January 1, 2004, until the date of the Ply Gem Acquisition, February 12,
2004 (see Note 2), as well as the consolidated operating results from the date
of inception of Ply Gem Holdings, Inc., January 23, 2004, through the end of the
first quarter, April 3, 2004.
Ply Gem is a diversified manufacturer of residential and commercial building
products, which are sold, primarily in the United States and Canada, and include
a wide variety of products for the residential and commercial construction, the
do-it-yourself and the professional remodeling and renovation markets. Since our
building products are intended for exterior use, our sales and operating
earnings tend to be lower during periods of inclement weather. Weather
conditions in the first quarter of each calendar year historically result in
that quarter producing significantly less sales revenue than in any other period
of the
4
year. As a result, we have historically had lower profits or losses in the first
quarter, and reduced profits in the fourth quarter of each calendar year due to
the weather. Our results of operations for individual quarters in the future may
be impacted by adverse weather conditions. Since a portion of our manufacturing
overhead and operating expenses are relatively fixed throughout the year,
operating income and net earnings tend to be lower in quarters with lower sales
levels. In addition, the demand for cash to fund our working capital is greater
from late in the fourth quarter through the first quarter.
Our performance is dependent to a significant extent upon the levels of home
repair and remodeling and new home construction spending, all of which are
affected by such factors as interest rates, inflation, consumer confidence and
unemployment.
The demand for our products is seasonal, particularly in the Northeast and
Midwest regions of the United States and Western Canada where inclement weather
during the winter months usually reduces the level of building and remodeling
activity in both the home repair and remodeling and new home construction
sectors. Our sales are usually lower during the first and fourth quarters.
PRINCIPLES OF CONSOLIDATION AND COMBINATION
The consolidated and combined financial statements include the accounts of Ply
Gem Holdings, Inc. and its subsidiaries, all of which are wholly owned, or Ply
Gem Industries, Inc. and its subsidiaries combined with CWD Windows and Doors, a
division of Broan-Nutone Canada, Inc. All intercompany accounts and transactions
have been eliminated.
ACCOUNTING POLICIES AND USE OF ESTIMATES
The preparation of these consolidated and combined financial statements in
conformity with generally accepted accounting principles in the United States
involves estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of income and expense
during the reporting periods. Certain of the Company's accounting policies
require the application of judgment in selecting the appropriate assumptions for
calculating financial estimates. By their nature, these judgments are subject to
an inherent degree of uncertainty. The Company periodically evaluates the
judgments and estimates used in their critical accounting policies to ensure
that such judgments and estimates are reasonable for their interim and year-end
reporting requirements. These judgments are based on the Company's historical
experience, current trends and information available from other sources, as
appropriate. If different conditions result from those assumptions used in the
Company's judgments, the results could be materially different from the
Company's estimates.
INVENTORIES
Inventories in the accompanying consolidated balance sheets are valued at the
lower of cost or market. At April 2, 2005 and December 31, 2004, approximately
$16.4 million and $11.7 million of total inventories, respectively, were valued
on the last-in, first-out method ("LIFO"). Under the first-in, first-out method
("FIFO") of accounting, such inventories would have been approximately $1.2
million higher at April 2, 2005 and December 31, 2004. All other inventories
were valued under the FIFO method. The Company records provisions, as
appropriate, to write-down obsolete and excess inventory to estimated net
realizable value. The process for evaluating obsolete and excess inventory often
requires the Company to make subjective judgments and estimates concerning
future sales levels, quantities and prices at which such inventory will be able
to be sold in the normal course of business. Accelerating the disposal process
or incorrect estimates of future sales potential may cause the actual results to
differ from the estimates at the time such inventory is disposed or sold.
RELATED PARTY TRANSACTIONS
Included in the combined statement of operations in selling, general and
administrative expense are former parent company (Nortek) corporate charges of
approximately $0.3 million for the period from January 1, 2004 to February 11,
2004, related to accounting, legal, insurance, treasury and other management
services
5
provided by Nortek, which have been allocated based upon a combination of the
specific identification method and as a percentage of the Company's net sales to
Nortek's consolidated net sales. In the opinion of the Company's management,
this method of allocating such costs was reasonable. Included in interest
expense is approximately $3.5 million for the period from January 1, 2004 to
February 11, 2004 related to interest owed to a subsidiary which was wholly
owned by Nortek.
Upon completion of the Ply Gem Acquisition, the Company entered into two
advisory agreements with an affiliate of Caxton-Iseman Capital or related
parties, or the "Caxton-Iseman Party", which we refer to as the "Debt Financing
Advisory Agreement" and the "General Advisory Agreement". Under the Debt
Financing Advisory Agreement, we paid the Caxton-Iseman Party a debt financing
arrangement and advisory fee, equal to 2.375% of the aggregate amount of the
debt financing incurred in connection with the Ply Gem Acquisition ($11.4
million), in the first quarter of 2004. Under the General Advisory Agreement,
the Company paid a management fee to the Caxton-Iseman Party of approximately
$0.2 million for the period from January 23, 2004 to April 3, 2004, and
approximately $0.3 million for the period from January 1, 2005 to April 2, 2005.
FOREIGN CURRENCY
The Company's Canadian subsidiary utilizes the Canadian dollar as its functional
currency. For reporting purposes, the Company translates the assets and
liabilities of its foreign entity at the exchange rates in effect at the end of
the reporting periods. Net sales and expenses are translated using average
exchange rates in effect during the periods. Gains and losses from foreign
currency translation are credited or charged to accumulated other comprehensive
income in the accompanying consolidated balance sheets. A gain or loss resulting
from fluctuations in the exchange rate may be recognized due to debt,
denominated in US dollars, recorded by the Company's Canadian subsidiary.
For the period January 1, 2005 to April 2, 2005, the Company recorded a loss
from foreign currency transactions of approximately $0.3 million. As of April 2,
2005, and December 31, 2004 accumulated other comprehensive income included a
currency translation adjustment of approximately $2.4 million and $2.6 million,
respectively.
STOCK OPTIONS
On February 12, 2004, Ply Gem Investment Holdings, Inc.'s Board of Directors
adopted the 2004 Stock Option Plan (the "Plan") providing for grants of up to
140,494 shares of Ply Gem Investment Holdings, Inc.'s common stock under
nonqualified stock options and subsequently increased the grants provided under
the plan up to 184,065 shares on November 30, 2004. Employees of Ply Gem
Investment Holdings, Inc. or any majority-owned subsidiary are eligible for
awards, as specified in the Plan. Ply Gem Investment Holdings, Inc.'s Board of
Directors or Compensation Committee retains the right to select the grantees and
set the term of each award, which may not be more than ten years. Ply Gem
Investment Holdings, Inc.'s Board of Directors also has the power to determine
the terms of the awards granted, including the number of shares subject to each
award and other matters as specified in the Plan agreement. Generally, the
exercise price of an option must be at least the estimated fair market value of
a share as of the grant date. Previously granted awards generally vest over five
years from the date of grant.
For the periods January 23, 2004 through April 3, 2004, and January 1, 2005
through April 2, 2005 , the Company accounted for its stock-based employee
compensation plan under the recognition and measurement principles of APB
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
Interpretations. No stock-based employee compensation cost is reflected in the
statement of operations, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income if the
Company had applied the fair value recognition provisions of SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, to stock-based employee compensation.
6
Ply Gem Ply Gem
Holdings, Inc. Holdings, Inc.
January 23, 2004 - January 1, 2005 -
April 3, 2004 April 2, 2005
------------------ -----------------
(AMOUNTS IN THOUSANDS)
Net income (loss) as reported ........................... $ 59 $ (3,855)
Deduct: Total stock-based employee compensation
expense determined under fair-value method for all
awards, net of tax effects .............................. (86) (8)
--------- ----------
Pro forma net income (loss) ............................. $ (27) $ (3,863)
========= ==========
In connection with the Ply Gem Acquisition, all of the outstanding Class A
Common Stock options issued by Nortek to Ply Gem Industries, Inc. employees were
cancelled.
SALE LEASEBACK
On August 27, 2004, Ply Gem Industries, Inc. entered into a sale and leaseback
transaction with net proceeds of approximately $36.0 million being used to fund
a portion of the acquisition of MWM Holding, Inc. It was the Company's intention
that these leases meet the criteria for a sale leaseback transaction and receive
accounting treatment as operating leases. Following Ply Gem Industries' review,
the original lease agreements were executed and treated as a sale leaseback
transaction and were accounted for as operating leases in the Company's third
quarter 2004 results. After further review in connection with the preparation of
the December 31, 2004 financial statements, the Company concluded that for the
periods from August 27, 2004 through October 2, 2004 (Ply Gem Holdings, Inc.'s
third quarter) and from October 3, 2004 to December 31, 2004 and January 1, 2005
until an amended lease became effective, these leases did not meet the sale
leaseback accounting criteria. The primary discrepancy that was identified in
the leases related to default and exchange provisions contained within the
original leases that resulted in prohibited forms of continuing involvement. The
lease agreement was amended effective March 29, 2005 and as of the end of the
first quarter, April 2, 2005, the assets and financing obligation liability have
been removed from the consolidated balance sheet.
OTHER NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (revised 2004) ("SFAS 123R"),
SHARE-BASED PAYMENT. SFAS 123R establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods and
services or incurs liabilities in exchange for goods or services that are based
on the fair value of the entity's equity instruments or that may be settled by
the issuance of those equity instruments. SFAS 123R requires a public entity to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award and to
recognize that cost over the period during which an employee is required to
provide service in exchange for the award. Due to the Security and Exchange
Commission's delay of the effective date, the Company plans to adopt the
provisions of SFAS 123R for the first quarter of our fiscal year ending December
31, 2006. At this time, we do not anticipate that the adoption of this statement
will have a material effect on our consolidated financial position or results of
operations.
CONCENTRATION OF CREDIT RISK
The accounts receivable balance related to one customer of our siding, fencing,
railing and decking segment was approximately $11.7 million and $9.6 million at
April 2, 2005 and December 31, 2004, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments including cash and
cash equivalents and long-term debt approximates their fair value. The fair
value of the Company's fixed and floating-rate long-term debt was estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities.
