- --------------------------------------------------------------------------------
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 March 31, 2004
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 001-15469
THERMOVIEW INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 61-1325129
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5611 Fern Valley Road 40228
Louisville, Kentucky (Zip Code)
(Address of principal executive offices)
(Registrant's telephone number, including area code, 502-968-2020)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Rule 12b.2 of the Exchange Act). Yes [ ] No [X]
As of April 30, 2004, 8,638,716 shares of the Registrant's common stock,
$.001 par value, were issued and outstanding.
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THERMOVIEW INDUSTRIES, INC.
TABLE OF CONTENTS
Part I Financial Information
Item 1. Financial Statements..............................................1
Condensed Consolidated Balance Sheets.................................1
Condensed Consolidated Statements of Operations.......................2
Condensed Consolidated Statements of Cash Flows.......................3
Notes to Condensed Consolidated Financial Statements..................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......18
Item 4. Controls and Procedures..........................................19
Part II Other Information
Item 1. Legal Proceedings................................................20
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities.......................................21
Item 3. Defaults upon Senior Securities..................................21
Item 4. Submission of Matters to a Vote of Security Holders..............21
Item 5. Other Information................................................21
Item 6. Exhibits and Reports on Form 8-K.................................21
_____
Item 1. Financial Statements
ThermoView Industries, Inc.
Condensed Consolidated Balance Sheets
December 31 March 31, 2004
2003 (Unaudited)
Assets
Current assets:
Cash and equivalents .......................... $ 211,449 $ 213,249
Restricted cash ............................... 300,000 360,000
Receivables:
Trade, net of allowance for doubtful accounts
of $345,000 in 2003 and $347,181 in 2004...... 3,096,229 3,754,646
Other ......................................... 140,444 157,315
Costs in excess of billings on uncompleted
contracts .................................... 560,617 551,642
Inventories ................................... 1,960,611 2,158,373
Prepaid expenses and other current assets ..... 645,027 936,209
------------- -------------
Total current assets ........................... 6,914,377 8,131,434
Property and equipment, net of depreciation .... 2,676,003 2,779,813
Other assets:
Goodwill ...................................... 28,358,742 28,358,742
Other assets .................................. 544,787 520,522
------------- -------------
28,903,529 28,879,264
------------- -------------
Total assets ................................... $ 38,493,909 $ 39,790,511
============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable .............................. $ 4,048,388 $ 4,459,846
Accrued expenses .............................. 2,072,902 2,600,101
Billings in excess of costs on uncompleted
contracts .................................... 541,697 1,236,367
Income taxes payable .......................... 65,602 65,602
Current portion of long-term debt ............. 544,795 879,505
------------- -------------
Total current liabilities ...................... 7,273,384 9,241,421
Long-term debt ................................. 16,510,303 17,095,565
Preferred shares subject to mandatory redemption 7,593,520 7,742,338
Other long-term liabilities .................... 471,489 563,663
------------- -------------
Total liabilities .............................. 31,848,696 34,642,987
Stockholders' equity:
Preferred stock, 2,975,000 shares authorized:
Series A, $.001 par value; none issued ....... -- --
Series B, $.001 par value; none issued ....... -- --
Common stock, $.001 par value; 25,000,000 shares
authorized; 8,628,716 shares issued and out-
standing at December 31, 2003 and 8,638,716
shares issued and outstanding at March 31, 2004 8,628 8,638
Paid-in capital .............................. 64,531,209 64,537,449
Accumulated deficit .......................... (57,894,624) (59,398,563)
------------- -------------
Total stockholders' equity ..................... 6,645,213 5,147,524
------------- -------------
Total liabilities and stockholders' equity ..... $ 38,493,909 $ 39,790,511
============= =============
See accompanying notes.
1
ThermoView Industries, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
For the three months ended
March 31,
-----------------------------
2003 2004
------------- -------------
Revenues ....................................... $ 16,193,013 $ 14,839,140
Cost of revenues earned ........................ 8,456,221 7,867,099
------------- -------------
Gross profit ................................... 7,736,792 6,972,041
Selling, general and administrative expenses ... 8,396,181 7,480,599
Depreciation expense ........................... 214,101 212,598
Amortization expense ........................... 5,064 12,983
------------- -------------
Loss from operations ........................... (878,554) (734,139)
Equity in earnings (loss) of joint venture ..... (26,207) (3,335)
Interest expense ............................... (632,130) (768,651)
Interest income ................................ 9,764 5,563
------------- -------------
Loss before income taxes ....................... (1,527,127) (1,500,562)
Income tax expense (benefit) ................... (424) 3,377
------------- -------------
Net loss ....................................... (1,526,703) (1,503,939)
Less non-cash Series D and E preferred stock
dividends ..................................... (231,497) --
------------- -------------
Net loss attributable to common stockholders ... $ (1,758,200) $ (1,503,939)
============= =============
Basic and diluted loss per common share:
Net Loss attributable to common stockholders .. $ (0.19) $ (0.16)
------------- -------------
Net loss attributable to common stockholders .. $ (0.19) $ (0.16)
============= =============
See accompanying notes.
2
ThermoView Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
March 31,
-----------------------------
2003 2004
-------------- -------------
Operating activities
Net loss ...................................... $ (1,526,703) $ (1,503,939)
Adjustments to reconcile net loss to
net cash provided by (used in) operations:
Depreciation and amortization .............. 219,165 225,581
Accretion of debt discount ................. 188,160 188,160
Accrued interest on preferred shares subject
to redemption ............................ -- 148,818
Interest added to principal ................ -- 310,079
Accrued interest on collateral guaranty .... -- 100,000
Equity in income of joint venture .......... 26,207 3,335
Charges to warranty reserves ............... -- (7,825)
Changes in operating assets and liabilities 837,829 478,070
-------------- -------------
Net cash provided by (used in) operating
activities ................................. (255,342) (57,721)
Investing activities
Payments for purchase of property and equipment (280,713) (77,841)
Other ......................................... (66,494) 7,946
-------------- -------------
Net cash used in investing activities ......... (347,207) (69,895)
Financing activities
Increase in long-term debt .................... -- 353,002
Payments of long-term debt .................... (120,363) (169,836)
Amount escrowed for special purposes .......... -- (60,000)
Exercise of options ........................... -- 6,250
-------------- -------------
Net cash provided by (used in) financing
activities .................................. (120,363) 129,416
-------------- -------------
Net increase (decrease) in cash and equivalents (722,912) 1,800
Cash and equivalents at beginning of period 2,179,887 211,449
-------------- -------------
Cash and equivalents at end of period ......... $ 1,456,975 $ 213,249
============== =============
See accompanying notes.
