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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
(Mark One)
   
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended June 30, 2002
 
or
 
o
   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 333-54122

Atrium Corporation

(Exact name of registrant as specified in its charter)
     
Delaware   75-2814598
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification Number)

1341 W. Mockingbird Lane, Suite 1200W, Dallas, Texas 75247, (214) 630-5757

(Address of principal executive offices, including zip code and telephone number, including area code)

     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 þ          No o

TABLE OF CONTENTS

CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
ATRIUM CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE LOSS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s discussion and analysis of financial condition and results of operations
Item 3. Quantitative and qualitative disclosure about market risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EX-99.1 Certification Pursuant to 18 USC Sec. 1350
EX-99.2 Certification Pursuant to 18 USC Sec. 1350

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ATRIUM CORPORATION

FORM 10-Q

Quarter Ended June 30, 2002

INDEX

             
Page
PART I
FINANCIAL INFORMATION
Item 1.
  Consolidated Financial Statements (Unaudited):        
    Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001     2  
    Consolidated Statements of Operations for the Three Months Ended June 30, 2002 and 2001     3  
    Consolidated Statements of Operations for the Six Months Ended June 30, 2002 and 2001     4  
    Consolidated Statement of Stockholders’ Equity and Other Comprehensive Loss for the Six Months Ended June 30, 2002     5  
    Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001     6  
    Notes to Consolidated Financial Statements     7-12  
Item 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     13-16  
Item 3.
  Quantitative and Qualitative Disclosures about Market Risk     17  
PART II
OTHER INFORMATION
Item 1.
  Legal Proceedings     17  
Items 2, 3, 4 and 5 are not applicable        
Item 6.
  Exhibits and Reports on Form 8-K     17  
Signatures     18  

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ATRIUM CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)
                     
June 30, December 31,
2002 2001
(Unaudited)
ASSETS
CURRENT ASSETS:
               
 
Cash and cash equivalents
  $ 2,098     $ 1,247  
 
Accounts receivable, net
    3,842       3,895  
 
Retained interest in sold accounts receivable
    29,561       14,373  
 
Inventories
    37,745       36,737  
 
Prepaid expenses and other current assets
    4,356       4,819  
 
Deferred tax asset
    1,298       1,106  
     
     
 
   
Total current assets
    78,900       62,177  
PROPERTY, PLANT AND EQUIPMENT, net
    56,715       55,755  
GOODWILL, net
    345,239       345,239  
DEFERRED FINANCING COSTS, net
    16,295       17,982  
OTHER ASSETS, net
    7,336       7,366  
     
     
 
   
Total assets
  $ 504,485     $ 488,519  
     
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
CURRENT LIABILITIES:
               
 
Current portion of notes payable
  $ 5,493     $ 6,191  
 
Accounts payable
    33,102       18,539  
 
Accrued liabilities
    26,981       29,695  
     
     
 
   
Total current liabilities
    65,576       54,425  
     
     
 
LONG-TERM LIABILITIES:
               
 
Notes payable
    339,804       333,760  
 
Deferred tax liability
    1,298       1,106  
 
Other long-term liabilities
    542       707  
 
Swaps contract liability
    5,443       6,821  
     
     
 
   
Total long-term liabilities
    347,087       342,394  
     
     
 
   
Total liabilities
    412,663       396,819  
     
     
 
COMMON STOCK SUBJECT TO MANDATORY REDEMPTION
    15,604       15,604  
     
     
 
COMMITMENTS AND CONTINGENCIES
               
STOCKHOLDERS’ EQUITY:
               
 
Common stock $.01 par value, 245,000 shares authorized, 170,444 and 170,399 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively
    2       2  
 
Paid-in capital
    179,403       179,526  
 
Accumulated deficit
    (97,077 )     (95,163 )
 
Accumulated other comprehensive loss
    (6,110 )     (8,269 )
     
     
 
   
Total stockholders’ equity
    76,218       76,096  
     
     
 
   
Total liabilities and stockholders’ equity
  $ 504,485     $ 488,519  
     
     
 

The accompanying notes are an integral part of the consolidated financial statements.

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ATRIUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)
                   
2002 2001
NET SALES
  $ 148,181     $ 141,570  
COST OF GOODS SOLD
    98,938       97,726  
     
     
 
Gross profit
    49,243       43,844  
     
     
 
OPERATING EXPENSES:
               
Selling, delivery, general and administrative expenses (excluding securitization, stock compensation and amortization expense)
    30,959       27,214  
 
Securitization expense
    298       —  
 
Stock compensation expense
    158       568  
 
Amortization expense
    826       3,598  
     
     
 
SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES
    32,241       31,380  
Special charge
    3,948       139  
     
     
 
      36,189       31,519  
     
     
 
 
Income from operations
    13,054       12,325  
INTEREST EXPENSE
    11,295       11,400  
OTHER INCOME (EXPENSE), net
    181       (83 )
     
     
 
Income before income taxes
    1,940       842  
PROVISION FOR INCOME TAXES
    74       296  
     
     
 
NET INCOME
  $ 1,866     $ 546  
     
     
 

The accompanying notes are an integral part of the consolidated financial statements.

