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, 2001 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 4, 2001:
Common stock $.001 par value 12,852,607
1
BUILDING MATERIALS HOLDING CORPORATION
INDEX
Page
Number
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Income for the three
months ended March 31, 2001 and 2000 3
Condensed Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 and 2000 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II -- OTHER INFORMATION 12
Item 1 - Legal Proceedings 12
SIGNATURES 13
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,
2001 2000
--------- -------
Net sales $223,149 $233,467
Cost of sales 159,482 173,466
--------- ---------
Gross profit 63,667 60,001
Selling, general and 58,742 52,905
administrative expense
Other income 572 2,565
--------- ---------
Income from operations 5,497 9,661
Equity in earnings of
unconsolidated companies
1,847 1,976
Interest expense 3,807 4,373
--------- ---------
Income before income taxes 3,537 7,264
Income taxes 1,362 2,797
--------- ---------
Net income $2,175 $4,467
========= =========
Net income per common share:
Basic: $0.17 $0.35
===== =====
Diluted: $0.17 $0.35
===== =====
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,
2001 2000
------------ ------------
ASSETS
Current assets
Cash $6,206 $ 4,570
Receivables, net 107,813 111,287
Inventories 78,916 79,023
Prepaid expenses and other current assets 7,985 8,309
-------- --------
Total current assets 200,920 203,189
Property, plant and equipment, net 170,576 167,709
Equity investments in unconsolidated companies 33,634 31,787
Goodwill, net 46,202 46,679
Deferred loan costs 3,695 3,981
Other 6,957 6,289
-------- --------
Total assets $461,984 $459,634
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses 65,340 61,114
-------- --------
Total current liabilities 65,340 61,114
Long-term debt 159,916 165,006
Other long-term liabilities 13,989 12,959
-------- --------
Total liabilities 239,245 239,079
-------- --------
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 109,175 109,166
Retained earnings 113,551 111,376
-------- --------
Total stockholders' equity 222,739 220,555
-------- --------
Total liabilities and stockholders' equity $461,984 $459,634
======== ========
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,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,175 $ 4,467
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation and amortization 4,102 3,998
Deferred income taxes (74) --
Net gain on sale of assets (13) (2,056)
Equity in earnings of unconsolidated companies (1,847) (1,976)
Changes in assets and liabilities, net of effects of
acquisitions and location sales
Receivables, net 3,474 (4,160)
Inventories (477) (10,040)
Prepaid expenses 1,010 4,566
Accounts payable and accrued expenses 5,467 2,379
Other assets and long-term liabilities 468 309
------ ------
Net cash flows from operating activities 14,285 (2,513)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (7,624) (18,610)
Acquisitions, net of cash acquired -- (479)
Proceeds from sale of business unit, net of cash sold 758 --
Proceeds from disposition of property and equipment 1,340 5,478
Other, net (661) (750)
------ ------
Net cash flows from investing activities (6,187) (14,361)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on term notes (2,778) --
Net change under revolving credit agreement (2,400) 17,089
Change in book overdrafts (1,239) 705
Other, net (45) 19
------ ------
Net cash flows from financing activities (6,462) 17,813
------ -------
Net change in cash 1,636 939
Cash, beginning of period 4,570 7,452
------ ------
Cash, end of period $6,206 $ 8,391
====== =======
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 ("BMHC" or 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 accounting principles generally accepted in the United States
of America ("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, these condensed consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto included in the Company's 2000 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 BMHC's 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,
2001 2000
---- ----
Wood Products $85,268 38.2% $ 98,562 42.2%
Value-added 101,043 45.3 94,274 40.4
Building Materials 22,858 10.2 26,196 11.2
Other 13,980 6.3 14,435 6.2
------ ---- ------ ----
$223,149 100.0% $233,467 100.0%
======== ========
6
3. NET INCOME PER COMMON SHARE (in thousands)
Net income per common share was determined using the following information:
Three Months Ended
March 31,
2001 2000
---------- -------
Net income available to common
shareholders $2,175 $4,467
====== ======
Weighted average shares used to
determine basic net income
per common share 12,840 12,689
Net effect of dilutive stock options
35 104
------ ------
Weighted average shares used to
determine diluted net income per
common share
12,875 12,793
====== ======
4. DEBT (in thousands)
At March 31, 2001, debt consisted of the following:
Term note $105,545
Revolving credit facility 49,800
Non-interest bearing term note, net of related
discount of $1,050 3,950
Other 621
---------
$159,916
Principal payments of $12.1 million due within the next twelve months are
expected to be refinanced through the unused portion of the revolving credit
facility. As a result, this amount has been classified as long-term.
