10-Q 1 bmcaq.txt UNITED STATES 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, 2001 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 33-81808 BUILDING MATERIALS CORPORATION OF AMERICA (Exact name of registrant as specified in its charter) Delaware 22-3276290 (State of Incorporation) (I. R. S. Employer Identification No.) 1361 Alps Road, Wayne, New Jersey 07470 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (973) 628-3000 See table of additional registrants. 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 / / As of November 10, 2001, 1,015,010 shares of Class A Common Stock, $.001 par value, and 15,000 shares of Class B Common Stock, $.001 par value, of Building Materials Corporation of America were outstanding. There is no trading market for the common stock of Building Materials Corporation of America. As of November 10, 2001, each of the additional registrants had the number of shares outstanding which is shown on the table below. No shares were held by non-affiliates. ADDITIONAL REGISTRANTS

2 Part I - FINANCIAL INFORMATION Item 1 - FINANCIAL STATEMENTS BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Third Quarter Ended Nine Months Ended ------------------- ----------------- Oct. 1, Sept. 30, Oct. 1, Sept. 30, 2000 2001 2000 2001 -------- -------- ------- -------- (Thousands) Net sales ............................. $330,882 $376,315 $946,471 $996,201 -------- -------- -------- -------- Costs and expenses: Cost of products sold ............... 242,460 256,778 687,117 709,914 Selling, general and administrative.. 65,843 75,399 192,313 199,369 Goodwill amortization ............... 506 507 1,530 1,517 Gain on sale of assets............... (17,505) - (17,505) - -------- -------- -------- -------- Total costs and expenses........... 291,304 332,684 863,455 910,800 -------- -------- -------- -------- Operating income ...................... 39,578 43,631 83,016 85,401 Interest expense ...................... (13,369) (15,067) (38,348) (45,670) Other expense, net..................... (2,673) (1,799) (6,086) (5,266) -------- -------- -------- -------- Income before income taxes and extraordinary losses ............ 23,536 26,765 38,582 34,465 Income taxes......... ................. (8,708) (9,903) (14,275) (12,752) -------- -------- -------- -------- Income before extraordinary losses .... 14,828 16,862 24,307 21,713 Extraordinary losses, net of income tax benefits of $194................. (330) - (330) - -------- -------- -------- -------- Net income............................. $ 14,498 $ 16,862 $ 23,977 $ 21,713 ======== ======== ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED BALANCE SHEETS September 30, December 31, 2001 2000 (Unaudited) ------------ --------- ASSETS (Thousands) Current Assets: Cash and cash equivalents......................... $ 82,747 $ 51,652 Accounts receivable, trade, net................... 19,474 28,566 Accounts receivable, other........................ 51,843 121,341 Tax receivable from parent corporations........... 1,500 - Inventories....................................... 101,702 113,927 Other current assets.............................. 3,925 4,474 --------- --------- Total Current Assets............................ 261,191 319,960 Property, plant and equipment, net.................. 362,464 347,209 Excess of cost over net assets of businesses acquired, net .................................... 65,317 63,800 Deferred income tax benefits........................ 42,897 30,970 Tax receivable from parent corporations............. 7,500 9,000 Other noncurrent assets............................. 31,800 31,865 --------- --------- Total Assets........................................ $ 771,169 $ 802,804 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt............ $ 5,908 $ 5,356 Accounts payable.................................. 57,520 68,874 Payable to related parties........................ 10,052 15,777 Accrued liabilities............................... 42,888 49,157 Reserve for product warranty claims............... 14,900 14,900 -------- --------- Total Current Liabilities....................... 131,268 154,064 --------- --------- Long-term debt less current maturities.............. 674,698 669,094 --------- --------- Reserve for product warranty claims................. 28,756 22,956 --------- --------- Other liabilities................................... 