<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the fiscal year ended December 31, 1997 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 33-26991
__________________________________________
AMERICAN BUILDERS AND CONTRACTORS SUPPLY CO., INC.
AMCRAFT BUILDING PRODUCTS CO., INC.
MULE-HIDE PRODUCTS CO., INC.
(Exact names of Registrants as specified in their respective charters)
DELAWARE 5033 39-1413708
DELAWARE 5033 39-1701778
TEXAS 5033 62-11277211
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
ONE ABC PARKWAY, BELOIT, WISCONSIN 53511
(Address of principal executive offices) (Zip code)
608-362-7777
(Registrant's telephone number, including area code)
_______________________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check 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 requred to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowlege, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
American Builders and Contractors Supply Co., Inc. (the Company) is
the largest wholesale distributor of roofing products and one of the largest
wholesale distributors of vinyl siding materials in the United States,
operating 205 distribution centers located in 40 states. ABC provides its
customers with access to what it believes to be the largest selection of
roofing and vinyl siding materials in the industry and with a knowledgeable
staff capable of providing product specific information, as well as credit
services and marketing support. For the year ended December 31, 1997, the
Company generated net sales of $959.3 million. On a pro forma basis
considering the Champ acquisition, the Company would have had net sales of
$1,132.9 million for 1997.
The products distributed by the Company consist exclusively of roofing
and siding materials, windows and related tools and accessories for
residential and, to a lesser extent, commercial applications. The Company
markets these products on a wholesale basis primarily to small and
medium-sized roofing and siding contractors that are involved in the
replacement segment of the construction industry. ABC also distributes
products to builders and subcontractors involved in new construction projects.
ABC was founded in 1982 by its President and Chief Executive Officer,
Kenneth A. Hendricks, who, as the owner of a successful roofing business, saw
a market for the Company's services. Since its inception, ABC has experienced
significant growth. The Company's net sales have increased from $446.4
million, for the year ended December 31, 1993, to $959.3 million, for the year
ended December 31, 1997, representing compound annual growth rates of 21.2%.
In addition, comparable distribution center sales have grown at an average
annual rate of 12.8% over the same period.
Since January 1, 1993, the Company has completed 30 acquisitions,
acquiring 72 local distribution centers (net of consolidations). The Company
has historically selected acquisition candidates based, in part, on the
opportunity to improve their operating results. The Company seeks to leverage
its purchasing power, broad product selection and management expertise to
improve the financial performance of its acquired distribution centers while
maintaining the acquired customer bases. In 1997, the Company acquired two
larger distributors. In May 1997, the Company acquired Viking Aluminum
Producucts, Inc., a regional building supply distributor with 12 locations in
the northeastern United States. In November 1997, the Company acquired Champ
Industries, Inc., a regional building supply distributor with 32 locations
located primarily in the southwestern and western United States. The Company
believes that the ongoing consolidation in the building materials distribution
industry will continue to provide suitable acquisition candidates in the
future.
PRODUCTS, CUSTOMERS AND MARKETS
The roofing and vinyl siding products industry contains three primary
distribution channels: manufacturers' direct sales; mass merchandisers, such
as Home Depot; and wholesale distributors, such as the Company. Mass
merchandisers primarily sell products to homeowners and small contractors,
tend to stock items across a multitude of buliding supply categories and stock
a relatively narrow selection of non- premium grade roofing and siding
products. Typically, manufacturers do not sell products directly to retail
customers or small customers.
The products distributed by the Company consist primarily of roofing
products (both residential and commercial), siding products, windows, and
related tools, equipment and accessories. ABC provides its customers with what
it believes to be the largest selection of roofing and vinyl siding materials
in the industry. The products that the Company distributes can be classified
in the following five categories:
2
<PAGE>
Residential roofing products and accessories. The Company distributes
a broad selection of shingles, felt, roof tile, wood shakes, flashings, vents
and other roofing products to residential roofing contractors. Principal
brands of residential roofing products include GAF(R), GS(R), CertainTeed(R),
Elk(R), Tamko(R) and Owens-Corning(R).
Commercial roofing products and accessories. The Company distributes a
broad selection of modified bitumen, EPDM, hypalon, other rolled roofing,
felts, coatings, asphalt, flashings, vents, fasteners, roof insulation and
other roofing products to commercial roofing contractors. Principal brands of
commercial roofing products include Johns Manville(R), GAF(R), GS(R), US
Intec, Celotex(R), Firestone(R), Versico, Asphalt, Atlas(R),and Mule-Hide(R).
Mule-Hide primarily sells its private label roofing systems through ABC's
distribution centers.
Siding products and accessories. The Company distributes a broad
selection of siding products to siding contractors. The Company's siding
products consist primarily of vinyl siding, soffits and accessories and, to a
lesser extent, aluminum and wood siding. Principal vinyl siding brands include
Alcoa(R), Wolverine(R), Certainteed(R) and Amcraft(R).
Windows and accessories. The Company distributes a broad selection of
window products and accessories to residential window installers, including
vinyl, wood and aluminum window frames and single, double and triple glazed
windows. Principal window brands include CertainTeed(R), Simonton Windows(R),
Eagle Windows(R) and Weather-Shield(R).
Other building products and accessories. The Company distributes a
variety of roofing and siding products to complement its primary product
lines. Such products include gutters, sheet metal, roofing and siding
equipment, tools and other related accessories.
The following table sets forth certain information regarding the
Company's net sales by product for the years ended December 31, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
Total Net Sales
------------------------
Product Categories 1997 1996 1995
- ------------------ ------------------------
<S> <C> <C> <C>
Residential roofing............. $472.1 $391.8 $318.3
Commercial roofing.............. 240.6 214.2 181.5
Siding.......................... 129.5 90.5 70.6
Windows......................... 65.9 53.6 35.4
Other........................... 51.2 39.0 33.0
------------------------
Total for all categories.... $959.3 $789.1 $638.8
========================
</TABLE>
The Company distributes these products on a wholesale basis primarily
to small and medium-sized roofing and siding contractors that are involved in
the replacement segment of the construction industry. ABC also distributes
products to builders and subcontractors involved in new construction projects.
SALES AND MARKETING
As of December 31, 1997, the Company employed over 500 field sales
representatives. Each distribution center has at least two sales
representatives who are responsible for promoting ABC products and services in
their respective markets. The sales representatives report to the distribution
center manager and are supported by customer service representatives. A
substantial portion of each representative's pay is derived from sales
commissions. In addition, the Company employs a number of regional product
managers and sales managers who educate the Company's sales personnel and
customers regarding the technical specifications and marketability of certain
products.
3
<PAGE>
DISTRIBUTION CENTER OPERATIONS
The Company operates 205 local distribution centers located in 40
states, and has a market presence in 48 of the 50 most populous metropolitan
areas in the United States. Since January 1, 1995, the Company has opened 32
distribution centers, closed 3 distribution centers and acquired an additional
67 distribution centers (net of consolidations) in connection with its
selective acquisition program. A typical distribution center is comprised of
showroom space, office space, warehouse and receiving space, secure outdoor
holding space and a loading dock. ABC's distribution centers range in size
from approximately 10,000 to approximately 110,000 square feet, with a typical
size of approximately 40,000 square feet.
Each location is managed by a distribution center manager who oversees
the center's employees, including a credit manager, various sales personnel,
customer service representatives and delivery and warehouse personnel. The
Company allows each distribution center manager to alter the product mix of a
given center to meet local market demands and to stock regional products (such
as roof tile in the Florida, Texas and California markets). Distribution
center employees' bonus levels are largely driven by location profitability.
The Company believes its incentive programs have contributed significantly to
its growth and have helped it to achieve an average annual growth rate of
comparable distribution center sales of 12.8% over the past five years.
The following table sets forth the Company's growth in terms of
distribution centers in each of the past three years:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------
<S> <C> <C> <C>
Distribution centers on January 1............ 157 126 109
Distribution centers acquired................ 51 22 14
Distribution centers opened.................. 11 14 7
Acquired distribution centers consolidated... (11) (5) (4)
Distribution centers closed.................. (3) - -
------------------
Distribution centers on December 31.......... 205 157 126
==================
</TABLE>
COMPETITION
The roofing and siding products distribution industry is highly
competitive and fragmented. The Company competes directly with a large number
of local and regional building products distributors and, in certain markets
and product categories, with two national distributors, Cameron Ashley
Building Products and Allied Building Products. The Company also competes to a
lesser extent with mass-merchandisers, such as Home Depot, and with direct
sales from building products manufacturers.
PURCHASING
ABC purchases its products directly from a wide variety of
manufacturers, including GAF, GS Roofing Products Company, Inc., Elk
Corporation of America, Owens-Corning Fiberglass Corporation, Johns Manville
Corporation and Alcoa Buiding Products, Inc. Payment, discount and volume
purchase programs are negotiated directly by the Company with its major
suppliers, with a significant portion of the Company's purchases made from
suppliers offering these programs. The Company believes it is the largest or a
significant customer to many of its primary suppliers, and, as a result, is
able to negotiate volume discounts and other favorable terms. At 12.4% of the
Company's 1997 product purchases, GAF (including its subsidiary U.S. Intec)
was the only supplier which represented more than 10.0% of the Company's total
purchases. The Company typically purchases its products from manufacturers
pursuant to individual purchase orders, and does not generally enter into
long-term contracts for the purchase of products.
4
<PAGE>
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.
EMPLOYEES
As of December 31, 1997, the Company employed 3,219 full-time and 50
part-time employees, of whom 22 were members of a union. The Company's
collective bargaining agreements with its union expire on various dates, from
May 1998 through September 1999. The Company believes that its relations with
its employees are good.
ENVIRONMENTAL MATTERS
A number of roofing materials are considered environmentally
hazardous. The Company typically handles and stores a variety of these
materials at its distribution center locations. The Company maintains
appropriate environmental compliance programs at each of its distribution
centers and has never been the subject of any material enforcement action by
any governmental agency.
Many of the Company's distribution centers are located in areas of
current or former industrial activity, where environmental contamination may
have occurred. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
estate may be required to investigate and remediate releases or threatened
releases of hazardous or toxic substances or petroleum products located at
such property, and may be held liable for property damage and for
investigation and remediation costs in connection with the contamination.
The Company does not believe there are any material environmental
liabilities at any of its distribution center locations. Nevertheless, there
can be no assurance that the Company's knowledge is complete with regard to
all material environmental liabilities and it could subsequently discover
potential environmental liabilities arising from its sites or from neighboring
facilities.
ITEM 2. PROPERTIES
The Company operates both owned and leased branches in 40 states. Its
facilities range in size from approximately 10,000 to 110,000 square feet.
This building space is used for warehousing and distribution purposes and, to
a lesser extent, for sales and administrative purposes. The Company owns a
118,000 square foot office building where its corporate offices are located in
Beloit, Wisconsin. The Company believes its facilities are adequately
maintanined and utilized and are suitable for the purposes for which they are
used. See Note 5 to the Consolidated Financial Statements of the Company for
a summary of payments due under the Company's leases.
None of the Company's owned real properties are subject to any major
encumbrances.
5
<PAGE>
The following table sets the geographical location of the Company's
distribution centers as of December 31, 1997:
<TABLE>
<CAPTION>
Total Number
of
Region Locations
- ------ ------------
<S> <C>
Florida........................... 8
Lake Central (Great Lakes)........ 21
Mid-Atlantic...................... 17
Midwest........................... 32
New England....................... 18
Northern California and Hawaii.... 14
Rocky Mountain.................... 20
Southeast......................... 23
Southwest......................... 36
Western........................... 16
---
205
===
</TABLE>
The Company leases the majority of its properties from the Company's
sole stockholder and certain of his affiliates.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any
of the matters in which it is currently involved will have a material adverse
effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no public market for the stock of the Company. There was one
holder of record of the Company's common stock as of December 31, 1997.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected consolidated financial
information of the Company for each of the five years in the period ended
December 31, 1997. The information contained in the following table should be
read in conjunction with, and is qualified in its entirety by reference to,
the information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
audited consolidated financial statements and related notes included elsewhere
in this report.
6
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................. $959,321 $ 789,103 $638,821 $513,766 $446,384
Cost of sales......................... 744,186 615,627 501,027 403,032 350,987
Gross profit.......................... 215,135 173,476 137,794 110,734 95,397
Operating expenses.................... 194,802 152,316 121,335 98,462 84,796
----------------------------------------------------------------------
Operating income...................... 20,333 21,160 16,459 12,272 10,601
Net interest expense.................. (16,480) (10,457) (9,092) (5,466) (4,144)
----------------------------------------------------------------------
Income from continuing operations
before provision for income taxes... 3,853 10,703 7,367 6,806 6,457
Provision for income taxes (1)........ 311 329 338 260 236
----------------------------------------------------------------------
Income from continuing operations..... 3,542 10,374 7,029 6,546 6,221
Discontinued operations (2)........... - - - - (2,981)
----------------------------------------------------------------------
Net income............................ $ 3,542 $ 10,374 $ 7,029 $ 6,546 $ 3,240
======================================================================
BALANCE SHEET DATA
(AT END OF PERIOD):
Accounts receivable, net.............. $143,106 $ 92,360 $ 73,133 $ 49,756 $ 37,508
Inventories........................... 128,847 95,779 79,297 50,007 48,247
Total assets.......................... 409,622 51,948 205,316 130,305 13,294
Accounts payable and accrued
expenses............................. 100,483 71,805 61,069 47,221 4,858
Long-term debt, less current
maturities........................... 281,206 139,664 113,397 62,040 50,277
Stockholder's equity.................. 21,792 31,960 25,524 8,165 6,323
OTHER DATA:
Comparable distribution center
sales growth (3)..................... 5.2% 11.5% 17.3% 11.1% 18.7%
</TABLE>
(1) Consists of certain state and local income taxes. As subchapter S
corporations under the Internal Revenue Code of 1986, as amended (the
"Code"), the Company and its subsidiaries have not been subject to U.S.
federal income taxes or most state income taxes. Instead, such taxes have
been paid by Mr. Hendricks. The Company has in the past made periodic
distributions to Mr. Hendricks in respect of such tax liabilities. From
and after the date of the Indenture, such distributions will be made in
accordance with the terms of the Tax Allocation Agreement (as defined
herein). See "Certain Transactions."
