UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934: For the period ended June 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission Files 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 such 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, no par value, $0.01 par value, 147.04 shares as of August 1, 2000
Index
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - June 30, 2000 and December 31, 1999
Condensed consolidated statements of operations and retained earnings -
Three months ended June 30, 2000 and 1999; Six months ended June 30, 2000
and 1999
Condensed consolidated statements of cash flows - Six months ended June 30,
2000 and 1999
Notes to condensed consolidated financial statements - June 30, 2000
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
Part 1. Financial Information
Item 1. Financial Statements
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
June 30, December 31,
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash $3,162 $4,717
Accounts receivable 174,932 143,864
Inventories 183,652 135,511
Prepaid expenses and other 4,415 3,672
------------ -----------
Total current assets 366,161 287,764
Property and equipment, net 67,584 67,515
Net receivable from sole stockholder 2,194 5,320
Goodwill 38,495 39,143
Other intangible assets 5,862 6,200
Other assets 2,414 2,516
------------ -----------
$482,710 $408,458
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $141,765 $82,497
Accrued payroll and benefits 8,169 9,930
Accrued liabilities 11,230 12,346
Current portion of long-term debt 5,502 5,582
------------ -----------
Total current liabilities 166,666 110,355
Long-term debt 291,600 270,429
Contingent liabilities (Note 2)
Stockholder's equity:
Common stock - -
Additional paid-in capital 3,780 3,780
Retained earnings 20,664 23,894
------------ ------------
Total stockholder's equity 24,444 27,674
------------ ------------
$482,710 $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 June 30, Six months ended June 30,
------------------------------- -----------------------------
2000 1999 2000 1999
-------------- --------------- ------------- -------------
Net sales $336,719 $316,080 $578,963 $548,258
Cost of sales 255,036 241,865 438,876 420,306
-------------- --------------- ------------- -------------
Gross profit 81,683 74,215 140,087 127,952
Operating expenses:
Distribution centers 60,807 56,979 114,243 107,143
General and administrative 7,547 4,321 14,107 8,502
Amortization of intangible assets 400 423 800 865
Non-recurring charge - 4,100 - 4,100
-------------- --------------- ------------- -------------
68,754 65,823 129,150 120,610
-------------- --------------- ------------- -------------
Operating income 12,929 8,392 10,937 7,342
Other income (expense):
Interest income 69 125 186 244
Interest expense (6,521) (5,753) (12,477) (11,453)
-------------- --------------- ------------- -------------
(6,452) (5,628) (12,291) (11,209)
-------------- --------------- ------------- -------------
Income (loss) before provision for income taxes 6,477 2,764 (1,354) (3,867)
Provision for income taxes 68 73 172 115
-------------- -------------- ------------- -------------
Net income (loss) 6,409 2,691 (1,526) (3,982)
Retained earnings at beginning of period 15,959 10,610 23,894 17,283
Distributions to sole stockholder (1,704) - (1,704) -
-------------- -------------- ------------- -------------
Retained earnings at end of period $20,664 $13,301 $20,664 $13,301
============== ============== ============= =============
See notes to condensed consolidated financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six months ended June 30,
-------------------------
2000 1999
---------- -----------
Operating activities
Net Loss ($1,526) ($3,982)
Adjustments to reconcile net loss to cash (used in) provided
by operating activities, net of acquisitions:
Depreciation 7,319 7,100
Amortization 800 865
Amortization of deferred financing costs 186 215
Provision for doubtful accounts 4,332 4,704
Loss on disposal of property and equipment 573 93
Changes in operating assets and liabilities:
Accounts receivable (35,400) (21,925)
Inventories (48,141) (41,470)
Prepaid expenses and other (744) (183)
Other assets 102 (908)
Accounts payable 59,268 58,540
Accrued liabilities (2,875) 815
----------- -----------
Cash (used in) provided by operating activities (16,106) 3,864
Investing activities
Additions to property and equipment (9,060) (7,053)
Proceeds from disposal of property and equipment 1,098 950
Acquisitions of businesses - (650)
----------- ------------
Cash used in investing activities (7,962) (6,753)
Financing activities
Net borrowings under line of credit 21,870 5,627
Payments on notes payable (779) (2,916)
Distributions to sole stockholder (1,704) -
Net change in receivable from sole stockholder 3,126 (1,130)
----------- ------------
Cash provided by financing activities 22,513 1,581
----------- ------------
Net decrease in cash (1,555) (1,308)
Cash at beginning of period 4,717 4,682
----------- ------------
Cash at end of period $3,162 $3,374
=========== ============
See notes to condensed consolidated financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 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 and six month periods ended June 30, 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 June 30, 2000 and December 31, 1999, the Company had guaranteed debt of
the sole stockholder in the amounts of $1,806,000 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 of $3,664,000 at June 30, 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.