14,312 14,741 --------- --------- Stockholders' Equity (Deficit): Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per share; 400,000 shares authorized; no shares issued..... - - Class A Common Stock, $.001 par value per share; 1,300,000 shares authorized; 1,015,514 and 1,015,010 shares, issued and outstanding, respectively ................................... 1 1 Class B Common Stock, $.001 par value per share; 100,000 shares authorized; 15,000 shares issued and outstanding ......................... - - Accumulated deficit............................... (77,866) (58,052) --------- --------- Total Stockholders' Equity (Deficit)............ (77,865) (58,051) --------- --------- Total Liabilities and Stockholders' Equity (Deficit)................................. $ 771,169 $ 802,804 ========= ========= The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended ------------------- Oct. 1, Sept.30, 2000 2001 -------- -------- (Thousands) Cash and cash equivalents, beginning of period........... $ 55,952 $ 82,747 -------- -------- Cash provided by (used in) operating activities: Net income ............................................ 23,977 21,713 Adjustments to reconcile net income to net cash used in operating activities: Extraordinary losses ............................. 330 - Gain on sale of assets ............................ (17,505) - Depreciation ...................................... 27,076 26,869 Goodwill and other amortization.................... 2,164 2,801 Deferred income taxes.............................. 4,713 11,927 Noncash interest charges........................... 1,901 3,337 Increase in working capital items...................... (51,837) (123,740) Decrease in reserve for product warranty claims........ (4,851) (5,800) Purchases of trading securities........................ (794) - Proceeds from sales of trading securities.............. 1,860 - Change in net receivable from/payable to related parties/parent corporations.......................... 493 5,725 Other, net............................................. 4,276 (2,404) -------- -------- Net cash used in operating activities.................... (8,197) (59,572) -------- -------- Cash provided by (used in) investing activities: Capital expenditures................................... (41,648) (11,506) Proceeds from sale of assets........................... 31,702 - Purchases of available-for-sale securities............. (850) - Proceeds from sales of available-for-sale securities... 4,506 - Proceeds from sales of other short-term investments.... 1,590 - -------- -------- Net cash used in investing activities.................... (4,700) (11,506) -------- -------- Cash provided by (used in) financing activities: Proceeds from sale of accounts receivable.............. 35,995 49,999 Proceeds from issuance of long-term debt............... 34,044 - Increase (decrease)in borrowings under revolving credit facilities.................................... 70,000 (2,000) Repayments of long-term debt........................... (35,564) (4,745) Distributions to parent corporations................... (47,029) (1,899) Net repurchase of common stock......................... (1,180) - Financing fees and expenses............................ (6,701) (1,372) -------- -------- Net cash provided by financing activities................ 49,565 39,983 -------- -------- Net change in cash and cash equivalents.................. 36,668 (31,095) -------- -------- Cash and cash equivalents, end of period................. $ 92,620 $ 51,652 ======== ======== Supplemental Cash Flow Information: Cash paid during the period for: Interest (net of amount capitalized)................. $ 34,279 $ 45,319 Income taxes......................................... 9,527 855 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Building Materials Corporation of America (the "Company" or the "Parent Company") was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation ("BHC"), which is a wholly-owned subsidiary of G-I Holdings Inc. ("G-I Holdings"). The consolidated financial statements of the Company reflect, in the opinion of management, all adjustments necessary to present fairly the financial position of the Company at September 30, 2001, and the results of operations and cash flows for the periods ended October 1, 2000 and September 30, 2001. All adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the "Form 10-K"). Certain reclassifications have been made to conform to current year presentation. Note 1. Comprehensive Income