(2) In 1993, one of the Company's wholly-owned subsidiaries made a decision
to discontinue its manufacturing operations, which primarily produced
vinyl windows. The results of operations of the subsidiary's
manufacturing segment have been classified as discontinued operations for
the year ended December 31, 1993.
(3) "Comparable distribution center sales growth" is defined as the
percentage change in distribution center sales as compared to sales for
the same distribution centers in the prior year. For purposes of this
calculation, only distribution centers that were open as of the begining
of the applicable period are included.
ITEM 7. 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 205 distribution centers located in
40 states. Since January 1, 1993, the Company has opened 41 distribution
centers, closed 3 distribution centers and acquired an additional 72
distribution centers (net of consolidations) in connection with its
acquisition program.
Effects of Acquisitions. The Company has historically selected
acquisition candidates based, in part, on the opportunity to improve their
operating results. The Company seeks to leverage its purchasing power, broad
product selection and management expertise to improve the financial
performance of its acquired distribution centers while maintaining the
acquired customer bases. Results of operations reported herein for each period
only include results of operations for acquired businesses from their
respective dates of
7
<PAGE>
acquisition. Full year operating results, therefore, could differ materially
from that presented. In addition, there has typically been a period following
each acquisition in which the acquired business does not perform at the same
level as the Company's existing distribution centers. As a result of the
Company's ongoing acquisition program, its results of operations have
historically reflected, and are likely to continue to reflect, the periodic
inclusion of under-performing businesses.
The Company has accounted for its acquisitions using the purchase
method of accounting. As a result, these acquisitions have affected and will
prospectively affect the Company's results of operations in certain
significant respects. The aggregate acquisition costs are allocated to the
tangible and intangible assets acquired and liabilities assumed by the Company
based upon their respective fair values as of the acquisition date. The cost
of such assets are then amortized according to the classes of assets acquired
and the useful lives thereof. The Company has begun to acquire larger
distributors with established operating results, necessitating payment of
purchase prices in excess of the fair value of net assets acquired resulting
in goodwill, which is amortized over periods of 25-35 years. Similar future
acquisitions may result in additional amortization expense. In addition, due
to the effects of the increased borrowing to finance future acquisitions, the
Company's interest expense may increase in future periods.
Additional information regarding the Company's acquisitions, including
unaudited condensed pro forma financial information with respect to the Champ
acquisition, is included in Note 2 to the Company's Consolidated Financial
Statements included elsewhere in this Form 10-K.
Provision for Income Taxes. The Company and its subsidiaries have been
operated as subchapter S corporations under the 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 Mr. Hendricks. Such corporations have historically made
periodic distributions to Mr. Hendricks in respect of such tax liabilities. In
connection with the Offering, the Company will enter into the Tax Allocation
Agreement with Mr. Hendricks pursuant to which he will receive distributions
from the Company with respect to taxes associated with the Company's income.
See "Certain Transactions."
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of
operations as a percentage of net sales for each of the three years ended
December 31, 1997:
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
INCOME STATEMENT DATA: -----------------------
Net sales................................ 100.0% 100.0% 100.0%
Cost of sales............................ 77.6 78.0 78.4
---------------------
Gross profit............................. 22.4 22.0 21.6
Operating expenses:
Distribution centers................. 18.8 17.8 17.4
General and administrative........... 1.4 1.5 1.6
Amortization......................... 0.1 0.0 0.0
---------------------
Total operating expenses........... 20.3 19.3 19.0
---------------------
Operating income......................... 2.1% 2.7% 2.6%
=====================
8
<PAGE>
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED
DECEMBER 31, 1996
Net sales for the year ended December 31, 1997 increased by $170.2
million, or 21.6%, to $959.3 million from $789.1 million for the year ended
December 31, 1996. Components of the change in net sales are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1997 1996 Increase % Increase
- -------------------- -----------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
In operation prior to January 1, 1995..... $721.7 $695.5 $ 26.2 3.8%
Acquired in 1995.......................... 42.0 31.8 10.2 32.1
Opened by the Company in 1995............. 20.5 18.1 2.4 13.3
Acquired in 1996.......................... 52.3 33.1 19.2 58.0
Opened by the Company in 1996............. 26.4 10.6 15.8 149.1
Acquired in 1997......................... 78.4 - 78.4 -
Opened by the Company in 1997............. 18.0 - 18.0 -
-----------------------------------
Total................................ $959.3 $789.1 $170.2 21.6%
===================================
</TABLE>
The increase in net sales for distribution centers in operation prior
to January 1, 1995 was less than comparable increases in prior years primarily
due to the decreased demand nationwide for residential and commercial roofing
products which comprise 74.3% of the Company's net sales in 1997. Comparable
distribution center sales growth, which consists of stores opened prior to
January 1, 1996, was 5.2%
Cost of sales for the year ended December 31, 1997 increased by $128.6
million, or 20.9%, to $744.2 million from $615.6 million for the year ended
December 31, 1996, primarily as a result of costs associated with increased
sales. Cost of sales decreased from 78.0% in 1996 to 77.6% in 1997.
Increased sales of higher margin products such as vinyl siding and window
contributed to the increased gross margin percentage. In addition, direct
sales (product shipped from the vendor directly to the customer's job site),
which have significantly lower margins than sales from the distribution
center's warehouse, decreased as a percentage of total sales in 1997.
Distribution center operating income which consists of net sales less
cost of sales and operating expenses for the distribution centers, including
amortization expense, increased $1.2 million to $34.2 million in 1997 from $33.0
million in 1996. Components of distribution center operating income (loss) and
the change therein are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1997 1996 CHANGE
- -------------------- -----------------------
(IN MILLIONS)
<S> <C> <C> <C>
In operation prior to January 1, 1995....... $34.3 $33.7 $0.6
Acquired in 1995............................ 1.4 0.8 0.6
Opened by the Company in 1995............... (0.3) (0.3) 0.0
Acquired in 1996............................ (0.1) 0.1 (0.2)
Opened by the Company in 1996............... (1.2) (1.3) 0.1
Acquired in 1997............................ 0.4 - 0.4
Opened by the Company in 1997............... (0.3) - (0.3)
-----------------------
Total.................................. $34.2 $33.0 $1.2
=======================
</TABLE>
The tables set forth above illustrate that the Company's commitment to
growth has a significant impact on operating income. Although distribution
centers in operation prior to January 1, 1995 accounted for only 75.2% of net
sales in 1997, such distribution centers accounted for 100.3% of distribution
center operating income.
The increase in distribution center operating income for distribution
centers in operation prior to January 1, 1995 was less than increases
experienced in prior years primarily due to lower increases in sales than
anticipated. The Company had increases in personnel and other expenses in
anticipation of volume in excess of what occurred.
9
<PAGE>
General and administrative expenses increased $2.0 million to $13.9
million in 1997 from $11.9 million in 1997 yet decreased as a percentage of
net sales to 1.4% from 1.5% in 1996. Major components of the increased
expenses were salaries and benefits to support the increased sales.
Interest expense for the year ended December 31, 1997 increased by
$5.8 million, or 52.3%, to $16.9 million from $11.1 million for the year ended
December 31, 1996, primarily as a result of higher interest rates on the
senior subordinated debt as compared to the revolver utilized in the prior
year ($2.2 million) and increased borrowings related to acquisitions and
increased working capital needs ($4.0 million) offset by a lower overall
average borrowing rate on the revolver ($0.4 million).
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
Net sales for the year ended December 31, 1996 increased by $150.3
million, or 23.5%, to $789.1 million from $638.8 million for the year ended
December 31, 1995. Components of the change in net sales are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1996 1995 INCREASE % INCREASE
- -------------------- -------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
In operation prior to January 1, 1994........ $649.5 $587.2 $ 62.3 10.6%
Acquired in 1994............................. 16.0 13.1 2.9 22.1
Opened by the Company in 1994................ 30.0 23.4 6.6 28.2
Acquired in 1995............................. 31.8 9.0 22.8 253.3
Opened by the Company in 1995................ 18.1 6.1 12.0 196.7
Acquired in 1996............................. 33.1 - 33.1 -
Opened by the Company in 1996................ 10.6 - 10.6 -
----------------------------------
Total................................... $789.1 $638.8 $150.3 23.5%
==================================
</TABLE>
Cost of sales for the year ended December 31, 1996 increased by $114.6
million, or 22.9%, to $615.6 million from $501.0 million for the year ended
December 31, 1995, primarily as a result of costs associated with increased
sales. Cost of sales decreased as a percentage of net sales over the same
period to 78.0% in 1996 from 78.4% in 1995, primarily due to increased sales
of higher margin products such as vinyl siding and windows.
Distribution center operating income, which consists of net sales less
cost of sales and operating expenses for the distribution centers, including
amortized expense, is a key measure that the Company uses to evaluate
individual distribution center performance. Distribution center operating
income increased $6.2 million to $33.0 million in 1996 from $26.8 million in
1995. Components of distribution center operating income (loss) and the change
therein are as follows:
<TABLE>
<CAPTION>
DISTRIBUTION CENTERS 1996 1995 CHANGE
- -------------------- -------------------------
(IN MILLIONS)
<S> <C> <C> <C>
In operation prior to January 1, 1994.... $33.4 $29.1 $ 4.3
Acquired in 1994......................... 0.1 0.0 0.1
Opened by the Company in 1994............ 0.2 (0.9) 1.1
Acquired in 1995......................... 0.8 (0.7) 1.5
Opened by the Company in 1995............ (0.3) (0.7) 0.4
Acquired in 1996......................... 0.1 -- 0.1
Opened by the Company in 1996............ (1.3) -- (1.3)
-------------------------
Total............................... $33.0 $26.8 $ 6.2
=========================
</TABLE>
Distribution centers in operation prior to January 1, 1994 accounted
for only 82.3% of sales in 1996, but accounted for 101.2% of distribution
center operating income.
10
<PAGE>
General and administrative expenses increased $1.5 million to $11.9
million in 1996 from $10.4 million in 1995 while decreasing as a percentage of
net sales to 1.5% in 1996 compared to 1.6% in 1995. Major components of the
increased expenses were salaries and benefits and a full year of depreciation
on the Company's new headquarters building as compared to a partial year of
depreciation in 1995.
Interest expense for the year ended December 31, 1996 increased by
$1.4 million, or 14.4%, to $11.1 million from $9.7 million for the year ended
December 31, 1995, as a result of greater borrowings associated with increased
working capital needs due to the Company's growth, partially offset by a
decrease in the interest rate on such borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities. Net cash provided by (used in)
operations was $(1.7) million for the year ended December 31, 1997 compared to
$4.8 million for the year ended December 31, 1996 and $(6.3) million for the
year ended December 31, 1995. The decrease in 1997 was due to decreased
earnings as well as increases in receivables and inventory which were not
offset by an increase in accounts payable. The increase in 1996 occurred
primarily as a result of increased earnings of $3.3 million, increased
depreciation and amortization of $2.3 million and the effect of changes in
operating assets and liabilities aggregating $5.1 million.
Cash Flows from Investing Activities. Net cash used in investing
activities was $(111.5) million, $(26.7) million and $(25.0) million for the
years ended December 31, 1997, 1996 and 1995, respectively. The Company's
investing activities consist primarily of costs associated with the
acquisition of building products distributors and, to a lesser extent, capital
expenditures. Acquisition of businesses were $86.7 million, $12.7 million and
$5.6 million in the fiscal years ended December 31, 1997, 1996 and 1995,
respectively. Capital expenditures were $25.3 million, $14.7 million and
$19.9 million in the fiscal years ended December 31, 1997, 1996 and 1995,
respectively.
Cash Flows from Financing Activities. Net cash provided by financing
activities was $114.7 million, $21.8 million and $32.3 million for the years
ended December 31, 1997, 1996 and 1995, respectively. The Company's financing
activities consist primarily of the borrowings incurred in connection with the
growth of its existing distribution centers as well as acquisition of building
products distributors and, to a lesser extent, distributions to the Company's
sole stockholder in respect of tax liabilities related to the Company.
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 assurance can be given, however, that this will be the case.
Senior Subordinated Notes: As of December 31, 1997, the Company had
$100 million of unsecured Senior Subordinated Notes bearing interest at 10
5/8%. These notes mature on May 15, 2007 and are subordinate to borrowings
under the revolving credit agreement.