3
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
ThermoView Industries, Inc. ("ThermoView" or "the Company"), have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions in Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States 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. ThermoView's business is subject to
seasonal variations. The demand for replacement windows and related home
improvement products is generally lower during the winter months due to
inclement weather. Demand for replacement windows is generally higher in the
second and third quarters. Operating results for the three-month period ended
March 31, 2004, are not necessarily indicative of the results that may be
expected for the year ended December 31, 2004.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2003.
2. Operating Losses and Negative Cash Flow
During the first quarter of 2004, the Company incurred a net loss to common
shareholders of $1,503,939, compared to a net loss in the first quarter of 2003
of $1,758,200. The Company's net cash used by operating activities for the
quarter was $57,721. The Company would have used more cash had it not been for a
slow-down in payment of routine vendor payables. The Company continues to carry
higher accounts payable balances to conserve cash.
Revenue decreased by $1,353,873 from first quarter 2003 to first quarter
2004. Contributing factors for this decrease in revenue include: a $1.1 million
decrease in revenue due to a change in management and marketing strategies at
our ThermoView of California subsidiary; and, a $380,000 decrease in revenue due
to a re-engineering of operations at Thermo-Shield, our Chicago retail
subsidiary, during the first quarter of 2004.
The Company's loss by month declined as the quarter progressed. Following
is the net loss for each month in the first quarter of 2003 and 2004:
2003 2004
---- ----
January $ (943,575) $ (729,086)
February (668,746) (586,954)
March (145,879) (187,899)
The Company expects positive cash from operations beginning in the second
quarter. Average weekly cash collections during the first quarter were $1.17
million. Average weekly cash collections for the five weeks subsequent to March
31, 2004 were $1.35 million.
4
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
2. Operating Losses and Negative Cash Flow (Continued)
During 2003, the Company was in compliance with all debt covenants through
the third quarter. During the fourth quarter, management determined that the
Company would not be able to meet its cash obligations, or comply with the terms
of its debt agreements, at December 31, 2003 and into 2004. Accordingly,
Management entered into negotiations with its principal creditor, GE Capital
Corporation ("GE"), to restructure the cash flow and covenant requirements. In
the first quarter of 2004, GE agreed to modify its agreements with the Company,
effective December 31, 2003. The new agreements allow the Company to defer all
payments of interest and principal until the fourth quarter of 2004, at which
time payments essentially equal to those in the prior agreement resume. The new
agreements also set new covenant requirements for 2004.
On June 30, 2003, we restructured our long-term debt and preferred stock.
GE Equity holds Series A debt, Series C debt and other subordinated debt. Under
the restructuring agreements, GE Equity reduced the interest rate on both series
of debt from 10% to 8% and from 12% to 8% on the subordinated debt.
Additionally, GE Equity converted $1 million of the subordinated debt to 680,000
common stock warrants at 28 cents per share. These warrants are exercisable
through March 22, 2013 and were determined to have a fair value of $204,000. GE
Equity extended ThermoView's debt maturities two years to June 30, 2006, and to
July 31, 2006 for the subordinated debt.
The holder of $1.2 million of notes in connection with obligations related
to guarantors of a bank revolving line of credit also agreed to extend the due
date of the notes from June 2004 to September 30, 2006.
ThermoView's preferred stock holders also converted $1 million worth of
Series D preferred stock to 680,000 common stock warrants at 28 cents per share.
These warrants are exercisable through June 30, 2013 and were determined to have
a fair value of $204,000. Also, the Series D and E preferred stock holders
agreed to reduce the dividend rate on the remainder of the preferred holdings
from 12% to 8%, to defer cash dividends until the Series A and B debt is
retired, and to extend the date for mandatory redemption to August 31, 2006.
The June 30, 2003 debt restructuring contained revised terms as to
principal repayment and the achievement of certain covenants and ratios. We
satisfied all ratios and covenants as of September 30, 2003. Fourth quarter
results necessitated revisions of scheduled principal repayments, covenants and
ratios as defined in the June 30, 2003 restructuring. Accordingly, GE Equity
agreed to restate repayment terms and covenants and ratios as of December 31,
2003 as follows:
a) ThermoView must achieve certain quarterly and/or trailing twelve-month
EBITDA levels as well as fixed charge coverage ratios and current asset to
current liability ratios. The first measurement date for EBITDA levels is
June 30, 2004 and the first measurement date for fixed charge coverage
ratios and current asset to current liability ratios is September 30, 2004.
b) Interest can be deferred as additional principal on Series A and B
sub-notes from December 1, 2003 through the third quarter of 2004.
5
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
2. Operating Losses and Negative Cash Flow (Continued)
c) Interest can be deferred as additional principal on the Series C sub-note
and the senior subordinated promissory note from October 1, 2003 through
the third quarter of 2004.
d) Principal repayments of $100,000 per month are required on the Series A and
B sub-notes beginning November 30, 2004.
e) Principal repayments on the Series C sub-note of $50,000 per month are
required from April 30, 2005 through December 31, 2005 and $100,000 per
month thereafter.
If we default in the future under our debt arrangements, the lenders can,
among other items, accelerate all amounts owed and increase interest rates on
our debt. An event of default could result in the loss of our subsidiaries
because of the pledge of our ownership in all of our subsidiaries to the
lenders. As of March 31, 2004, we are not in default under any of our debt
arrangements.
While revenues and cash flow from operations during the first quarter of
2004 continued to decline and economic and regulatory issues continue to
challenge us, the Company has aggressively cut costs, significantly lowering its
breakeven point in 2003 and the beginning of 2004. We believe that our revenues
and cash flow from operations will allow us to meet our anticipated needs during
at least the next 12 months for:
o debt service requirements under terms as revised as of December 31,
2003;
o sinking fund requirements securing the supercedeas bond for the
Clemmens litigation;
o working capital requirements;
o planned property and equipment capital expenditures;
o expanding our retail segment;
o offering new technologically improved products to our customers; and
o integrating more thoroughly the advertising and marketing programs of
our regional subsidiaries into a national home-remodeling business.
In the event the Company does not return to positive cash from operations,
the Company will not be able to meet its revised debt covenants, thereby making
its long-term debt currently due, and will need to re-evaluate its goodwill for
potential further impairment and related write-offs.
