AMERICAN BUILDING CONTROL INC - 10-Q Quarterly Report

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 June 30, 2003


[ ]		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 0-9463

AMERICAN BUILDING CONTROL, INC.

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction		75-2626358 (I.R.S. Employer
Of incorporation or organization)		Identification No.)

1301 WATERS RIDGE DRIVE
LEWISVILLE, TEXAS		75057
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (972) 353-6458

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $.01 PAR VALUE

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 checkmark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [ ] No [X]

As of July 15, 2003, 14,148,388 shares of the Registrant’s Common Stock were outstanding.

TABLE OF CONTENTS


Forward Looking Statements
PART I
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
Index to Exhibits
EX-31.1 Certification of CEO Pursuant to Rule 302
EX-31.2 Certification of CFO Pursuant to Rule 302
EX-32.1 Certification of CEO Pursuant to Rule 906
EX-32.2 Certification of CFO Pursuant to Rule 906

AMERICAN BUILDING CONTROL, INC.
FORM 10-Q
TABLE OF CONTENTS


FORWARD LOOKING STATEMENTS	ii
PART I – FINANCIAL INFORMATION	1
ITEM 1: FINANCIAL STATEMENTS	1
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
ITEM 4: CONTROLS AND PROCEDURES	25
PART II – OTHER INFORMATION	26
ITEM 1: LEGAL PROCEEDINGS	26
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS	26
ITEM 3: DEFAULTS UPON SENIOR SECURITIES	26
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	26
ITEM 5: OTHER INFORMATION	27
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K	27
SIGNATURES	28
CERTIFICATIONS

Forward Looking Statements

Certain statements contained or incorporated in this quarterly report on Form 10-Q, which are not statements of historical fact, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward looking statements are made in good faith by American Building Control, Inc. (the “Company”) pursuant to the “safe harbor” provisions of the Reform Act. These statements may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from any future results, performance or achievements, whether expressed or implied. These risks, uncertainties and factors include the timely development and acceptance of new products and services, the impact of competitive pricing, fluctuations in operating results, the ability to introduce new products and services, technological changes, reliance on intellectual property and other risks. The objectives set forth in this Form 10-Q are subject to change due to global market and economic conditions beyond the control of the Company.

PART I

ITEM 1. FINANCIAL STATEMENTS

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)


		June 30,		December 31,
		2003		2002

ASSETS
Current Assets:
	Cash and cash equivalents	$	7,897	$	16,436
	Marketable securities		1,531		—
	Trade accounts receivable, net		4,895		4,955
	Inventories		3,780		4,357
	Receivable from Honeywell International, Inc. - current portion		3,600		3,600
	Prepaid expenses and other current assets		1,397		1,165
	Net assets of discontinued operations		194		1,833

Total current assets			23,294		32,346
Property and Equipment, net			9,729		10,518
Other Assets:
	Goodwill, net		5,228		5,332
	Other intangible assets, net		188		330
	Receivable from Honeywell International, Inc. - less current portion		1,800		1,800
	Other assets		283		290

Total assets		$	40,522	$	50,616

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

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)


			June 30,			December 31,
			2003			2002

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Trade accounts payable		$	2,906		$	3,201
	Accrued expenses			3,015			4,068
	Accrued compensation			1,458			1,556
	Royalty claim on assignment agreement			229			715
	Severance - current portion			1,075			792
	Other current liabilities			986			1,115
	Deferred income - current portion			624			1,038
	Net liabilities of discontinued operations			1,339			2,145

		Total current liabilities		11,632			14,630
Long-Term Liabilities
	Financing obligation			6,600			6,600
	Deferred income - less current portion			1,363			1,038
	Royalty claim on assignment agreement - less current portion			203			—
	Severance - less current portion			88			914

		Total long-term liabilities		8,254			8,552
Commitments and Contingencies				—			—
Stockholders’ Equity:
	Preferred stock, $5 par value, issuable in series; 2,000,000 shares authorized; Series A, 12% cumulative convertible; 195,351 shares authorized, issued and outstanding			977			977
	Common stock, $.01 par value; 50,000,000 shares authorized; 17,634,238 and 17,494,238 shares issued at June 30, 2003 and December 31, 2002, respectively			176			175
	Additional paid-in-capital			162,615			162,269
	Deferred stock compensation			(124	)		—
	Accumulated deficit			(104,392	)		(97,354	)
	Accumulated other comprehensive income			85			50
	Treasury stock, at cost (3,485,850 and 3,467,650 common shares at June 30, 2003 and December 31, 2002)			(38,701	)		(38,683	)

		Total stockholders’ equity		20,636			27,434

		Total liabilities and stockholders’ equity	$	40,522		$	50,616

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

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)


					Three months ended June 30,

					2003			2002

Net sales					$	9,847		$	11,861
Cost of sales (exclusive of depreciation shown seperately below)						7,387			8,558