Revolving Credit Agreement: The Company is party to a credit
agreement due June, 2000, which as of December 31, 1997, permitted revolving
borrowings of up to $200 million under the revolving line of credit
indebtedness (the "Revolver"). Debt outstanding under this agreement as of
December 31, 1997 was $163.8 million and borrowings under the Revolver are
secured by accounts receivable and inventory. The company is currently
negotiating an increase in the permitted borrowings under the Revolver to $250
million from $200 million, and expects to enter into an amendment effecting
such increase in the second quarter of 1998. However there can be no assurance
that such amendment will be entered into at such time or at all.
The Company believes that its current cash position, funds from
operations, and the availability of funds under its revolving credit
agreements, will be sufficient to meet anticipated requirements for working
capital for the next twelve months.
11
<PAGE>
YEAR 2000 ISSUE
The Company has developed a plan to modify its information technology
to be ready for the year 2000 and has begun converting critical data
processing systems. The Company currently expects the project to be
substantially complete by early 1999 and to cost between $250,000 and
$300,000. This estimate includes internal costs, but excludes the costs to
upgrade and replace systems in the normal course of business. The Company
does not expect this project to have a significant effect on operations. As
of December 31, 1997, approximately $100,000 had been expensed. The Company
will continue to implement systems with strategic value, though some projects
may be delayed due to resource constraints.
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.
INFLATION
The Company believes that inflation did not have a material impact on
its results of operations for the three years ended December 31, 1997.
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 a 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 anticipated benefits
from its acquisition strategy; (iii) the continued effectiveness of the
Company's sales and marketing strategy; and (iv) 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.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules are listed in Part IV Item 14
of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to (i)
each member of the Company's Board of Directors (the "Board"), (ii) each
executive officer of the Company and (iii) certain key employees of the
Company.
NAME AGE POSITION
- ------------------------------------------------------------------------------
Kenneth A. Hendricks.... 56 President, Chief Executive Officer and Director
Diane Hendricks......... 50 Executive Vice President, Secretary and Director
Kendra Story............ 38 Chief Financial Officer, Treasurer and Director
Jeffrey Stentz.......... 37 Director of Acquisitions
Robert Bartels.......... 49 Vice President-Operations
Gil Aleman.............. 54 Director
Kent Nelson............. 53 Director
Kenneth A. Hendricks has served as President, Chief Executive Officer
and a director of the Company since its inception in June 1982. Mr. Hendricks
is also President of Amcraft and Chairman of the Board of Mule-Hide. Prior to
1982, Mr. Hendricks was the owner and operator of a number of successful
exterior building contracting businesses and real estate businesses. Mr.
Hendricks is a member of the board of directors of Blackhawk Bancorp, Inc.
Diane Hendricks has served as Executive Vice President, Secretary and
a director of the Company since its inception. Ms. Hendricks is also President
of American Patriot Insurance Agency, Inc. Ms. Hendricks is primarily
responsible for overseeing insurance, personnel matters, bonus programs,
profit sharing and legal matters for the Company.
Kendra Story has served as the Chief Financial Officer, Treasurer and
a director of the Company since its inception. Ms. Story is primarily
responsible for overseeing finance, accounting, internal audit and inventory
management for the Company.
Robert Bartels has served as the Company's Vice President-Operations
since September of 1997, prior to then, he was the Director of Purchasing.
From 1992 to 1996, Mr. Bartels served as national marketing and sales director
for Globe Industries Incorporated and IKO Industries, Inc., each of which is a
manufacturer of roofing materials. From 1971 to 1992, Mr. Bartels was employed
by The Celotex Corporation, a manufacturer of roofing and siding products, in
a variety of positions with increasing responsibility, most recently as vice
president of sales.
Jeffrey Stentz has served as the Company's Director of Acquisitions
since 1995. From 1993 to 1995, Mr. Stentz served as chief financial officer of
PDQ Food Stores, Inc., a privately owned convenience food store chain. Prior
to that time, Mr. Stentz was a senior lending officer at Valley Bank and a
credit analyst at NBD Bank and at First Interstate Bancorp.
Gil Aleman has served as a director of the Company since 1997. Mr.
Aleman is recently retired from Jim Walter Corporation, where he served as
President of its Celotex roofing division from 1985 to 1997. Prior to 1985,
Mr. Aleman served as President of Jim Walter Window Components, a division of
Jim Walter Corporation.
Kent Nelson has served as a director of the Company since 1997. Mr.
Nelson has been Managing Director and a member of the Executive Committee of
Aon Risk Services, Inc., an insurance company,
13
<PAGE>
since 1989, and is an adjunct professor at the Management Graduate School of
Business of Northern Illinois University.
Kenneth and Diane Hendricks are husband and wife. Kendra Story is a
daughter of Mr. Hendricks.
ITEM 11. EXECUTIVE COMPENSATION
The compensation of executive officers of the Company is determined by
the Board. The following Summary Compensation Table includes individual
compensation information for the Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company in the year
ended December 31, 1997 for services rendered in all capacities to the Company
and its subsidiaries during the year ended December 31, 1997.
<TABLE>
<CAPTION>
All Other
Name and Principal Position Annual Compensation Compensation (1)
- --------------------------------------------------------------------------
Annual Bonus
---------------------
<S> <C> <C> <C>
Kenneth A. Hendricks............. $999,989 $ - $6,133
President, Chief Executive
Officer and Director
Diane Hendricks.................. 200,000 - 5,618
Executive Vice President,
Secretary and Director
Kendra Story..................... 151,308 26,733 4,864
Treasurer, Chief Financial
Officer and Director
Robert Bartels................... 138,462 25,000 2,200
Vice President - Operations
Jeffrey Stentz................... 109,165 50,000 3,880
Director of Acquisitions
</TABLE>
(1) Consists of estimated amounts paid by the Company for automobiles and
for matching payments under the Company's 401(k) Profit Sharing Plan,
respectively, as follows: Mr. Hendricks--$2,775 and $3,358; Ms.
Hendricks--$2,200 and $3,418; Ms. Story--$2,200 and $2,664; Mr.
Bartels--$2,200 and $0; and Mr. Stentz--$2,200 and $1,680.
For a description of the employment agreement to be entered into
between Mr. Hendricks and the Company, see "Certain Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the Company's capital stock is owned beneficially and of record
by the Company's founder, President and Chief Executive Officer. There are no
outstanding options or other rights to purchase any shares of the Company's
capital stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ABC transacts business with a number of entities, including Corporate
Contractors, Inc. ("CCI"), ABC Express, Inc. ("Express"), Water Tower
Industrial Properties ("Water Tower"), Hendricks Commercial Properties
("HCP"), Hendricks Carolina Properties, L.L.C. ("Carolina"), Patriot, Ltd.
("Patriot") and American Patriot Insurance Agency, Inc. ("APIA")
(collectively, the "Related Entities"), which are owned by ABC's sole
stockholder and his spouse. CCI performs construction work such as interior
renovations and additions at ABC locations. Express provides transportation
services for the Company. The Company
14
<PAGE>
leases properties from Water Tower, Carolina and HCP. The Company believes
that the transactions between ABC and the Related Entities have generally been
conducted on an arm's-length basis.
In connection with certain of the Company's acquisitions, the
Company's sole stockholder or his affiliates have purchased the real estate of
the acquired business, which the Company has then leased from Mr. Hendricks or
his affiliates. In addition, certain of the distribution centers opened by the
Company are located in facilities purchased by and leased from Mr. Hendricks
or his affiliates. These real estate purchases have historically been financed
with a combination of debt financing and equity, and a portion of the equity
has sometimes been funded by Mr. Hendricks with borrowings from ABC. The
aggregate amount of such borrowings from ABC outstanding as of December 31,
1997 was approximately $7.3 million. The Company and Mr. Hendricks currently
intend to continue to acquire properties for the Company's occupancy using
such method of financing. The Company's debt agreements will permit it to lend
additional amounts to Mr. Hendricks in connection with such transactions in
the future. Interest is charged on such loans at a rate comparable to the rate
the Company pays on its bank borrowings. The maximum amount of such borrowings
at any time during the three years ended December 31, 1997, occurred in April
1997 and aggregated $8.2 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of the Notes--Certain Covenants--Restricted
Payments."
As described above, as of December 31, 1997, the Company leased 83
facilities from Mr. Hendricks or his affiliates. For the year ended December
31, 1997, the Company paid $7.4 million in lease payments to Mr. Hendricks or
his affiliates in respect of such properties. During 1997, the Company entered
into a series of amended leases with lease terms of at least ten years for
such properties. Annual payments due under such leases will be based on the
prevailing market rates in the areas in which such properties are located and
will be adjusted annually to reflect changes in the consumer price index.
As of December 31, 1997, 1996 and 1995, the Company had obligations
outstanding under guarantees and letters of credit in respect of debt of Mr.
Hendricks and his affiliates in the amounts of $3.7 million, $3.9 million and
$2.7 million, respectively. Such guarantees and letters of credit are
primarily related to certain indebtedness of the Company which was assumed by
Mr. Hendricks. The maximum amount of such guarantees and letters of credit at
any time during the past three years occurred in July 1996 and aggregated $4.0
million.
Patriot, an insurance company owned by Mr. Hendricks and his spouse,
provides certain insurance coverage to the Company, which is subsequently
reinsured in part by third party insurance carriers. APIA serves as a broker
with respect to insurance facilities for the Company and the Related Entities.
The Company paid Patriot, net of reimbursements, $5.9 million, $5.3 million
and $5.2 million in 1997, 1996 and 1995, respectively, for reported and
unreported claim liabilities (as determined by an unrelated third- party
claims adjusting service) that are not the subject of reinsurance, as well as
costs of reinsurance premiums and other related costs.
During 1997, the Company entered into an employment agreement (the
"Employment Agreement") with Mr. Hendricks which will provide for an annual
salary of $1.0 million, subject to annual increases, if approved by a majority
of ABC's disinterested directors, of up to 20.0% of his salary in the
preceding year. The Employment Agreement will be for a term of three years,
renewable annually thereafter upon the mutual agreement of the Company and Mr.
Hendricks.
The Company has entered into a Tax Allocation Agreement with Mr.
Hendricks pursuant to which he will receive distributions from each of the
Company and its wholly owned subsidiaries with respect to taxes payable by Mr.
Hendricks associated with the operations of each entity.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1.) FINANCIAL STATEMENTS
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
PAGE
----
Report of Ernst & Young LLP, Independent Auditors................ 17
Consolidated Balance Sheets as of December 31, 1997 and 1996..... 18
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995............................... 19
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1997, 1996 and 1995......................... 20
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995................................ 21
Notes to Consolidated Financial Statements....................... 22
(2.) FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and, therefore,
have been omitted.
(3.) LISTING OF EXHIBITS
Exhibit 27 - Financial Data Schedule
(b) CURRENT REPORTS ON FORM 8-K:
During the fourth quarter ended December 31, 1997, the Company filed
Form 8-K dated November 17, 1997 relating to its acquisition of Champ
Industries, Inc. Item 2, "Acquisition or Disposition of Assets" was filed on
November 17, 1997, and Item 7, "Financial Statements and Exhibits," was filed
by amendment subsequent to December 31, 1997.
(c) EXHIBITS:
See Exhibit Index submitted as a separate section of this report.
16
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
American Builders & Contractors Supply Co., Inc.
We have audited the accompanying consolidated balance sheets of
American Builders & Contractors Supply Co., Inc., and subsidiaries (the
Company) as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1997. Our audits also included
the financial statement schedule listed in the index at Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of the Company at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therin.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
March 25, 1998
17
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash................................ $ 4,139,758 $ 2,630,337
Accounts receivable, less
allowance for doubtful accounts
of $5,949,000--1997 and
$4,325,000--1996................... 143,105,577 92,360,063
Inventories......................... 128,846,638 95,778,586
Prepaid expenses and other.......... 3,762,591 1,544,128
-----------------------------
Total current assets............. 279,854,564 192,313,114
Property and equipment, net (Note 4)... 71,614,380 49,944,290
Net receivable from sole
stockholder (Note 6).................. 7,328,218 5,149,185
Goodwill, net of accumulated
amortization of $500,089--1997 and
$112,817--1996........................ 41,732,490 2,947,183
Other intangible assets, net of
accumulated amortization of
$786,522--1997 and
$410,246--1996........................ 7,987,953 363,963
Security deposits...................... 1,025,844 1,117,855
Other assets........................... 78,246 112,723
-----------------------------
$409,621,695 $251,948,313
=============================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................... $ 78,489,098 $ 57,700,357
Accrued liabilities................. 21,994,354 14,104,151
Current portion of long-term
debt (Note 3)...................... 6,140,688 8,519,814
-----------------------------
Total current liabilities......... 106,624,140 80,324,322
Long-term debt (Note 3)................ 281,205,914 139,663,817
Commitments and contingent liabilities
(Notes 5, 6 and 7)
Stockholder's equity:
Common stock no par value; 10,000
shares authorized, 147.04
shares issued and outstanding...... 109,001 109,001
Additional paid-in capital......... 1,755,054 1,215,053
Retained earnings.................. 19,927,586 30,636,120
-----------------------------
Total stockholder's equity........ 21,791,641 31,960,174
-----------------------------
$409,621,695 $251,948,313
=============================
</TABLE>
See accompanying notes.