3. Income (Loss) per Common Share
Income (loss) per common share is calculated in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The
Company calculates basic earnings per common share using the weighted average
number of shares outstanding for the period. The weighted average number of
6
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
3. Income (Loss) per Common Share (Continued)
shares outstanding for the three month periods ended March 31, 2003 and 2004,
includes shares related to a stock purchase warrant that can be exercised for
nominal cash consideration. Outstanding shares for purposes of determining
diluted earnings per common share includes the weighted average number of shares
outstanding for basic earnings per share, plus the diluted effect of any common
share equivalents such as options or warrants in the calculation. As the Company
recorded losses attributable to operations for the three-month periods ended
March 31, 2003 and 2004, common share equivalents outstanding would be
anti-dilutive. Accordingly, basic and diluted earnings per share amounts are the
same.
Weighted average shares outstanding were as follows:
Weighted Average Shares
Period Outstanding
----------------------------------------- -----------------------
For the three months ended March 31, 2003 9,190,059
For the three months ended March 31, 2004 9,198,960
A reconciliation of loss attributable to common stockholders used in
computing the per share amounts for comparative quarters is as follows:
Three Months
Ended March 31,
2003 2004
---- ----
Net loss $ (1,526,703) $(1,503,939)
Preferred stock dividends (231,497) -
----------------- ------------
Loss attributable to common stockholders $ (1,758,200) $(1,503,939)
----------------- ------------
4. Stock Option Information
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to account for its employee stock options under APB No. 25,
"Accounting for Stock Issued to Employees." Accordingly, no compensation cost
has been recognized for employee options. Had compensation cost for employee
options been determined based on the fair value at the grant date consistent
with SFAS No. 123, the Company's net income (loss) and income (loss) per share
would have been as follows:
Net loss: 2003 2004
------------- -------------
As reported $ (1,526,703) $ (1,503,939)
Pro forma (1,547,508) $ (1,524,744)
Net loss attributable to common stockholders:
As reported (1,758,200) $ (1,503,939
Pro forma (1,779,005) $ (1,524,744)
Basic and diluted loss per common share:
Basic, As reported $ (.17) $ (.16)
Diluted, As reported (.17) (.16)
Basic, Pro forma (.19) (.17)
Diluted, Pro forma (.19) (.17)
7
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
5. Long-term Debt and Mandatorily Redeemable Preferred Stock
On June 30, 2003, the Company restructured its long-term debt and preferred
stock. GE Equity holds Series A debt, Series C debt and other subordinated debt.
Under the restructuring agreements, GE Equity reduced the interest rate on both
Series A and C debt from 10% to 8% and from 12% to 8% on the subordinated debt.
Additionally, GE Equity converted $1 million of the subordinated debt to 680,000
common stock warrants at 28 cents per share. These warrants are exercisable
through March 22, 2013 and were determined to have a fair value of $204,000.
ThermoView's Series A and C debt maturities were extended by two years to June
30, 2006, and to July 31, 2006 for the subordinated debt.
ThermoView's preferred stock holders also converted $1 million worth of
Series D preferred stock to 680,000 common stock warrants at 28 cents per share.
These warrants are exercisable through June 30, 2013 and were determined to have
a fair value of $204,000. Also, the Series D and E preferred stock holders
agreed to reduce the dividend rate on the remainder of the preferred holdings
from 12% to 8%, to defer cash dividends until the Series A and B debt is
retired, and to extend the date for mandatory redemption to August 31, 2006.
During the fourth quarter of 2003 management determined that the Company
would not be able to meet its cash obligations, or comply with the terms of its
debt agreements, at December 31, 2003 and into 2004. During the first quarter of
2004, GE Equity agreed to modify its agreements with the Company, effective
December 31, 2003. The new agreements allow the Company to defer all payments of
interest until the fourth quarter of 2004, and set new debt covenants.
The restructured debt agreements require ThermoView to pay $100,000 toward
principal each month commencing November 2004, as well as monthly interest. The
debt restructuring also calls for payments of excess cash toward principal two
times per year, at the option of the lender. Excess cash is defined as amounts
over $1 million at the two measurement dates.
Under terms of the restructured debt agreements, ThermoView must achieve
certain quarterly and/or trailing twelve month EBITDA levels as well as fixed
charge coverage ratios and current asset to current liability ratios. The first
measurement date for EBITDA levels is June 30, 2004 and the first measurement
date for the fixed charge coverage ratios and current asset to current liability
ratios is September 30, 2004.
The holder of $1.2 million of notes in connection with obligations related
to guarantors of a bank revolving line of credit also agreed to extend the due
date of the notes from June 2004 to September 30, 2006.
The Financial Accounting Standards Board (FASB) issued SFAS 150,
"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equities," effective for companies for the first interim period
beginning after June 15, 2003. The new rule requires accounting for some
financial instruments as liabilities that under previous guidance were accounted
for as equity or between liabilities and equity ("mezzanine"). The Company has
previously reported mandatorily redeemable preferred stock series D and E, in
prior periods, in the mezzanine section of the balance sheet. With the Company's
8
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
5. Long-term Debt and Mandatorily Redeemable Preferred Stock (Continued)
adoption of this standard on July 1, 2003, the mandatorily redeemable preferred
stock is included as a component of liabilities and described as "preferred
shares subject to mandatory redemption," as of September 30, 2003. Prior periods
are not restated when SFAS 150 is applied.
Preferred shares subject to mandatory redemption is comprised of the
following:
Series D: Par value of $.001 with an aggregate redemption amount and
liquidation preference of $5,181,426 at December 31, 2003. Total
shares authorized - 1,500,000 shares; shares issued and outstanding
756,900 as of December 31, 2003, and March 31, 2004. The date of the
mandatory redemption is August 31, 2006.
Series E: Par value of $.001 with an aggregate redemption amount and
liquidation preference of $2,560,912 at December 31, 2003. Total
shares authorized - 500,000; shares issued and outstanding of 336,600
December 31, 2003, and March 31, 2004. The date of the mandatory
redemption is August 31, 2006.
In addition, upon adoption of SFAS 150, dividends or other distributions on
mandatorily redeemable preferred stock are reported as interest expense on
mandatorily redeemable preferred stock in the statement of operations. Prior
periods are not restated when SFAS 150 is applied.
6. Segment Information
For the three-month periods ended March 31, 2003 and 2004, the Company's
business units had separate management teams and infrastructures that operate
primarily in the vinyl replacement windows, doors and related home improvement
products industry in various states in the Midwest and in Southern California.
