<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934: For the period ended March 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 33-26991
American Builders & Contractors Supply Co., Inc.
Amcraft Building Products Co., Inc.
Mule-Hide Products Co., Inc.
--------------------------------------------------------------------
(Exact names of registrant as specified in is charter)
Delaware 5033 39-1413708
Delaware 5033 39-1701778
Texas 5033 62-1277211
---------------------------------------------------------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification No.)
organization) Code Number)
One ABC Parkway
Beloit, Wisconsin 53511
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (608) 362-7777
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. [X] Yes [_] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.01 par value, 147.04 shares as of April 30,1999
<PAGE>
Index
American Builders and Contractors Supply Co., Inc. and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1999 and December 31,
1998
Condensed consolidated statements of operations and retained earnings -
Three months ended March 31, 1999 and March 31, 1998
Condensed consolidated statements of cash flows - Three months ended
March 31, 1999 and March 31, 1998
Notes to condensed consolidated financial statements - March 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part 1. Financial Information
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 3,092,000 $ 4,682,000
Accounts receivable 144,497,000 149,102,000
Inventories 177,072,000 130,802,000
Prepaid expenses and other 4,659,000 4,596,000
------------ ------------
Total current assets 329,320,000 289,182,000
Property and equipment, net 67,755,000 69,190,000
Net receivable from sole stockholder 6,374,000 4,840,000
Goodwill 40,115,000 40,439,000
Other intangible assets 6,986,000 7,211,000
Security deposits 904,000 992,000
Other assets 1,944,000 1,047,000
------------ ------------
$453,398,000 $412,901,000
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $153,935,000 $ 84,978,000
Accrued liabilities 18,342,000 22,061,000
Current portion of long-term debt 5,057,000 5,057,000
------------ ------------
Total current liabilities 177,334,000 112,096,000
Long-term debt 263,590,000 281,658,000
Contingent liabilities (Note 2)
Stockholder's equity:
Common stock 0 0
Additional paid-in capital 1,864,000 1,864,000
Retained earnings 10,610,000 17,283,000
------------ ------------
Total stockholder's equity 12,474,000 19,147,000
------------ ------------
$453,398,000 $412,901,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
Note: The balance sheet at December 31, 1998 has been derived from the audited
balance sheet at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
<PAGE>
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
1999 1998
------------------------------
<S> <C> <C>
Net sales $232,178,000 $215,365,000
Cost of sales 178,442,000 166,371,000
------------ ------------
Gross profit 53,736,000 48,994,000
Operating expenses:
Distribution centers 50,164,000 52,218,000
General and administrative 4,181,000 4,177,000
Amortization of intangibles 441,000 439,000
------------ ------------
54,786,000 56,834,000
------------ ------------
Operating loss (1,050,000) (7,840,000)
Other income (expense):
Interest income 118,000 161,000
Interest expense (5,699,000) (6,231,000)
------------ ------------
(5,581,000) (6,070,000)
------------ ------------
Loss before provision for income taxes (6,631,000) (13,910,000)
Provision for income taxes 42,000 27,000
------------ ------------
Net loss (6,673,000) (13,937,000)
Retained earnings at beginning of period 17,283,000 19,928,000
Distributions to sole stockholder --- ---
------------ ------------
Retained earnings at end of period $ 10,610,000 $ 5,991,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION> Three months ended March 31
1999 1998
------------ ------------
<S> <C> <C>
Operating activities
Net loss $ (6,673,000) $(13,937,000)
Adjustments to reconcile net loss to cash provided by
operating activities net of acquisitions:
Depreciation 3,545,000 3,344,000
Amortization 441,000 439,000
Amortization of deferred financing costs 107,000 106,000
Provision for doubtful accounts 1,826,000 1,486,000
(Gain) loss on disposal of property and equipment 76,000 (18,000)
Changes in operating assets and liabilities:
Accounts receivable 2,986,000 3,441,000