18
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Net sales.......................... $959,321,241 $789,102,559 $638,821,047
Cost of sales...................... 744,186,017 615,626,559 501,026,597
--------------------------------------------
Gross profit....................... 215,135,224 173,476,000 137,794,450
Operating expenses:
Distribution centers (Note 5).... 180,158,358 140,108,749 110,783,470
General and administrative....... 13,896,888 11,878,553 10,383,029
Amortization of intangible assets 746,875 328,614 168,745
--------------------------------------------
194,802,121 152,315,916 121,335,244
--------------------------------------------
Operating income................... 20,333,103 21,160,084 16,459,206
Other income (expense):
Interest income.................. 469,645 689,205 652,978
Interest expense................. (16,949,586) (11,146,057) (9,745,252)
--------------------------------------------
(16,479,941) (10,456,852) (9,092,274)
--------------------------------------------
Income before provision for
income taxes...................... 3,853,162 10,703,232 7,366,932
Provision for income taxes......... 310,838 329,509 338,386
--------------------------------------------
Net income......................... $ 3,542,324 $ 10,373,723 $ 7,028,546
============================================
</TABLE>
See accompanying notes.
19
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED TOTAL STOCK-
STOCK PAID-IN CAPITAL EARNINGS HOLDER'S EQUITY
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994...... $109,001 $1,215,053 $20,702,521 $ 22,026,575
Net income........................ - - 7,028,546 7,028,546
Distributions to sole stockholder. - - (3,530,897) (3,530,897)
---------------------------------------------------------
Balance at December 31, 1995...... 109,001 1,215,053 24,200,170 25,524,224
Net income........................ - - 10,373,723 10,373,723
Distributions to sole stockholder. - - (3,937,773) (3,937,773)
---------------------------------------------------------
Balance at December 31, 1996...... 109,001 1,215,053 30,636,120 31,960,174
Net income........................ - - 3,542,324 3,542,324
Contributions by sole stockholder. - 540,001 - 540,001
Distributions to sole stockholder. - - (14,250,858) (14,250,858)
---------------------------------------------------------
Balance at December 31, 1997...... $109,001 $1,755,054 $19,927,586 $21,791,641
=========================================================
</TABLE>
See accompanying notes.
20
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................... $ 3,542,324 $10,373,723 $ 7,028,546
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation............................. 11,116,823 8,750,803 6,639,351
Amortization............................. 746,875 328,614 168,745
Amortization of deferred financing costs. 232,628 - -
Provision for doubtful accounts.......... 4,463,785 3,603,631 3,164,991
Loss on disposal of property and equipment 305,934 17,412 103,428
Change in operating assets and liabilities:
Accounts receivable................... (12,972,988) (18,328,728) (19,061,181)
Inventories........................... (2,979,764) (9,832,405) (13,033,846)
Prepaid expenses and other............ (1,855,197) (142,212) (101,276)
Security deposits..................... 295,587 (570,341) (77,921)
Other assets.......................... 843,321 (179,614) (143,021)
Accounts payable...................... (9,061,854) 7,961,040 6,929,014
Accrued liabilities................... 3,627,663 2,774,544 2,101,027
--------------------------------------------------
Cash provided by (used in)
operating activities............... (1,694,863) 4,756,467 (6,282,143)
INVESTING ACTIVITIES
Additions to property and equipment.......... (25,346,559) (14,697,361) (19,922,034)
Proceeds from disposal of property
and equipment............................... 528,222 688,209 445,121
Acquisition of businesses.................... (86,687,666) (12,684,977) (5,571,511)
--------------------------------------------------
Cash used in investing activities... (111,506,003) (26,694,129) (25,048,424)
FINANCING ACTIVITIES
Net borrowings under line of credit.......... 47,284,907 23,381,086 23,524,699
Proceeds from long-term debt................. 100,109,172 9,734,539 14,983,005
Payments on long-term debt................... (13,221,806) (6,175,029) (4,147,483)
Net change in receivable from/payable to
sole stockholder............................ (1,639,033) (1,177,384) 1,487,500
Distributions paid to sole stockholder....... (14,250,858) (3,937,773) (3,530,897)
Deferred financing costs..................... (3,572,095) - -
--------------------------------------------------
Cash provided by financing activities 114,710,287 21,825,439 32,316,824
--------------------------------------------------
Net increase (decrease) in cash.............. 1,509,421 (112,223) 986,257
Cash at beginning of year........... 2,630,337 2,742,560 1,756,303
--------------------------------------------------
Cash at end of year................. $ 4,139,758 $ 2,630,337 $ 2,742,560
==================================================
Supplemental disclosures of cash flow
information are as follows:
Cash paid for interest.............. $ 15,246,275 $ 10,982,497 $ 9,355,205
Cash paid for income taxes.......... 382,475 345,459 344,151
</TABLE>
See accompanying notes.
21
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The accompanying consolidated financial statements include the
accounts of American Builders & Contractors Supply Co., Inc. (ABC or the
Company) and its wholly owned subsidiaries, Mule-Hide Products Co., Inc.
(Mule-Hide), and Amcraft Building Products Co., Inc. (Amcraft). During
1997, Mule- Hide and Amcraft, which previously were owned by ABC's sole
stockholder, were contributed to ABC. At the same time, Hendricks Real
Estate Properties, Inc., which was also owned by ABC's sole stockholder,
was merged into ABC. These transactions were transfers among entities
under common control and, accordingly, were accounted for using
historical costs in a manner similar to that in pooling of interests
accounting (i.e. including retroactive combination).
The Company is primarily engaged in the sale of roofing and
siding products throughout the United States. There were 205, 157 and
126 distribution center locations at December 31, 1997, 1996 and 1995,
respectively.
INVENTORIES
Inventories, which consist primarily of purchased roofing and
siding products, are stated at the lower of cost (average cost basis) or
market.
PROPERTY AND EQUIPMENT
Property and equipment additions (including leasehold
improvements) are capitalized at cost. Depreciation on these assets is
calculated using the straight-line method over the estimated useful
lives of the related assets or, in the case of leasehold improvements,
the life of the lease, if shorter. Estimated useful lives are as follows
(in years):
Buildings and Improvements.......... 39 years
Warehouse equipment................. 5-7 years
Vehicles............................ 5-10 years
Office furniture and equipment...... 3-7 years
Leasehold improvements.............. 5 years or life of
lease, if less
GOODWILL
Goodwill recorded in acquisitions of businesses is amortized over 25
to 35 years using the straight-line method.
OTHER INTANGIBLE ASSETS
Other intangible assets include non-complete agreements and deferred
financing costs, which are amortized over the term of the respective
agreements or loans (ranging from 3 to 15 years).
ADVERTISING
Advertising costs are expensed in the period incurred. Total
advertising expense was $3,895,936, $3,311,658 and $2,481,540 for 1997,
1996 and 1995, respectively.
22
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
INCOME TAXES
ABC and its subsidiaries have elected to be treated as Subchapter
S Corporations for federal and state income tax purposes. As a result, the
Company's sole stockholder includes the taxable income of ABC and its
subsidiaries in his personal income tax returns. Accordingly, with the exception
of the amounts described in the following paragraph, the accompanying financial
statements include no provision or liability for income taxes.
Certain states impose a corporate state tax on earnings of a Subchapter
S Corporation. Provisions of $310,838, $329,509 and $338,386 have been made for
such income taxes for the years ended December 31, 1997, 1996 and 1995,
respectively.
Net income differs from income currently taxable to the Company's sole
stockholder due to certain items which are reported differently for financial
reporting purposes than for income tax purposes; principally inventory costs
capitalized, bad debts and depreciation.
REVENUE RECOGNITION
The Company recognizes revenue upon delivery of product to the customer,
which typically occurs at the Company's distribution center locations.
LATE PAYMENT CHARGES
Late payment charges are recorded in connection with past due receivable
balances and are reflected as a reduction to the expenses incurred in collecting
those accounts, all within distribution center operating expenses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain 1996 and 1995 amounts were reclassified to conform with 1997
presentation.
2. BUSINESS ACQUISITIONS
All business acquisitions consummated through December 31, 1997 have
been accounted for using the purchase method and operations of such acquisitions
are included in the Company's financial statements from the respective dates of
acquisition.
1997 Acquisitions
On November 3, 1997, the Company acquired the stock or assets of five
corporations affiliated with Champ Industries, Inc. (Champ) for a purchase
price of approximately $61 million, which included the pay-off of certain
Champ debt and direct acquisition costs. Champ was engaged primarily in the
wholesale distribution and sale of roofing material and supplies (primarily in
Texas and California). The excess of cost over the fair value of the net assets
acquired, which approximated $36 million, is being amortized on a straight line
basis over 35 years. The allocation of the purchase price of Champ is tentative
pending completion of determing the closing net worth adjustment. Subsequent to
the business combination, the Champ entities acquired through stock acquisitions
were merged into the Company.
23
<PAGE>
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On May 19, 1997, the Company acquired certain assets and assumed
certain liabilites of Viking Products, Inc. and certain assets of Viking
Aluminum Products, Inc. (collectively, Viking). The purchase price was
approximately $26 million, which included a $3,000,000 seller note. Viking was
a regional distributor of residential roofing, siding and window products to
customers located primarily in the northeastern U.S. The excess of cost over
the fair value of the net assets acquired, which approximated $2.85 million,
is being amortized on a straight line basis over 25 years.
During 1997, the Company also made several other relatively small
acquisitions with an aggregate cost of approximately $3.5 million.
1996 and 1995 Acquisitions
During the year ended December 31, 1996, ABC acquired the inventory,
accounts receivable and fixed assets of seventeen locations for a total
purchase price of approximately $15,205,000. In connection with these
transactions, the Company recorded $2,510,000 in goodwill.
During the year ended December 31, 1995, ABC acquired the inventory,
accounts receivable and fixed assets of eleven locations for a total purchase
price of approximately $5,905,000. In connection with these transactions, the
Company recorded $550,000 in goodwill.
A summary of the purchase allocation for the acquisitions is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Fixed assets............... $ 8,274,510 $ 1,527,716 $ 573,744
Inventories................ 30,088,288 6,649,324 3,743,218
Accounts receivable........ 42,236,311 4,502,460 1,031,452
Other...................... 1,575,473 15,529 6,097
Goodwill and other
intangible assets......... 43,616,917 2,510,000 550,000
---------------------------------------
125,791,499 15,205,029 5,904,511
Less: seller notes......... (3,150,000) (2,520,052) (333,000)
liabilities assumed.. (35,953,833) - -
---------------------------------------
Net effect on cash......... $ 86,687,666 $12,684,977 $5,571,511
=======================================
</TABLE>
Pro Forma Results
Pro forma unaudited results of operations for the years ended December
31, 1997 and 1996, assuming the 1997 purchase of Champ had been consummated as
of January 1, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Net sales.............................. $1,132,877,000 $986,611,000
Net income............................. 6,229,000 13,730,000
</TABLE>
Unaudited pro forma financial information for other acquisitions is
not presented because those acquisitions did not have a material impact on the
Company's results of operations.
The pro forma results do not purport to represent what the Company's
net sales or net income would actually have been if the acquisiton in fact had
occurred at the beginning of the periods indicated.
24
<PAGE>
AMERICAN BUILDERS &
CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS--(Continued)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Notes payable to banks under Revolver........ $163,765,015 $116,480,109
Installment loans on vehicles and equipment.. 14,445,027 21,855,748
Mortgage notes payable on real estate........ 6,235,998 6,619,524
Other notes payable.......................... 2,249,873 3,228,250
Capital lease obligations.................... 650,689 -
Senior subordinated notes.................... 100,000,000 -
----------------------------
287,346,602 148,183,631
Less current maturities...................... 6,140,688 8,519,814
----------------------------
$281,205,914 $139,663,817
============================
</TABLE>
In May 1997, ABC issued $100,000,000 of 10 5/8% Senior Subordinated
Notes due 2007, for which it received net proceeds of approximately
$96,500,000 after deducting expenses and commissions. Net proceeds of
$10,000,000 were distributed to the Company's sole stockholder, who
simultaneously repaid to the Company approximately $8,200,000 million of net
borrowings. The remainder of the net proceeds combined with the repayments of
the net stockholder advances approximated $94,700,000 and was used to repay
indebtedness outstanding under the Revolver.
ABC has a financing agreement with a group of banks (Revolver) which
expires on June 30, 2000, under which ABC may borrow, on a revolving credit
basis, up to a maximum of $200,000,000 based on a percentage of eligible
accounts receivable and eligible inventory. Interest on the Revolver at
December 31, 1997 was largely based on LIBOR (6.0%) plus 1.25%. The weighted
average interest rate on all borrowings outstanding under the Revolver at
December 31, 1997 was 7.4%.
The agreement contains various covenants, including provisions that
place restrictions on ABC's ability to merge or sell its business, sell
assets, make investments other than in the ordinary course of business,
repurchase stock, or pay dividends. Additional provisions require ABC to
maintain specified tangible net worth and cash flow amounts and require that
ABC's current sole stockholder continue to own at least 51% of the Company's
stock. The agreement also includes a prepayment fee.
25
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The mortgage notes payable relate to ABC's corporate offices, and are
due in monthly principal and interest installments of approximately $50,000
through April 2002, with a final maturity date of May 31, 2002. Interest on
the mortgage notes is computed at 8.75% through October 31, 1997, with
variable interest thereafter based on an average yield of one-year U.S.
Treasury securities plus 3.5%.
The Company has various other installment loans, notes payable and
capital lease obligations with maturity dates ranging from 1998 through 2002,
and interest rates ranging from 7.76% to 10.0% on the installment loans and
other notes payable and 3.36% to 17.0% on the capital lease obligations.
Substantially all of the Company's assets are collateral for Company
indebtedness.