The business units have been aggregated into two reportable operating segments:
manufacturing and retail.
Manufacturing
The manufacturing segment includes the businesses that manufacture and sell
vinyl replacement windows to the Company's retail segment and to unaffiliated
customers.
Retail
The retail segment includes the businesses that design, sell and install
vinyl replacement windows, doors and related home improvement products to
commercial and retail customers.
9
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
6. Segment Information (Continued)
Segment information for the three months ended March 31 2003 and 2004, are
as follows:
For the three months Manufac-
ended March 31, 2003 turing Retail Corporate Consolidated
-------------------- ---------- ------------ ----------- ------------
Revenues from external
customers $ 809,370 $15,306,763 $ 76,880 $16,193,013
Intersegment revenues 88,266 -- -- 88,266
Income (loss) from
operations (218,850) (49,526) (610,178) (878,554)
Total assets 3,908,427 34,633,707 1,422,832 39,964,966
For the three months Manufac-
ended March 31, 2004 turing Retail Corporate Consolidated
-------------------- ----------- ------------ ----------- ------------
Revenues from external
customers $ 627,219 $ 14,136,097 $ 75,824 $14,839,140
Intersegment revenues 431,383 -- -- 431,383
Income (loss) from
operations (151,732) (70,751) (511,656) (734,139)
Total assets 1,912,896 34,257,599 3,620,016 39,790,511
7. Contingencies and Commitments
On November 19, 2001, Nelson E. Clemmens, former director and president of
ThermoView, filed an action titled Nelson E. Clemmens v. ThermoView Industries,
Inc., Civil Action No. 01-CI-07901 (Jefferson Circuit Court, November 19, 2001)
against ThermoView alleging subrogation and indemnity rights associated with Mr.
Clemmens' loss of guaranty collateral to PNC Bank. These claims are in
connection with the April 2000 amendment to ThermoView's previous bank debt with
PNC Bank, in which Stephen A. Hoffmann, Richard E. Bowlds, Nelson E. Clemmens
and Douglas I. Maxwell, III guaranteed $3,000,000 of our PNC Bank debt. In
January 2001, PNC seized the collateral pledged as security by the guarantors
for the loan guaranty. In March 2001, ThermoView reached settlements with
Messrs. Bowlds and Hoffmann for any claims that they may hold against us
regarding their loss of assets in connection with the guaranty. We did not reach
a settlement with Messrs. Clemmens and Maxwell with regard to guarantees of
$1,000,000. Following the initial discovery phase, Clemmens sought a judicial
determination that ThermoView's March 2001 assignment of the underlying debt
relieved him of a contractual obligation to refrain from asserting a claim of
repayment until the debt was ultimately satisfied. On September 30, 2002, the
Jefferson Circuit Court issued an order of summary judgment stating that
Clemmens could not assert a claim for repayment until the debt was ultimately
satisfied. Clemmens filed a motion with the court to reconsider the September
30, 2002, ruling. On February 26, 2003, the Jefferson Circuit Court reversed the
previous judgment granted to ThermoView and awarded judgment to Clemmens against
ThermoView. ThermoView sought a reconsideration of the February 26, 2003 ruling.
On May 9, 2003, the Jefferson Circuit Court upheld the previous ruling in favor
of Clemmens, and entered a final appealable judgment which allowed Clemmens to
seek collection against ThermoView for the loss of collateral in the amount of
$500,000 plus interest at the rate of 10% annually beginning January 1, 2001
($150,000 through December 31, 2003). On May 19, 2003, ThermoView appealed the
judgment issued to Clemmens to the Kentucky Court of Appeals. ThermoView
submitted its Appellant's Brief to the Kentucky Court of Appeals on December 22,
2003, and the appeal remains pending. On June 6, 2003, ThermoView, with the
guarantee of GE Capital Equity, posted a supercedeas bond in the amount of
$690,000 with the Jefferson Circuit Court to prevent Clemmens from enforcing the
10
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
7. Contingencies and Commitments (Continued)
judgment awarded to him during the pendency of the appeal of this matter. In
order to secure the supercedeas bond, ThermoView entered into an agreement with
GE Capital Equity to deposit funds monthly into a sinking fund to serve as
security for the amount of the supercedeas bond. Pursuant to this agreement,
ThermoView has and will make payments of $50,000 monthly for the months of July
through December, and $30,000 monthly during the months January through June,
2004 until the balance of the sinking fund is equal to $690,000. At March 31,
2004, $360,000 is included on the accompanying balance sheet as restricted cash.
According to the agreement, the balance should be $390,000 at March 31, 2004,
however, the March 2004 payment was made in April 2004. In addition, under the
agreement, ThermoView must make additional payments to the sinking fund such
that the balance of the sinking fund will be no less than $690,000 by November
1, 2004. In consideration for the agreement, ThermoView has agreed to pay to GE
Capital Equity Investments a fee of 2.5% of the face amount of the bond upon
issuance and has granted GE Capital Equity a first priority lien on its assets
to secure any amounts drawn on the bond. In the event that ThermoView prevails
upon the appeal and no amounts are drawn upon the bond, the balance of the
sinking fund will be applied to the Series A and B notes of ThermoView on a
pro-rata basis. Maxwell has not asserted a claim for the loss of his collateral
as of the date of filing of this report. Maxwell could assert claims for the
same amount as Clemmens. Management has evaluated the potential loss associated
with Clemmens' litigation and Maxwell's unasserted claim and believes that the
Company has recorded adequate liabilities on its balance sheet as of March 31,
2004. While ThermoView believes that the ultimate resolution of this Clemmens'
matter on appeal will be favorable to ThermoView, an adverse final determination
of our position regarding this matter could have a material adverse effect on
our cash flow.
The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. Although there can be no assurance as to the ultimate disposition
of these matters, it is the opinion of the Company's management, based upon the
information available at this time, that the expected outcome of these matters,
individually or in the aggregate, will not have a material adverse effect on the
results of operations and financial condition of the Company.
8. Recently Enacted Accounting Standards
The Financial Accounting Standards Board (FASB) recently issued two new
accounting standards, Statement 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, and Statement 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equities,
both of which generally became effective in the quarter beginning July 1, 2003.
Adoption of Statement 149 did not have a material effect on the Company's
financial position, results of operations, or cash flows. The effects of
adoption Statement 150 are described in Note 5.
