SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_X_ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 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 0-19335
BUILDING MATERIALS HOLDING CORPORATION
(Parent of BMC West Corporation)
Delaware 91-1834269
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Building Materials Holding Corporation
One Market Plaza, Steuart Tower, Ste 2650, San Francisco, CA 94105
Telephone: (208)331-4382 or (415)227-1650
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 month (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 ___
CLASS Shares Outstanding as
-----
of May 8, 2000:
Common stock $.001 par value 12,734,754
BUILDING MATERIALS HOLDING CORPORATION
INDEX
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Page
NUMBER
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Income for
the three months ended March 31, 2000 and 1999 3
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 4
Condensed Consolidated Statements of Cash Flows for
the three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
EXHIBITS 15
2
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(amounts in thousands, except per share data)
Three Months Ended
March 31, March 31,
2000 1999
-------- --------
Net sales $233,467 $215,625
Cost of sales 173,466 161,514
-------- --------
Gross profit 60,001 54,111
Selling, general and 52,905 47,954
administrative expense
Other income 2,565 487
-------- --------
Income from operations 9,661 6,644
Equity in earnings of unconsolidated
companies, net of amortization 1,976 --
Interest expense 4,373 2,544
-------- --------
Income before income taxes 7,264 4,100
Income taxes 2,797 1,579
-------- --------
Net Income $ 4,467 $ 2,521
======== ========
Net income per common share:
Basic: $0.35 $0.20
===== =====
Diluted: $0.35 $0.20
===== =====
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(UNAUDITED)
March 31, December 31,
2000 1999
-------- --------
ASSETS
Current assets
Cash $ 8,391 $ 7,452
Receivables, net 114,524 110,123
Inventories 90,814 80,679
Prepaid expenses and other current assets 5,867 10,433
-------- --------
Total current assets 219,596 208,687
Property, plant and equipment, net 165,640 153,598
Equity investments in unconsolidated companies 32,738 30,762
Goodwill, net 47,143 47,477
Deferred loan costs 4,611 4,873
Other 6,199 4,722
-------- --------
Total assets $475,927 $450,119
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 3,200 $ 3,200
Accounts payable and accrued expenses 69,314 66,204
-------- --------
Total current liabilities 72,514 69,404
Long-term debt, net of current portion 187,636 170,547
Other long-term liabilities 11,175 10,058
Stockholders' equity
Common stock, $.001 par value, 20,000,000
shares authorized; 12,700,686 and
12,679,686 shares outstanding, respectively
13 13
Additional paid-in capital 108,458 108,433
Retained earnings 96,131 91,664
-------- --------
Total stockholders' equity 204,602 200,110
-------- --------
Total liabilities and stockholders' equity $475,927 $450,119
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
Three Months Ended
March 31, March 31,
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,467 $ 2,521
Adjustments to reconcile net income to cash
used by operating activities:
Depreciation and amortization 3,998 3,515
Net gain on sale of assets (2,056) (102)
Equity in earnings of unconsolidated
companies, net of amortization (1,976) --
Changes in assets and liabilities, net of
effects of acquisitions and location sales
Receivables, net (4,160) (9,710)
Inventories (10,040) (4,074)
Prepaid expenses 4,566 179
Accounts payable and accrued expenses 2,379 5,626
Other assets and long-term liabilities 309 368
-------- --------
Net cash used by operating activities (2,513) (1,677)
======== ========
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (18,610) (5,206)
Acquisitions, net of cash acquired (479) (304)
Proceeds from disposition of property and equipment 5,478 212
Other, net (750) --
-------- --------
Net cash used in investing activities (14,361) (5,298)
======== ========
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of other notes payable -- (5,023)
Net borrowings under revolving credit agreement 17,089 15,480
Increase(decrease) in book overdrafts 705 (3,359)
Increase in other assets 19 16
-------- --------
Net cash provided by financing activities 17,813 7,114
======== ========
Net change in cash 939 139
Cash, beginning of period 7,452 8,264
-------- --------
Cash, end of period $ 8,391 $ 8,403
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
BUILDING MATERIALS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Building Materials Holding Corporation (the "Company") on a
consolidated basis, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in the consolidated financial statements prepared in
accordance with Generally Accepted Accounting Principles ("GAAP") have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Although the Company believes that the disclosures are
adequate to make the information presented not misleading, it is recommended
that these condensed consolidated financial statements be read in conjunction
with the Company's audited consolidated financial statements and notes thereto
included in the 1999 Annual Report. In the opinion of management, all
adjustments necessary to present fairly the results for the periods presented
have been included. The adjustments made were of a normal, recurring nature.