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ATRIUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Six Months Ended June 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)
                   
2002 2001
NET SALES
  $ 261,470     $ 252,193  
COST OF GOODS SOLD
    177,180       173,800  
     
     
 
Gross profit
    84,290       78,393  
     
     
 
OPERATING EXPENSES:
               
Selling, delivery, general and administrative expenses (excluding securitization, stock compensation and amortization expense)
    57,587       51,910  
 
Securitization expense
    554       —  
 
Stock compensation expense
    233       713  
 
Amortization expense
    1,630       7,133  
     
     
 
SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES
    60,004       59,756  
Special charge
    3,948       139  
     
     
 
      63,952       59,895  
     
     
 
 
Income from operations
    20,338       18,498  
INTEREST EXPENSE
    22,419       23,196  
OTHER INCOME, net
    397       56  
     
     
 
Loss before income taxes
    (1,684 )     (4,642 )
PROVISION FOR INCOME TAXES
    230       510  
     
     
 
NET LOSS
  $ (1,914 )   $ (5,152 )
     
     
 

The accompanying notes are an integral part of the consolidated financial statements.

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ATRIUM CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

AND OTHER COMPREHENSIVE LOSS
For the Six Months Ended June 30, 2002
(Dollars in thousands, except share amounts)
(Unaudited)
                                                   
Retained Accumulated
Class A Earnings Other Total
Paid-in (Accumulated Comprehensive Stockholders’
Shares Amount Capital Deficit) Income (Loss) Equity
Balance, December 31, 2001
    170,399     $ 2     $ 179,526     $ (95,163 )   $ (8,269 )   $ 76,096  
Issuance of Class A Shares
    70       —       1       —       —       1  
Repurchase of Class A Shares
    (25 )     —       (25 )     —       —       (25 )
Repurchase of stock options
    —       —       (99 )     —       —       (99 )
Comprehensive income (loss):
                                               
 
Net loss
    —       —       —       (1,914 )     —       (1,914 )
 
Net fair market value adjustment of derivative instruments, net of tax of $0
    —       —       —       —       2,159       2,159  
     
     
     
     
     
     
 
Total comprehensive income (loss)
    —       —       —       (1,914 )     2,159       245  
     
     
     
     
     
     
 
Balance, June 30, 2002
    170,444     $ 2     $ 179,403     $ (97,077 )   $ (6,110 )   $ 76,218  
     
     
     
     
     
     
 

The accompanying notes are an integral part of the consolidated financial statements.

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ATRIUM CORPORATION

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
(Dollars in thousands)
(Unaudited)
                       
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
               
 
Net loss
  $ (1,914 )   $ (5,152 )
 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
               
 
Depreciation and amortization
    7,107       11,861  
 
Non-cash stock compensation expense
    150       (25 )
 
Amortization of deferred financing costs
    1,763       1,473  
 
Accretion of discount on senior subordinated notes
    100       89  
 
Accretion of discount on senior payment-in-kind notes
    4,187       3,489  
 
Accretion of gain from interest rate collars
    —       (164 )
 
Amortization of gain from sale/leaseback of building
    (26 )     (3 )
 
Provision for bad debts
    496       444  
 
Special charge
    1,176       —  
 
Gain on sales of assets
    (13 )     (11 )
 
Changes in assets and liabilities:
               
   
Accounts receivable
    (16,630 )     (13,818 )
   
Sale of accounts receivable
    1,000       —  
   
Inventories
    (1,008 )     (241 )
   
Prepaid expenses and other current assets
    389       (336 )
   
Accounts payable
    12,608       5,483  
   
Accrued liabilities
    (3,377 )     (5,488 )
     
     
 
     
Net cash provided by (used in) operating activities
    6,008       (2,399 )
     
     
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
 
Purchases of property, plant and equipment
    (6,505 )     (8,669 )
 
Proceeds from sales of assets
    57       42  
 
Other assets
    (1,600 )     (2,384 )
     
     
 
     
Net cash used in investing activities
    (8,048 )     (11,011 )
     
     
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
 
Payments of notes payable and capital lease obligations
    (14 )     (152 )
 
Net borrowings under revolving credit facility
    4,500       1,500  
 
Proceeds from the issuance of common stock
    1       10,050  
 
Repurchase of stock options and common stock
    (124 )        
 
Capitalized deferred financing costs
    —       (1,366 )
 
Scheduled principal payments on term notes
    (2,744 )     (2,980 )
 
Additional principal payments on term notes
    (684 )     —  
 
Checks drawn in excess of bank balances
    1,956       4,149  
     
     
 
     
Net cash provided by financing activities
    2,891       11,201