In January 2003, FASB issued Interpretation No. (FIN) 46, "Consolidation of
Variable Interest Entities" effective in quarters beginning October 1, 2003. The
objective of interpretation is to provide guidance on how to identify a variable
interest entity (VIE) and determine when the assets, liabilities non-controlling
interests, and results of operations of a VIE need to be included in a company's
consolidated financial statements. A company that holds variable interest in an
11
THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
8. Recently Enacted Accounting Standards (Continued)
entity will need to consolidate the entity if the company's interest in the VIE
is such that the company will absorb a majority of the VIE's expected losses
and/or receive a majority of the entity's expected residual returns, if they
occur. FIN 46 also requires additional disclosures by primary beneficiaries and
other significant variable interest holders. The Company does not believe it is
a primary beneficiary of a VIE or holds any significant interests or involvement
in a VIE and does not expect the adoption of FIN 46 has had or will have an
impact on the Company's consolidated financial statements.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report on Form 10-Q contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "estimates,"
"will," "should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in the
forward-looking statements as a result of any number of factors, most of which
are beyond the control of management. These factors include operating losses,
continued and increased expenses, non-cash dividends and interest related to our
financings, adverse judgments to ThermoView, and restrictions imposed by our
senior and subordinated debt.
Although we believe that the expectations and assumptions reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.
The following should be read in conjunction with the response to Part I,
Item 1, of this Report and our audited consolidated financial statements
contained in our Annual Report on Form 10-K for the year ended December 31,
2003. Any capitalized terms used but not defined in this Item have the same
meaning given to them in the Form 10-K.
Overview
We design, manufacture, sell and install custom vinyl replacement windows
for residential and retail commercial customers. We also sell and install
replacement doors, home textured exterior coatings, vinyl siding, patio decks,
patio enclosures, cabinet refacings and kitchen and bathroom remodeling
products, as well as residential roofing.
Our sector in the remodeling industry has been challenged by a number of
material events:
o A recession with lingering effects of the terrorist attacks of
September 11, 2001, a stock market drop, and banks/lenders being
reluctant to extend consumer credit.
o Investor confidence shaken by corporate scandals.
o The worst winter in ten years severely impacting operating results in
the first quarter of 2003.
o The war in Iraq.
o New Federal "do not call" legislation.
We have reported a revenue decline in each of the last four years. The
material events identified above are the primary reason for failing to meet our
number one goal of increasing revenue. Despite failing to increase revenue, 2003
and first quarter of 2004 have seen the following successes:
o Continued cost cutting and beneficial debt restructuring.
o Considerable progress toward a successful, optimal, best practices
operating model including consolidation and/or standardization of key
elements of our business such as advertising, marketing, accounting,
and our logo.
13
o Development of a new technologically superior extrusion process using
state-of-the-art GE plastics to be used in our window products.
Because of the large, growing home improvement market, we believe
ThermoView has considerable opportunities in the future. However, it is going to
be vital for us to:
o Complete the best practices model that we have been diligently
implementing.
o Complete the master job tracking system.
o Complete the loan finder software system to provide an effective means
of locating ready financing sources for our customers.
o Complete introduction of the technologically superior Compozit window
extrusion at all of our window manufacturers by the end of 2004.
o Open a number of streamlined, efficient, retail showrooms in smaller
communities as a means of increasing volumes.
o Expanding our manufacturing facility to provide windows to some of our
other retail locations in addition to providing windows to our North
Dakota retail operation.
The extent of response to our advertising, the closure rate experienced on
our sales calls, and the expression of interest by financial institutions in
providing consumer remodeling loans are all key indicators of trends in our
business. We are presently observing positive changes in each of these key
indicators.
Business Segments
Our subsidiaries have separate management teams and infrastructures and
operate in two reportable operating segments: retail and manufacturing.
Retail. Our retail segment consists of our subsidiaries that design, sell
and install custom vinyl replacement windows, doors and related home improvement
products to commercial and retail customers. Our retail segment derives its
revenues from the sale and installation of thermal replacement windows, storm
windows and doors, patio decks, patio enclosures, vinyl siding and other home
improvement products. Our retail segment recognizes revenues on the completed
contract method. A contract is considered complete when the home improvement
installation is substantially complete. Gross profit in the retail segment
represents revenues after deducting product and installation labor costs.
Manufacturing. Our manufacturing segment consists of our subsidiary that
manufactures and sells vinyl replacement windows to one of our retail companies
and to unaffiliated customers. Our manufacturing segment recognizes revenues
when products are shipped. Gross profit in the manufacturing segment represents
revenues after deducting product costs (primarily glass, vinyl and hardware),
window fabrication labor and other manufacturing expenses.
14
Historical Results of Operations
Three Months ended
March 31,
-------------------------
2003 2004
---- ----
(In thousands)
Revenues ............................................. $ 16,193 $ 14,839
Cost of revenues earned .............................. 8,456 7,867
-------- --------
Gross profit ......................................... 7,737 6,972
Selling, general and administrative expenses ......... 8,396 7,481
Depreciation expense ................................. 215 213
Amortization expense ................................. 5 13
-------- --------
Loss from operations ................................. (879) (735)
Equity in earnings (loss) of joint venture ........... (26) (3)
Interest expense ..................................... (632) (769)
Interest income ...................................... 10 6
-------- --------
Loss before income taxes ............................. (1,527) (1,501)
Income tax benefit ................................... -- 3
-------- --------
Net loss ............................................. (1,527) (1,504)
Less non-cash Series D and E preferred stock dividends (231) --
-------- --------
Net loss attributable
to common stockholders ........................... $ (1,758) $ (1,504)
======== ========
Three months ended March 31, 2003 Compared to Three Months Ended March 31, 2004
Revenues. Revenue decreased by $1.4 million from first quarter 2003 to
first quarter 2004. Contributing factors for this decrease in revenue include: a
$1.1 million decrease in revenue due to a change in management and marketing
strategies at our ThermoView of California subsidiary; and, a $380,000 decrease
in revenue due to a re-engineering of operations at Thermo-Shield, our Chicago
retail subsidiary, during the first quarter of 2004.