7
2. PURCHASE ACCOUNTING
On February 12, 2004, Ply Gem Holdings, Inc. purchased Ply Gem Industries, Inc.
from Nortek, Inc. The Company accounted for the transaction as a purchase in
accordance with the provisions of SFAS No. 141, which results in a new valuation
for the assets and liabilities of Ply Gem Industries, Inc. and its subsidiaries
based upon fair values as of the date of the purchase. The purchase price,
including approximately $4.3 million of value attributed to phantom stock issued
to replace Ply Gem Industries, Inc. employees' forfeited Nortek stock options,
was allocated to the assets and liabilities based on their estimated fair
values.
(IN THOUSANDS)
-----------------
Other current assets, net of cash $ 68,357
Inventories 50,293
Property, plant and equipment 116,626
Trademarks/Tradenames 25,900
Patents 12,000
Customer relationships 16,000
Goodwill 381,723
Other assets 38,661
Current liabilities (55,964)
Assumed indebtedness (29,473)
Other liabilities (71,114)
------------------
Purchase price, net of cash acquired $ 553,009
On August 27, 2004 Ply Gem Industries, Inc. acquired all of the outstanding
shares of capital stock of MWM Holding, Inc. in accordance with a stock purchase
agreement entered into among Ply Gem, MWM Holding, Inc., and the selling
stockholders. The Company accounted for the transaction as a purchase in
accordance with the provisions of SFAS No. 141, which results in a new valuation
for the assets and liabilities of MWM Holding Inc. and its subsidiaries based
upon fair values as of the date of the purchase. The purchase price, including
approximately $2.0 million of value attributed to phantom stock issued to
replace MWM Holding, Inc. employees' forfeited MWM Holding, Inc. stock options,
was allocated to the assets and liabilities based on their estimated fair
values.
(IN THOUSANDS)
-----------------
Other current assets, net of cash $ 22,569
Inventories 14,437
Property, plant and equipment 36,768
Trademarks/Tradenames 32,500
Customer relationships 82,107
Goodwill 199,400
Other assets 14,204
Current liabilities (30,291)
Other liabilities (35,118)
-----------------
Purchase price, net of cash acquired $ 336,576
We have estimated the fair value of our assets and liabilities, as of the MW
Acquisition date, utilizing information available at the time our consolidated
financial statements were prepared. These estimates are subject to refinement
until all pertinent information has been obtained.
8
Unaudited pro forma results of operations for the periods January 1, 2004 to
February 11, 2004 and January 23, 2004 to April 3, 2004 as if both purchases had
occurred at the beginning of the period is as follows:
January 1, 2004 January 23, 2004
to to
February 11, 2004 April 3, 2004
----------------- ----------------
(Amounts in thousands)
Net sales $ 67,757 $ 107,227
Net loss (3,187) (1,926)
3. INTANGIBLE ASSETS, GOODWILL AND OTHER LONG-LIVED ASSETS
The table that follows presents the major components of intangible assets as of
April 2, 2005 and December 31, 2004:
Average
Amortization
Period Accumulated Net Carrying
(i Years) Cost Amortization Value
---------- --------- ------------ ------------
(AMOUNTS IN THOUSANDS)
AS OF APRIL 2, 2005:
Patents 13 $ 12,000 $ (1,060) $ 10,940
Trademarks/Tradenames 15 25,900 (1,993) 23,907
Customer relationships 15 98,000 (5,131) 92,869
--------- --------- ---------
Total intangible assets $ 135,900 $ (8,184) $ 127,716
========= ========= =========
Intangible with indefinite lives:
Trademarks $ 32,500 $ -- $ 32,500
========= ========= =========
AS OF DECEMBER 31, 2004:
Patents 13 $ 12,000 $ (834) $ 11,166
Trademarks/Tradenames 15 25,900 (1,574) 24,326
Customer relationships 15 98,000 (3,335) 94,665
--------- --------- ---------
Total intangible assets $ 135,900 $ (5,743) $ 130,157
========= ========= =========
Intangible with indefinite lives:
Trademarks $ 32,500 $ -- $ 32,500
========= ========= =========
Amortization expense for the periods from January 1, 2005 to April 2, 2005 and
from January 1, 2004 to February 11, 2004 and January 23, 2004 to April 3, 2004
was approximately $2.4 million, $0.2 million, and $0.4 million, respectively.
Amortization expense for the remainder of 2005, and for the five succeeding
fiscal years is estimated to be approximately $7.3 million, $9.8 million, $9.8
million, $9.8 million, $9.8 million, and $9.8 million, respectively.
9
4. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is comprised of the following:
January 1, 2004 January 23, 2004 January 1, 2005
to to to
February 11, 2004 April 3, 2004 April 2, 2005
----------------- ----------------- ---------------
(AMOUNTS IN THOUSANDS)
Net income (loss) $ (3,350) $ 59 $ (3,855)
Foreign currency translation adjustment (375) (9) (150)
---------- ---------- ---------
Comprehensive income (loss) $ (3,725) $ 50 $ (4,005)
========== ========== =========
5. LONG-TERM DEBT
Long-term debt in the accompanying consolidated and combined balance sheets at
December 31, 2004 and April 2, 2005 consists of the following:
December 31, 2004 April 2, 2005
----------------- -------------
(AMOUNTS IN THOUSANDS)
Senior term loan facility $ 304,501 $ 303,651
Senior revolver credit facility -- 35,500
Senior subordinated notes 360,321 360,310
Asset financing obligation 35,769 --
Other borrowings 7,000 7,000
---------- ----------
707,591 706,461
Less current maturities 2,784 1,947
---------- ----------
$ 704,807 $ 704,514
========== ==========
The Company's senior credit facility with a syndicate of financial institutions
and institutional lenders provides for senior secured financing of up to $381.0
million, consisting of $311.0 million of term loan facilities with a maturity of
seven years after the original date of the credit agreement (February 12, 2004)
and a $70.0 million revolving loan facility, including a letter of credit
subfacility, with a maturity of five years. The term loan facility was drawn in
full in connection with the consummation of the Ply Gem and MW Acquisitions. The
term loan facilities have three tranches, originally consisting of: 1) a $170.0
million tranche under which Ply Gem Industries, Inc. is the borrower, 2) a $30.0
million tranche under which our Canadian subsidiary, CWD Windows and Doors,
Inc., is the borrower, and 3) a $111.0 million tranche under which Ply Gem
Industries, Inc. is the borrower, which was added to the facility August 27,
2004, as a result of the financing for the MW acquisition.
During December 2004 we repaid the entire amount of $18.0 million which was
borrowed under the revolving credit facility and at December 31, 2004 had
approximately $57.1 million available borrowing capacity. Also, during December
2004 we prepaid $5.0 million of the $30.0 million tranche under which our
Canadian subsidiary, CWD Windows and Doors, Inc., is the borrower. During the
first quarter of 2005 we borrowed $35.5 million under the revolving credit
facility and as of April 2, 2005, we had $25.7 million of availability under our
revolving credit facility.
The interest rates applicable to loans under our new senior credit facilities
will be, at our option, equal to either a base rate plus an applicable interest
margin, or an adjusted LIBOR rate plus an applicable interest margin, as defined
in the senior credit facility agreement. Our rates at April 2, 2005 ranged from
5.18% to 5.60%.
Our senior credit facilities (following amendments) require scheduled quarterly
payments on the term loan facilities of approximately $0.5 million beginning in
the quarter ended July 3, 2004 and for the next 23
10
calendar quarters thereafter, and payments of $45.8 million on June 30, 2010,
September 30, 2010, and December 30, 2010 and $156.6 million on the maturity
date, allocated pro rata between the three tranches.
The indebtedness of the U.S. borrower (Ply Gem Industries, Inc.) under our
senior credit facilities is guaranteed by Ply Gem Holdings, Inc., and all of our
existing and future direct and indirect subsidiaries, subject to exceptions for
foreign subsidiary guarantees of the U.S. borrower's obligations to the extent
such guarantees are prohibited by applicable law or would result in materially
adverse tax consequences and other exceptions. The indebtedness of the Canadian
borrower under our senior credit facilities is guaranteed by Ply Gem Holdings,
Inc., the U.S. borrower and all of the Canadian borrower's future direct and
indirect subsidiaries and is effectively guaranteed by all subsidiaries
guaranteeing the U.S. borrower's obligations under our senior credit facilities.
All indebtedness under our senior credit facilities is secured, subject to
certain exceptions, by a perfected first priority pledge of all of our equity
interests and those of our direct and indirect subsidiaries, and, subject to
certain exceptions, perfected first priority security interests in, and
mortgages on, all tangible and intangible assets; provided that all tangible and
intangible assets of the Canadian borrower and its subsidiaries are pledged to
secure debt only of the Canadian borrower.
Our senior credit facilities require that we comply on a quarterly basis with
certain financial covenants, including a minimum interest coverage ratio test, a
maximum leverage ratio test and a maximum capital expenditures level. Our
covenants also restrict the payment of dividends, with certain exceptions,
without the lenders consent in writing.
Concurrently with the Ply Gem Acquisition, Ply Gem Industries, Inc. issued
$225.0 million aggregate principal amount of our 9% senior subordinated notes
due 2012, which are guaranteed by Ply Gem Holdings Inc. and the domestic
subsidiaries of Ply Gem Industries, Inc. Subsequently, in connection with the MW
Acquisition, Ply Gem Industries, Inc. issued an additional $135.0 million of our
9% senior subordinated notes due 2012, which are guaranteed by Ply Gem Holdings
Inc. and the domestic subsidiaries of Ply Gem Industries, Inc.
Ply Gem Holdings, Inc. is a holding company and has no operations. Under the
terms of the indenture governing the 9% notes, there are restrictions on the
ability of Ply Gem Industries, Inc. to dividend or distribute cash or property
to Ply Gem Holdings. Inc.