Note 2. Inventories Inventories consist of the following: December 31, Sept. 30, 2000 2001 -------- -------- (Thousands) Finished goods .................... $ 61,606 $ 79,133 Work-in-process ................... 16,938 7,411 Raw materials and supplies ........ 27,743 31,968 -------- -------- Total ............................. 106,287 118,512 Less LIFO reserve ................. (4,585) (4,585) -------- -------- Inventories ....................... $101,702 $113,927 ======== ======== 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3. Contingencies Asbestos Litigation Against G-I Holdings In connection with its formation, the Company contractually assumed and agreed to pay the first $204.4 million of liabilities for asbestos-related bodily injury claims relating to the inhalation of asbestos fiber ("Asbestos Claims") of its parent, G-I Holdings. As of March 30, 1997, the Company had paid all of its assumed asbestos-related liabilities. In January 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to its Asbestos Claims. This proceeding is in a preliminary stage. Claimants in the G-I Holdings bankruptcy, including judgment creditors, might seek to satisfy their claims by asking the bankruptcy court to require the sale of G-I Holdings' assets, including its holdings of BHC's common stock and its indirect holdings of the Company's common stock. Such action could result in a change of control of the Company. In addition, those claimants may seek to file Asbestos Claims against the Company (with 1,935 alleged Asbestos Claims pending against the Company as of September 30, 2001). The Company believes that it will not sustain any liability in connection with these or any other asbestos-related claims. Furthermore, on February 2, 2001, the United States Bankruptcy Court for the District of New Jersey issued a temporary restraining order enjoining any existing or future claimant from bringing Asbestos Claims against the Company. On June 22, 2001, following a hearing, the Bankruptcy Court converted the temporary restraints into a preliminary injunction, which is expected to remain in effect pending confirmation of a Chapter 11 plan of reorganization for the G-I Holdings estate. On February 7, 2001, G-I Holdings filed a defendant class action in the United States Bankruptcy Court for the District of New Jersey seeking a declaratory judgment that the Company has no successor liability for Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I Holdings. This action is in a preliminary stage and no trial date has been set by the court. As a result, it is not possible to predict the outcome of this litigation. While the Company cannot predict whether any additional Asbestos Claims will be asserted against it, or the outcome of any litigation relating to those claims, the Company believes that it has meritorious defenses to any claim that it has asbestos-related liability, although there can be no assurances in this regard. On February 8, 2001, a creditors committee established in G-I Holdings' bankruptcy case filed a complaint in the United States Bankruptcy Court for the District of New Jersey against G-I Holdings and the Company. The complaint requests substantive consolidation of the Company with G-I Holdings or an order directing G-I Holdings to cause the Company to file for bankruptcy protection. The Company and G-I Holdings intend to vigorously defend the lawsuit. The Company believes that no basis exists for the court to grant the relief requested. The plaintiffs also filed for interim relief absent the granting of their requested relief described above. On March 21, 2001, the Bankruptcy Court refused to grant the requested interim relief. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3. Contingencies (Continued) For a further discussion with respect to the history of the foregoing litigation and asbestos-related matters, see Item 3,"Legal Proceedings," and Notes 3, 11 and 16 to Consolidated Financial Statements contained in the Company's Form 10-K. Environmental Litigation The Company, together with other companies, is a party to a variety of proceedings and lawsuits involving environmental matters ("Environmental Claims"), in which recovery is sought for the cost of cleanup of contaminated sites, a number of which Environmental Claims are in the early stages or have been dormant for protracted periods. At most sites, the Company anticipates that liability will be apportioned among the companies found to be responsible for the presence of hazardous substances at the site. The Company believes that the ultimate disposition of such matters will not, individually or in the aggregate, have a material adverse effect on the liquidity, financial position or results of operations of the Company. For further information regarding environmental matters and other litigation, reference is made to Item 3, "Legal Proceedings" contained in the Company's Form 10-K. Tax Claim Against G-I Holdings The Company and certain of its subsidiaries were members of the consolidated group ("the G-I Holdings Group") for Federal income tax purposes that included G-I Holdings in certain prior years and, accordingly, would be severally liable for any tax liability of the G-I Holdings Group in respect of those prior years. On September 15, 