Gross Profit. Gross profit, which represents revenues less cost of revenues
earned, decreased from $7.7 million in the first quarter of 2003 to $7.0 million
in the first quarter of 2004. The reduction in the amount of gross profit is
consistent with the reduced revenue discussed above. As a percentage of
revenues, gross profit decreased from 47.8% in the first quarter of 2003 to
47.0% in the first quarter of 2004. This decrease results primarily because some
costs of goods sold at our subsidiaries are fixed and these fixed costs are more
significant relative to the lower volumes in the first quarter of 2004 compared
to the first quarter of 2003.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $8.4 million in the first quarter of 2003
to $7.5 million in the first quarter of 2004. Selling, general and
administrative expenses as a percentage of revenue decreased from 51.8% in the
first quarter of 2003 to 50.4% in the first quarter of 2004. The decrease in
selling, general and administrative expenses as a percentage of revenues in the
first quarter of 2004 results from management's focus on operating efficiencies
while at the same time, searching for new revenue growth and increased
15
shareholder value. In addition, management began to focus on economies of scale
with marketing and advertising efforts, centralizing various phone room
functions, national media plans and expanded us of various media types. We now
have more marketing resources and talent while continuing to streamline many
areas of operations.
Depreciation Expense. Depreciation expense decreased from $214,101 in the
first quarter of 2003 to $212,598 in the first quarter of 2004, reflecting a
fairly constant amount of property and equipment.
Interest Expense. Interest expense increased from $632,130 in 2003 to
$768,651 in 2004. The increase results from the adoption of the Financial
Accounting Standards Board (FASB) SFAS 150, "Accounting for Certain financial
Instruments with Characteristics of Both Liabilities and Equities" wherein
dividends or other distributions on mandatorily redeemable preferred stock are
reported as interest expense. The impact to interest expense by this accounting
change was reduced due to the June 30, 2003, restructure of long-term debt and
preferred stock. See Note 5, paragraph 7 of Notes to Condensed Consolidated
Financial Statements.
2003 2004
-------- --------
Interest expense (632,130) (768,651)
Less non-cash Series D and E preferred
stock dividends -- 148,818
-------- --------
Interest expense excluding Series D and E
non-cash preferred stock dividends (632,130) (619,833)
Income Tax Expense (Benefit). Due to operating losses, management concluded
that it is more likely than not that our deferred tax assets will not be
realized. Accordingly, we established a valuation allowance against all deferred
tax assets, and no deferred income taxes have been recorded in 2003 or 2004.
Income tax expense (benefit), in the first quarter of 2003 and 2004 relates to
some minor state tax refunds and minor state tax expense.
Non-Cash Dividends. Non-cash dividends in the first quarter of 2003
represents accrued dividends on the Series D and E preferred stock.
Liquidity and Capital Resources
As of March 31, 2004, we had cash and equivalents of $211,249, a working
capital deficit of $1.1 million, $17.1 million of long-term debt, net of current
maturities, and $7.7 million of preferred stock subject to mandatory redemption.
Our operating activities for the three months ended March 31, 2003, used
$255,342 of cash. Our operating activities for the three months ended March 31,
2004, used $57,721 of cash.
The use of $347,207 of cash for investing activities for the three months
ended March 31, 2003 related primarily to the acquisition of property and
equipment. The use of $69,895 of cash for investing activities for the three
months ended March 31, 2004, is $277,312 less than the same quarter last year,
and is due to financing almost all fixed asset additions.
We used $120,363 in cash for financing activities in the three months ended
March 31, 2003, primarily for repayment of debt. In the three months ended March
16
31, 2004, $129,416 of cash was provided by financing activities of which
$353,002 was provided by increases in long-term debt.
During the first quarter of 2004, we incurred a net loss to common
shareholders of $1,503,939, compared to a net loss in the first quarter of 2003
of $1,758,200. Our net cash used by operating activities for the quarter was
$57,721. We would have used more cash had it not been for a slow-down in payment
of routine vendor payables. We continue to carry higher accounts payable
balances to conserve cash.
Revenue decreased by $1,353,873 from first quarter 2003 to first quarter
2004. Contributing factors for this decrease in revenue include: a $1.1 million
decrease in revenue due to a change in management and marketing strategies at
our ThermoView of California subsidiary; and, a $380,000 decrease in revenue due
to a re-engineering of operations at Thermo-Shield, our Chicago retail
subsidiary, during the first quarter of 2004.
Our loss by month declined as the quarter progressed. Following is the net
loss for each month in the first quarter of 2003 and 2004:
2003 2004
---- ----
January $ (943,575) $ (729,086)
February (668,746) (586,954)
March (145,879) (187,899)
We expect positive cash from operations beginning in the second quarter.
Average weekly cash collections during the first quarter were $1.17 million.
Average weekly cash collections for the five weeks subsequent to March 31, 2004
were $1.35 million.
In the event we do not return to positive cash from operations, we will not
be able to meet our revised debt covenants, thereby making our long-term debt
currently due, and we will need to revaluate our goodwill for potential further
impairment and related write-offs.
Our cash flow could be negatively impacted by an adverse final
determination in the Nelson E. Clemmens' litigation. The adverse judgment could
result in our requirement to pay $500,000 plus 10% interest accrued from January
1, 2001 until paid. We have recorded $500,000 as long-term debt on our balance
sheet, and accrued interest amounting to $150,000 through March 31, 2004. We
have appealed the latest decision and expect that it will take over twelve
months to complete the appeals process. For more information, see Note 7 of
Notes to Condensed Consolidated Financial Statements.
We are required to maintain certain financial ratios and to comply with
various other covenants and restrictions under the terms of the financing
agreements, including restrictions as to additional financings, the payment of
dividends and the incurrence of additional indebtedness. We are in compliance
with all covenants as of December 31, 2003.
Under our financing arrangements, substantially all of our assets are
pledged as collateral. In March 2001, GE Equity and a group of our officers and
directors purchased from PNC Bank the PNC note due from ThermoView in the
original principal amount of $15 million representing our credit facility. PNC
Bank in January 2001 had declared the credit facility in default for covenant
violations. In connection with the purchase of the PNC Note by GE Equity and
others, all defaults were waived.
17
If we default in the future under our debt arrangements, the lenders can,
among other items, accelerate all amounts owed and increase interest rates on
our debt. An event of default could result in the loss of our subsidiaries
because of the pledge of our ownership in all of our subsidiaries to the
lenders. As of December 31, 2003 and March 31, 2004, we are not in default under
any of our debt arrangements.
We believe that our cash flow from operations will allow us to meet our
anticipated needs during at least the next 12 months for:
o debt service requirements;
o working capital requirements;
o planned property and equipment capital expenditures;
o expanding our retail segment;
o offering new technologically improved products to our customers; and
o integrating more thoroughly the advertising and marketing programs of
our regional subsidiaries into a national home-remodeling business.