7
5. EQUITY INVESTMENT
Summarized first quarter 2001 and 2000 combined income statement information of
the Company's equity-basis unconsolidated companies follows (in thousands):
Three Months Ended
March 31,
2001 2000
---- ----
Net Sales $35,626 $34,855
Income from operations $ 1,109 $ 1,111
Net Income $ 1,094 $ 1,107
Less other members share of net income (558) (565)
------- -------
Company's share of net income 536 542
Other income allocations, net
of amortization of intangibles 1,311 1,434
------- -------
Equity in earnings of
unconsolidated companies $1,847 $1,976
======= =======
6. SUBSEQUENT EVENT
On May 10, 2001, the Company announced their intent to exercise its option to
acquire the remaining 51% interest in Knipp Brothers Industries, LLC. Terms for
the acquistion of the remaining 51% interest are currently being finalized. The
Company expects, subject to various regulatory approvals, to finalize terms
during the second quarter and close the transaction by early July 2001.
8
BUILDING MATERIALS HOLDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
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, 2000. 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
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
For The Three Months Ended
March 31,
2001 2000
-------- ------
Net sales 100.0% 100.0%
Gross profit 28.5 25.7
Selling, general and
administrative expense 26.3 22.7
Other income .2 1.1
Income from operations 2.5 4.1
Equity in earnings of unconsolidated
companies .8 .8
Interest expense 1.7 1.9
Income taxes 0.6 1.2
Net income 1.0 1.9
9
FIRST QUARTER OF 2001 COMPARED TO THE FIRST QUARTER OF 2000
- -----------------------------------------------------------
Net sales for the three months ended March 31, 2001 were $223.1 million, down
4.4% from the first quarter of 2000 when sales were $233.5 million. The decrease
in net sales resulted primarily from the impact of deflation of commodity wood
product prices. The Company expects that commodity wood product prices in BMHC's
product mix will remain, on average, at current levels and will adversely affect
BMHC's financial results in the second quarter of 2001. Same-store sales
decreased 6.7% as compared to the first quarter of 2000 at facilities that
operated for at least two months in both the first quarter of 2000 and 2001.
Value-added products accounted for $101.0 million, or 45.3% of net sales for the
first quarter of 2001, an increase from $94.3 million, or 40.4% of net sales for
the first quarter of 2000.
Gross profit as a percentage of sales increased to 28.5% in the first quarter of
2001 from 25.7% in the first quarter of 2000, primarily as a result of increased
sales of higher margin value-added products, such as roof trusses, pre-hung
doors, millwork, and pre-assembled windows. In addition, gross margins have
increased in our commodity wood products due to the impact of deflation,
resulting in lower material costs.
Selling, general and administrative (SG&A) expense was $58.7 million in the
first quarter of 2001 as compared to $52.9 million in the first quarter of 2000,
and increased as a percentage of net sales from 22.7% in 2000 to 26.3% in 2001.
The Company attributes most of this dollar increase to the increase in
value-added product sales, which generally require higher SG&A expenses, and the
cost of integrating facility expansions and operations acquired during the last
12 months. The percentage increase is a result of reduced net sales due to the
deflation of commodity wood product prices.