1997, G-I Holdings received a notice from the Internal Revenue Service (the "IRS") of a deficiency in the amount of $84.4 million (after taking into account the use of net operating losses and foreign tax credits otherwise available for use in later years) in connection with the formation in 1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the"surfactants partnership"), a partnership in which G-I Holdings held an interest. G-I Holdings has advised the Company that it believes that it will prevail in the tax matter arising out of the surfactants partnership, although there can be no assurance in this regard. The Company believes that the ultimate disposition of this matter will not have a material adverse effect on its business, financial position or results of operations. On September 21, 2001, the IRS filed a proof of claim with respect to such deficiency against G-I Holdings in the G-I Holdings bankruptcy. If such proof of claim is sustained, the Company and/or certain of the Company's subsidiaries together with G-I Holdings and several current and former subsidiaries of G-I Holdings, would be severally liable for a portion of such taxes and interest. If the IRS were to prevail for the years in which the Company and/or certain of its 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3. Contingencies (Continued) subsidiaries were part of the G-I Holdings Group, the Company would be severally liable for approximately $40 million in taxes plus interest, although this calculation is subject to uncertainty depending upon various factors including G-I Holdings' ability to satisfy its tax liabilities and the application of tax credits and deductions. For the possible consequences to the Company of the failure of G-I Holdings to satisfy this liability and other information relating to G-I Holdings, see "Asbestos Litigation Against G-I Holdings" above. Note 4. New Accounting Standards On June 30, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and eliminates the pooling method of accounting. SFAS No. 141 will not have an impact on the Company's business since the Company has historically accounted for all business combinations using the purchase method of accounting. With the adoption of SFAS No. 142, effective January 1, 2002, goodwill will no longer be subject to amortization over its estimated useful life. However, goodwill will be subject to at least an annual assessment for impairment and more frequently if circumstances indicate a possible impairment. Companies must perform a fair-value-based goodwill impairment test. In addition, under SFAS No. 142, an acquired intangible asset should be separately recognized if the benefit of the intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged. Intangible assets will be amortized over their useful lives. Early adoption of SFAS No. 142 is not permitted. On an annualized basis, effective January 1, 2002, the Company's net income will increase by approximately $1.3 million, unless any impairment charges are necessary. Note 5. Guarantor Financial Information All of the Company's subsidiaries, other than BMCA Receivables Corporation, are guarantors under the Company's $100 million secured bank credit facility, the amended and restated $110 million secured bank credit facility, the 10 1/2% Senior Notes due 2003, the 7 3/4% Senior Notes due 2005, the 8 5/8% Senior Notes due 2006, the 8% Senior Notes due 2007 (the "2007 Notes"), and the 8% Senior Notes due 2008. These guarantees are full, unconditional and joint and several. In addition, Building Materials Manufacturing Corporation ("BMMC") a wholly-owned subsidiary of the Company, is a co-obligor on the 2007 Notes. The Company and BMMC entered into license agreements, effective January 1, 1999, for the right to use intellectual property, including patents, trademarks, know-how, and franchise rights owned by Building Materials Investment Corporation, a wholly-owned subsidiary of the Company, for a license fee stated as a percentage of net sales. These license agreements are for a period of one year and are subject to automatic renewal unless either party 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 5. Guarantor Financial Information (Continued) terminates with 60 days written notice. Also, effective January 1, 1999, BMMC sells all finished goods to the Company at a manufacturing profit. In January 2001, certain subsidiaries of the Company were merged into BMMC, and accordingly, certain reclassifications were made to the guarantor financial statements to conform with current period presentations. Presented below is condensed consolidating financial information for the Company, the guarantor subsidiaries and the non-guarantor subsidiary prepared on a basis which retroactively reflects the formation of such companies for all periods presented. This financial information should be read in conjunction with the Consolidated Financial Statements and other notes related thereto. Separate financial information for the Company's guarantor subsidiaries and non-guarantor subsidiary is not included herein because management has determined that such information is not material to investors. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Statement of Income Third Quarter Ended October 1, 2000 (Thousands) (Unaudited)

