UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934: For the period ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 33-26991
American Builders & Contractors Supply Co., Inc.
Amcraft Building Products Co., Inc.
Mule-Hide Products Co., Inc.
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(Exact names of registrant as specified in its charter)
Delaware 5033 39-1413708
Delaware 5033 39-1701778
Texas 5033 62-1277211
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(State or other jurisdiction of (Primary Standard (I.R.S. Employer Identification No.)
incorporation or organization) Industrial Classification
Code Number)
One ABC Parkway
Beloit, Wisconsin 53511
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (608) 362-7777
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 filing requirements
for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.01 par value, 147.04 shares as of May 1, 2000
Index
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 2000 and December 31, 1999
Condensed consolidated statements of operations and retained earnings - Three
months ended March 31, 2000 and March 31, 1999
Condensed consolidated statements of cash flows - Three months ended March 31,
2000 and March 31, 1999
Notes to condensed consolidated financial statements - March 31, 2000
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Part 1. Financial Information
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
March 31, December 31,
ASSETS 2000 1999
--------- ------------
Current assets:
Cash $ 3,107 $ 4,717
Accounts receivable 144,391 143,864
Inventories 203,257 135,511
Prepaid expenses and other 3,316 3,672
-------- --------
Total current assets 354,071 287,764
Property and equipment, net 66,438 67,515
Net receivable from sole stockholder 3,314 5,320
Goodwill 38,819 39,143
Other intangible assets 6,031 6,200
Security deposits 986 740
Other assets 1,759 1,776
-------- --------
$471,418 $408,458
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $156,573 $ 82,497
Accrued payroll and benefits 9,469 9,930
Accrued liabilities 11,406 12,346
Current portion of long-term debt 5,497 5,582
-------- --------
Total current liabilities 182,945 110,355
Long-term debt 268,734 270,429
Contingent liabilities (Note 2)
Stockholder's equity:
Common stock -- --
Additional paid-in capital 3,780 3,780
Retained earnings 15,959 23,894
-------- --------
Total stockholder's equity 19,739 27,674
-------- --------
$471,418 $408,458
======== ========
See notes to condensed consolidated financial statements.
Note: The balance sheet at December 31, 1999 has been derived from the audited
balance sheet at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
(in thousands)
Three months ended March 31,
----------------------------
2000 1999
----------------------------
Net sales $242,244 $232,178
Cost of sales 183,840 178,442
-------- --------
Gross profit 58,404 53,736
Operating expenses:
Distribution centers 53,437 50,164
General and administrative 6,560 4,181
Amortization of intangible assets 400 441
-------- --------
60,397 54,786
-------- --------
Operating loss (1,993) (1,050)
Other income (expense):
Interest income 117 118
Interest expense (5,956) (5,699)
-------- --------
(5,839) (5,581)
-------- --------
Loss before provision for income taxes (7,832) (6,631)
Provision for income taxes 103 42
-------- --------
Net loss (7,935) (6,673)
Retained earnings at beginning of period 23,894 17,283
Distributions to sole stockholder -- --
-------- --------
Retained earnings at end of period $ 15,959 $ 10,610
======== ========
See notes to condensed consolidated financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three months ended March 31
2000 1999
-------- --------
Operating activities
Net loss $ (7,935) $ (6,673)
Adjustments to reconcile net loss to cash provided by
operating activities net of acquisitions:
Depreciation 3,646 3,545
Amortization 400 441
Amortization of deferred financing costs 93 107
Provision for doubtful accounts 1,755 1,826
(Gain) loss on disposal of property and equipment 520 76
Changes in operating assets and liabilities:
Accounts receivable (2,282) 2,986
Inventories (67,746) (45,833)
Prepaid expenses and other 356 (57)
Security deposits (246) 88
Other assets 17 (896)
Accounts payable 74,076 68,957
Accrued liabilities (1,401) (3,719)
-------- --------
Cash provided by operating activities 1,253 20,848
Investing activities
Additions to property and equipment (3,903) (2,418)
Proceeds from disposal of property and equipment 814 232
Acquisitions of business -- (650)
-------- --------
Cash used in investing activities (3,089) (2,836)
Financing activities
Net payments under line of credit (1,360) (17,849)
Payments on notes payable (420) (219)
Net change in receivable from sole stockholder 2,006 (1,534)
-------- --------
Cash provided by (used in) financing activities 226 (19,602)
-------- --------
Net decrease in cash (1,610) (1,590)
Cash at beginning of period 4,717 4,682
-------- --------
Cash at end of period $ 3,107 $ 3,092
======== ========
See notes to condensed consolidated financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2000
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting primarily of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2000 are not indicative
of the results that may be expected for the year ending December 31, 2000 due to
the seasonality of the business. For further information, refer to the
consolidated financial statements and footnotes thereto included in American
Builders & Contractors Supply Co., Inc.'s (ABC or the Company) Annual Report on
Form 10-K for the year ended December 31, 1999.