			Gross profit			2,460			3,303
Other operating costs:
		Selling, general and administrative				5,459			5,268
		Depreciation and amortization				564			597

						6,023			5,865

			Operating loss			(3,563	)		(2,562	)
Other income (expense):
	Interest expense					(185	)		(838	)
	Interest income					29			11
	Foreign exchange gains					25			—
	Other, net					154			361

						23			(466	)

			Loss before income taxes and discontinued operations			(3,540	)		(3,028	)
Income tax benefit						—			84

			Loss from continuing operations			(3,540	)		(2,944	)
Loss from discontinued operations, net of tax expense of $32 in 2002						(782	)		(48	)

			Net loss			(4,322	)		(2,992	)
Dividend requirements on preferred stock						(29	)		(29	)

			Net loss allocable to common stockholders		$	(4,351	)	$	(3,021	)

Basic and diluted loss per share from:
			Continuing operations		$	(0.25	)	$	(0.21	)
			Discontinued operations			(0.06	)		(0.00	)

			Basic and diluted loss per share		$	(0.31	)	$	(0.21	)

			Number of common shares used in computations:
				Basic		14,149,199			14,046,588
				Diluted		14,149,199			14,046,588

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

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)


					Six months ended June 30,

					2003			2002

Net sales					$	21,242		$	21,632
Cost of sales (exclusive of depreciation shown seperately below)						15,159			15,427

			Gross profit			6,083			6,205
Other operating costs:
		Selling, general and administrative				10,333			9,617
		Depreciation and amortization				1,068			1,233

						11,401			10,850

			Operating loss			(5,318	)		(4,645	)
Other income (expense):
	Interest expense					(484	)		(1,638	)
	Interest income					48			13
	Foreign exchange gains					25			—
	Other, net					192			396

						(219	)		(1,229	)

Loss before income taxes, discontinued operations and cumulative effect of accounting change						(5,537	)		(5,874	)
Income tax benefit						—			84

			Loss from continuing operations			(5,537	)		(5,790	)
			Income (loss) from discontinued operations, net of tax benefit of $397 in 2002			(1,446	)		1,572

			Loss before cumulative effect of accounting change			(6,983	)		(4,218	)
Cumulative effect of accounting change:
	Cumulative effect of accounting change - continuing operations					—			(14,762	)
	Cumulative effect of accounting change - discontinued operations					—			(11,353	)

			Net loss			(6,983	)		(30,333	)
Dividend requirements on preferred stock						(58	)		(58	)

			Net loss allocable to common stockholders		$	(7,041	)	$	(30,391	)

Basic and diluted earnings (loss) per share from:
			Continuing operations		$	(0.40	)	$	(0.42	)
			Discontinued operations			(0.10	)		0.11
			Cumulative effect of accounting change - continuing operations			—			(1.05	)
			Cumulative effect of accounting change - discontinued operations			—			(0.81	)

			Basic loss per share		$	(0.50	)	$	(2.17	)

			Number of common shares used in computations:
				Basic		14,084,844			14,046,588
				Diluted		14,084,844			14,046,588

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

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


		Six months ended June 30,

		2003			2002

Operating Activities:
Net loss			($6,983	)		($30,333	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Cumulative effect of accounting change		—			26,115
	Loss (gain) on disposal of fixed assets		156			(12	)
	Deferred compensation expense		21			—
	Other compensation expense		202			—
	Amortization of deferred income		238			—
	Depreciation and amortization		1,118			1,708
	Provision for losses on accounts receivable		274			11
	Non-cash charges reversed		(341	)		—
	Mark-to-market interest rate swap		83			—
Changes in operating assets and liabilities:
	Trade accounts receivable		(202	)		(726	)
	Inventories		597			(784	)
	Prepaid and other current assets		(8	)		575
	Income taxes		—			6,035
	Other assets		149			(46	)
	Trade accounts payable		(328	)		7
	Accrued and other current liabilities		(2,768	)		1,384

	Net cash provided by (used in) operating activities		(7,792	)		3,934

Investing Activities:
Purchases of property and equipment			(567	)		(715	)
Proceeds received from sales of property and equipment			1,462			—
Purchases of marketable securities			(1,531	)		—
Earnout payments on prior acquisitions			(73	)		(237	)

	Net cash used in investing activities		(709	)		(952	)

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

AMERICAN BUILDING CONTROL, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


		Six months ended June 30,

		2003			2002

Financing Activities:
Net repayments on revolving line of credit			—			(4,283	)
Repayments on other debt			—			(177	)
Purchases of treasury stock			(18	)		—
Payment of preferred stock dividends			(58	)		(58	)

	Net cash used in financing activities		(76	)		(4,518	)

Net decrease in cash and cash equivalents

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