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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     
(Mark One)    
(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
     
    For the quarterly period ended September 30, 2002
     
    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: 333-54122

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 (X)    No (  )

 

 

ATRIUM CORPORATION

FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002

INDEX

                 
            Page
           
PART I.
FINANCIAL INFORMATION
       
      2  
      3  
      4  
      5  
      6  
      7-12  
    13-17  
    17  
    17  
    18  
 
Items 2, 3, 4 and 5 are not applicable
        
    18  
    19  
    20-21  

1

 

ATRIUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)

                     
        September 30,   December 31,
        2002   2001
       
 
        (unaudited)        
ASSETS
CURRENT ASSETS:
                
 
Cash and cash equivalents
   $ 5,481     $ 1,247  
 
Accounts receivable, net
     3,368       3,895  
 
Retained interest in sold accounts receivable
     31,025       14,373  
 
Inventories
     38,033       36,737  
 
Prepaid expenses and other current assets
     4,256       4,819  
 
Deferred tax asset
     1,327       1,106  
 
    
     
 
   
Total current assets
     83,490       62,177  
PROPERTY, PLANT AND EQUIPMENT, net
     57,394       55,755  
GOODWILL, net
     345,239       345,239  
DEFERRED FINANCING COSTS, net
     15,450       17,982  
OTHER ASSETS, net
     7,825       7,366  
 
    
     
 
   
Total assets
   $ 509,398     $ 488,519  
 
    
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
                
 
Current portion of notes payable
   $ 5,489     $ 6,191  
 
Accounts payable
     31,496       18,539  
 
Accrued liabilities
     31,124       29,695  
 
    
     
 
   
Total current liabilities
     68,109       54,425  
 
    
     
 
LONG-TERM LIABILITIES:
                
 
Notes payable
     336,310       333,760  
 
Deferred tax liability
     1,327       1,106  
 
Other long-term liabilities
     523       707  
 
Swaps contract liability
     5,481       6,821  
 
    
     
 
   
Total long-term liabilities
     343,641       342,394  
 
    
     
 
   
Total liabilities
     411,750       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 September 30, 2002 and December 31, 2001, respectively
     2       2  
 
Paid-in capital
     179,403       179,526  
 
Accumulated deficit
     (91,606 )     (95,163 )
 
Accumulated other comprehensive loss
     (5,755 )     (8,269 )
 
    
     
 
   
Total stockholders’ equity
     82,044       76,096  
 
    
     
 
   
Total liabilities and stockholders’ equity
   $ 509,398     $ 488,519  
 
    
     
 

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

2

 

ATRIUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2002 and 2001
(Dollars in thousands)
(unaudited)

                   
      2002   2001
     
 
NET SALES
   $ 144,763     $ 138,514  
COST OF GOODS SOLD
     95,977       93,643  
 
    
     
 
Gross profit
     48,786       44,871  
 
    
     
 
OPERATING EXPENSES:
                
Selling, delivery, general and administrative expenses (excluding securitization, stock compensation and amortization expense)
     30,313       28,693  
 
Securitization expense
     325       1,165  
 
Stock compensation expense
     75       (207 )
 
Amortization expense
     845       3,619  
 
    
     
 
SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES
     31,558       33,270  
Special charge
     —       136  
 
    
     
 
 
     31,558       33,406  
 
    
     
 
 
Income from operations
     17,228       11,465  
INTEREST EXPENSE
     11,377       11,421  
OTHER EXPENSE, net
     132       47  
 
    
     
 
Income (loss) before income taxes
     5,719       (3 )
PROVISION FOR INCOME TAXES
     248       389  
 
    
     
 
Income (loss) before extraordinary charge
     5,471       (392 )
EXTRAORDINARY CHARGE ON EARLY RETIREMENT OF DEBT (net of income tax benefit of $0 in 2001)
     —       837  
 
    
     
 
NET INCOME (LOSS)
   $ 5,471     $ (1,229 )
 
    
     
 

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

3

 

ATRIUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2002 and 2001
(Dollars in thousands)
(unaudited)

                   
      2002   2001
     
 
NET SALES
   $ 406,233     $ 390,707  
COST OF GOODS SOLD
     273,157       267,443  
 
    
     