To fund a portion of the acquisition of MWM Holding, Inc. on August 27, 2004,
Ply Gem Industries, Inc. entered into a sale and leaseback transaction with net
proceeds of approximately $36.0 million. Due to certain default and exchange
provisions in these leases, sale/leaseback treatment was not achieved, resulting
in violations to our senior credit facilities. The Company requested and
received a waiver from its lenders as it related to our lease agreements in that
these leases would not constitute indebtedness under Ply Gem's credit agreement
for the restriction on indebtedness covenant and any lien in connection with
such leases would not constitute liens for the purposes of the restriction on
liens covenant through April 30, 2005 and only so long as these leases did not
represent more than an aggregate of $36.0 million of financing obligations. At
December 31, 2004 the Company included on its balance sheet an asset financing
obligation of approximately $35.8 million. The lease agreement was amended
effective March 29, 2005 and as of the end of the first quarter, April 2, 2005,
the financing obligation liability and corresponding assets have been removed
from the balance sheet.
The table that follows is a summary of maturities of all of the Company's
long-term debt obligations due in each twelve month period after April 2, 2005:
(AMOUNTS IN THOUSANDS)
2005 $ 1,947
2006 1,947
2007 1,947
2008 1,947
2009 1,947
Thereafter 696,726
----------
$ 706,461
==========
11
At April 2, 2005, approximately $8.8 million of letters of credit have been
issued under our senior credit facility for the purposes of: i) approximately
$7.7 million as additional security for an industrial revenue bond outstanding
(included in other borrowings in the long-term debt table above) and ii)
approximately $1.1 million to support our workers compensation plan at one of
our subsidiaries. Further, approximately $3.2 million of letters of credit were
issued apart from the senior credit facility to secure certain environmental
obligations.
6. COMMITMENTS AND CONTINGENCIES
In connection with the Ply Gem Acquisition, Nortek has agreed to indemnify the
Company for certain liabilities as set forth in the Purchase Agreement. In the
event Nortek is unable to satisfy amounts due under these indemnifications then
the Company would be liable. The Company believes that Nortek has the financial
capacity to honor its indemnification obligations and therefore does not
anticipate incurring any losses related to liabilities indemnified by Nortek
under the Purchase Agreement. A receivable related to this indemnification has
been recorded in other long-term assets in the approximate amount of $9.8
million.
The Company has indemnified third parties in certain transactions involving
dispositions of former subsidiaries. As of December 31, 2004 and April 2, 2005,
the Company has recorded liabilities in relation to these indemnifications of
approximately $13.2 million and $8.8 million, respectively, consisting of the
following:
(Amounts in thousands)
2004 2005
------- -------
Product claim liabilities $ 3,813 $ 3,812
Long-term lease liabilities 5,152 847
Multiemployer pension plan withdrawal liability 4,187 4,147
------- -------
$13,152 $ 8,806
======= =======
The product claim liabilities of approximately $3.8 million at December 31, 2004
and April 2, 2005, represented the estimated costs to resolve the outstanding
matters related to a former subsidiary of the Company, which is a defendant in a
number of lawsuits alleging damage caused by alleged defects in certain pressure
treated wood products. The Company had indemnified the buyer of the former
subsidiary for all known liabilities and future claims relating to such matters
and retained the rights to all potential reimbursements related to insurance
coverage. Many of the suits have been resolved by dismissal or settlement with
amounts being paid out of insurance proceeds or other third party recoveries.
The Company and the former subsidiary continue to vigorously defend the
remaining suits. Certain defense and indemnity costs are being paid out of
insurance proceeds and proceeds from a settlement with suppliers of material
used in the production of the treated wood products. The Company and the former
subsidiary have engaged in coverage litigation with certain insurers and have
settled coverage claims with several of the insurers. On February 12, 2004, in
conjunction with the Ply Gem Acquisition, Nortek and the Company executed a
Novation Agreement, removing the Company as the primary obligor.
The long-term lease liabilities of approximately $5.2 million and $0.8 million
at December 31, 2004 and April 2, 2005, respectively, relate to the estimated
amounts to be paid, net of any estimated recoveries where subleases are in
place, primarily in connection with various facility leases where the Company
has retained the liability for the lease agreement in connection with the sale
of certain former subsidiaries that utilized the facilities. Accrued costs
include base rent, additional rent for consumer price index increases as defined
in the leases, taxes, utilities, insurance, repairs and maintenance and, if
applicable, the estimated settlement costs to terminate the leases prior to the
end of their scheduled term. The Company has recorded all long-term lease
liabilities at the undiscounted gross amount expected to be paid to settle the
liabilities in the future.
The multi employer pension liability of approximately $4.2 million and $4.1
million at December 31, 2004 and April 2, 2005, respectively, relates to
liabilities assumed by the Company in 1998 when its former subsidiary, Studley
Products, Inc. ("Studley") was sold. In connection with the sale, Studley ceased
making contributions to the Production Service and Sales District Council
Pension Fund (the "Pension
12
Fund") and the Company assumed responsibility for all withdrawal liabilities to
be assessed by the Pension Fund. Accordingly, the Company is making quarterly
payments of approximately $0.1 million to the Pension Fund through 2018 based
upon the assessment of withdrawal liability received from the Pension Fund. The
multiemployer pension liability represents the present value of the quarterly
payment stream using a 6% discount rate as well as an estimate of additional
amounts that may be assessed in the future by the Pension Fund under the
contractual provisions of the Pension Fund. The Company sells a number of
products and offers a number of warranties. The specific terms and conditions of
these warranties vary depending on the product sold and country in which the
product is sold. The Company estimates the costs that may be incurred under
their warranties and records a liability for such costs at the time of sale.
Factors that affect the Company's warranty liabilities include the number of
units sold, historical and anticipated rates of warranty claims, cost per claim
and new product introduction. The Company periodically assesses the adequacy of
the recorded warranty claims and adjusts the amounts as necessary.
Changes in the Company's warranty liabilities are as follows:
January 1, 2004 January 23, 2004 January 1, 2005
to to to
February 11, 2004 April 3, 2004 April 2, 2005
----------------- ----------------- ---------------
(AMOUNTS IN THOUSANDS)
BALANCE, BEGINNING OF PERIOD $ 9,499 $ 9,491 $ 11,095
Warranty expense provided during period 330 713 552
Settlements made during period (338) (538) (704)
-------- -------- --------
BALANCE, END OF PERIOD $ 9,491 $ 9,666 $ 10,943
======== ======== ========
The Company is subject to other contingencies, including legal proceedings and
claims arising out of its businesses that cover a wide range of matters,
including, among others, environmental matters, contract and employment claims,
product liability, warranty and modification, adjustment or replacement of
component parts of units sold, which may include product recalls. Product
liability, environmental and other legal proceedings also include matters with
respect to businesses previously owned. The Company has used various substances
in their products and manufacturing operations, which have been or may be deemed
to be hazardous or dangerous, and the extent of its potential liability, if any,
under environmental, product liability and workers' compensation statutes,
rules, regulations and case law is unclear. Further, due to the lack of adequate
information and the potential impact of present regulations and any future
regulations, there are certain circumstances in which no range of potential
exposure may be reasonably estimated.
As of April 2, 2005, the Company has accrued approximately $0.8 million to cover
the estimated costs of known litigation claims, including the estimated cost of
legal services, that the Company is contesting including certain employment and
former shareholder litigation related to the Company.
It is impossible to ascertain the ultimate legal and financial liability with
respect to contingent liabilities, including lawsuits, and therefore no such
estimate has been made.
13
7. ACCRUED EXPENSES AND TAXES, NET AND OTHER LONG-TERM LIABILITIES
Accrued expenses and taxes, net, consist of the following at December 31, 2004
and April 2, 2005:
December 31, 2004 April 2, 2005
----------------- -------------
(AMOUNTS IN THOUSANDS)
Insurance $ 4,460 $ 5,258
Employee compensation and benefits 12,730 11,332
Sales and marketing 14,396 7,795
Product warranty 4,040 3,734
Short-term product claim liability 2,321 2,321
Interest 12,134 4,609
Other, net 11,863 6,444
--------- ---------
$ 61,944 $ 41,493
========= =========
Other long-term liabilities consist of the following at December 31, 2004 and
April 2, 2005:
December 31, 2004 April 2, 2005
----------------- -------------
(AMOUNTS IN THOUSANDS)
Insurance $ 3,597 $ 3,635
Pension liabilities 14,454 14,199
Product warranty 7,055 7,209
Long-term lease liabilities 5,152 847
Long-term product claim liability 1,492 1,491
Other 651 1,066
---------- ---------
$ 32,401 $ 28,447
========== =========
8. SEGMENT INFORMATION
Statement of Financial Accounting Standards No. 131, "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION" (SFAS 131) requires companies to
report certain information about operating segments in their financial
statements and established standards for related disclosures about products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by management in deciding
how to allocate resources and in assessing performance. Operating segments
meeting certain aggregation criteria may be combined into one reportable segment
for disclosure purposes. Comparative information for prior years is presented to
conform to our current organizational structure.
The Company has two reportable segments: 1) vinyl siding, fencing, railing, and
decking and 2) windows and doors.
The income (loss) from continuing operations before income taxes of each segment
includes the revenue generated on transactions involving products within that
segment less identifiable expenses. Unallocated income and expenses include
items which are not directly attributed to or allocated to either of our
reporting segments. Such items include interest, legal costs, corporate payroll,
and unallocated finance and accounting expenses. Unallocated corporate assets
include cash and receivables.
14
Following is a summary of the Company's segment information.