2. Contingent Liabilities
At March 31, 2000 and December 31, 1999, the Company had guaranteed debt of
the sole stockholder in the amounts of $1,839,000 and $1,870,000, respectively.
Certain assets owned by the Company serve as collateral as part of an overall
guaranty of this debt by the Company. The Company also had outstanding letters
of credit in the amount of $3,664,000 at March 31, 2000 and December 31, 1999,
with respect to debt of the Company's sole stockholder and his affiliates.
3. Guarantor Subsidiaries
Amcraft Building Products Co., Inc. and Mule-Hide Products Co., Inc. (the
Guarantor Subsidiaries) are wholly owned subsidiaries of ABC and have fully and
unconditionally guaranteed the Senior Subordinated Notes on a joint and several
basis. The Guarantor Subsidiaries comprise all of the Company's direct and
indirect subsidiaries. The separate financial statements of the Guarantor
Subsidiaries have not been included herein because management has concluded that
such financial statements would not provide additional information that is
material to investors.
The following is summarized consolidated financial information of the wholly
owned subsidiaries.
March 31, 2000 December 31, 1999
---------------- -----------------
(in thousands)
Current assets:
Accounts receivable from ABC $ 9,946 $ 6,879
Other current assets - third parties 2,942 3,041
-------- --------
Total 12,888 9,920
Noncurrent assets 606 632
Current liabilities (8,682) (6,454)
Noncurrent liabilities --- ---
Three months ended March 31,
------------------------------------
2000 1999
---------------- -----------------
(in thousands)
Net sales:
To ABC $12,184 $11,219
To third parties 395 467
-------- --------
Total 12,579 11,686
Gross profit 2,197 2,031
Net income 714 455
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
4. Comprehensive Income
The Company's comprehensive loss for the three months ended March 31, 2000 and
1999, as required to be reported by FASB Statement No. 130, was identical to the
actual losses reported for those periods.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company. ABC is the largest wholesale distributor of roofing products and
one of the largest wholesale distributors of vinyl siding materials in the
United States, operating 200 distribution centers located in 41 states as of
March 31, 2000. Since January 1, 2000, the Company has opened two distribution
centers and closed two.
Provision for Income Taxes. ABC and its subsidiaries are operated as
Subchapter S corporations under the Internal Revenue Code. As a result, these
entities do not incur federal and state income taxes (except with respect to
certain states) and, accordingly, no discussion of income taxes is included in
"Results of Operations" below. Federal and state income taxes (except with
respect to certain states) on the income of such corporations are incurred and
paid directly by the Company's sole stockholder. Such corporations have
historically made periodic distributions to the stockholder with respect to such
tax liabilities. The Company entered into the Tax Allocation Agreement with the
sole stockholder, pursuant to which he will receive distributions from the
Company with respect to taxes associated with the Company's income.
Special Note Regarding Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results
of Operations (MD&A) contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the Securities Act). Such
forward-looking statements are based on the beliefs of the Company's management
as well as on assumptions made by and information currently available to the
Company at the time such statements were made. When used in this MD&A, the words
"anticipate," "believe," "estimate," "expect," "intends" and similar
expressions, as they relate to the Company are intended to identify forward-
looking statements, which include statements relating to, among other things:
(i) the ability of the Company to continue to successfully compete in the
roofing and vinyl siding products market; (ii) the continued effectiveness of
the Company's sales and marketing strategy; and (iii) the ability of the Company
to continue to successfully develop and launch new distribution centers. Actual
results could differ materially from those projected in the forward-looking
statements as a result of the matters discussed herein and certain economic and
business factors, some of which may be beyond the control of the Company.
