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 September 30, 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 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 November 1,
2000
Index
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September 30, 2000 and December
31, 1999
Condensed consolidated statements of operations and retained earnings -
Three months ended September 30, 2000 and 1999; Nine months ended
September 30, 2000 and 1999
Condensed consolidated statements of cash flows - Nine months ended
September 30, 2000 and 1999
Notes to condensed consolidated financial statements - September 30,
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
Item 1. Financial Statements
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
September 30, December 31,
2000 1999
--------------- --------------
ASSETS
Current assets:
Cash $ 3,192 $ 4,717
Accounts receivable 180,007 143,864
Inventories 165,652 135,511
Prepaid expenses and other 3,535 3,672
-------- --------
Total current assets 352,386 287,764
Property and equipment, net 68,568 67,515
Net receivable from sole stockholder 2,696 5,320
Goodwill 38,171 39,143
Other intangible assets 5,421 6,200
Other assets 2,235 2,516
-------- --------
$469,477 $408,458
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $158,983 $ 82,497
Accrued payroll and benefits 7,109 9,930
Accrued liabilities 16,356 12,346
Current portion of long-term debt 6,078 5,582
-------- --------
Total current liabilities 188,526 110,355
Long-term debt 245,821 270,429
Contingent liabilities (Note 2)
Stockholder's equity:
Common stock -- --
Additional paid-in capital 3,780 3,780
Retained earnings 31,350 23,894
-------- --------
Total stockholder's equity 35,130 27,674
-------- --------
$469,477 $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 September 30, Nine months ended September 30,
---------------------------------- ---------------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
Net sales $362,203 $347,663 $941,166 $895,921
Cost of sales 275,275 265,929 714,151 686,235
----------- ----------- ------------ -----------
Gross profit 86,928 81,734 227,015 209,686
Operating expenses:
Distribution centers 63,517 60,123 177,759 167,265
General and administrative 5,894 4,454 20,002 12,956
Amortization of intangible assets 400 414 1,201 1,280
Non-recurring charge -- -- -- 4,100
----------- ----------- ------------ -----------
69,811 64,991 198,962 185,601
----------- ----------- ------------ -----------
Operating income 17,117 16,743 28,053 24,085
Other income (expense):
Interest income 60 132 246 376
Interest expense (6,614) (5,751) (19,091) (17,204)
----------- ----------- ------------ -----------
(6,554) (5,619) (18,845) (16,828)
----------- ----------- ------------ -----------
Income before provision for income taxes
and extraordinary item 10,563 11,124 9,208 7,257
Provision for income taxes 68 54 239 169
----------- ----------- ------------ -----------
Income before extraordinary item 10,495 11,070 8,969 7,088
Extraordinary item (Note 4) 1,043 -- 1,043 --
----------- ----------- ------------ -----------
Net income 11,538 11,070 10,012 7,088
Retained earnings at beginning of period 20,664 13,301 23,894 17,283
Distributions to sole stockholder (852) -- (2,556) --
----------- ----------- ------------ -----------
Retained earnings at end of period $31,350 $24,371 $31,350 $24,371
=========== =========== ============ ===========
See notes to condensed consolidated financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine months ended September 30,
--------------------------------
2000 1999
-------------- --------------
Operating activities
Net income $ 10,012 $ 7,088
Adjustments to reconcile net income to cash provided
by operating activities, net of acquisitions:
Depreciation 10,974 10,709
Amortization 1,201 1,280
Amortization of deferred financing costs 279 576
Provision for doubtful accounts 7,142 7,997
Loss on disposal of property and equipment 757 183
Extraordinary item (1,043) --
Changes in operating assets and liabilities:
Accounts receivable (43,285) (31,889)
Inventories (29,866) (33,444)
Prepaid expenses and other 136 (420)
Other assets 281 (667)
Accounts payable 76,485 62,090
Accrued liabilities 1,190 5,429
-------------- --------------
Cash provided by operating activities 34,263 28,932
Investing activities
Additions to property and equipment (14,180) (10,671)
Proceeds from disposal of property and equipment 1,403 1,119
Acquisitions of businesses (282) (1,042)
-------------- --------------
Cash used in investing activities (13,059) (10,594)
Financing activities
Net repayments under line of credit (11,427) (10,355)
Payments on long term debt (11,370) (10,179)
(Distributions to) / contributions from sole stockholder (2,556) 1,916
Net change in receivable from sole stockholder 2,624 (1,384)
-------------- --------------
Cash used in financing activities (22,729) (20,002)
-------------- --------------
Net decrease in cash (1,525) (1,664)
Cash at beginning of period 4,717 4,682
-------------- --------------
Cash at end of period $ 3,192 $ 3,018
============== ==============
See notes to condensed consolidated financial statements.
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 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 nine month periods ended September 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 September 30, 2000 and December 31, 1999, the Company had guaranteed
debt of the sole stockholder in the amounts of $1,774,000 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 September 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.
September 30, 2000 December 31, 1999
--------------------------- ---------------------------
(in thousands)
Current assets:
Accounts receivable from ABC $11,859 $ 6,879
Other current assets - third parties 2,961 3,041
--------------------------- ---------------------------
Total 14,820 9,920
Noncurrent assets 490 632
Current liabilities (8,348) (6,454)
Noncurrent liabilities --- ---
Nine months ended September 30,
2000 1999
--------------------------- ---------------------------
(in thousands)
Net sales:
To ABC $41,623 $37,185
To third parties 1,988 2,023
--------------------------- ---------------------------
Total 43,611 39,208
Gross profit 7,332 6,691
Net income 2,864 1,928
4. Extraordinary Item
During the third quarter, the Company repurchased $11.6 million of its
Senior Subordinated Notes. The purchase resulted in an extraordinary gain of
$1.0 million net of the amortization of a portion of the original transaction
fees and other expenses.