FOR THE PERIOD FROM
JANUARY 1, 2005 TO
APRIL 2, 2005
(AMOUNTS IN THOUSANDS)
Siding, Fencing,
Railing and Windows
Decking and Doors Unallocated Consolidated
---------------- ---------- ----------- ------------
Net sales $ 78,848 $ 92,887 $ -- $ 171,735
Income (loss) before income taxes 3,358 4,811 (14,509) (6,340)
Total assets 491,721 530,446 65,428 1,087,595
FOR THE PERIOD FROM
JANUARY 1, 2004 TO
FEBRUARY 11, 2004
(AMOUNTS IN THOUSANDS)
Siding, Fencing,
Railing and Windows
Decking and Doors Unallocated Consolidated
---------------- ---------- ----------- ------------
Net sales $ 29,546 $ 11,066 $ -- $ 40,612
Loss before income taxes (3,010) (1,537) (653) (5,200)
Total assets 487,676 51,881 (45,943) 493,614
FOR THE PERIOD FROM
JANUARY 23, 2004 TO
APRIL 3, 2004
(AMOUNTS IN THOUSANDS)
Siding, Fencing,
Railing and Windows
Decking and Doors Unallocated Consolidated
---------------- ---------- ----------- ------------
Net sales $ 53,729 $ 19,021 $ -- $ 72,750
Income (loss) before income taxes 4,398 1,400 (5,650) 148
Total assets 532,640 149,384 48,602 730,626
15
9. GUARANTOR/NON-GUARANTOR
In connection with the financing of the Ply Gem Acquisition, Ply Gem Industries,
Inc. sold $225 million of its 9% Senior Subordinated Notes due 2012 (the
"Notes") and entered into $255 million of new senior credit facilities. As a
result of the MW Acquisition, an additional $135 million of Notes were issued,
and the size of the credit facilities was increased by $126 million. The Notes
are secured by full and unconditional guarantees on a joint and several basis
from certain of the Company's 100% owned subsidiaries. Accordingly, the
following guarantor and non-guarantor information is presented as of April 2,
2005 and for the periods from January 1, 2005 to April 2, 2005, January 1, 2004
to February 11, 2004, and January 23, 2004 to April 3, 2004. The non-guarantor
information presented represents our Canadian subsidiary.
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2005 TO APRIL 2, 2005
Guarantor Issuer Non-
Ply Gem Ply Gem Guarantor Guarantor
Holdings, Inc. Industries, Inc. Subsidiaries Subsidiary Eliminations Consolidated
-------------- ---------------- ------------ ---------- ------------ ------------
(Amounts in thousands)
Net Sales ........................ $ -- $ -- $ 161,136 $ 10,599 $ -- $ 171,735
Cost and Expenses:
Cost of products sold ............ -- -- 130,050 7,716 -- 137,766
Selling, general and
administrative expense ........ -- 1,294 19,393 2,355 -- 23,042
Intercompany administrative
charges ....................... -- (6,448) 6,448 -- -- --
Amortization of intangible
assets ........................ -- -- 2,440 -- -- 2,440
---------- ---------- --------- ---------- --------- ----------
-- (5,154) 158,331 10,071 -- 163,248
---------- ---------- --------- ---------- --------- ----------
Operating earnings ............... -- 5,154 2,805 528 -- 8,487
Foreign currency loss ............ -- -- -- (304) -- (304)
Interest expense ................. -- (13,181) (859) (562) -- (14,602)
Investment income ................ -- 25 51 3 -- 79
---------- ---------- --------- ---------- --------- ----------
Income before equity in
subsidiaries' income (loss).... -- (8,002) 1,997 (335) -- (6,340)
Equity in subsidiaries'
income (loss) ................. (3,855) 946 -- -- 2,909 --
---------- ---------- --------- ---------- --------- ----------
Income before provision
for income taxes .............. (3,855) (7,056) 1,997 (335) 2,909 (6,340)
Provision (benefit) for
income taxes .................. -- (3,201) 840 (124) -- (2,485)
---------- ---------- --------- ---------- --------- ----------
Net income (loss) ................ $ (3,855) $ (3,855) $ 1,157 $ (211) $ 2,909 $ (3,855)
========== ========== ========= ========== ========= ==========
16
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2004 TO FEBRUARY 11, 2004
Issuer Non-
Ply Gem Guarantor Guarantor
Industries, Inc. Subsidiaries Subsidiary Eliminations Combined
---------------- ------------ ---------- ------------ --------
(Amounts in thousands)
Net Sales ............................... $ -- $ 37,187 $ 3,425 $ -- $ 40,612
Cost and Expenses:
Cost of products sold ................... -- 30,991 2,620 -- 33,611
Selling, general and
administrative expense ............... 561 6,552 1,232 -- 8,345
Intercompany administrative
charges .............................. (3,166) 3,166 -- -- --
Amortization of intangible assets ....... -- 201 -- -- 201
--------- --------- --------- -------- ---------
(2,605) 40,910 3,852 -- 42,157
--------- --------- --------- -------- ---------
Operating earnings (loss) ............... 2,605 (3,723) (427) -- (1,545)
Interest expense ........................ (39) (3,645) -- -- (3,684)
Investment income ....................... -- 18 11 -- 29
--------- --------- --------- -------- ---------
Income (loss) before equity in
subsidiaries' loss ................... 2,566 (7,350) (416) -- (5,200)
Equity in subsidiaries' loss ............ (5,667) -- -- 5,667 --
--------- --------- --------- -------- ---------
Loss before benefit for income
taxes ................................ (3,101) (7,350) (416) 5,667 (5,200)
Benefit for income taxes ................ -- (1,683) (167) -- (1,850)
--------- --------- --------- -------- ---------
Net loss ................................ $ (3,101) $ (5,667) $ (249) $ 5,667 $ (3,350)
========= ========= ========= ======== =========
17
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 23, 2004 TO APRIL 3, 2004
Guarantor Issuer Non-
Ply Gem Ply Gem Guarantor Guarantor
Holdings, Inc. Industries, Inc. Subsidiaries Subsidiary Eliminations Consolidated
-------------- ---------------- ------------ ---------- ------------ ------------
(Amounts in thousands)
Net Sales ....................... $ -- $ -- $ 67,031 $ 5,719 $ -- $ 72,750
Cost and Expenses:
Cost of products sold ........... -- -- 53,813 4,056 -- 57,869
Selling, general and
administrative expense ....... -- 631 7,637 1,036 -- 9,304
Intercompany
administrative charges ....... -- (80) 82 (2) -- --
Amortization of intangible
assets ....................... -- -- 401 -- -- 401
-------- -------- -------- -------- --------- --------
-- 551 61,933 5,090 -- 67,574
-------- -------- -------- -------- --------- --------
Operating earnings .............. -- (551) 5,098 629 -- 5,176
Interest expense ................ -- (4,752) (265) -- -- (5,017)
Investment income ............... -- -- (11) -- -- (11)
-------- -------- -------- -------- --------- --------
Income before equity in
subsidiaries' income ......... -- (5,303) 4,822 629 -- 148
Equity in subsidiaries'
income ....................... 59 3,241 -- -- (3,300) --
-------- -------- -------- -------- --------- --------
Income before provision
for income taxes ............. 59 (2,062) 4,822 629 (3,300) 148
Provision (benefit) for
income taxes ................. -- (2,121) 1,959 251 -- 89
-------- -------- -------- -------- --------- --------
Net income ...................... $ 59 $ 59 $ 2,863 $ 378 $ (3,300) $ 59
======== ======== ======== ======== ========= ========
18
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 2, 2005
Guarantor Issuer Non-
Ply Gem Ply Gem Guarantor Guarantor
Holdings, Inc. Industries, Inc. Subsidiaries Subsidiary Eliminations Consolidated
-------------- ---------------- ------------ ---------- ------------ ------------
(Amounts in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........ $ -- $ 8,584 $ 8,687 $ 1,210 $ -- $ 18,481
Accounts receivable, net ......... -- -- 66,136 5,580 -- 71,716
Inventories:
Raw materials ................. -- -- 34,455 3,012 -- 37,467
Work in process ............... -- -- 3,657 998 -- 4,655
Finished goods ................ -- -- 26,627 1,532 -- 28,159
----------- ----------- ----------- ----------- ------------ -----------
Total inventory ............... -- -- 64,739 5,542 -- 70,281
Prepaid expenses and other
current assets ................ -- 3,521 7,780 516 -- 11,817
Deferred income taxes ............ -- -- 18,356 -- -- 18,356
----------- ----------- ----------- ----------- ------------ -----------
Total current assets ....... -- 12,105 165,698 12,848 -- 190,651
Investments in subsidiaries ...... 191,401 822,615 -- -- (1,014,016) --
PROPERTY AND EQUIPMENT, AT COST:
Land ............................. -- -- 1,870 144 -- 2,014
Buildings and improvements ....... -- -- 14,691 525 -- 15,216
Machinery and equipment .......... -- 164 105,162 2,284 -- 107,610
----------- ----------- ----------- ----------- ------------ -----------
-- 164 121,723 2,953 -- 124,840
Less accumulated depreciation .... -- (20) (14,429) (447) -- (14,896)
----------- ----------- ----------- ----------- ------------ -----------
Total property and
equipment, net ................... -- 144 107,294 2,506 -- 109,944
----------- ----------- ----------- ----------- ------------ -----------
OTHER ASSETS:
Goodwill ......................... -- -- 547,021 37,451 -- 584,472
Intangible assets, net ........... -- -- 160,216 -- -- 160,216
Intercompany note receivable ..... -- 11,746 -- -- (11,746) --
Other ............................ -- 42,292 20 -- -- 42,312
----------- ----------- ----------- ----------- ------------ -----------
Total other assets ............ -- 54,038 707,257 37,451 (11,746) 787,000
----------- ----------- ----------- ----------- ------------ -----------
$ 191,401 $ 888,902 $ 980,249 $ 52,805 $(1,025,762) $ 1,087,595
=========== =========== =========== =========== ============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt ................ $ -- $ 1,698 -- $ 249 $ -- $ 1,947
Accounts payable ................. -- -- 45,279 2,434 -- 47,713
Accrued expenses and taxes ....... -- 9,126 31,292 1,075 -- 41,493
----------- ----------- ----------- ----------- ------------ -----------
Total current liabilities .... -- 10,824 76,571 3,758 -- 91,153
Deferred income taxes ............ -- -- 71,236 844 -- 72,080
Intercompany note payable ........ -- -- -- 11,746 (11,746) --
Other long term liabilities ...... -- 13,612 13,944 891 -- 28,447
Long-term debt, less current
maturities .................... -- 673,065 7,000 24,449 -- 704,514
STOCKHOLDER'S EQUITY:
Preferred stock .................. -- -- -- -- -- --
Common stock ..................... -- -- -- -- -- --
Additional paid-in-capital ....... 175,427 175,427 780,974 3,677 (960,078) 175,427
Retained earnings ................ 13,826 13,826 30,784 5,032 (49,642) 13,826
Accumulated other
comprehensive income (loss) ... 2,148 2,148 (260) 2,408 (4,296) 2,148
----------- ----------- ----------- ----------- ------------ -----------
$ 191,401 $ 888,902 $ 980,249 $ 52,805 $(1,025,762) $ 1,087,595
=========== =========== =========== =========== ============ ===========
19
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2004
Guarantor Issuer Non-
Ply Gem Ply Gem Guarantor Guarantor
Holdings, Inc. Industries, Inc. Subsidiaries Subsidiary Eliminations Consolidated
-------------- ---------------- ------------ ---------- ------------ ------------
(Amounts in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......... $ -- $ 1,923 $ 3,483 $ 1,388 $ -- $ 6,794
Accounts receivable, net ........... -- -- 59,855 5,362 -- 65,217
Inventories:
Raw materials ................... -- -- 27,555 2,950 -- 30,505
Work in process ................. -- -- 3,389 871 -- 4,260
Finished goods .................. -- -- 25,186 1,545 -- 26,731
----------- ----------- ----------- ----------- ------------ -----------
Total inventory ................. -- -- 56,130 5,366 -- 61,496