Results of Operations
The following table summarizes the Company's historical results of operations
as a percentage of net sales for the three months ended March 31, 2000 and 1999:
Three months ended March 31
--------------------------------
2000 1999
--------------------------------
Income statement data:
Net sales 100.0% 100.0%
Cost of sales 75.9 76.9
------------ -------------
Gross profit 24.1 23.1
Operating expenses:
Distribution centers 22.0 21.6
General and administrative 2.7 1.8
Amortization of intangible assets .2 .2
------------- --------------
Total operating expenses 24.9 23.6
------------ -------------
Operating loss (0.8)% (0.5)%
============ =============
Comparison of the Three-Month Period Ended March 31, 2000 to the Three-Month
Period Ended March 31, 1999
The Company's results of operations are affected by the seasonal nature of the
roofing and siding business. See "Seasonality."
Net sales for the three months ended March 31, 2000 increased by 4.3% to
$242.2 million from $232.2 million for the three months ended March 31, 1999.
Comparable distribution centers sales growth was 4.7%. Increases in comparable
distribution center sales are due primarily to increases in volume with the
remainder of the increase due to selective price increases on certain products
in selected markets.
Gross profit for the three months ended March 31, 2000 increased by 8.7%, to
$58.4 million from $53.7 million for the three months ended March 31, 1999,
primarily as a result of profits associated with increased sales. Gross profit,
as a percent of net sales, increased to 24.1% in 2000, from 23.1% in 1999,
principally due to a continued focus on improving gross profit through increased
sales of higher profit margin products.
Distribution center operating expenses increased by $3.2 million to $53.4
million from $50.2 million for the three months ended March 31, 2000 and 1999,
respectively. As of percent of net sales, distribution center operating expenses
for the three months ended March 31, increased to 22.0% in 2000 from 21.6% in
1999. This increase is primarily the result of two factors. First, the Company
began increasing staff for the upcoming higher volume months (see Seasonality)
earlier than a year ago. Second, the Company has experienced higher fuel costs
for its delivery vehicles.
General and administrative expenses for the three months ended March 31,
increased by $2.4 million to $6.6 million in 2000 from $4.2 million in 1999.
General and administrative expenses as a percentage of net sales increased to
2.7% in 2000 from 1.8% in 1999. The majority of the increase is due to
management's desire to evaluate the Company's needs for a next generation of
computer system and operating procedures. This evaluation, which began in late
1999, is expected to last for the remainder of 2000 and has resulted in an
increase in consulting fees. A second factor contributing to the increase is a
formal training program initiated for key branch personnel during the third
quarter of 1999. This program is focused on improving branch operations and
procedures as well as improving customer service skills and increasing product
knowledge.
Operating loss for the three months ended March 31, 2000 increased by $0.9
million to a loss of $2.0 million for the three months ended March 31, 2000,
from a $1.1 million loss for the same period in 1999.
Interest expense for the three months ended March 31, 2000 increased by $0.3
million or 4.5% to $6.0 million from $5.7 million for the three months ended
March 31, 1999. The increase is due to increased rates on the Company's LIBOR
and prime rate borrowings being partially offset by reduced borrowing levels.
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash provided by operating
activities was $1.3 million and $20.8 million for the three months ended March
31, 2000 and 1999, respectively. The decrease was due primarily to increased
inventory levels as the Company purchased inventory in advance of price
increases from major vendors.
Cash Flows from Investing Activities. Net cash used in investing activities
increased to $3.1 million from $2.8 million for the three months ended March 31,
2000 and 1999, respectively, due principally to increased additions to property
and equipment being partially offset by reduced expenditures for acquisitions
and increased proceeds from disposals.
Cash Flows from Financing Activities. Net cash provided by (used in) financing
activities was $0.2 million and $(19.6) million for the three months ended March
31, 2000 and 1999, respectively. This reduction was primarily the result of
funding increased inventory purchases discussed above.
Liquidity. The Company's principal sources of funds are anticipated to be cash
flows from operating activities and borrowings under its revolving credit
agreement. The Company believes that these funds will provide the Company with
sufficient liquidity and capital resources for the Company to meet its financial
obligations, as well as to provide funds for the Company's working capital,
capital expenditures, and other needs for the foreseeable future. No assurances
can be given, however, that this will be the case.
Seasonality
Because of cold weather conditions in many of the markets in which the Company
does business and the seasonal nature of the roofing and siding business
generally, the Company's revenues vary substantially throughout the year, with
its lowest revenues typically occurring in the months of December through
February.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 2000.
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.
American Builders & Contractors Supply
Co., Inc.
May 11, 2000 /s/ Kendra A. Story
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Date: Kendra A. Story
Chief Financial Officer and Director
Exhibit Index
Exhibit No. Description
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27 Financial Data Schedule