Future maturities of long-term debt as of December 31, 1997, are as
follows:
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
Year Ending December 31,
1998............... $ 6,140,688
1999............... 5,877,674
2000............... 168,565,529
2001............... 1,563,416
2002............... 5,199,295
Thereafter......... 100,000,000
------------
$287,346,602
============
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
Land........................... $ 3,607,692 $ 1,915,519
Buildings and improvements..... 12,948,995 10,889,390
Warehouse equipment............ 9,067,216 7,045,874
Vehicles....................... 60,305,121 39,914,661
Office furniture and equipment. 11,063,481 8,482,177
Leasehold improvements......... 12,849,138 10,696,340
---------------------------
109,841,643 78,943,961
Less accumulated depreciation.. 38,227,263 28,999,671
---------------------------
$ 71,614,380 $49,944,290
===========================
</TABLE>
5. LEASE COMMITMENTS
ABC conducts the majority of its operations in leased facilities under
operating leases expiring at various dates through 2007. Generally, the leases
provide that ABC pay all insurance, maintenance, and other costs and expenses
associated with use of the buildings. Some of the leases also require ABC to
pay real estate taxes.
As of December 31, 1997, the real estate for 83 of the distribution
centers was owned by a related party. The total rent expense for these
related-party leases was $7,393,000, $6,249,000 and $4,629,000 and for the
years ended December 31, 1997, 1996 and 1995, respectively.
26
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Rent expense under all leases totaled $16,998,000, $12,592,000,
and $9,838,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. Future minimum rental payments required as of December 31,
1997, under leases with an original term of more than one year are as
follows:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Year ending December 31,
1998....................... $18,604,248
1999....................... 14,669,664
2000....................... 12,333,371
2001....................... 10,745,404
2002....................... 9,166,448
Thereafter................. 29,381,718
Future minimum payments -----------
required........... $94,900,853
</TABLE>
6. RELATED-PARTY TRANSACTIONS
The Company is related to certain other affiliates by common
ownership and management. Transactions and balances with these entities
are as follows for the reporting periods:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Accounts receivable...... $ 27,433 $ 288,024 $ 281,809
Security deposits........ 413,767 374,044 374,044
Accounts payable......... 4,336 11,340 4,974
Sales.................... 100,165 65,969 172,830
Purchases................ 56,442 556,390 65,759
Rent expense--buildings.. 7,393,379 6,248,942 4,629,109
</TABLE>
The Company has the following receivables from, and payables to,
its sole stockholder:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
--------------------------
<S> <C> <C>
Receivables....... $7,328,218 $7,304,164
Payables.......... - (2,154,979)
--------------------------
$7,328,218 $5,149,185
==========================
</TABLE>
Interest on the receivables and payables is charged/incurred at
a rate comparable to the interest rate ABC pays on its Revolver and was
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Interest income........ $465,872 $ 627,751 $ 628,908
Interest expense....... (20,121) (239,397) (207,823)
----------------------------------
$445,751 $ 388,354 $ 421,085
==================================
</TABLE>
At December 31, 1997 and 1996, the Company had guaranteed debt
of the sole stockholder in the amounts of $2,029,000 and $3,616,000,
respectively. Certain assets owned by the Company are utilized as
collateral as part of an overall guaranty of this debt by the Company.
The Company also had outstanding letters of credit of $1,626,000 and
$300,000 at December 31, 1997 and 1996, respectively, with respect to
debt of the sole stockholder and his affiliates.
27
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
An insurance company, owned by the sole stockholder, provides
property and casualty insurance, including workers compensation
insurance, to the Company. The Company paid the insurance company for
reported and unreported claim liabilities, net of reimbursements, as
determined by an unrelated third- party claims adjusting service,
amounting to $5,860,605, $5,256,000 and $5,175,000 in 1997, 1996 and
1995, respectively.
7. LITIGATION
The Company is involved in various legal matters arising in the
normal course of business. In the opinion of management and legal
counsel, the amount of losses that may be sustained, if any, would not
have a material effect on the financial position and results of operations
of the Company.
8. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan covering substantially all
employees. The Company may make elective contributions. Discretionary
contributions of $924,000, $716,000 and $614,000 were made for 1997,
1996 and 1995, respectively.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, which
consist of cash, accounts receivable, accounts payable and borrowings,
approximates their fair value at both December 31, 1997 and 1996.
Substantially all of the Company's accounts receivable are due
from contractors located throughout the United States. Credit is
extended based on an evaluation of the customer's financial condition
and projects, where applicable. Credit losses are provided for in the
financial statements and have consistently been within management's
expectations.
10. SUMMARIZED FINANCIAL INFORMATION ABOUT GUARANTOR SUBSIDIARIES
The following is summarized aggregated financial information for
Mule-Hide and Amcraft, both of which fully, unconditionally, jointly,
and severally guarantee the $100 million of Senior Subordinated Notes
issued by ABC. The amounts are before consolidated level elimination
entries (i.e. sales to ABC and accounts receivable from ABC are
eliminated in consolidation but are separately shown below; all other
amounts are unaffected). Separate financial statements of the
guarantors are not presented because, in the opinion of management, such
financial statements are not material to investors.
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-------------------------
<S> <C> <C>
Current assets:
Accounts receivable from ABC...... $ 2,355,004 $ 1,165,462
Other current assets-third parties 3,950,487 4,088,947
-------------------------
Total.......................... 6,305,491 5,254,409
Noncurrent assets................. 707,312 1,340,694
Current liabilities............... (6,894,655) (6,471,068)
Noncurrent liabilities............ - (653,148)
</TABLE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Net sales:
To ABC............... $38,172,755 $33,922,487 $27,034,490
To third parties..... 5,869,444 5,532,971 4,853,632
-------------------------------------------
Total...... 44,042,199 39,455,458 31,888,122
Gross profit........... 7,572,577 6,784,164 5,483,012
Net income............. 1,593,119 1,577,620 772,841
</TABLE>
28
<PAGE>
INDEX TO EXHIBITS
3.1 Certificate of Incorporation of the Company (Incorporated by reference
to exhibit 3.1 to the Company's Registration Statement on Form S-4 (File
No. 33-26991)).
3.2 By-laws of the Company (Incorporated by reference to exhibit 3.2 to the
Company's Registration Statement on Form S-4 (File No. 33-26991)).
3.3 Articles of Incorporation of Mule-Hide (Incorporated by reference to
exhibit 3.3 to the Company's Registration Statement on Form S-4 (File
No. 33-26991)).
3.4 By-laws of Mule-Hide (Incorporated by reference to exhibit 3.4 to the
Company's Registration Statement on Form S-4 (File No. 33-26991)).
3.5 Certificate of Incorporation of Amcraft (Incorporated by reference to
exhibit 3.5 to the Company's Registration Statement on Form S-4 (File
No. 33-26991)).
3.6 By-laws of Amcraft (Incorporated by reference to exhibit 3.6 to the
Company's Registration Statement on Form S-4 (File No. 33-26991)).
10.1 Employment Agreement,dated as of May 1, 1997, between the Company and
Kenneth A. Hendricks (Incorporated by reference to exhibit 10.3 to the
Company's Registration Statement on Form S-4 (File No. 33-26991)).
10.2 Tax Allocation Agreement, dated as of May 1, 1997, among the Company,
Mule-Hide and Amcraft and Kenneth A. Hendricks (Incorporated by
reference to exhibit 10.4 to the Company's Registration Statement on
Form S-4 (File No. 33-26991)).
10.3 Form of lease agreement between the Company and Hendricks Real Estate
Properties and schedule of lease terms for all properties leased
pursuant thereto (Incorporated by reference to exhibit 10.5 to the
Company's Registration Statement on Form S-4 (File No. 33-26991)).
10.4 Amended and Restated Loan and Security Agreement among American National
Bank and Trust Company of Chicago, NationsBank of Texas, N.A.,
Bankamerica Business Credit, Inc. and the Company, as amended to date
(the "Credit Agreement") (Incorporated by reference to exhibit 10.6 to
the Company's Registration Statement on Form S-4 (File No. 33-26991)).
10.5 Amended and Restated Patent, Trademark and License Mortgage by the
Company in favor of NationsBank of Texas, N.A., as agent for the lenders
under the Credit Agreement, as amended (Incorporated by reference to
exhibit 10.7 to the Company's Registration Statement on Form S-4 (File
No. 33-26991)).
10.6 Amended and Restated Limited Guaranty Agreement between Kenneth A.
Hendricks, dated as of February 8, 1996, in favor of NationsBank of
Texas, N.A., individually or as agent for the lenders under the Credit
Agreement (Incorporated by reference to exhibit 10.8 to the Company's
Registration Statement on Form S-4 (File No. 33-26991)).
10.7 Continuing Guarantee Agreement, dated July 20, 1996, between Mule-Hide
and Heritage for the benefit of Kenneth A. Hendricks (Incorporated by
reference to exhibit 10.9 to the Company's Registration Statement on
Form S-4 (File No. 33-26991)).
10.8 Guaranty dated December 22, 1992, between the Company and Transohio
Savings Bank, for the benefit of Kenneth A. Hendricks (Incorporated by
reference to exhibit 10.10 to the Company's Registration Statement on
Form S-4 (File No. 33-26991)).
29
<PAGE>
10.9 Guaranty dated December 22, 1996, between the Company and MetLife
Capital Corporation for the benefit of Kenneth A. Hendricks
(Incorporated by reference to exhibit 10.11 to the Company's
Registration Statement on Form S-4 (File No. 33-26991)).
10.10 Employment Agreement, dated as of August 1, 1997, between the Company
and Jeffrey Stentz.
10.11 Tenth Amendment to the Amended and Restated Loan and Security Agreement
between NationsBank of Texas, N.A. and the Company, as amended to date
(the "Credit Agreement")
10.12 Eleventh Amendment to the Amended and Restated Loan and Security
Agreement between NationsBank of Texas, N.A. and the Company, as amended
to date (the "Credit Aggrement)
21.1 Subsidiaries of the Company, Mule-Hide and Amcraft (Incorporated by
reference to exhibit 21.1 to the Company's Registration Statement on
Form S-4 (File No. 33-26991)).
27.1 Financial Data Schedule.
30
<PAGE>
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1997, 1996, 1995
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Additions Other
beginning charged to Accounts Deductions Balance at
Description of year expense (2) (1) end of year
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accounts Receivable--Allowance for
doubtful accounts:
1997............................... $4,325,000 $4,464,000 $1,733,000 $4,573,000 $5,949,000
1996............................... 3,904,000 3,604,000 - 3,183,000 4,325,000
1995............................... 3,393,000 3,165,000 - 2,654,000 3,904,000
</TABLE>
(1) Consist of charge-offs, net of recoveries
(2) Allowance for doubtful accounts recorded in connection with acquisitions
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registration has duly caused this Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Beloit, State of Wisconsin, on 3/30, 1998.
AMERICAN BUILDERS AND CONTRACTORS SUPPLY
CO. INC.
/s/ Kendra A. Story
By:___________________________________
Kendra A. Story
Chief Financial Officer, Treasurer
32
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made and entered into as of the 1st day of
August, 1997, between AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC., a
Delaware corporation (hereinafter referred to as "Employer"), and JEFFREY W.
STENTZ, a resident of Middleton, Wisconsin (hereinafter referred to as
"Employee").
1. Employment. Employer hereby agrees to employ Employee and
Employee hereby agrees to serve as Employer's Director of Acquisitions on the
conditions, covenants, and terms set forth herein. Employer shall assign
duties to Employee from time to time with respect to Employer's business.
Employee agrees to serve and render such services to Employer as may be
prescribed from time to time by the Employer's President, Chief Executive
Officer, Chief Operating Officer, Board of Directors or its other designated
officers. Employee further agrees that during the term of this Agreement, he
will serve Employer faithfully, diligently, and to the best of his ability,
and shall devote his best efforts, attention, energy, and skill to the
performance of the duties assigned to him and to promote and further the
interests of Employer.
2. Term of Employment. The term of employment shall commence on the
date of the execution of this Agreement and shall continue for a period of
five (5) years except as otherwise provided in paragraph 7 hereof (the
"Initial Employment Term"). The Initial Employment Term may be renewed from
month to month after five (5) years from the date hereof ("Renewal Employment
Term"). The Initial Employment Term and any Renewal Employment Term are
together referred to as "Employment Term".
3. Compensation and Benefits.
(a) Salary. As compensation for the services to be rendered by
Employee to Employer hereunder and in consideration for the Restrictive
Covenants set forth in paragraph 6 hereof, Employer shall pay Employee an
annual base salary of One Hundred Twenty-Five Thousand Dollars ($125,000),
payable in appropriate installments to conform with the regular payroll dates
for salaried personnel of Employer. The base salary of Employee may be
adjusted from time to time by Employer, in Employer's sole discretion, so long
as the annual base salary will not be less than One Hundred Twenty-Five
Thousand Dollars ($125,000).
(b) Travel and Other Expenses. Employee shall also be entitled to
reimbursement for all reasonable and necessary travel and other expenses
incurred by him in connection with his rendering of services to Employer
hereunder in accordance with Employer's personnel policies in effect from time
to time.
1
<PAGE>
(c) Benefits. Employee shall receive a bonus in the amount of Fifty
Thousand Dollars ($50,000) for services rendered to Employer during calendar
year 1997, which bonus shall be payable on or before April 1, 1998. The
bonus shall be deemed to be earned if Employee is employed by Employer on
December 31, 1997. From time to time during the Employment Term, Employer may
award Employee such other bonuses, if any, as Employer deems appropriate, in
its sole discretion. Employee shall be entitled to participate in all pension
and profit sharing programs, medical insurance programs, life insurance
programs, and other employee benefit programs, if any, as may from time to
time be applicable to other employees of the Employer as determined and
approved by Employer.