Prepaid expenses and other
current assets .................. -- 1,004 8,169 623 -- 9,796
Deferred income taxes .............. -- -- 18,356 -- -- 18,356
----------- ----------- ----------- ----------- ------------ -----------
Total current assets ......... -- 2,927 145,993 12,739 -- 161,659
Investments in subsidiaries ........ 195,407 810,462 -- -- (1,005,869) --
PROPERTY AND EQUIPMENT, AT COST:
Land ............................... -- -- 4,908 2,349 -- 7,257
Buildings and improvements ......... -- -- 42,648 3,843 -- 46,491
Machinery and equipment ............ -- 158 102,738 2,266 -- 105,162
----------- ----------- ----------- ----------- ------------ -----------
-- 158 150,294 8,458 -- 158,910
Less accumulated depreciation ...... -- (15) (11,372) (487) -- (11,874)
----------- ----------- ----------- ----------- ------------ -----------
Total property and equipment,
net ................................ -- 143 138,922 7,971 -- 147,036
----------- ----------- ----------- ----------- ------------ -----------
OTHER ASSETS:
Goodwill ........................... -- -- 541,730 43,420 -- 585,150
Intangible assets, net ............. -- -- 162,657 -- -- 162,657
Intercompany note receivable ....... -- 9,346 -- -- (9,346) --
Other .............................. -- 47,669 128 -- -- 47,797
----------- ----------- ----------- ----------- ------------ -----------
Total other assets .............. -- 57,015 704,515 43,420 (9,346) 795,604
----------- ----------- ----------- ----------- ------------ -----------
$ 195,407 $ 870,547 $ 989,430 $ 64,130 $(1,015,215) $ 1,104,299
=========== =========== =========== =========== ============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt ..................... $ -- $ 1,700 $ 834 $ 250 $ -- $ 2,784
Accounts payable ................... -- -- 32,885 1,715 -- 34,600
Accrued expenses and taxes ......... -- 17,125 40,232 4,587 -- 61,944
----------- ----------- ----------- ----------- ------------ -----------
Total current liabilities ...... -- 18,825 73,951 6,552 -- 99,328
Deferred income taxes .............. -- -- 71,463 893 -- 72,356
Intercompany note payable .......... -- -- -- 9,346 (9,346) --
Other long term liabilities ........ -- 17,969 13,531 901 -- 32,401
Long-term debt, less current
maturities ...................... -- 638,346 36,515 29,946 -- 704,807
STOCKHOLDER'S EQUITY:
Preferred stock .................... -- -- -- -- -- --
Common stock ....................... -- -- -- -- -- --
Additional paid-in-capital ......... 175,427 175,427 767,338 9,205 (951,970) 175,427
Retained earnings .................. 17,682 17,682 26,892 4,729 (49,303) 17,682
Accumulated other
comprehensive income (loss) ..... 2,298 2,298 (260) 2,558 (4,596) 2,298
----------- ----------- ----------- ----------- ------------ -----------
$ 195,407 $ 870,547 $ 989,430 $ 64,130 $(1,015,215) $ 1,104,299
=========== =========== =========== =========== ============ ===========
20
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2005 TO APRIL 2, 2005
Guarantor Issuer Non-
Ply Gem Ply Gem Guarantor Guarantor
Holdings, Inc. Industries, Inc. Subsidiaries Subsidiary Eliminations Consolidated
-------------- ---------------- ------------ ---------- ------------ ------------
(Amounts in thousands)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) .................... $ (3,855) $ (3,855) $ 3,892 $ 255 $ (292) $ (3,855)
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
Depreciation and amortization
expense .......................... -- 5 6,503 110 -- 6,618
Non-cash interest expense, net ....... -- 1,188 -- -- -- 1,188
Loss on foreign currency
transaction ...................... -- -- -- 304 -- 304
Deferred income taxes ................ -- -- 49 (39) -- 10
Equity in subsidiaries' net income ... 3,855 (4,147) -- -- 292 --
CHANGES IN OPERATING
ASSETS AND LIABILITIES:
Accounts receivable, net ............. -- -- (6,281) (267) -- (6,548)
Inventories .......................... -- -- (8,609) (228) -- (8,837)
Prepaid expenses and other
current assets .................... -- (2,767) 795 (175) -- (2,147)
Accounts payable ..................... -- -- 12,400 713 -- 13,113
Accrued expenses and taxes ........... -- (8,048) (8,944) (3,377) -- (20,369)
Other ................................ -- (8,038) 7,937 265 -- 164
-------- -------- -------- -------- -------- --------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES ............. -- (25,662) 7,742 (2,439) -- (20,359)
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Capital expenditures ................. -- (6) (2,475) (45) -- (2,526)
-------- -------- -------- -------- -------- --------
NET CASH USED IN INVESTING
ACTIVITIES ................... -- (6) (2,475) (45) -- (2,526)
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Proceeds from long-term debt ......... -- 35,500 -- -- -- 35,500
Proceeds from intercompany
investment ........................ -- (2,400) -- 2,400 -- --
Payments on long-term debt ........... -- (771) (63) (75) -- (909)
-------- -------- -------- -------- -------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES ................. -- 32,329 (63) 2,325 -- 34,591
-------- -------- -------- -------- -------- --------
Impact of exchange rate movement
on cash ........................... -- -- -- (19) -- (19)
Net increase (decrease) in cash
and cash equivalents .............. -- 6,661 5,204 (178) -- 11,687
Cash and cash equivalents at the
beginning of the period ........... -- 1,923 3,483 1,388 -- 6,794
-------- -------- -------- -------- -------- --------
Cash and cash equivalents at the
end of the period ................. $ -- $ 8,584 $ 8,687 $ 1,210 $ -- $ 18,481
======== ======== ======== ======== ======== ========
21
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
COMBINING STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2004 TO FEBRUARY 11, 2004
Issuer Non-
Ply Gem Guarantor Guarantor
Industries, Inc. Subsidiaries Subsidiary Eliminations Combined
---------------- ------------ ---------- ------------ --------
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................ $ (3,101) $ (5,667) $ (249) $ 5,667 $ (3,350)
ADJUSTMENTS TO RECONCILE NET LOSS TO
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Depreciation and amortization
expense............................. 39 1,243 91 -- 1,373
Non-cash interest expense, net.......... -- 26 -- -- 26
Deferred income taxes................... (5,630) 3,920 -- -- (1,710)
Equity in subsidiaries.................. 5,667 -- -- (5,667) --
CHANGES IN OPERATING
ASSETS AND LIABILITIES:
Accounts receivable, net................ -- 546 1,323 -- 1,869
Inventories............................. -- (2,742) (482) -- (3,224)
Prepaid expenses and other
current assets....................... (45) (185) (30) -- (260)
Accounts payable........................ (27) 8,194 (402) -- 7,765
Accrued expenses and taxes.............. (820) 1,287 (1,806) -- (1,339)
Other................................... -- 498 -- -- 498
--------- --------- ------- ----------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (3,917) 7,120 (1,555) -- 1,648
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital expenditures.................... -- (702) (16) -- (718)
Change in restricted cash............... -- 1,118 -- -- 1,118
Other................................... -- 1 (6) -- (5)
--------- --------- ------- ----------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES -- 417 (22) -- 395
CASH FLOWS USED IN FINANCING
ACTIVITIES:
Payments on long-term debt.............. (35) (54) -- -- (89)
Net transfers to Nortek, Inc............ -- (7,286) (76) -- (7,362)
--------- --------- ------- ----------- ---------
NET CASH USED IN FINANCING
ACTIVITIES (35) (7,340) (76) -- (7,451)
Net increase (decrease) in cash and
cash equivalents..................... (3,952) 197 (1,653) -- (5,408)
Cash and cash equivalents at the
beginning of the period.............. 3,851 2,255 2,411 -- 8,517
--------- --------- ------- ----------- ---------
Cash and cash equivalents at the end
of the period........................... $ (101) $ 2,452 $ 758 $ -- $ 3,109
========= ========= ======= =========== =========
22
PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 23, 2004 TO APRIL 3, 2004
Guarantor Issuer
Ply Gem Ply Gem Non-
Holdings, Industries, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiary Eliminations Consolidated
--------- ----------- ------------- ----------- ------------ ------------
(Amounts in thousands)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income......................... $ 59 $ 59 $ 4,984 $ 378 $ (5,421) $ 59
ADJUSTMENTS TO RECONCILE NET
INCOME TO CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES: Depreciation
and amortization expense....... -- 5 1,627 104 -- 1,736
Write off of inventory -- -- 1,934 -- -- 1,934
Non-cash interest expense, net -- 71 -- -- -- 71
Equity in subsidiaries' net income (59) (5,362) -- -- 5,421 --
CHANGES IN OPERATING
ASSETS AND LIABILITIES:
Accounts receivable, net........... -- -- (14,600) (730) -- (15,330)
Inventories........................ -- -- 298 301 -- 599
Prepaid expenses and other
current assets.................. -- (1,057) 378 34 -- (645)
Accounts payable................... -- 955 6,177 1,044 -- 8,176
Accrued expenses and taxes......... -- 3,620 (7,745) 478 -- (3,647)
Other.............................. -- 2,154 2,380 7 -- 4,541
--------- ----------- ------------- ----------- ----------- ------------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES -- 445 (4,567) 1,616 -- (2,506)
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Capital expenditures............... -- (51) (969) (37) -- (1,057)
Change in restricted cash.......... -- -- (4,570) -- -- (4,570)
Payment for acquisitions, net of
cash acquired................... -- (550,866) -- -- -- (550,866)
Other ............................. -- -- 435 24 -- 459
--------- ----------- ------------- ----------- ----------- ------------
NET CASH USED IN INVESTING
ACTIVITIES -- (550,917) (5,104) (13) -- (556,034)
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Proceeds from long-term debt....... -- 402,000 -- 30,000 -- 432,000
Proceeds from intercompany
loans, net ..................... -- 30,000 -- (30,000) -- --
Payments on long-term debt......... -- -- (4,928) -- -- (4,928)
Equity contribution................ -- 136,725 -- -- -- 136,725
--------- ----------- ------------- ----------- ----------- ------------
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES -- 568,725 (4,928) -- -- 563,797
--------- ----------- ------------- ----------- ----------- ------------
Net increase (decrease) in cash
and cash equivalents............ -- 18,253 (14,599) 1,603 -- 5,257
Cash and cash equivalents at the
beginning of the period......... -- -- -- -- -- --
--------- ----------- ------------- ----------- ----------- ------------
Cash and cash equivalents at the
end of the period............... $ -- $ 18,253 $ (14,599) $ 1,603 $ -- $ 5,257
========= =========== ============= =========== =========== ============
23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information contained in this discussion and in the unaudited Condensed
Consolidated and Combined Financial Statements and Accompanying Notes presented
in this Form 10-Q should be read in conjunction with information set forth in
Ply Gem Holdings, Inc.'s Annual Report on Form 10-K. Certain statements in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are "forward-looking statements." See "Special Note Regarding
Forward-Looking Statements."