Other income decreased from $2.5 million in 2000 to $0.5 million in 2001 due
primarily to a $2.2 million gain on the sale of real estate in Beaverton, Oregon
realized in the first quarter of 2000.
Equity in earnings of unconsolidated companies was $1.8 million compared to $2.0
million in the first quarter of 2000. This decrease is attributed to startup
costs associated with the addition of a lumber operation and truss plant in
Nevada and startup costs incurred due to expansion into the California market.
Interest expense of $3.8 million in the first quarter of 2001 decreased from
$4.4 million in the same period of 2000, primarily due to lower debt levels.
These lower debt levels are the result of reduced working capital needs,
10
largely attributable to lower commodity wood prices. Average debt levels for the
first quarter of 2001 were $159.4 million compared to $179.4 million in the
first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital resources is to fund future growth and
capital expenditures, as the Company has expanded operations in recent years.
Capital resources have primarily consisted of cash flows from operations and the
incurrence of debt.
OPERATIONS
In the first three months of 2001, net cash provided by operations was $14.3
million compared to net cash used in operations of $2.5 million in the first
three months of 2000. The increase in cash provided by operations is primarily
due to a decrease in net receivables as a result of lower net sales and an
increase in accounts payable. Working capital decreased from $142.1 million at
March 31, 2000 to $135.6 million at March 31, 2001.
CAPITAL INVESTMENT AND ACQUISITIONS
Capital expenditures were $7.6 million in the first three months of 2001.
Capital expenditures were incurred to acquire additional property and expand and
remodel existing building materials centers and value-added facilities. Proceeds
from the sale of business units, net of cash sold, was $0.7 million during the
first three months of 2001, related to the sale of the Grand Junction, Colorado
location.
FINANCING
Net cash used by financing activities was $6.5 million in the first three months
of 2001 compared to cash provided of $17.8 million in the same period in 2000.
As a result of less working capital needs during the first quarter of 2001, the
Company made payments upon its revolving credit agreement, as well as provided
for payments on its term note.
At March 31, 2001 the Company's existing senior credit facility provided for
borrowings of up to $244.4 million, which includes $105.5 million provided for
by the term loan all of which was outstanding at March 31, 2001, and $138.9
million provided for by the revolving credit facility, $49.8 million of which
was outstanding at March 31, 2001. Borrowings under the facility bear interest
at prime plus 0.50% to 1.50%, or Offshore Rate plus 2.0% to 3.0%. The agreement
expires in 2004.
11
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. The
Company 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 flows from operations, its
borrowing capacity under the revolver and its access to debt and equity markets,
the Company believes it will have sufficient capital to meet its anticipated
needs.
DISCLOSURES OF CERTAIN MARKET RISKS
The Company experiences changes in interest expense when market interest rates
change or changes are made to its debt structure. Previously, the Company has
managed its exposure to market interest rate changes through periodic
refinancing of its variable rate debt with fixed rate term debt obligations.
Based on debt outstanding at March 31, 2001, a 25 basis point increase in
interest rates would result in approximately $400,000 of additional annual
interest costs.
Commodity wood products, including lumber and panel products, accounted for
approximately 38.2% and 42.2% of net sales in the first three months of 2001 and
2000, respectively. Prices of commodity wood products, which are subject to
significant volatility, could directly affect net sales. The Company does not
utilize any derivative financial instruments.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in litigation and other legal matters
arising in the normal course of business. In the opinion of
management, the Company's recovery or liability, if any,
under any of these matters will not have a material effect on
the Company's financial position, liquidity or results of
operations.
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 4, 2001 /s/ Robert E. Mellor
------------------------------------------
Robert E. Mellor
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: May 4, 2001 /s/ Ellis C. Goebel
------------------------------------------
Ellis C. Goebel
Senior Vice President - Finance
and Treasurer
(Principal Financial Officer)