(d) Vacations. Employee shall be entitled to vacations in accordance
with Employer's personnel policies in effect from time to time.
4. Other Activities. During the Employment Term, Employee shall
devote substantially all of his working time and efforts to the business and
affairs of Employer and to the duties and responsibilities assigned to him
pursuant to this Agreement. Employee may devote a reasonable amount of his
time to civic, community or charitable activities. Subject to the
restrictions contained in paragraph 6 hereof, Employee may invest his assets
in such manner as will not require any substantial services by Employee in the
conduct of the business or affairs of the entities or in the management of the
assets in which such investments are made. Employee shall fully inform
Employer of all such businesses and managements in which Employee actively
engages during the Employment Term.
5. Intellectual Property and Confidential Information.
(a) Intellectual Property. During the Employment Term, Employee will
disclose to Employer all ideas, inventions and business plans developed by him
during such period which relate directly or indirectly to the business of
Employer, including without limitation any process, operation, product or
improvement which may be patentable or unpatentable, copyrightable or not
copyrightable (collectively, "Intellectual Property"). Employee agrees that
such will be the property of Employer and that he will at Employer's request
and cost do whatever is necessary to secure the rights thereto by patent,
copyright or otherwise to Employer.
(b) Confidential Information. In the course of Employee's
employment, Employee will be provided with or may create certain information,
technical data and know-how regarding the business of Employer, its customers,
pricing, cost of goods, plans and its products, including, but not limited to,
information relating to Employer's existing or contemplated businesses,
employees, vendors, customer identity and
2
<PAGE>
requirements, customer lists, business plans, sales, financials, products
(quantities, vendor and customer prices, profit margins, discounts, rebates,
refunds and credits), technology, manufacturing techniques, engineering
processes, product formulae, marketing and promotion plans and methods,
technical service expertise and distribution activities, all of which is
confidential (such information, together with the Intellectual Property is
hereinafter referred to as "Confidential Information"). Employee shall
receive, hold and treat all Confidential Information as confidential and
secret and shall protect the secrecy of said Confidential Information.
Employee shall disclose the Confidential Information only to such persons who
are required to have such knowledge in connection with their work for
Employer. Such Confidential Information shall not be disclosed to others
without the prior written consent of the Employer. The following shall not be
Confidential Information and the provisions of this subparagraphs shall not be
applicable to: (i) information which at the time of disclosure to Employee is
a matter of public knowledge; (ii) information which, after disclosure,
becomes public knowledge other than through a breach of the Agreement, any
other confidentiality or trade-secret agreement or violation of any trade
secret or confidential relationships between Employer and any third party; and
(iii) information which Employee reasonably determines may be necessary or
appropriate to disclose in order to effectively discharge his duties to
Employer. Employee shall not use such Confidential Information for his own
use or for the use of anyone other than Employer. At such time as Employee
shall cease to be employed by the Employer, the Employee will surrender to the
Employer all papers, documents, writings, computer disks, photographs, and
other property provided by him or coming into his possession by or through
Employee's employment and relating to the Confidential Information (including
all copies and reproductions thereof), and Employee agrees that all such
Confidential Information and the materials containing such Confidential
Information will at all times remain the property of the Employer. Employee
shall return to Employer either before or immediately upon the Employee's
termination of employment with Employer any and all written information,
materials, or equipment (including computer disks) and any other documents,
equipment, and materials of any other kind relating in any way to Employer's
business in Employee's possession, custody, or control, whether confidential
or not, including any and all copies or reproductions thereof which may have
been made by or for Employee.
Employee understands and agrees that in the event Employee is in doubt,
or should reasonably be in doubt, regarding whether or not certain information
is Intellectual Property or Confidential Information, Employee shall obtain
the written approval of Employer's Board of Directors prior to any
disclosure. In the event Employee's employment has been terminated, Employee
shall obtain the written approval of Employer's general counsel (as designated
by Employers's Board of Directors) prior to any disclosure if Employee is or
should be in such doubt. A failure to obtain consent in a case where Employee
is or should be in doubt regarding the nature of the information
3
<PAGE>
without obtaining prior approval shall constitute a breach of this Agreement.
6. Termination.
(a) Termination for Cause. Employer shall have the right at any
time, by written notice to Employee, to terminate the Employment Term
forthwith and to discharge Employee for cause if any one of the following
events shall occur during the Employment Term:
(i) Employee's conviction in a court of law of a felony, or
of any crime or offense involving misuse or misappropriation of money
or other property; or
(ii) Employee's continued, repeated failure or refusal to
perform specific directives of the Board of Directors of Employer,
which directives are consistent with the scope and nature of
Employee's duties and responsibilities, and which are not remedied by
Employee within ten (10) days after notice; or
(iii) The commission of any intentional tort by Employee
against Employer, Employer's other employees or Employer's customers,
or arising in connection with Employee's duties and responsibilities
hereunder; or
(iv) A breach by Employee of any of the covenants set forth in
paragraph 5 hereof; or the repeated breach by Employee of any term,
condition or provision of any employee manual, memorandum, notice or
other instruction as may be provided by Employer to its employees from
time to time; or the repeated breach by Employee of any other material
term of this Agreement; or
(v) Any act of dishonesty by Employee which adversely affects
the business of Employer; or
(vi) Employee's termination of his employment with Employer
prior to the end of the Employment Term.
In the event of termination for cause as set forth in this paragraph
6(a), or upon violation of any of the obligations and restrictive
covenants set forth in paragraph 5 hereof, whether before or after
termination of employment, Employee shall have no further rights under
this Agreement of any kind. Nothing herein shall be deemed to limit
any other rights and remedies Employer may have against Employee.
(b) Termination for Death. In the event of the death of Employee,
the Employment Term shall thereupon terminate and be of no further force or
effect.
(c) Termination for Disability. In the event that, by reason of
physical or mental illness continuing for a period of twelve (12) consecutive
weeks in any consecutive twelve (12) month period, Employee has been
substantially unable, with reasonable accommodation, to perform the essential
functions of the Director of Acquisitions,
4
<PAGE>
Employer may, on ten (10) days prior written notice to Employee, terminate the
Employment Term. Employee's obligations under paragraph 5 shall survive the
Termination for Disability.
(d) Termination Without Cause. Employer or Employee may terminate
the Employment Term at any time without cause by giving the other party notice
in writing at least thirty (30) days prior to the effective date of Employee's
termination.
(e) Severance Pay. In the event (i) the Initial Employment Term
expires and is not renewed by Employer or (ii) Employer terminates the Initial
Employment Term without cause or (iii) there is a Change of Control of
Employer (which is defined as 51% or more of the capital stock of Employer is
held by any person or entity other than Kenneth A. Hendricks or Diane M.
Hendricks) and Employee elects in writing to terminate this Agreement within
sixty (60) days of the effective date of the Change of Control, then Employer
shall pay Employee an amount equal to his then current base salary for one
year ("Severance Pay"), which sum shall be payable on the effective date of
termination of Employee's employment. Employee's obligations under paragraph
5 and 7 shall survive the termination without cause (whether employment is
terminated by Employer or Employee); provided, however, Employee's obligations
under Paragraph 7(b) shall not survive if (i) the Initial Employment Term
expires and is not renewed by Employer or (ii) Employee terminates the Initial
Employment Term pursuant to paragraph 6(d) due to a Change of Control.
7. Restrictive Covenants.
(a) Covenant Not To Compete During Employment Term. During the
Employment Term (as renewed), Employee shall not directly or indirectly
finance, own, manage, operate, control, or participate in the financing,
ownership, management, operation or control of, or be employed by or act as an
officer, director, agent, representative, advisor, consultant, partner or
investor, or be connected with in any other manner, any business of the type
and character engaged in or competitive with that conducted by Employer. For
these purposes, Employee's ownership of securities of a public company not in
excess of one percent (1%) of any class of such securities shall not be
considered to be in competition with Employer.
(b) Covenant Not to Compete After Employment. Employee agrees that,
for a period beginning at the end of the Initial Employment Term or the
earlier termination thereof for any reason and ending one (1) calendar year
from the effective of such expiration or termination ("Non-Compete Period"),
Employee will not directly or indirectly in any place within the United States
("Non-Compete Area") finance, own, manage, advise, consult, operate, control,
or participate in the financing, ownership,
5
<PAGE>
management, consultation, operation or control of, or be employed by or act as
an officer, director, agent, representative, advisor, consultant, partner or
investor, or be connected in any manner with any business which engages in the
distribution of roofing or siding products to contractors or which offers
advice regarding mergers, acquisitions and finance to any business engaged in
the distribution of roofing or siding products to contractors (together
"Competing Business"). During the Non-Compete Period, Employee will not employ
or attempt to employ any individual then employed by Employer during the
Non-Compete Period. In consideration for Employee's covenants and obligations
under this paragraph 7, Employer agrees to employ Employee and pay Employee
the base salary, and the Severance Pay if the conditions set forth in
paragraph 7(e) are fulfilled. In the event of a Change of Control, Employee
may terminate the covenants contained in this paragraph 7(b) if (i) Employee
gives written notice of his election to Employer within ten (10) days of the
Change of Control and (ii) Employees waives his rights to Severance Pay and
returns any Severance Pay received.
(c) Other Covenants. In view of the fact that the services to be
rendered by Employee on behalf of Employer are of a special and unique
character, Employee agrees that while he is employed by Employer and during
the Non-Compete Period, he shall not, directly or indirectly, either on his
own behalf or on behalf of any other person, firm, partnership, corporation,
limited liability company or other entity, without the prior written consent
of Employer:
(i) Attempt in any manner to persuade any client of Employer
to cease to do business or to reduce the amount of business which any
client has customarily done or contemplates doing with Employer; or
(ii) Employ or attempt to employ any person who is then in
Employer's employment or was in Employer's employment within ninety
(90) days immediately prior to the effective date of Employee's
termination; or
(iii) Solicit or attempt to solicit business of any client of
Employer (unless such solicitations are rendered as an employee of
Employer) or render services (other than on behalf of Employer) for
any such client which are competitive with those services which
Employer performed for such client within ninety (90) days of the end
of the Employment Term.
(iv) As used in this paragraph 7(b), the term "client" shall
include anyone who is then a client or customer of Employer and anyone
who was a client or customer at any time during the one year period
immediately preceding the end of the Employment Term, as well as
prospective clients or customers with whom Employer has been
negotiating to become a client or customer within a one year period
immediately preceding the end of the Employment Term.
Employee acknowledges and agrees that these restrictions are reasonable in
light of the
6
<PAGE>
nature and scope of Employee's position, duties and responsibilities with
Employer, and the restrictions set forth in this paragraph 7 are necessary to
protect the legitimate business interests of Employer.
(d) Enforcement to Extent Lawfully Possible. If any of the covenants
or terms contained paragraphs 5 or 7 are held to be unenforceable because of
the duration of such covenant, the area covered thereby or for any other
perceived overinclusiveness, the parties agree that the duration of such
provision, the area covered thereby, or such other perceived overinclusiveness
shall be reduced to the maximum scope permitted by law, and, in its reduced
form, shall be enforceable.
8. Injunctive and Other Relief. The parties hereto recognize that
the services to be rendered under this Agreement by Employee to Employer are
special, unique and of extraordinary character, that maintaining the
confidential nature of the Confidential Information possessed and to be
possessed by Employee is crucial to the success of Employer's business and
that any breach by Employee of the provisions of paragraphs 5 or 7 of this
Agreement may cause irreparable damage to Employer for which damages at law
will be inadequate. Therefore, in the event of any breach or threatened
breach by Employee of the provisions of paragraphs 5 or 7 of this Agreement,
then, in addition to any other remedy that may be available to it, Employer
shall be entitled to injunctive relief without the necessity of proving actual
damages and without posting bond or other security, as well as to an equitable
accounting of all earnings, profits and other benefits arising out of a breach
of paragraphs 5 or 7. Employee also expressly agrees to indemnify and hold
Employer harmless from all losses, damages, costs, expenses and liabilities,
including attorney's fees, incurred as a result of any breach by Employee of
this Agreement. In the event of any legal action by either Employer or
Employee to enforce this Agreement, if the party bringing such action prevails
(as determined by the adjudicator), such party shall be entitled to recover
from the other party its reasonable costs and expenses (including attorney's
fees); provided, however, nothing herein shall require the adjudicator to
determine that any party is the prevailing party.
9. Severability of Provisions. If any of the provisions of this
Agreement shall be held invalid or unenforceable, the remainder of the
provisions of this Agreement shall not be affected thereby and shall be given
full effect, without regard to the invalid portions.
10. Assignment. This Agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of Employee herein may
not be sold, transferred, assigned, pledged or hypothecated. The rights and
benefits of Employer under this Agreement shall be transferrable by Employer,
and all the covenants and agreements of Employee hereunder shall inure to the
benefit of and be enforceable by
7
<PAGE>
Employer's successors and assigns. The obligations of Employee hereunder are
binding upon Employee and Employee's heirs, successors, assigns, and legal
representatives.