In connection with adjusting certain covenants in loan agreements, the
preferred shareholders agreed to modify terms of their agreements such that,
except under limited circumstances, cash dividend payments will not be required
until July 31, 2004.
We believe, in the long term, cash will be sufficient to meet our needs. We
are currently in the process of opening two new retail offices in the Midwest in
June, 2004. We have and are investing in the development of a new line of
climate resistant, highly durable, Compozit(TM) window systems that exceed the
durability of the components of the current replacement window. In addition, we
continue to integrate the advertising and marketing programs of our regional
subsidiaries into a national home-remodeling business.
We do not expect annual capital expenditures for the next three years to
significantly vary from amounts reported for the last three years, which have
been in the range of $500,000 to $900,000 annually.
Pending Litigation
ThermoView does not anticipate any significant adverse effect on our
results of operations through December 2004 because of the Clemmens litigation
described in Part II, Item 1, Legal Proceedings. Although we believe that we
will prevail upon appeal of the claim, an adverse outcome in this action could
have a material adverse effect on our cash flow...
Item 3. Quantitative and Qualitative Disclosures about Market Risk
In June 2003, we restructured our debt and all of our debt continues to be
fixed rate debt. Interest rate changes would result in gains or losses in the
market value of our fixed-rate debt due to the differences between the current
market interest rates and the rates governing these instruments. With respect to
18
our fixed-rate debt currently outstanding, a 10% change in interest rates (for
example, from 10% to 11%) would not have resulted in a significant change in the
fair value of our fixed-rate debt.
Item 4. Controls and Procedures
As of March 31, 2004, an evaluation was carried out under the supervision
and with the participation of ThermoView's 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)
under the Securities Exchange Act of 1934). Based on their evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that ThermoView's
disclosure controls and procedures are, to the best of their knowledge,
effective to ensure that information required to be disclosed by ThermoView in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Subsequent to March 31, 2004, our Chief
Executive Officer and Chief Financial Officer have concluded that there were no
significant changes in ThermoView's internal controls or in other factors that
could significantly affect our internal controls.
19
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
On November 19, 2001, Nelson E. Clemmens, former director and president of
ThermoView, filed an action titled Nelson E. Clemmens v. ThermoView Industries,
Inc., Civil Action No. 01-CI-07901 (Jefferson Circuit Court, November 19, 2001)
against ThermoView alleging subrogation and indemnity rights associated with Mr.
Clemmens' loss of guaranty collateral to PNC Bank. These claims are in
connection with the April 2000 amendment to ThermoView's previous bank debt with
PNC Bank, in which Stephen A. Hoffmann, Richard E. Bowlds, Nelson E. Clemmens
and Douglas I. Maxwell, III guaranteed $3,000,000 of our PNC Bank debt. In
January 2001, PNC seized the collateral pledged as security by the guarantors
for the loan guaranty. In March 2001, ThermoView reached settlements with
Messrs. Bowlds and Hoffmann for any claims that they may hold against us
regarding their loss of assets in connection with the guaranty. We did not reach
a settlement with Messrs. Clemmens and Maxwell with regard to guarantees of
$1,000,000. Following the initial discovery phase, Clemmens sought a judicial
determination that ThermoView's March 2001 assignment of the underlying debt
relieved him of a contractual obligation to refrain from asserting a claim of
repayment until the debt was ultimately satisfied. On September 30, 2002, the
Jefferson Circuit Court issued an order of summary judgment stating that
Clemmens could not assert a claim for repayment until the debt was ultimately
satisfied. Clemmens filed a motion with the court to reconsider the September
30, 2002, ruling. On February 26, 2003, the Jefferson Circuit Court reversed the
previous judgment granted to ThermoView and awarded judgment to Clemmens against
ThermoView. ThermoView sought a reconsideration of the February 26, 2003 ruling.
On May 9, 2003, the Jefferson Circuit Court upheld the previous ruling in favor
of Clemmens, and entered a final appealable judgment which allowed Clemmens to
seek collection against ThermoView for the loss of collateral in the amount of
$500,000 plus interest at the rate of 10% annually beginning January 1, 2001
($150,000 through December 31, 2003). On May 19, 2003, ThermoView appealed the
judgment issued to Clemmens to the Kentucky Court of Appeals. ThermoView
submitted its Appellant's Brief to the Kentucky Court of Appeals on December 22,
2003, and the appeal remains pending. On June 6, 2003, ThermoView, with the
guarantee of GE Capital Equity, posted a supercedeas bond in the amount of
$690,000 with the Jefferson Circuit Court to prevent Clemmens from enforcing the
judgment awarded to him during the pendency of the appeal of this matter. In
order to secure the supercedeas bond, ThermoView entered into an agreement with
GE Capital Equity to deposit funds monthly into a sinking fund to serve as
security for the amount of the supercedeas bond. Pursuant to this agreement,
ThermoView shall make payments of $50,000 monthly for the months of July through
December, 2003 and $30,000 monthly during the months January through June, 2004
until the balance of the sinking fund is equal to the face amount of the bond.
At March 31, 2004, $360,000 is included on the accompanying balance sheet as
restricted cash. According to the agreement, the balance should be $390,000 at
March 31, 2004, however, the March 2004 payment was made in April 2004. In
addition, under the agreement, ThermoView must make additional payments to the
sinking fund such that the balance of the sinking fund will be no less than
$690,000 by November 1, 2004. In consideration for the agreement, ThermoView has
agreed to pay to GE Capital Equity Investments a fee of 2.5% of the face amount
of the bond upon issuance and has granted GE Capital Equity a first priority
lien on its assets to secure any amounts drawn on the bond. In the event that
ThermoView prevails upon the appeal and no amounts are drawn upon the bond, the
balance of the sinking fund will be applied to the Series A and B notes of
20
ThermoView on a pro-rata basis. Maxwell has not asserted a claim for the loss of
his collateral as of the date of filing of this report. Maxwell could assert
claims for the same amount as Clemmens. Management has evaluated the potential
loss associated with Clemmens' litigation and Maxwell's unasserted claim and
believes that ThermoView has recorded adequate liabilities on its balance sheet
as of March 31, 2004. While ThermoView believes that the ultimate resolution of
this Clemmens' matter on appeal will be favorable to ThermoView, an adverse
final determination of our position regarding this matter could have a material
adverse effect on our cash flow.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On May 17, 2004, ThermoView issued a press release reporting financial
results for the first quarter. The press release is filed herewith as Exhibit
99.1.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Index to Exhibits.
(b) Reports on Form 8-K.
None.
21
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.