GENERAL
We are a leading manufacturer of residential exterior building products in North
America. We offer a comprehensive product line of vinyl siding and skirting,
vinyl windows and doors, and vinyl and composite fencing, railing and decking
that serves both the home repair and remodeling and new home construction
sectors in all 50 states and Western Canada. We also manufacture vinyl and
aluminum soffit and siding accessories, aluminum trim coil, wood windows and
steel and fiberglass doors, enabling us to bundle complementary and
color-matched products and accessories with our core vinyl products. We have two
reportable segments: (i) siding, fencing, railing and decking, and (ii) windows
and doors.
Ply Gem Holdings, a wholly owned subsidiary of Ply Gem Investment Holdings,
Inc., was incorporated on January 23, 2004 for the purpose of acquiring Ply Gem
Industries, Inc. from Nortek (the "Ply Gem Acquisition"). The Ply Gem
Acquisition was completed on February 12, 2004, when Nortek sold Ply Gem
Industries, to Ply Gem Holdings, pursuant to the terms of the Stock Purchase
Agreement among Ply Gem Investment Holdings, Inc. and Nortek, Inc. and WDS LLC
dated as of December 19, 2003, as amended. Prior to February 12, 2004, the date
of the Ply Gem Acquisition, Ply Gem Holdings, had no operations and Ply Gem
Industries, was a wholly-owned subsidiary of WDS LLC, which was a wholly-owned
subsidiary of Nortek.
On August 27, 2004 Ply Gem Industries acquired all of the outstanding capital
stock of MWM Holding, in accordance with a stock purchase agreement entered into
among Ply Gem, MWM Holding and the selling stockholders (the "MW Acquisition").
The accompanying financial statements include the operating results of MWM
Holding from August 27, 2004, the date of acquisition.
We are a holding company with no operations or assets of our own other than the
capital stock of our subsidiaries. The terms of Ply Gem Industries' credit
facility place restrictions on its ability to pay dividends and otherwise
transfer assets to us. Further, the terms of the indenture governing Ply Gem
Industries' senior subordinated notes place restrictions on the ability of Ply
Gem Industries and our other subsidiaries to pay dividends and otherwise
transfer assets to us.
FINANCIAL STATEMENT PRESENTATION
NET SALES. Net sales represent the selling price of our products plus
certain shipping charges less applicable provisions for discounts and
allowances. Allowances include cash discounts, volume rebates and gross returns
among others.
COST OF PRODUCTS SOLD. Cost of products sold includes direct material
and manufacturing costs, manufacturing depreciation, third-party and in-house
delivery costs and product warranty expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense, or "SG&A expense," includes all non-product related
operating expenses, including selling, marketing, research and development
costs, information technology and other general and administrative expenses.
OPERATING EARNINGS. Operating earnings represents net sales less cost
of products sold, SG&A expense and amortization of intangible assets.
24
COMPARABILITY. The data presented for the period ended April 3, 2004
includes predecessor data for Ply Gem Industries, Inc. from January 1, 2004 to
February 11, 2004 and successor data for Ply Gem Holdings, Inc. from January 23,
2004 to April 3, 2004 and therefore those periods are not directly comparable.
In addition, during the period January 23, 2004 (inception) through February 11,
2004, Ply Gem Holdings, Inc., which ultimately acquired Ply Gem Industries,
Inc., conducted no operations.
IMPACT OF COMMODITY PRICING
Our principal raw materials, PVC resin and aluminum, have historically been
subject to rapid price changes. We have in the past been able to substantially
pass on significant cost increases through price increases to our customers. Our
results of operations for individual quarters can and have been impacted by a
delay between the time of PVC resin and aluminum cost increases and decreases
and related price changes that we implement in our products.
IMPACT OF WEATHER
Since our building products are intended for exterior use, our sales and
operating earnings tend to be lower during periods of inclement weather. Weather
conditions in the first quarter of each calendar year historically result in
that quarter producing significantly less sales revenue than in any other period
of the year. As a result, we have historically had lower profits or losses in
the first quarter, and reduced profits in the fourth quarter of each calendar
year due to the weather. Our results of operations for individual quarters in
the future may be impacted by adverse weather conditions.
CRITICAL ACCOUNTING POLICIES
The following discussion and analysis of our financial condition and results of
operations are based upon our combined and consolidated financial statements,
which have been prepared in accordance with U.S. generally accepted accounting
principles. Certain of our accounting policies require the application of
judgments in selecting the appropriate assumptions for calculating financial
estimates. By their nature, these judgments are subject to an inherent degree of
uncertainty. We periodically evaluate the judgments and estimates used for our
critical accounting policies to ensure that such judgments and estimates are
reasonable for our interim and year-end reporting requirements. These judgments
and estimates are based our historical experience, current trends and
information available from other sources, as appropriate. If different
conditions result than those assumptions used in our judgments, the results
could be materially different from our estimates. Management believes that the
two areas where different assumptions could result in materially different
reported results are accounts receivable related to estimation of allowances for
doubtful accounts and inventories in estimating reserves for obsolete and excess
inventory. Although we believe the likelihood of a material difference in either
of these two areas is very low based upon our historical experience, a 10%
change in our allowance for doubtful accounts and our inventory reserve
estimates at April 2, 2005 would result in a $0.8 million and $0.5 million
impact upon SG&A expense and cost of products sold, respectively. Additionally,
we have included in the discussion that follows our estimation methodology for
both accounts receivable and inventories. While all significant policies are
important to our combined and consolidated financial statements, some of these
policies may be viewed as being critical. Our critical accounting policies
include:
REVENUE RECOGNITION. We recognize sales based upon shipment of products
to our customers net of applicable provisions for discounts and allowances. The
customer takes title upon shipment and assumes the risks and rewards of
ownership of the product. Revenue includes selling price of the product and all
shipping costs paid by the customer. Revenue is reduced at the time of sale for
estimated sales returns and all applicable allowances and discounts based on
historical experience. We also provide for estimates of warranty, bad debts,
shipping costs and certain sales-related customer programs at the time of sale.
Shipping and warranty costs are included in cost of products sold. Bad debt
expense and sales-related marketing programs are included in selling, general
and administrative expense. We believe that our procedures for estimating such
amounts are reasonable and historically have not resulted in material
adjustments in subsequent periods when the estimates are reconciled to the
actual amounts.
ACCOUNTS RECEIVABLE. We maintain an allowance for doubtful accounts for
estimated losses from the inability of our customers to make required payments,
which is provided for in bad debt expense. We determine the adequacy of this
allowance by regularly reviewing our accounts receivable aging and evaluating
individual customers' receivables, considering customers' financial condition,
credit history and
25
other current economic conditions. If a customer's financial condition were to
deteriorate which might impact its ability to make payment, then additional
allowances may be required.
INVENTORIES. Inventories in the accompanying consolidated and combined
balance sheets are valued at the lower of cost or market. At April 2, 2005, and
December 31, 2004 approximately $16.4 million and $11.7 million of total
inventories, respectively, were valued on the last-in, first-out method, or
"LIFO." Under the first-in, first-out method, or "FIFO," of accounting, such
inventories would have been approximately $1.2 million higher at April 2, 2005
and December 31, 2004. All other inventories were valued under the FIFO method.
We record provisions, as appropriate, to write-down obsolete and excess
inventory to estimated net realizable value. The process for evaluating obsolete
and excess inventory often requires subjective judgments and estimates
concerning future sales levels, quantities and prices at which such inventory
will be sold in the normal course of business. Accelerating the disposal process
or incorrect estimates of future sales potential may cause the actual results to
differ from the estimates at the time such inventory is disposed or sold.
ASSET IMPAIRMENT. In accordance with SFAS No. 144, we evaluate the
realizability of certain long-lived assets, which primarily consist of property
and equipment and intangible assets, based on expectations of non-discounted
future cash flows for each subsidiary having a material amount of long-lived
assets. If the sum of the expected non-discounted future cash flow is less than
the carrying amount of all assets including SFAS No. 144 long-lived assets, we
would recognize an impairment loss. Based upon our most recent analysis, we
believe that no material impairment of SFAS No. 144 long-lived assets existed at
April 2, 2005.