11. Entire Agreement; Prior Agreements; Changes; Governing Law and
Captions. This Agreement contains the entire agreement between the parties,
superseding all prior understandings, arrangements and agreements, whether
oral or written, relating to Employee's employment by Employer and all other
subjects addressed herein. It may only be changed, amended, modified, waived,
or discharged in written agreement signed by the party against whom
enforcement of any waiver, change, addition, modification or discharge is
sought and, in the case where Employer is sought to be bound, must be approved
in writing by the Board of Directors or designated officers of Employer prior
to such signed writing. The waiver or discharge of any provision of this
Agreement shall only be effective in the specific instance and for the
specific purpose for which it was given. This Agreement shall be interpreted,
governed by and construed in accordance with the substantive laws of the State
of Wisconsin, without regard to its choice of laws rules. Paragraph headings
are for convenience of reference only and shall not be considered a part of
this Agreement.
12. Notices. Except as expressly set forth herein, any notices or
other communications required or permitted hereunder shall be in writing and
shall be deemed effective when delivered in Employer's case to Kenneth A.
Hendricks, in person, or by telex or telecopier or, if mailed in the United
States, then three days after deposited in the mails, postage prepaid, in the
case of Employee addressed to him at:
Jeff Stentz
7520 Oak Circle Drive
Middleton, WI 53562
and in the case of Employer, addressed to it at:
Kenneth A. Hendricks
ABC Supply Co., Inc.
One ABC Parkway
Beloit, Wisconsin 53511
with copies sent to:
Karl W. Leo, Esquire
Leo and Associates
200 Randolph Avenue, Suite 200
Huntsville, Alabama 35801
8
<PAGE>
or such other address(es) as shall have been specified in writing by either
party to the other in like manner.
13. Legal Representation. Employee acknowledges that he has been
represented, or has had the opportunity to be represented by counsel, and
Employee further acknowledges that Employer and its counsel have made no
representation to or given Employee any legal advise regarding this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYER:
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
/s/ KENNETH A. HENDRICKS
- ----------------------------------
Kenneth A. Hendricks, President
EMPLOYEE:
/s/ JEFFREY W. STENTZ
- ----------------------------------
JEFFREY W. STENTZ
9
<PAGE>
STATE OF WISCONSIN )
) ss.
COUNTY OF ROCK )
I, the undersigned, in and for said county and state, hereby certify that
Kenneth A. Hendricks, who as President of American Builders & Contractors
Supply Co., Inc. is signed to the foregoing Employment Agreement and who is
known to me, acknowledged before me that he, as such authorized agent and with
full authority, executed the same voluntarily for and as the act of said
corporation.
Sworn to and subscribed before me this 23rd day of September, 1997.
/s/ TAMMY L. HESS
---------------------------------------
Notary Public
(SEAL) My commission expires: August 23, 1998
---------------
STATE OF WISCONSIN )
) ss.
COUNTY OF ROCK )
I, the undersigned, in and for said county and state, hereby certify that
JEFFREY W. STENTZ, whose name is signed to the foregoing Employment Agreement
and who is known to me, acknowledged before me that he, being informed of the
contents of said Employment Agreement, executed the same voluntarily.
Sworn to and subscribed before me this 23rd day of September, 1997.
/s/ TAMMY L. HESS
---------------------------------------
Notary Public
(SEAL) My commission expires: August 23, 1998
---------------
10
<PAGE>
TENTH AMENDMENT
to
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Tenth Amendment to Amended and Restated Loan and Security Agreement
(this "Amendment"), effective as of November 3, 1997 (the "Effective Date"),
is entered into among American Builders & Contractors Supply Co., Inc., a
Delaware corporation (such corporation, including its predecessor in interest,
the "Borrower") with its chief executive office located at One ABC Parkway,
Beloit, Wisconsin, the financial institutions listed on the signature pages
hereof (individually, a "Lender" and collectively, the "Lenders") and
NationsBank of Texas, N.A. ("NationsBank"), as Agent for the Lenders (in such
capacity, the "Agent"):
W I T N E S S E T H
WHEREAS, the Borrower, the Lenders and ANB are party to that certain
Amended and Restated Loan and Security Agreement (the "Original Loan
Agreement") dated as of July 1, 1993, as amended by that certain First
Amendment to Amended and Restated Loan and Security Agreement dated as of
September 2, 1994 (the "First Amendment"), that certain Waiver and Second
Amendment to Amended and Restated Loan and Security Agreement dated June 19,
1995 (the "Second Amendment"), that certain Third Amendment to Amended and
Restated Loan and Security Agreement dated as of September 18, 1995 (the
"Third Amendment"), that certain Waiver and Fourth Amendment to Amended and
Restated Loan and Security Agreement dated as of September 30, 1995 (the
"Fourth Amendment"); that certain Waiver and Fifth Amendment to Amended and
Restated Loan and Security Agreement dated as of December 29, 1995 (the "Fifth
Amendment"), that certain Waiver and Sixth Amendment to Amended and Restated
Loan and Security Agreement dated as of February 8, 1996 (the "Sixth
Amendment"), that certain Waiver and Seventh Amendment to Amended and Restated
Loan and Security Agreement undated but entered into as of September 30, 1996
(the "Seventh Amendment"), that certain Waiver and Eighth Amendment to Amended
and Restated Loan and Security Agreement entered into as of March 27, 1997
(the "Eighth Amendment") and that certain Ninth Amendment to Amended and
Restated Loan and Security Agreement entered into as of May 7, 1997 (the
"Ninth Amendment") (the Original Loan Agreement, as amended by the First
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment,
the Fifth Amendment, the Sixth Amendment, the Seventh Amendment, Eighth
Amendment and the Ninth Amendment, is referred to hereinafter as the "Loan
Agreement") pursuant to which Lenders have agreed to make certain loans and
extend certain other financial accommodations to the Borrower in an aggregate
principal amount of up to Two Hundred Million Dollars ($200,000,000.00) as
provided therein;
WHEREAS, the Borrower has requested the Agent and the Lenders to modify
the Loan Agreement in certain respects and the Agent has agreed to do so
subject to the terms and conditions contained herein, and subject to
confirmation of consent by Requisite Lenders as required by Section 10.15 of
the Loan Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or financial accommodations heretofore, now or
hereafter made to or for the benefit of the Borrower by the Lenders, it hereby
is agreed as follows:
1. Amendment to Section 8.17 of the Loan Agreement. Section 8.17
("Minimum Tangible Net Worth") of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"8.17 Minimum Tangible Net Worth. Tangible Net Worth, as determined
as of each date set forth below, shall not be less than the amount set
forth below opposite such date:
Date Amount
---- ------
December 31, 1997 $60,000,000.00
December 31, 1998 $60,000,000.00
Each fiscal year-end thereafter $75,000,000.00
2. Amendment to Section 8.18 of the Loan Agreement. Section 8.18
("Minimum Cash Flow") of the Loan Agreement is hereby deleted in its entirety
and replaced with the following:
"8.18 Maximum Funded Debt to EBITDA. The ratio of Funded Debt to
EBITDA, determined as of the last day of each calendar quarter and
measured for the preceding period of four calendar quarters, shall not
exceed the following prescribed amounts, as applicable:
Date Ratio
---- -----
December 31, 1997 8.50 to 1.0
March 31, 1998 8.50 to 1.0
June 30, 1998 8.00 to 1.0
September 30, 1998 7.00 to 1.0
December 31, 1998 6.30 to 1.0
March 31, 1999 6.20 to 1.0
June 30, 1999 6.80 to 1.0
September 30, 1999 6.50 to 1.0
December 31, 1999 6.30 to 1.0
March 31, 2000 5.90 to 1.0
June 30, 2000 6.80 to 1.0
3. Consent to Acquisition of Additional Store. The Borrower
previously has notified Agent and the Lenders that the Borrower intended to
enter into an agreement (such agreement, together with all exhibits, schedules
and related agreements, collectively the "Acquisition Agreement") with Champ
Industries, Inc. ("Champ"), and perhaps also one or more of its subsidiaries
(collectively, "Seller"), pursuant to which the Borrower would purchase
(collectively the "Acquisition") all of the capital stock and/or assets of
each of Perfection Roofing Materials, Inc,
-2-
<PAGE>
Marshall Roofing Supply, Inc., Stone Metal Products, Inc., SHR Roofing Supply,
Inc. and United Building Supply, Inc., respectively (collectively the
"Acquired Companies"). The purchase price (as defined by Section 8.3 of the
Loan and Security Agreement) in respect of the Acquisition is in the aggregate
amount of $104,000,000 (the "Acquisition Purchase Price"). Promptly following
consummation of the Acquisition, the Borrower would cause each of the Acquired
Companies' whose capital stock was acquired to be merged (the "Mergers") into
the Borrower, such that upon consummation of the foregoing, the Borrower would
be the sole owner and operator of all of the assets and business of each of
the Acquired Companies. Section 8.3 ("Consolidations, Mergers or
Acquisitions") of the Loan and Security Agreement prescribes limitations with
respect to the maximum purchase price of an Additional Store, both
individually and in the aggregate during any calendar year. The Acquisition,
if consummated, would constitute the acquisition of an Additional Store,
subject to such limitations of Section 8.3 and the Acquisition Purchase Price
would cause the aggregate purchase price limitations prescribed therein to be
exceeded for the calendar year ending December 31, 1997. The Borrower has
requested Agent and the Lenders to (a) consent to the Acquisition and the
Mergers and the incurrence and payment of the Acquisition Purchase Price, and
(b) implement a temporary increase in the maximum purchase price limitations
for Additional Stores prescribed by clause (c) of Section 8.3 of the Loan and
Security Agreement for the calendar year ending December 31, 1997. Conditioned
as provided in subparagraphs 3.3, 3.4 and 3.5 under the proviso following,
Agent and the Lenders hereby agree as follows:
3.1. Agent and the Lenders hereby consent to the Acquisition and the
Mergers, and the incurrence and payment by the Borrower of the Acquisition
Purchase Price;
3.2. Agent and the Lenders hereby agree that notwithstanding the
provisions of clause (c) of Section 8.3 of the Loan and Security Agreement,
but otherwise subject to the Loan and Security Agreement, the Borrower may
exceed the aggregate purchase price limitation prescribed by such clause (c)
applicable to the calendar year ending December 31, 1997, provided, that not
more than $20,000,000 of such aggregate purchase price may be incurred
during the period November 4, 1997 through December 31, 1997;
provided and conditioned, however, that:
3.3. No Default or Event of Default shall have occurred as of the
date of consummation of the Acquisition or at the time of any payment on the
Acquisition Purchase Price, and no Default or Event of Default shall result
therefrom, respectively;
3.4. The Acquisition Purchase Price shall not exceed $104,000,000, of
which $60,000,000 shall be payable in cash and $44,000,000 will be comprised
of assumption of existing payable obligations owing by the Acquired
Companies, and not more than $37,000,000 of such Acquisition Purchase Price
may be in consideration for good will;
-3-
<PAGE>
3.5 The Borrower will not report any Accounts or Inventory acquired
in respect of the Acquisitions as Eligible Accounts or Eligible Inventory
unless and until (i) the Acquisition and the Mergers have been fully
consummated and the Borrower is the absolute owner of such Accounts and
Inventory, respectively, (ii) the Borrower has complied with each of the
other requirements of Section 8.3 of the Loan and Security Agreement (as
amended by this Amendment) applicable to the Acquisition, (iii) the Borrower
has furnished to Agent a copy of the executed bill of sale or other evidence
of transfer of title to the Borrower in all such Accounts and Inventory
purchased by the Borrower, and a certified copy of a certificate of merger
in respect of each of the Mergers, (iv) the Agent has received a lien search
report (including without limitation in the name of each Seller), or other
evidence satisfactory to Agent, verifying that such Accounts and Inventory
are free of any prior security interests or liens except as may be expressly
allowed by the Loan and Security Agreement,
3.6. Except as expressly provided otherwise herein, all other
requirements of Section 8.3 of the Loan and Security Agreement shall remain
in full force and effect.
The Borrower expressly acknowledges, agrees, represents and warrants that (i)
Borrower has made its own independent review and analysis with respect to the
Acquisition and has relied solely upon such review and analysis in making its
decision to enter into and consummate the Acquisition, (ii) the Borrower at
all relevant times has known and been aware of the fact that NationsBank of
Texas, N.A. ("NationsBank"), prior to the Acquisition, has had a financing
relationship with Champ and/or one or more of the Acquired Companies, and
neither NationsBank or any of its affiliates (including without limitation
NationsBanc Capital Markets, Inc.), or the Agent, the Co-Agent or any Lender
has made any representation, warranty or recommendation to the Borrower, or
made any information, financial or otherwise, available to the Borrower, in
respect of the Acquired Companies or the Acquisition, and in making its
decision to enter into and consulate the Acquisition, the Borrower has made no
reliance whatsoever on the fact of such prior financing relationship of
NationsBank or any other statements made by NationsBank or any of its
affiliates (including without limitation NationsBanc Capital Markets, Inc.),
or the Agent, the Co-Agent or any Lender.