11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Statement of Income Third Quarter Ended September 30, 2001 (Thousands) (Unaudited)

12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Statement of Income Nine Months Ended October 1, 2000 (Thousands) (Unaudited)

13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Statement of Income Nine Months Ended September 30, 2001 (Thousands) (Unaudited)

14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Balance Sheet December 31, 2000 (Thousands)

15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Balance Sheet September 30, 2001 (Thousands) (Unaudited)

16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Statement of Cash Flows Nine Months Ended October 1, 2000 (Thousands) (Unaudited)

17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5. Guarantor Financial Information - (Continued) Building Materials Corporation of America Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2001 (Thousands) (Unaudited)

18 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Third Quarter 2001 Compared With Third Quarter 2000 The Company recorded third quarter net income of $16.9 million compared with net income of $14.5 million in the third quarter of 2000. Net income for the third quarter of 2000 included a one-time after tax gain of $11.0 million ($17.5 million pre-tax) from the sale of certain assets of the Security Products business of LL Building Products Inc. and an after-tax extraordinary loss of $0.3 million. Excluding the one-time gain from the sale of assets and the extraordinary loss, net income would have been $3.8 million in 2000. The increase in net earnings was primarily the result of higher operating income and lower other expenses, partially offset by higher interest expense. The Company's net sales for the third quarter of 2001 were $376.3 million, representing an increase of $45.4 million or 13.7% from last year's third quarter net sales of $330.9 million, with the increase primarily due to net sales gains in steep slope roofing products, partially offset by decreased sales in low slope roofing products and by the sale of the Security Products business of LL Building Products Inc., which was sold in September 2000. Excluding the net sales of the Security Products business in the third quarter of 2000, net sales in the third quarter of 2001, on a comparable basis, were higher by 15.9%. The increase in net sales of steep slope roofing products reflected higher unit volumes and average selling prices, while the decline in net sales of low slope roofing products were primarily attributable to lower volumes. Operating income in the third quarter of 2001 was $43.6 million compared with $39.6 million in the third quarter of 2000, an increase of 10.1%. Excluding the operating income of the Security Products business of LL Building Products Inc., and the gain on sale of these assets of $17.5 million in the third quarter of 2000, operating income in the third quarter of 2001 was more than double the third quarter of 2000. The increase in operating income was primarily attributable to an increase in steep slope roofing products sales volumes, and higher average selling prices, along with lower manufacturing costs. Interest expense for the quarter increased to $15.1 million from $13.4 million for the same period in 2000, primarily due to higher average borrowings and lower capitalized interest in 2001. The lower capitalized interest in 2001 is the result of the completion of construction of three new manufacturing facilities in the second half of 2000. Other expense, net was $1.8 million for the third quarter of 2001 compared with $2.7 million in 2000. Results of Operations - Nine Months 2001 Compared With Nine Months 2000 For the first nine months of 2001, the Company recorded net income of $21.7 million compared with $24.0 million in 2000. Excluding the impact of the after-tax gain of $11.0 million from the sale of the Security Products business of LL Building Products Inc. and the after-tax extraordinary loss of $0.3 million in 2000, net income would have been $13.3 million in 2000. The increase in net earnings was primarily the result of higher operating income and lower other expenses, partially offset by higher interest expense. 19 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company's net sales for the first nine months of 2001 were $996.2 million compared to $946.5 million in the same period of 2000. Excluding the net sales of the Security Products business of LL Building Products Inc. for the nine months ended October 1, 2000, net sales for the nine months ended September 30, 2001, on a comparable basis, were higher by 7.9%. Net sales gains in steep slope roofing products were partially offset by lower net sales in low slope roofing products and the sale of the Security Products business of LL Building Products Inc. The increase in net sales of steep slope roofing products resulted from higher unit volumes and average selling prices, while the decline in net sales of low slope roofing products resulted from lower unit volumes and average selling prices. Operating income for the first nine months of 2001 