INSURANCE LIABILITIES. We record insurance liabilities and related
expense for health, workers' compensation, product and general liability losses
and other insurance reserves and expenses in accordance with either the
contractual terms of their policies or, if self-insured, the total liabilities
that are estimable and probable as of the reporting date. Insurance liabilities
are recorded as current liabilities to the extent they are expected to be paid
in the succeeding year with the remaining requirements classified as long-term
liabilities. The accounting for self-insured plans requires that significant
judgments and estimates be made both with respect to the future liabilities to
be paid for known claims and incurred but not reported claims as of the
reporting date. We rely heavily on historical trends and, in certain cases, the
advice and calculations of third-party actuarial consultants when determining
the appropriate insurance reserves to record in our consolidated and combined
balance sheets for a substantial portion of our workers' compensation and
general and product liability losses.
INCOME TAXES. Federal income taxes have been recorded in our combined
financial statements based upon our pro rata share of Nortek's consolidated
federal tax provision. We account for deferred income taxes using the liability
method in accordance with SFAS No. 109 "Accounting for Income Taxes," or "SFAS
No. 109," which requires that the deferred tax consequences of temporary
differences between the amounts recorded in our financial statements and the
amount included in our federal and state income tax returns be recognized in the
balance sheet. The amount recorded in our financial statements at December 31 of
each year reflects estimates of final amounts due to timing of completion and
filing of actual income tax returns. Estimates are required with respect to,
among other things, the appropriate state income tax rates to use in the various
states that we and our subsidiaries are required to file, the potential
utilization of operating and capital loss carry-forwards for both federal and
state income tax purposes and valuation allowances required, if any, for tax
assets that may not be realized in the future. After February 12, 2004, U.S.
federal income tax returns will be prepared and filed by Ply Gem Investment
Holdings, Inc. on behalf of itself, Ply Gem Holdings, Inc., Ply Gem Industries,
Inc. and its subsidiaries. We have executed a tax sharing agreement with Ply Gem
Holdings, Inc. and Ply Gem Investment Holdings, Inc. pursuant to which tax
liabilities for each respective party are computed on a stand-alone basis. U.S.
subsidiaries will continue to file unitary, combined and separate state income
tax returns. CWD Windows and Doors will file separate Canadian income tax
returns.
RESULTS OF OPERATIONS
In view of the seasonality of our business, it must be emphasized that the
results of operations for the periods presented are not necessarily indicative
of the results for a full fiscal year. The following tables set forth our
results of operations based on the amounts and the percentage relationship of
the items listed to net sales for the periods indicated. However, our results of
operations set forth in the tables below may not necessarily reflect what would
have occurred if we had been a
26
separate, stand-alone entity during the predecessor periods presented or what
will occur in the future. Unallocated cost of products sold and selling, general
and administrative expenses are not material and are not discussed in the
following section.
Our statement of operations data for the prior year period includes the period
January 1 through February 11, 2004 for Ply Gem Industries, Inc. and the period
from January 23 to April 3, 2004 for Ply Gem Holdings, Inc. The periods were
prepared using different bases of accounting and therefore are not directly
comparable. As a result of the Ply Gem Acquisition on February 12, 2004, we
applied purchase accounting to the period January 23, 2004 through April 3,
2004.
SIDING, FENCING, RAILING AND DECKING SEGMENT
NET SALES
Combined Consolidated
- ------------------------- -------------------------------------------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 to January 23, 2004 to January 1, 2005 to
February 11, 2004 April 3, 2004 April 2, 2005
- -------------------------------------------------------------------------------
(Amounts in thousands)
$ 29,546 $ 53,729 $ 78,848
Net sales for the first quarter of 2005 decreased from the periods January 1,
2004 to February 11, 2004 and January 23, 2004 to April 3, 2004 (the "2004
periods") by approximately $4.4 million, or 5%. Net sales were lower than the
prior year driven by the weak end use demand in both vinyl and metal products
across all channels resulting from the harsh winter weather experienced in the
Midwest and Northeast. We expect that a portion of the decrease in sales will
be made up in the second and third quarters, as overall demand has not changed.
In general, management believes that sales will increase as vinyl products
continue to take market share from other exterior residential building products
due to vinyl's low maintenance, high durability, ease of installation, energy
efficiency, lower price and superior aesthetics.
COST OF PRODUCTS SOLD
Combined Consolidated
- ------------------------- -------------------------------------------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 to January 23, 2004 to January 1, 2005 to
February 11, 2004 April 3, 2004 April 2, 2005
- -------------------------------------------------------------------------------
(Amounts in thousands)
$ 24,281 $ 42,299 $ 66,044
82.2 % 78.7 % 83.8 %
Cost of products sold for the first quarter of 2005 decreased from the 2004
periods by approximately $0.5 million, or 1%. The decrease in cost of products
sold was primarily due to the decrease in unit sales volume. The increase in
cost of products sold as a percentage of sales resulted from higher raw material
costs, specifically PVC resin and aluminum, both of which saw significant
increases in market prices after the first quarter of 2004. The increase in raw
material costs will be partially offset in the second and third quarters when
price increases to our customers are expected to come into effect.
27
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Combined Consolidated
- ------------------------- -------------------------------------------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 to January 23, 2004 to January 1, 2005 to
February 11, 2004 April 3, 2004 April 2, 2005
- -------------------------------------------------------------------------------
(Amounts in thousands)
$ 4,272 $ 5,569 $ 8,650
14.5 % 10.4 % 11.0 %
SG&A expense for the first quarter of 2005 decreased by approximately $1.1
million from the 2004 periods. SG&A expenses decreased by approximately $0.9
million primarily as a result of the lower sales volume and by approximately
$0.2 million due to administrative cost reductions. Management does not
anticipate SG&A expenses as a percentage of sales to change materially going
forward.
WINDOWS AND DOORS SEGMENT
NET SALES
Combined Consolidated
- ------------------------- -------------------------------------------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 to January 23, 2004 to January 1, 2005 to
February 11, 2004 April 3, 2004 April 2, 2005
- -------------------------------------------------------------------------------
(Amounts in thousands)
$ 11,066 $ 19,021 $ 92,887
Net sales for the first quarter of 2005 increased from the 2004 periods by
approximately $62.8 million. The increase in net sales was primarily driven by
sales of MW, which contributed $62.7 million to our net sales during the first
quarter of 2005. An increase of approximately $1.5 million in sales of our
Canadian subsidiary was offset by a decrease of approximately $1.4 million in
sales of our US subsidiaries, including $1.0 attributable to Thermal-Gard, which
ceased operations in April 2004. We are currently introducing a new line of
repair and remodeling windows under our Great Lakes and Napco Window Systems
brands. Management expects future sales to increase as vinyl continues to grow
as the preferred material for replacement windows, and is increasingly used in
new construction.
COST OF PRODUCTS SOLD
Combined Consolidated
- ------------------------- -------------------------------------------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 to January 23, 2004 to January 1, 2005 to
February 11, 2004 April 3, 2004 April 2, 2005
- -------------------------------------------------------------------------------
(Amounts in thousands)
$ 9,448 $ 15,827 $ 71,425
85.4 % 83.2 % 76.9 %
Cost of products sold for the first quarter of 2005 increased by approximately
$46.2 million over the 2004 periods. The increase in cost of products sold was
primarily due to net sales contributed by MW which increased cost of products
sold by $47.4 million. This increase is also due to approximately $1.0 million
in increased costs at our Canadian subsidiary in relation to their increased
sales, and is partially offset by a decrease of approximately $0.8 million due
to the closing of our Thermal-Gard subsidiary during 2004. Management believes
that cost of products sold as a percentage of sales in our window and doors
28
segment will not materially change but will be favorably impacted by cost
savings and synergies resulting from the MW Acquisition in August 2004.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Combined Consolidated
- ------------------------- -------------------------------------------------
Ply Gem Ply Gem Ply Gem
Industries, Inc. Holdings, Inc. Holdings, Inc.
January 1, 2004 to January 23, 2004 to January 1, 2005 to
February 11, 2004 April 3, 2004 April 2, 2005
- -------------------------------------------------------------------------------
(Amounts in thousands)
$ 3,040 $ 3,265 $ 14,155
27.5 % 17.2 % 15.2 %
SG&A expense for the first quarter of 2005 increased by approximately $7.8
million over the 2004 periods. The increase in SG&A expense was primarily due to
the addition of MW operations, which increased SG&A expenses by approximately
$7.7 million. Management does not anticipate SG&A expenses as a percentage of
sales to change materially going forward.
UNALLOCATED EXPENSES
INTEREST EXPENSE Interest expense for the first quarter of 2005 increased by
approximately $5.9 million over the 2004 periods as a result of increased
borrowings due to the Ply Gem and MW Acquisitions. Intercompany interest expense
of approximately $3.5 million was incurred for the period January 1, 2004 to
February 11, 2004, based on an intercompany note payable to a wholly owned
subsidiary of our former parent, Nortek, which is not comparable to the 2005
debt.
INCOME TAXES The benefit for income taxes for the first quarter of 2005
increased $0.7 million over the 2004 periods, primarily as a result of the
greater net loss for the 2005 period versus the 2004 periods.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL
Our primary cash needs are for working capital, capital expenditures and debt
service. We have historically financed these cash requirements through
internally generated cash flow and funds borrowed under our credit facility.
Net cash provided by (used in) operating activities for the first quarter of
2005 and the 2004 periods of January 1, 2004 to February 11, 2004 and January
23, 2004 to April 3, 2004 was approximately ($20.4) million, $1.6 million, and
($2.5) million, respectively. The increase in net cash used in operating
activities for the 2005 period compared to the 2004 periods presented was
primarily driven by the seasonal cash flow requirements of our new subsidiary,
MW, and a decrease in sales caused by poor weather conditions.
Net cash provided by (used in) investing activities for the first quarter of
2005 and the 2004 periods of January 1, 2004 to February 11, 2004 and January
23, 2004 to April 3, 2004 was approximately ($2.5) million, $0.4 million, and
($556.0) million, respectively. The cash used in investing activities during the
2004 periods was driven by the cash used to fund the Ply Gem Acquisition.
Net cash provided by (used in) financing activities for the first quarter of
2005 and the 2004 periods of January 1, 2004 to February 11, 2004 and January
23, 2004 to April 3, 2004 was approximately $34.6 million, ($7.5) million and
$563.8 million respectively. The increase in net cash provided by financing
activities for the 2004 periods was driven by the cash provided from our new
capital structure that resulted from the consummation of the Ply Gem
Acquisition, which includes our senior subordinated notes, senior term loan
facilities, our senior revolving credit facility, and $136.7 million of equity
contribution.