Due to the seasonal nature of our business, the condensed consolidated results
of operations and resulting cash flows for the periods presented are not
necessarily indicative of the results that might be expected for the fiscal
year.
2. NET SALES BY PRODUCT (in thousands)
Three Months Ended
March 31 March 31
2000 1999
---------------- -----------------
Wood Products $ 98,562 42.2% $ 90,731 42.1%
Value-added 94,274 40.4 78,113 36.2
Building Materials 26,196 11.2 29,185 13.5
Other 14,435 6.2 17,596 8.2
-------- ----- -------- -----
$233,467 100.0% $215,625 100.0%
======== ========
6
3. NET INCOME PER COMMON SHARE (in thousands)
Net income per common share was determined as follows:
Three Months Ended
March 31, March 31,
2000 1999
------- -------
Net income available to common shareholders $ 4,467 $ 2,521
======= =======
Weighted average shares outstanding used to determine
basic net income per common share 12,689 12,655
Net effect of dilutive stock options 104 125
------- -------
Weighted average shares used to determine diluted net
income per common share 12,793 12,780
======= =======
4. DEBT
Debt consisted of the following (in thousands):
MARCH 31,
2000
---------
Term note $ 100,000
Revolving credit facility 87,296
Non-interest bearing term note, net of related
discount of $1,460 3,540
---------
190,836
Less current portion (3,200)
---------
$ 187,636
=========
5. SUBSEQUENT EVENT
On May 8, 2000, we completed the acquisition of four warehouse distribution
centers along with several sales offices doing business as Marvin Windows
Planning Center from Frontier Wholesale Company. The headquarters of this
acquisition is based in Dallas, Texas. We paid cash consideration of $5.2
million, which was financed through borrowings under the existing revolving
credit facility.
7
BUILDING MATERIALS HOLDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTION
- -------
Certain statements made in this Form 10-Q may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors are discussed in detail in Building
Materials Holding Corporation's Form 10-K for the fiscal year ended December 31,
1999. Given these uncertainties, investors are cautioned not to place undue
reliance on such forward-looking statements. We disclaim any obligation to
update any such factors or to publicly announce the results of any revisions to
any of the forward-looking statements contained in the Annual Report on Form
10-K or this Form 10-Q except as required by law.
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain costs, expenses and income items. The table
and subsequent discussion should be read in conjunction with the consolidated
financial statements and the notes thereto appearing elsewhere herein and in the
Annual Report on Form 10-K for the year ended December 31, 1999.
For The Three Months Ended
March 31, March 31,
2000 1999
------ ------
Net sales 100.0% 100.0%
Gross profit 25.7 25.1
Selling, general and
administrative expense 22.7 22.2
Income from operations 4.1 3.1
Equity in earnings of
unconsolidated companies 0.8 --
Interest expense 1.9 1.2
Income taxes 1.2 0.7
Net income 1.9 1.2
8
FIRST QUARTER OF 2000 COMPARED TO THE FIRST QUARTER OF 1999
-----------------------------------------------------------
Net sales for the three months ended March 31, 2000 were $233.5 million, up 8.3%
from first quarter 1999 net sales of $215.6 million. This increase is primarily
due to the result of a $16.8 million, or 8.2% increase in sales at facilities
that operated for at least two months in both the first quarter of 1999 and
2000. Same-store sales showed improvement over all of our 10-state market area
with double-digit growth noted in Montana, Texas and Utah. Net sales in the
first quarter of 2000 were also favorably impacted by recent acquisitions and
denovo expansion offset by certain location sales/closures. Value-added products
accounted for $94.3 million, or 40.4% of net sales for the first quarter of
2000, an increase from $78.1 million, or 36.2% of net sales for the first
quarter of 1999.
Gross profit as a percentage of sales increased to 25.7% in the first quarter of
2000 from 25.1% in the first quarter of 1999, primarily as a result of improved
margins on the sale of products to new residential contractors and increased
sales of value-added products including roof and floor trusses, wall panels,
pre-hung doors and millwork.