ThermoView Industries, Inc.
Date: May 17, 2004 By: /s/ Charles L. Smith
-----------------------------------------
Charles L. Smith,
Chief Executive Officer
(principal executive officer)
Date: May 17, 2004 By: /s/ David A. Anderson
-----------------------------------------
David A. Anderson,
Chief Financial Officer
(principal financial and accounting officer)
22
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
31.1 -- Rule 13a-14(a) Certification of Charles L. Smith for the
Form 10-Q for the quarter ended March 31, 2004.
31.2 -- Rule 13a-14(a) Certification of David A. Anderson for the
Form 10-Q for the quarter ended March 31, 2004.
32.1 -- 18 U.S.C. Section 1350 Certifications of Charles L. Smith
and David A. Anderson for the Form 10-Q for the quarter
ended March 31, 2004.
99.1 -- News Release of ThermoView Industries, Inc. announcing first
quarter financial results dated May 17, 2004.
23
CERTIFICATION Exhibit 31.1
I, Charles L. Smith, certify that:
1) I have reviewed this quarterly report on Form 10-Q of ThermoView
Industries, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3) Based on my knowledge, the financial statements and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures; and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Signature and Title: /s/ Charles L. Smith Date: May 17, 2004
---------------------------- ------------------
Chief Executive Officer
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to ThermoView Industries, Inc. and
will be retained by ThermoView Industries, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
24
CERTIFICATION Exhibit 31.2
I, David A. Anderson, certify that:
1) I have reviewed this quarterly report on Form 10-Q of ThermoView
Industries, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3) Based on my knowledge, the financial statements and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures; and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Signature and Title: /s/ David A. Anderson Date: May 17, 2004
------------------------ ----------------------
Chief Financial Officer
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to ThermoView Industries, Inc. and
will be retained by ThermoView Industries, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request.
25
Exhibit 32.1
Charles L. Smith and David A. Anderson, being the Chief Executive Officer
and Chief Financial Officer, respectively, of ThermoView Industries, Inc.,
hereby certify as of this 17th day of May, 2004, that the Form 10-Q for the
Quarter ended March 31, 2004, fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in the Form 10-Q fairly presents, in all material respects, the
financial condition and results of operations of ThermoView Industries, Inc.
By: /s/ Charles L. Smith
-----------------------------------------
Charles L. Smith,
Chief Executive Officer
By: /s/ David A. Anderson
-----------------------------------------
David A. Anderson,
Chief Financial Officer
26
Exhibit 99.1
ThermoView Industries, Inc. Reports Income for First Quarter 2004
Monday May 17, 9:15 am ET
LOUISVILLE, Ky., May 17 /PRNewswire-FirstCall/ -- ThermoView Industries Inc.
(Amex: THV - News), which designs, manufactures and markets home improvements
under the brand name "THV: America's Home Improvement Company," today reported
financial results for the first quarter ending March 31, 2004.
First quarter 2004 revenues were $14.8 million, compared to year-ago quarterly
revenues of $16.2 million. The net loss attributable to common stockholders was
$1,503,939 or 16 cents per basic and diluted share. That compares to a net loss
related to common stockholders of $1,758,200 or 19 cent per basic and diluted
share for the first quarter of 2003.
"ThermoView's first quarter revenues declined compared to 2003," said Charles L.
Smith, CEO and President of ThermoView. Smith continued, "However, our first
quarter 2004 gross sales exceeded the same period for 2003. In addition, our
backlog (contracts to be installed) at the end of the quarter has also increased
from 2003 levels. This should prove to be positive as we may attempt to reach
our future projections with this increased install base."
Smith also stated that ThermoView has made significant progress in its efforts
to open two new model THV locations. Both locations are on schedule to open in
their expected June 2004 timeframes. "Our due diligence should pay off with
these new THV sites in Paducah, KY and Peoria, IL. We are excited at putting our
best practices to work and we will heavily market our presence in these
promising new locations," said Smith.
ThermoView's May 17 conference call and webcast
ThermoView will hold a webcast at 2:00 p.m. EDT on May 17, 2004 to allow
securities analysts and shareholders the opportunity to hear management discuss
the company's quarterly results. Live audio of the conference call can be
accessed from http://www.thv.com , or http://www.vcall.com/CEPage.asp?ID=88195 .
First time listeners should visit www.vcall.com in advance to download and
install any necessary audio software.
About ThermoView Industries, Inc.
ThermoView is a national company that designs, manufactures, markets and
installs high-quality replacement windows and doors as part of a full-service
array of home improvements for residential homeowners. ThermoView's common stock
is listed on the American Stock Exchange under the ticker symbol "THV."
Additional information on ThermoView Industries is available at
http://www.thv.com .
Safe harbor statement
Statements in this news release that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties.
Words such as "expect," "intends," "believes," "plans," "anticipates" and
"likely" also identify forward-looking statements. All forward-looking
statements are based on current facts and analyses. Actual results may differ
materially from those currently anticipated due to a number of factors
including, but not limited to our history of operating losses, anticipated
future losses, competition, future capital needs, the need for market
acceptance, dependence upon third parties, disruption of vital infrastructure,
general economic downturn and intellectual property rights. All forward-looking
statements are made pursuant to the Securities Litigation Reform Act of 1995.
Additional information on factors that may affect the business and financial
results of the Company can be found in filings of the Company with the
Securities and Exchange Commission.
ThermoView Industries, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
For the three months ended
March 31,
2003 2004
Revenues $16,193,013 $14,839,140
Cost of revenues earned 8,456,221 7,867,099
Gross profit 7,736,792 6,972,041
Selling, general and administrative expenses 8,396,181 7,480,599
Depreciation expense 214,101 212,598
Amortization expense 5,064 12,983
Loss from operations (878,554) (734,139)
Equity in earnings (loss) of joint venture (26,207) (3,335)
Interest expense (632,130) (768,651)
Interest income 9,764 5,563
Loss before income taxes (1,527,127) (1,500,562)
Income tax expense (benefit) (424) 3,377
Net loss (1,526,703) (1,503,939)
Less non-cash Series D and E preferred
stock dividends (231,497) -
Net loss attributable to
common stockholders $(1,758,200) $(1,503,939)
Basic and diluted loss per common share:
Net Loss attributable to common stockholders $(0.19) $(0.16)
Net loss attributable to common stockholders $(0.19) $(0.16)
Contacts:
David A. Anderson, Chief Financial Officer, ThermoView Industries, Inc.,
502-968-2020.