 
Gross profit
     133,076       123,264  
 
    
     
 
OPERATING EXPENSES:
                
Selling, delivery, general and administrative expenses (excluding securitization, stock compensation and amortization expense)
     87,900       80,603  
 
Securitization expense
     879       1,165  
 
Stock compensation expense
     308       506  
 
Amortization expense
     2,475       10,752  
 
    
     
 
SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES
     91,562       93,026  
Special charge
     3,948       275  
 
    
     
 
 
     95,510       93,301  
 
    
     
 
 
Income from operations
     37,566       29,963  
INTEREST EXPENSE
     33,796       34,617  
OTHER INCOME, net
     265       9  
 
    
     
 
Income (loss) before income taxes
     4,035       (4,645 )
PROVISION FOR INCOME TAXES
     478       899  
 
    
     
 
Income (loss) before extraordinary charge
     3,557       (5,544 )
EXTRAORDINARY CHARGE ON EARLY RETIREMENT OF DEBT (net of income tax benefit of $0 in 2001)
     —       837  
 
    
     
 
NET INCOME (LOSS)
   $ 3,557     $ (6,381 )
 
    
     
 

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

4

 

ATRIUM CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE LOSS
For the Nine Months Ended September 30, 2002
(Dollars in thousands, except share amounts)
(unaudited)

                                                   
                                      Accumulated        
      Class A                   Other   Total
     
  Paid-in   Accumulated   Comprehensive   Stockholders'
      Shares   Amount   Capital   Deficit   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:
                                                
 
Net income
     —       —       —       3,557       —       3,557  
 
Net fair market value adjustment of derivative instruments, net of tax of $0
     —       —       —       —       2,514       2,514  
 
    
     
     
     
     
     
 
Total comprehensive income
     —       —       —       3,557       2,514       6,071  
 
    
     
     
     
     
     
 
Balance, September 30, 2002
     170,444     $ 2     $ 179,403     $ (91,606 )   $ (5,755 )   $ 82,044  
 
    
     
     
     
     
     
 

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

5

 

ATRIUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2002 and 2001
(Dollars in thousands)
(unaudited)

                       
          2002   2001
         
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                
 
Net income (loss)
   $ 3,557     $ (6,381 )
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
 
Extraordinary charge, net of income tax benefit
     —       837  
 
Depreciation and amortization
     10,965       18,099  
 
Non-cash stock compensation expense
     225       —  
 
Amortization of deferred financing costs
     2,533       2,246  
 
Accretion of discount on senior subordinated notes
     152       137  
 
Accretion of discount on senior payment-in-kind notes
     6,512       5,314  
 
Accretion of gain from interest rate collars
     —       (246 )
 
Amortization of gain from sale-leaseback of building
     (32 )     (5 )
 
Provision for bad debts
     —       18  
 
Loss on sale of receivables
     664       909  
 
Special charge
     456       —  
 
Loss on sales of assets
     1       17  
 
Changes in assets and liabilities:
                
   
Accounts receivable
     528       1,183  
   
Retained interest in sold accounts receivable
     (12,915 )     (11,847 )
   
Sale of accounts receivable
     (4,400 )     27,800  
   
Inventories
     (1,296 )     (2,180 )
   
Prepaid expenses and other current assets
     563       (442 )
   
Accounts payable
     8,271       2,469  
   
Accrued liabilities and other long-term liabilities
     1,804       (2,983 )
 
    
     
 
     
Net cash provided by operating activities
     17,588       34,945  
 
    
     
 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
 
Purchases of property, plant and equipment
     (10,362 )     (12,100 )
 
Proceeds from sales of assets
     194       101  
 
Other assets
     (2,933 )     (1,648 )
 
    
     
 
     
Net cash used in investing activities
     (13,101 )     (13,647 )
 
    
     
 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
 
Payments of notes payable and capital lease obligations
     (18 )     (230 )
 
Net payments under revolving credit facility
     —       (5,000 )
 
Proceeds from the issuance of common stock
     1       10,050  
 
Repurchase of stock options and common stock
     (124 )     (897 )
 
Capitalized deferred financing costs
     —       (1,514 )
 
Scheduled principal payments on term notes