was $85.4 million compared with $83.0 million reported in the same period of 2000. Excluding the operating income of the Security Products business of LL Building Products Inc. and the gain on sale of these assets for the nine months ended October 1, 2000, operating income for the nine months ended September 30, 2001, on a comparable basis, would have been higher by 38.2%. Higher operating results were primarily attributable to an increase in steep slope roofing products sales volumes and average selling prices along with lower manufacturing costs, partially offset by a decrease in low slope roofing products sales volumes and average selling prices, and the sale of the Security Products business of LL Building Products Inc. Interest expense for the first nine months increased to $45.7 million from $38.3 million for the same period in 2000, primarily due to higher average borrowings and lower capitalized interest in 2001. Other expense, net was $5.2 million for the first nine months of 2001 compared to $6.1 million for the same period in 2000. Liquidity and Financial Condition Net cash outflow during the first nine months of 2001 was $71.1 million, before financing activities, and included the use of $59.6 million of cash for operations and the reinvestment of $11.5 million for capital programs. Cash invested in additional working capital totaled $123.7 million during the first nine months of 2001, primarily reflecting seasonal increases in inventories of $12.2 million and $128.6 million in accounts receivable, including a $122.7 million increase in the receivable from the trust which purchases certain of the Company's trade accounts receivable, partially offset by a $17.6 million increase in accounts payable and accrued liabilities. The increase in the receivable from the trust results from seasonal increases and the amortization of the accounts receivable facility in accordance with its terms. The net cash used for operating activities also included a $5.7 million net increase in the payable to related parties/parent corporations. Net cash provided by financing activities totaled $40.0 million during the first nine months of 2001, mainly reflecting $50.0 million in proceeds from the sale of the Company's trade receivables, partially offset by $6.7 million in repayments of long-term debt and borrowings under the Company's bank revolving credit facilities. 20 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) As a result of the foregoing factors, cash and cash equivalents decreased by $31.1 million during the first nine months of 2001 to $51.7 million. See Note 3 to Consolidated Financial Statements for information regarding contingencies. * * * Forward-looking Statements This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements are only predictions and generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee" or other words or phrases. Similarly, statements that describe the Company's objectives, plans or goals also are forward-looking statements. The Company's operations are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. The forward-looking statements included herein are made only as of the date of this Quarterly Report on Form 10-Q and the Company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. No assurances can be given that projected results or events will be achieved. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K for a discussion of "Market-Sensitive Instruments and Risk Management." There were no material changes in such information as of September 30, 2001. 21 PART II OTHER INFORMATION Item 1. Legal Proceedings As of September 30, 2001, 1,935 alleged asbestos-related bodily injury claims relating to the inhalation of asbestos fiber are pending against Building Materials Corporation of America. See Note 3 to Consolidated Financial Statements above. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Second Amendment to the Registration Rights Agreement, dated as of October 5, 2001, among Building Materials Corporation of America, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment Corporation, as guarantors, and AG Capital Recovery Partners II, LP, as purchaser. (b) No Reports on Form 8-K were filed during the quarter ended September 30, 2001. 22 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BUILDING MATERIALS CORPORATION OF AMERICA BUILDING MATERIALS MANUFACTURING CORPORATION DATE: November 14, 2001 BY: /s/John F. Rebele ----------------- --------------------------------------- John F. Rebele Vice President and Chief Financial Officer (Principal Financial Officer) DATE: November 14, 2001 BY: /s/James T. Esposito ----------------- --------------------------------------- James T. Esposito Vice President and Controller (Principal Accounting Officer) 23 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant listed below has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BUILDING MATERIALS INVESTMENT CORPORATION DATE: November 14, 2001 BY: /s/John F. Rebele ----------------- --------------------------------------- John F. Rebele Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 24

BUILDING MATERIALS INVESTMENT CORP 10-Q