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Our capital expenditures for the first quarter of 2005 and the 2004 periods of
January 1, 2004 to February 11, 2004 and January 23, 2004 to April 3, 2004 were
approximately $2.5 million, $0.7 million and $1.1 million, respectively. The
capital expenditures during the first quarter of 2005 includes expenditures of
approximately $1.3 million for MW, which was purchased during the third quarter
of 2004. We expect our capital expenditures in the near future to remain
consistent with our expenditures in past periods.
IMPACT OF THE PLY GEM ACQUISITION AND THE MW ACQUISITION
We intend to fund our ongoing capital and working capital requirements,
including our internal growth, through a combination of cash flows from
operations and, if necessary, from borrowings under the revolving credit portion
of our senior credit facilities. As of April 2, 2005, we had $706.5 million of
indebtedness and $25.7 million of availability under our revolving credit
facility. The Company's senior credit facility with a syndicate of financial
institutions and institutional lenders provides for senior secured financing of
up to $381.0 million, consisting of $311.0 million of term loan facilities with
a maturity of seven years after the original date of the credit agreement
(February 12, 2004) and a $70.0 million revolving loan facility, including a
letter of credit subfacility, with a maturity of five years. The term loan
facility was drawn in full in connection with the consummation of the Ply Gem
and MW Acquisitions. The term loan facilities have three tranches, consisting
of: i) a $170.0 million tranche under which Ply Gem Industries, Inc. is the
borrower, ii) a $30.0 million tranche under which our Canadian subsidiary, CWD
Windows and Doors, Inc., is the borrower, and iii) a $111.0 million tranche
under which Ply Gem Industries, Inc. is the borrower, which was added to the
facility August 27, 2004, as a result of the financing for the MW acquisition.
Concurrently with the Ply Gem Acquisition, Ply Gem Industries, Inc. issued
$225.0 million aggregate principal amount of our 9% senior subordinated notes
due 2012, which are guaranteed by Ply Gem Holdings Inc. and the domestic
subsidiaries of Ply Gem Industries, Inc. Subsequently, in connection with the MW
Acquisition, Ply Gem Industries, Inc. issued an additional $135.0 million of our
9% senior subordinated notes due 2012, which are guaranteed by Ply Gem Holdings
Inc. and the domestic subsidiaries of Ply Gem Industries, Inc.
During December 2004, Ply Gem Industries repaid the entire amount borrowed
against the revolving credit facility. Also during December 2004, Ply Gem
Industries prepaid $5.0 million of the $30.0 million tranche under which our
Canadian subsidiary, CWD Windows and Doors, Inc. is the borrower.
During the first quarter of 2005, Ply Gem Industries borrowed $35.5 million
under the revolving credit facility to fund our seasonal working capital
requirements and first quarter capital expenditures.
The borrowings under the revolving credit facility will be available until its
maturity to fund our working capital requirements, capital expenditures and
other general corporate needs. The revolving credit facility will mature five
years after the closing of the Ply Gem Acquisition and will have no scheduled
amortization or commitment reductions. The term loan facilities will mature
seven years after the closing of the Ply Gem Acquisition and have quarterly
scheduled amortizations of $0.5 million beginning in the quarter ended July 3,
2004 and for the next 23 calendar quarters thereafter, $45.8 million on each of
June 30, 2010, September 30, 2010, December 31, 2010, and $156.6 million on the
maturity date.
The senior credit facilities and the indenture for the senior subordinated notes
impose certain restrictions on Ply Gem Industries, including restrictions on its
ability to incur indebtedness, pay dividends, make investments, grant liens,
sell assets and engage in certain other activities. The terms of the senior
credit facilities and the senior subordinated notes also significantly restrict
the ability of Ply Gem Industries to pay dividends and otherwise distribute
assets to Ply Gem Holdings. In addition, the senior credit facilities require
Ply Gem Industries to comply with certain financial ratios. Indebtedness under
the senior credit facilities is secured by substantially all of Ply Gem
Industries' assets, including its real and personal property, inventory,
accounts receivable, intellectual property and other intangibles. In addition,
our U.S. senior credit facilities are guaranteed by Ply Gem Holdings and secured
by its assets (including its equity interests), as well as guaranteed and
secured by the equity interests and substantially all of the assets of our
current and, if any, future domestic subsidiaries, subject to exceptions.
Because of the inherent seasonality in our business and the resulting working
capital requirements, our liquidity position within a given year will fluctuate.
The seasonal effect that creates greatest capital needs is experienced during
the first six months of the year and we anticipate the need to borrow funds
under
30
our existing revolving credit facility to support this requirement. However, we
anticipate that the funds generated by operations and funds available under our
new senior credit facilities will be adequate to finance our ongoing operational
cash flow needs, capital expenditures (as described above), debt service
obligations, management incentive expenses, fees payable under the General
Advisory Agreement with a Caxton-Iseman party, dated February 12, 2004 (the
"General Advisory Agreement"), and other contractual obligations for the
foreseeable future.
INFLATION; SEASONALITY
Our performance is dependent to a significant extent upon the levels of home
repair and remodeling and new home construction spending, all of which are
affected by such factors as interest rates, inflation, consumer confidence and
unemployment.
The demand for our products is seasonal, particularly in the Northeast and
Midwest regions of the United States and Western Canada where inclement weather
during the winter months usually reduces the level of building and remodeling
activity in both the home repair and remodeling and new home construction
sectors. Our sales are usually lower during the first and fourth quarters. Since
a portion of our manufacturing overhead and operating expenses are relatively
fixed throughout the year, operating income and net earnings tend to be lower in
quarters with lower sales levels. In addition, the demand for cash to fund our
working capital is greater from late in the fourth quarter through the first
quarter.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (revised 2004) ("SFAS 123R"),
"Share-Based Payment". SFAS 123R establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods and
services or incurs liabilities in exchange for goods or services that are based
on the fair value of the entity's equity instruments or that may be settled by
the issuance of those equity instruments. SFAS 123R requires a public entity to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award and to
recognize that cost over the period during which an employee is required to
provide service in exchange for the award. Due to the Security and Exchange
Commission's delay of the effective date, the Company plans to adopt the
provisions of SFAS 123R for the first quarter of our fiscal year ending December
31, 2006. At this time, we do not anticipate that the adoption of this statement
will have a material effect on our consolidated financial position or results of
operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We based these
forward-looking statements on our current expectations and projections about
future events. Our actual results could differ materially from those discussed
in, or implied by, these forward-looking statements. Forward-looking statements
are identified by words such as "believe," "anticipate," "expect," "intend,"
"plan," "will," "may" and other similar expressions. In addition, any statements
that refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. The following factors
could cause our actual results to differ materially from those implied by the
forward-looking statements in this Quarterly Report:
o our high degree of leverage and significant debt service obligations;
o restrictions under the indenture governing the notes and our senior
credit facilities;
o the competitive nature of our industry;
o changes in interest rates, and general economic, home repair and
remodeling and new home construction market conditions;
31
o changes in the price and availability of raw materials; and
o changes in our relationships with our significant customers.
Other factors that could cause actual results to differ from those implied
by the forward-looking statements contained in this Quarterly Report are set
forth in Amendment No. 5 to our Registration Statement on Form S-4. We undertake
no obligation to update the forward-looking statements in this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our principal interest rate exposure relates to the term loans
outstanding under our new senior credit facilities. We have approximately $303.7
million of term loans outstanding, bearing interest at a variable rate, based on
an adjusted LIBOR rate plus an applicable interest margin or the base rate plus
an applicable interest margin. Each quarter point increase or decrease in the
interest rate on the term loans would change our interest expense by
approximately $0.8 million per year. We also have a revolving credit facility
which provides for borrowings of up to $70.0 million, which will also bear
interest at variable rates in the same manner as the term loan facilities.
Assuming the new revolving credit facility is fully drawn, each quarter point
increase or decrease in the applicable interest rate would change our interest
expense by approximately $0.2 million per year. We are also party to several
municipal loan agreements, some of which accrue interest at a variable rate. The
aggregate net amount of principal outstanding on the municipal loans that is
subject to a variable rate of interest is $7.0 million, as of April 2, 2005.
Each quarter point increase or decrease in the interest rate on the municipal
loans subject to variable rates of interest would change our interest expense by
approximately $0.02 million per year. In the future we may enter into interest
rate swaps, involving exchange of floating or fixed rate interest payments, to
reduce our exposure to interest rate volatility.
Our term loan facility has three tranches. Outstanding balances consist
of a $168.1 million tranche under which Ply Gem Industries, Inc. is the
borrower, a $110.9 million tranche under which Ply Gem Industries, Inc. is the
borrower, and a $24.7 million tranche under which our Canadian subsidiary is the
borrower. Because the $24.7 million Canadian loan is denominated in US dollars,
and the Canadian subsidiary's functional currency is Canadian dollars, there
exists a risk of currency translation gain or loss. Each quarter point increase
or decrease in the currency translation rate would create a gain or loss of
approximately $0.08 million.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures as of April 2, 2005 were effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission's rules
and forms.
As previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2004, we implemented additional review procedures over the
application of sale leaseback accounting. There were no other changes in our
internal control over financial reporting that occurred during the quarter ended
April 2, 2005 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
32
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
(a) EXHIBITS
The exhibit listed below is filed as part of Form 10-Q for quarter ended April
2, 2005.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------
31.1 Certification by President and Chief Executive Officer pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2 Certification by Vice President and Chief Financial Officer
pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934*
32.1 Certification by President and Chief Executive Officer pursuant
to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2 Certification by Executive Vice President and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLY GEM HOLDINGS, INC.
(Registrant)
Date: May 16, 2005
By: /s/ Lee D. Meyer
-------------------------------
Lee D. Meyer
President and Chief Executive Officer
Date: May 16, 2005
By: /s/ Shawn K. Poe
-------------------------------
Shawn K. Poe
Vice President, Chief
Financial Officer, Treasurer and Secretary