4. Representation and Warranties of Borrower. The Borrower hereby
represents and warrants that as of the date of this Amendment (a) no event has
occurred and is continuing which, after giving effect to this Amendment,
constitutes a Default or an Event of Default, (b) the representations and
warranties of the Borrower contained in the Loan Agreement and the other
Financing Agreements are true and correct on and as of the date hereof to the
same extent as though made on and as of the date hereof, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case they are true and correct as of such earlier date, (c) the
execution and delivery by the Borrower of this Amendment and the performance
by the Borrower of the Loan Agreement, as amended by this Amendment, are
within its corporate power and have been duly authorized by all necessary
corporate action, (d) this Amendment and the Loan Agreement, as amended by
this Amendment, are legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, (e) the
execution and delivery by the Borrower of this Amendment and the performance
by the Borrower of the Loan Agreement, as amended by this Amendment, do not
require the consent of any Person and do not
-4-
<PAGE>
contravene the terms of the Borrower's Articles of Incorporation or By-Laws or
any indenture, agreement or undertaking to which the Borrower is a party or by
which the Borrower or any of its property is bound, and (f) except as
disclosed on Schedule 1 attached hereto, all schedules attached to the Loan
Agreement remain true, correct and complete.
5. Reference to and Effect on the Loan Agreement. Except as
expressly provided herein, the Loan Agreement and all other Financing
Agreements shall remain unmodified and in full force and effect and are hereby
ratified and confirmed. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver or forbearance of (a) any right, power
or remedy of the Lenders under the Loan Agreement or any of the other
Financing Agreements, or (b) any Default or Event of Default. This Amendment
shall constitute a Financing Agreement.
6. Fees, Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses of the Agent in connection with the preparation,
negotiation, execution and delivery and closing of this Amendment and all
related documentation, including the fees and out-of-pocket expenses of
counsel for the Agent with respect thereto.
7. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto as separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, when taken together, shall constitute
but one and the same agreement. A telecopy of any such executed counterpart
shall be deemed valid and may be relied upon as an original.
8. Effectiveness. This Amendment shall be deemed effective
prospectively as of the Effective Date specified in the preamble upon
execution by the Borrower, the Agent, the Co-Agent and each of the Lenders
whose names appear on the signature pages below (subject, however, to the
prior satisfaction of all conditions for effectiveness as specified by this
Amendment).
[Remainder of Page Intentionally Left Blank]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
AMERICAN BUILDERS &
ATTEST: CONTRACTORS SUPPLY CO., INC.
By: By:
------------------------- ----------------------------
Name: Name:
----------------------- --------------------------
Title: Title:
---------------------- -------------------------
NATIONSBANK OF TEXAS, N.A.
In its capacity as Agent
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Address for Notice:
901 Main Street, 6th Floor
Dallas, Texas 74202
Attention: Business Credit/Regional Manager:
URGENT
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
In its capacity as Co-Agent
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
-6-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
In its capacity as a Lender
Pro Rata Share: By:
17.50% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notice:
901 Main Street, 6th Floor
Dallas, Texas 74202
Attention: Business Credit/Regional Manager:
URGENT
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
In its capacity as a Lender
Pro Rata Share: By:
12.50% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
BANKAMERICA BUSINESS CREDIT, INC.
Pro Rata Share: By:
17.50% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
-7-
<PAGE>
LASALLE BUSINESS CREDIT, INC.
Pro Rata Share: By:
11.25% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
HARRIS TRUST AND SAVINGS BANK
Pro Rata Share: By:
11.25% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
FLEET CAPITAL CORPORATION
Pro Rata Share: By:
11.25% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
-8-
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
Pro Rata Share: By:
13.75% -----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notices:
--------------------------------
--------------------------------
Attention:
----------------------
-9-
<PAGE>
CONSENT AND AGREEMENT BY VALIDITY GUARANTORS
Each of the undersigned consents to the foregoing Tenth Amendment to
Amended and Restated Loan and Security Agreement ("Amendment") and each of the
undersigned agrees to the continued effectiveness of the Validity
Certification, respectively, originally executed and delivered to American
National Bank and Trust Company of Chicago by the undersigned, as the case may
be, on July 1, 1993. All references in the each Validity Certification,
respectively, to the Amended and Restated Loan and Security Agreement shall be
deemed to be to the Amended and Restated Loan and Security Agreement as
amended by the Amendment and all prior and subsequent amendments thereto.
This agreement has been executed as of the Effective Date specified in the
Amendment.
-------------------------------------
Kenneth A. Hendricks
------------------------------------
Kendra A. Story
-10-
<PAGE>
SCHEDULE 1
to
TENTH AMENDMENT
to
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
among
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.,
NATIONSBANK OF TEXAS, N.A., AS AGENT
AND THE CO-AGENT AND LENDERS PARTY THERETO
ADDITIONAL SCHEDULE INFORMATION
[insert, if any]
-11-
<PAGE>
ELEVENTH AMENDMENT
to
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Eleventh Amendment to Amended and Restated Loan and Security
Agreement (this "Amendment"), dated effective as of December 31, 1997 (the
"Effective Date"), is entered into among American Builders & Contractors
Supply Co., Inc., a Delaware corporation (such corporation, including its
predecessor in interest, the "Borrower") with its chief executive office
located at One ABC Parkway, Beloit, Wisconsin, the financial institutions
listed on the signature pages hereof (individually, a "Lender" and
collectively, the "Lenders") and NationsBank of Texas, N.A. ("NationsBank"),
as Agent for the Lenders (in such capacity, the "Agent"):
W I T N E S S E T H
WHEREAS, the Borrower, the Lenders and ANB are party to that certain
Amended and Restated Loan and Security Agreement (the "Original Loan
Agreement") dated as of July 1, 1993, as amended by that certain First
Amendment to Amended and Restated Loan and Security Agreement dated as of
September 2, 1994 (the "First Amendment"), that certain Waiver and Second
Amendment to Amended and Restated Loan and Security Agreement dated June 19,
1995 (the "Second Amendment"), that certain Third Amendment to Amended and
Restated Loan and Security Agreement dated as of September 18, 1995 (the
"Third Amendment"), that certain Waiver and Fourth Amendment to Amended and
Restated Loan and Security Agreement dated as of September 30, 1995 (the
"Fourth Amendment"); that certain Waiver and Fifth Amendment to Amended and
Restated Loan and Security Agreement dated as of December 29, 1995 (the "Fifth
Amendment"), that certain Waiver and Sixth Amendment to Amended and Restated
Loan and Security Agreement dated as of February 8, 1996 (the "Sixth
Amendment"), that certain Waiver and Seventh Amendment to Amended and Restated
Loan and Security Agreement undated but entered into as of September 30, 1996
(the "Seventh Amendment"), that certain Waiver and Eighth Amendment to Amended
and Restated Loan and Security Agreement entered into as of March 27, 1997
(the "Eighth Amendment"), that certain Ninth Amendment to Amended and Restated
Loan and Security Agreement entered into as of May 7, 1997 (the "Ninth
Amendment") and the certain Tenth Amendment to Amended and Restated Loan and
Security Agreement entered into as of November 3, 1997 (the "Tenth Amendment")
(the Original Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the
Sixth Amendment, the Seventh Amendment, Eighth Amendment, the Ninth Amendment
and the Tenth Amendment, is referred to hereinafter as the "Loan Agreement")
pursuant to which Lenders have agreed to make certain loans and extend certain
other financial accommodations to the Borrower in an aggregate principal
amount of up to Two Hundred Million Dollars ($200,000,000.00) as provided
therein (terms defined by the Loan Agreement, where used in this Amendment,
shall have the same meanings in this Amendment as are prescribed by the Loan
Agreement);
<PAGE>
WHEREAS, the Borrower has requested the Agent and the Lenders to modify
the Loan Agreement in certain respects and the Agent has agreed to do so
subject to the terms and conditions contained herein, and subject to
confirmation of consent by Requisite Lenders as required by Section 10.15 of
the Loan Agreement;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or financial accommodations heretofore, now or
hereafter made to or for the benefit of the Borrower by the Lenders, it hereby
is agreed as follows:
1. Amendment to Section 8.18 of the Loan Agreement. Section 8.18
("Maximum Funded Debt to EBITDA") of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
8.18 Maximum Funded Debt to EBITDA. The ratio of Funded Debt to
EBITDA, determined as of the last day of each calendar quarter and
measured for the preceding period of four calendar quarters, shall not
exceed the following prescribed amounts, as applicable:
Date Ratio
---- -----
December 31, 1997 10.00 to 1.0
March 31, 1998 10.75 to 1.0
June 30, 1998 9.75 to 1.0
September 30, 1998 7.00 to 1.0
December 31, 1998 6.30 to 1.0
March 31, 1999 6.20 to 1.0
June 30, 1999 6.80 to 1.0
September 30, 1999 6.50 to 1.0
December 31, 1999 6.30 to 1.0
March 31, 2000 5.90 to 1.0
June 30, 2000 6.80 to 1.0
2. Representation and Warranties of Borrower. The Borrower hereby
represents and warrants that as of the date of this Amendment (a) no event has
occurred and is continuing which, after giving effect to this Amendment,
constitutes a Default or an Event of Default, (b) the representations and
warranties of the Borrower contained in the Loan Agreement and the other
Financing Agreements are true and correct on and as of the date hereof to the
same extent as though made on and as of the date hereof, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case they are true and correct as of such earlier date, (c) the
execution and delivery by the Borrower of this Amendment and the performance
by the Borrower of the Loan Agreement, as amended by this Amendment, are
within its corporate power and have been duly authorized by all necessary
corporate action, (d) this Amendment and the Loan Agreement, as amended by
this Amendment, are legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms and (e) the
execution
-2-
<PAGE>
and delivery by the Borrower of this Amendment and the performance by the
Borrower of the Loan Agreement, as amended by this Amendment, do not require
the consent of any Person and do not contravene the terms of the Borrower's
Articles of Incorporation or By-Laws or any indenture, agreement or
undertaking to which the Borrower is a party or by which the Borrower or any
of its property is bound.
3. Reference to and Effect on the Loan Agreement. Except as
expressly provided herein, the Loan Agreement and all other Financing
Agreements shall remain unmodified and in full force and effect and are hereby
ratified and confirmed. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver or forbearance of (a) any right, power
or remedy of the Lenders under the Loan Agreement or any of the other
Financing Agreements, or (b) any Default or Event of Default. This Amendment
shall constitute a Financing Agreement.
4. Amendment Fee. In consideration of this Amendment, Subject to
Section 2.10 of the Loan Agreement, on the signing of this Amendment the
Borrower shall pay to the Agent, for the benefit of the Lenders, an amendment
fee in the amount of Fifty Thousand Dollars ($50,000.00).
5. Fees, Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses of the Agent in connection with the preparation,
negotiation, execution and delivery and closing of this Amendment and all
related documentation, including the fees and out-of-pocket expenses of
counsel for the Agent with respect thereto.
6. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto as separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, when taken together, shall constitute
but one and the same agreement. A telecopy of any such executed counterpart
shall be deemed valid and may be relied upon as an original.
7. Effectiveness. This Amendment shall be deemed effective
prospectively as of the Effective Date specified in the preamble upon
execution by the Borrower, the Agent, the Co-Agent and sufficient of the
Lenders whose names appear on the signature pages below to constitute
Requisite Lenders (subject, however, to the prior satisfaction of all
conditions for effectiveness as specified by this Amendment).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first written above.
[SIGNATURES FOLLOW]
-3-
<PAGE>
AMERICAN BUILDERS &
ATTEST: CONTRACTORS SUPPLY CO., INC.
By: By:
------------------------- ----------------------------------
Name: Name: Kendra Story
----------------------- ---------------------------------
Title: Title: Chief Financial Officer
---------------------- --------------------------------
Date: March __, 1998
-4-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
In its capacity as Agent
By:
----------------------------------
Name: Virginia Brown
---------------------------------
Title: Senior Vice President
--------------------------------
Date: March __, 1998
-5-
<PAGE>
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
In its capacity as Co-Agent
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-6-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
In its capacity as a Lender
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-7-
<PAGE>
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
In its capacity as a Lender
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-8-
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-9-
<PAGE>
LASALLE BUSINESS CREDIT, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-10-
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-11-
<PAGE>
FLEET CAPITAL CORPORATION
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-12-
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date: March __, 1998
-13-
<PAGE>
CONSENT AND AGREEMENT BY VALIDITY GUARANTORS
Each of the undersigned consents to the foregoing Eleventh Amendment to
Amended and Restated Loan and Security Agreement ("Amendment") and each of the
undersigned agrees to the continued effectiveness of the Validity
Certification, respectively, previously executed and delivered by the
undersigned for the benefit of the Agent and the Lenders. All references in
the each Validity Certification, respectively, to the Amended and Restated
Loan and Security Agreement shall be deemed to be to the Amended and Restated
Loan and Security Agreement as amended by the Amendment and all prior and
subsequent amendments thereto. This agreement has been executed as of the
Effective Date specified in the Amendment.
-------------------------------------
Kenneth A. Hendricks
------------------------------------
Kendra A. Story
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ABC SUPPLY'S CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1997 AND CONSOLIDATED
STATEMENT ON INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,140
<SECURITIES> 0
<RECEIVABLES> 143,106
<ALLOWANCES> 5,949
<INVENTORY> 128,847
<CURRENT-ASSETS> 279,855
<PP&E> 109,842
<DEPRECIATION> 38,227
<TOTAL-ASSETS> 409,622
<CURRENT-LIABILITIES> 106,624
<BONDS> 281,624
0
0
<COMMON> 109
<OTHER-SE> 21,683
<TOTAL-LIABILITY-AND-EQUITY> 409,622
<SALES> 959,321
<TOTAL-REVENUES> 959,321
<CGS> 744,186
<TOTAL-COSTS> 744,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,950
<INCOME-PRETAX> 3,853
<INCOME-TAX> 311
<INCOME-CONTINUING> 3,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,542
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