Selling, general and administrative (SG&A) expense was $52.9 million in the
first quarter of 2000 as compared to $48.0 million in the first quarter of 1999.
SG&A expense increased as a percentage of net sales from 22.2% in 1999 to 22.7%
in 2000. This increase can be attributed to higher costs associated with
value-added products as well as the cost of integrating acquired operations and
start up costs of denovo expansion.
Other income increased primarily from the gain on the sale of real estate in
Beaverton, Oregon for approximately $2.2 million.
Equity in earnings of unconsolidated companies was $2.0 million, net of
amortization of goodwill, after the completion of an investment of a 49%
interest in Knipp Brothers Industries, LLC, a framing company, and KBI
Distribution, LLC, a lumber yard, in the second quarter of 1999.
Interest expense of $4.4 million in the first quarter of 2000 increased from
$2.5 million in the same period of 1999, primarily due to an increase in
interest rates and average debt outstanding to fund operations and expansion.
9
Income taxes were provided at estimated annual effective tax rates of 38.5% for
the quarters ended March 31, 2000 and March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Our primary need for capital resources is to fund future growth and capital
expenditures, as well as to finance working capital needs which have been
increasing as we have grown in recent years. Capital resources have primarily
consisted of cash flows from operations and debt issuance.
OPERATIONS
In the first three months of 2000, net cash used in operations was $2.5 million
compared to $1.7 million in the first three months of 1999. The increase in cash
used in operations is due to timing of the collection of receivables, purchases
of inventory, and payments on payables as net working capital increased to
$147.1 million at March 31, 2000 compared to $128.4 million at March 31, 1999.
CAPITAL INVESTMENT AND ACQUISITIONS
Capital expenditures, exclusive of acquisitions, were $18.6 million in the first
three months of 2000. Capital expenditures included purchases of additional
property and expansion and remodeling of existing building materials centers and
value-added facilities. Proceeds from the disposition of property and equipment
were $5.5 million.
On February 28, 2000, we completed the acquisition of Alberta Sales, a millwork
facility that was consolidated into our existing Carson Valley location. We paid
cash consideration of $479,000, which was financed through borrowings under the
existing revolving credit facility.
FINANCING
Net cash provided by financing activities was $17.8 million in the first quarter
of 2000 compared to $7.1 million in the same period in 1999. The Company
utilized its available borrowing capacity to finance its growth during the
quarter.
10
The Company's borrowing capacity under its new revolving credit facility is
currently $125 million. Borrowings under the agreement bear interest at prime
plus 0.50% to 1.50%, or Offshore Rate plus 2.00% to 3.00%. The agreement expires
in 2004.
In the third quarter of 1998, a shelf registration was filed with the Securities
and Exchange Commission to register 2,000,000 shares of common stock. We may
issue these shares from time to time in connection with future business
combinations, mergers and/or acquisitions.
Based on the Company's ability to generate cash flow from operations, its
borrowing capacity under the revolver and its access to equity markets, the
Company believes it will have sufficient capital to meet its anticipated needs.
DISCLOSURES OF CERTAIN MARKET RISKS
We experience changes in interest expense when market interest rates change or
changes are made to our debt structure. Previously we have managed our exposure
to market interest rate changes through periodic refinancing of our variable
rate debt with fixed rate term debt obligations. Based on debt outstanding at
March 31, 2000, a 25 basis point increase in interest rates would result in
approximately $477,000 of additional annual interest costs.
Commodity wood products, including lumber and panel products, currently account
for approximately 42% of net sales. Prices of commodity wood products, which are
subject to significant volatility, could directly affect net sales. We do not
utilize any derivative financial instruments.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in litigation and other legal matters arising in the
normal course of business. In the opinion of management, our recovery
or liability, if any, under any of these matters will not have a
material effect on our financial position, liquidity or results of
operations.
11
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
12
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.
BUILDING MATERIALS HOLDING CORPORATION
Date: May 8, 2000 /s/ Robert E. Mellor
------------------------------------------------
Robert E. Mellor
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: May 8, 2000 /s/ Ellis C. Goebel
------------------------------------------------
Ellis C. Goebel
Senior Vice President - Finance
and Treasurer
(Principal Financial Officer)
13
INDEX TO EXHIBITS
BUILDING MATERIALS HOLDING CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2000
Page
EXHIBIT DESCRIPTION NUMBER
- ------- ----------- ------
27 Financial Data Schedule
14