June 30, 2000 December 31, 1999
------------------------- ----------------------------
(in thousands)
Current assets:
Accounts receivable from ABC $ 10,988 $ 6,879
Other current assets - third parties 2,921 3,041
------------------------- ----------------------------
Total 13,909 9,920
Noncurrent assets 569 632
Current liabilities (8,547) (6,454)
Noncurrent liabilities --- ---
Six months ended June 30,
2000 1999
-------------------------- ----------------------------
(in thousands)
Net sales:
To ABC $27,321 $24,344
To third parties 1,357 1,315
-------------------------- ----------------------------
Total 28,678 25,659
Gross profit 4,824 4,445
Net income 1,833 1,151
4. Comprehensive Income
The Company's comprehensive income (loss) for the three and six month
periods ended June 30, 2000 and 1999, as required to be reported by FASB
Statement No. 130, was identical to the actual income (loss) reported for those
periods.
Item 2.
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
June 30, 2000. Since January 1, the Company has opened four distribution centers
and closed four.
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
Certain matters discussed herein are 'forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements can generally be identified as such because the context of
the statement will include words such as the Company "believes", "anticipates",
"expects", or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking statements. Such
forward looking-statements are subject to certain risks and uncertainties which
are described in close proximity to such statements and which could cause actual
results to differ materially from those currently anticipated. Readers are urged
to consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are only made as of the
date of this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
Results of Operations
The following table summarizes the Company's historical results of
operations as a percentage of net sales for the three and six months ended June
30, 2000 and 1999:
Three months ended June 30, Six months ended June 30,
------------------------------ ------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Income statement data:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 75.8 76.5 75.8 76.7
----------- ----------- ----------- -----------
Gross profit 24.2 23.5 24.2 23.3
Operating expenses:
Distribution centers 18.0 18.0 19.7 19.5
General and administrative 2.3 1.4 2.5 1.6
Amortization of intangible assets 0.1 0.1 0.1 0.2
Non-recurring charge -- 1.3 -- 0.7
----------- ---------- ---------- ----------
Total operating expenses 20.4 20.8 22.3 22.0
----------- ---------- ---------- ----------
Operating income 3.8% 2.7% 1.9% 1.3%
=========== ========== ========== ==========
Comparison of the Three and Six Month Periods Ended June 30, 2000 to the Three
and Six Month Periods Ended June 30, 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 June 30, 2000 increased by 6.5% to
$336.7 million from $316.1 million for the three months ended June 30, 1999. Net
sales for the six months ended June 30, 2000 increased by 5.6% to $579.0 million
from $548.3 million for the six months ended June 30, 1999. Comparable
distribution center sales growth were 6.8% and 5.9% for the three and six month
periods ended June 30, respectively. Increases in comparable distribution center
sales are primarily due to increases in volume, with the remainder of the
increase due to price increases.