5. Comprehensive Income
The Company's comprehensive income for the three and nine month periods
ended September 30, 2000 and 1999, as required to be reported by FASB Statement
No. 130, was identical to the actual net income 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 42 states as of
September 30, 2000. Since January 1, the Company has acquired one distribution
center, opened five distribution centers and closed six.
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 nine months ended
September 30, 2000 and 1999:
Three months ended Nine months ended
September 30, September 30,
----------------------------------------- --------------------------------------
2000 1999 2000 1999
----------------- --------------- -------------- ----------------
Income statement data:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.0 76.5 75.9 76.6
----------------- --------------- -------------- ----------------
Gross profit 24.0 23.5 24.1 23.4
Operating expenses:
Distribution centers 17.6 17.3 18.9 18.7
General and administrative 1.6 1.3 2.1 1.4
Amortization of intangible assets 0.1 0.1 0.1 0.1
Non-recurring charge -- -- -- 0.5
----------------- --------------- -------------- ----------------
Total operating expenses 19.3 18.7 21.1 20.7
----------------- --------------- -------------- ----------------
Operating income 4.7% 4.8% 3.0% 2.7%
================= =============== ============== ================
Comparison of the Three and Nine Month Periods Ended September 30, 2000 to the
Three and Nine Month Periods Ended September 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 September 30, 2000 increased by 4.2%
to $362.2 million from $347.7 million for the three months ended September 30,
1999. Net sales for the nine months ended September 30, 2000 increased by 5.1%
to $941.2 million from $895.9 million for the nine months ended September 30,
1999. Comparable distribution center sales growth were 5.3% and 5.7% for the
three and nine month periods ended September 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 September 30, 2000 increased by
6.4% to $86.9 million from $81.7 million for the three months ended September
30, 1999. Gross profit, as a percent of net sales, for the three months ended
September 30 increased to 24.0% in 2000, from 23.5% in 1999. Gross profit for
the nine months ended September 30, 2000 increased by 8.3% to $227.0 million
from $209.7 million. Gross profit as a percent of net sales for the nine months
ended September 30, increased to 24.1% in 2000, from 23.4% in 1999. The gross
profit improvement for both the three and nine month period is primarily a
result of profits associated with increased sales. Management feels the
improvement in gross profit percentage relates primarily to strategic
initiatives, including pricing, purchasing, and incentive programs, at the
distributions centers to increase gross profit margin.
Distribution center operating expenses for the three months ended September
30, increased by $3.4 million to $63.5 million in 2000, from $60.1 million in
1999. As a percent of net sales, distribution center operating expenses for the
three months ended September 30, increased to 17.6% in 2000, from 17.3% in 1999.
For the nine months ended September 30, distribution center operating expenses
increased by $10.5 million to $177.8 million in 2000, from $167.3 million in
1999. As a percent of net sales, distribution center operating expenses for the
nine months ended September 30, increased to 18.9% in 2000 from 18.7% in 1999.
The increases for the three and nine month periods are primarily the result
of increased wages incurred as a result of increased sales, and increased fuel
costs for delivery vehicles. These two increases are partially offset by a
reduction in the provision for doubtful accounts.
General and administrative expenses for the three months ended September
30, increased by $1.4 million to $5.9 million in 2000, from $4.5 million in
1999. For the nine months ended September 30, general and administrative
expenses increased by $7.0 million to $20.0 million in 2000 from $13.0 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 better serving customer needs
and improving efficiencies. Throughout this process, the Company had engaged a
consulting firm and added internal project coordinators and financial analysts.
This evaluation, which concluded during the third quarter, 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 was the evaluation of the Company's computer
systems and review of potential replacement systems. Through this evaluation,
management has decided to maintain and enhance its current computer system, and,
at the present time, not to proceed with the development of a new system.
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 September 30, increased by $0.4
million to $17.1 million, from $16.7 million in 1999. Operating income for the
nine months ended September 30, increased by $4.0 million to $28.1 million from
$24.1 million in 1999. The increase for the three and nine months ended
September 30, are due to the factors noted above.
Interest expense for the three months ended September 30, increased by $0.8
million or 15.0% to $6.6 million in 2000 from $5.8 million in 1999. For the
nine months ended September 30, interest expense increased by $1.9 million or
11.0% to $19.1 million in 2000 from $17.2 million in 1999. The increase for
both the three and nine 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 provided by operations was
$34.3 million for the nine months ended September 30, 2000, as compared to $28.9
million for the same period in 1999. The increase was due in part to the net
income improvement of $2.9 million, as well as increases in accounts payable and
accounts receivable due to increased sales.
Cash Flows from Investing Activities. Net cash used in investing activities
was $13.1 million and $10.6 million for the nine months ended September 30, 2000
and 1999, respectively. The increase is due principally to the additions of
property and equipment.
Cash Flows from Financing Activities. Net cash used in financing activities
was $22.7 million and $20.0 million for the nine months ended September 30, 2000
and 1999, respectively. The increase is due primarily to reductions in long term
debt.
During the third quarter, the Company repurchased $11.6 million of its
Senior Subordinated Notes. The purchase resulted in an extraordinary gain of
$1.0 million net of the amortization of a portion of the original transaction
fees and other expenses. The funds to repurchase the Senior Subordinated Notes
were obtained primarily through additional borrowings under the Company's
revolving credit agreement.
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
10.1 Consent Agreement, dated August 10, 2000, among the Company, the
Lenders, and Bank of America, National Association.
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 September 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.
November 7, 2000 /s/ Kendra A. Story
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Date: Kendra A. Story
Chief Financial Officer and Director