Gross profit for the three months ended June 30, 2000 increased by 10.1% to
$81.7 million from $74.2 million for the three months ended June 30, 1999,
primarily as a result of profits associated with increased sales. Gross profit,
as a percent of net sales, for the three months ended June 30 increased to 24.2%
in 2000, from 23.5% in 1999, as a result of two factors. First, management
focused on improving gross profit through increased sales of higher profit
margin products. Second, the Company increased its inventory levels ahead of
industry price increases which occurred during the second quarter. When
possible, the Company passed the price increases on. Gross profit for the six
months ended June 30, 2000 increased by 9.5% to $140.1 million from $128.0
million. Gross profit as a percent of net sales for the six months ended June
30, increased to 24.2% in 2000, from 23.3% in 1999. The increase for the six
month period is due to the reasons cited above for the quarter.
Distribution center operating expenses for the three months ended June 30,
increased by $3.8 million to $60.8 million in 2000, from $57.0 million in 1999.
As a percent of net sales, distribution center operating expenses for the three
months ended June 30, 2000 and 1999 remained at 18.0%. For the six months ended
June 30, distribution center operating expenses increased by $7.1 million to
$114.2 million in 2000, from $107.1 million in 1999. As a percent of net sales,
distribution center operating expenses for the six months ended June 30,
increased to 19.7% in 2000 from 19.5% in 1999.
The increase for the six months is primarily the result of two factors.
During the first quarter of 2000, the Company began increasing staff for the
higher volume months (see Seasonality) earlier than in 1999. Second, the Company
has experienced higher fuel costs for its delivery vehicles.
General and administrative expenses for the three months ended June 30,
increased by $3.2 million to $7.5 million in 2000, from $4.3 million in 1999.
For the six months ended June 30, general and administrative expenses increased
by $5.6 million to $14.1 million in 2000 from $8.5 million in 1999. These
increases are primarily the result of the following factors.
The most significant increase in general and administrative expense is a
result of costs associated with a comprehensive evaluation and design of new
operating and administrative processes focused on customer needs. Through this
process, the Company has engaged a consulting firm and added internal project
coordinators and financial analysts. This evaluation has resulted in the
development and implementation of new policies and programs enabling more
consistent purchasing and pricing within local markets to improve gross profit.
The Company expects additional improvements to its operating and administrative
processes.
Another phase of this process, is the evaluation of the Company's need for
a next generation of computer systems. Management anticipates this assessment
will eventually lead to a replacement of its computer system. Future
expenditures are not able to be estimated at this time.
An additional factor in the increase of general and administrative expense
is the formal training program initiated for key distribution personnel during
the third quarter of 1999. This program is focused on center operations,
improving customer service skills, and increasing product knowledge.
Non-recurring charge in 1999 of $4.1 million relates to the settlement in
principle agreement with Viking Aluminum Products, Inc. and related legal and
other expenses.
Operating income for the three months ended June 30, increased by $4.5
million to $12.9 million, from $8.4 million in 1999. Operating income for the
six months ended June 30, increased by $3.6 million to $10.9 million from $7.3
million in 1999. The increase for the three and six months ended June 30, are
due to the factors noted above.
Interest expense for the three months ended June 30, increased by $0.7
million or 13.3% to $6.5 million in 2000 from $5.8 million in 1999. For the six
months ended June 30, interest expense increased by $1.0 million or 8.9% to
$12.5 million in 2000 from $11.5 million in 1999. The increase for both the
three and six month periods is due to increased interest rates on the Company's
LIBOR based borrowings.
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash (used in) provided by
operations was $(16.1) million for the six months ended June 30, 2000, as
compared to $3.9 million for the same period in 1999. The increase in cash used
is primarily due to increases in accounts receivable, which is the result of the
sales growth for the quarter, and increases in inventory levels as the Company
purchased inventory in advance of price increases which occurred during the
second quarter from major vendors.
Cash Flows from Investing Activities. Net cash used in investing activities
was $8.0 million and $6.8 million for the six months ended June 30, 2000 and
1999, respectively. The increase is due principally to the additions of property
and equipment.
Cash Flows from Financing Activities. Net cash provided by financing
activities was $22.5 million and $1.6 million for the six months ended June 30,
2000 and 1999, respectively. The increase is due primarily to the increase in
the net borrowings under the line of credit, associated with the working capital
needs noted 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
(a) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 30, 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.
August 8, 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