Inventories (45,833,000) (47,917,000)
Prepaid expenses and other (57,000) (215,000)
Security deposits 88,000 (43,000)
Other assets (896,000) (323,000)
Accounts payable 68,957,000 57,449,000
Accrued liabilities (3,719,000) 3,970,000
------------ ------------
Cash provided by operating activities 20,848,000 7,782,000
Investing activities
Additions to property and equipment (2,418,000) (3,816,000)
Proceeds from disposal of property and equipment 232,000 144,000
Acquisitions of business (650,000) (2,273,000)
------------ ------------
Cash used in investing activities (2,836,000) (5,945,000)
Financing activities
Net payments under line of credit (17,849,000) (3,642,000)
Proceeds from notes payable --- ---
Payments on notes payable (219,000) (1,995,000)
Net change in receivable from sole stockholder (1,534,000) (98,000)
Distributions to sole stockholder --- ---
Cash used in financing activities ------------ ------------
(19,602,000) (5,735,000)
------------ ------------
Net decrease in cash (1,590,000) (3,898,000)
Cash at beginning of period 4,682,000 4,140,000
Cash at end of period ------------ ------------
$ 3,092,000 $ 242,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting primarily of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1999 are not indicative
of the results that may be expected for the year ending December 31, 1999 due to
the seasonality of the business. For further information, refer to the
consolidated financial statements and footnotes thereto included in American
Builders & Contractors Supply Co., Inc.'s (ABC or the Company) Annual Report on
Form 10-K for the year ended December 31, 1998.
2. Contingent Liabilities
At March 31, 1999 and December 31, 1998, the Company had guaranteed debt of
the sole stockholder in the amounts of $1,962,000 and $1,939,000, respectively.
Certain assets owned by the Company serve as collateral as part of an overall
guaranty of this debt by the Company. The Company also had outstanding letters
of credit of $2,764,000 at both March 31, 1999 and December 31, 1998, with
respect to debt of the Company's sole stockholder and his affiliates.
In connection with the purchase of certain assets of Viking Building
Products, Inc. in 1997, the Company entered into a five year supply agreement
with Viking Aluminum Products, Inc. (VAP), a company owned by the former owners
of Viking Building Products, Inc. The supply agreement specified minimum annual
purchase commitments and damages for short falls. The Company has not met the
minimum level of purchases required under the agreement and legal actions have
been initiated by both the Company and VAP. The ultimate outcome of such actions
is uncertain.
3. Guarantor Subsidiaries
Amcraft Building Products Co., Inc. and Mule-Hide Products Co., Inc. (the
Guarantor Subsidiaries) are wholly owned subsidiaries of ABC and have fully and
unconditionally guaranteed the Senior Subordinated Notes on a joint and several
basis. The Guarantor Subsidiaries comprise all of the Company's direct and
indirect subsidiaries. The separate financial statements of the Guarantor
Subsidiaries have not been included herein because management has concluded that
such financial statements would not provide additional information that is
material to investors.
The following is summarized consolidated financial information of the
wholly owned subsidiaries.
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Current assets:
Accounts receivable from ABC $ 7,755,000 $ 3,596,000
Other current assets - third parties 3,273,000 3,633,000
----------- -----------
Total 11,028,000 7,229,000
Noncurrent assets 725,000 655,000
Current liabilities (9,236,000) (5,821,000)
Noncurrent liabilities -- --
</TABLE>
<PAGE>
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Net sales:
To ABC $11,219,000 $10,395,000
To third parties 467,000 1,673,000
----------- -----------
Total 11,686,000 12,068,000
Gross profit 2,031,000 2,216,000
Net income 455,000 381,000
</TABLE>
4. Comprehensive Income
The Company's comprehensive loss for the three months ended March 31, 1999
and 1998, as required to be reported by FASB Statement No. 130, was identical to
the actual losses reported for those periods.
<PAGE>
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 199 distribution centers located in 40 states as of
March 31, 1999. Since January 1, 1999, the Company has acquired 2 distribution
centers, consolidated 4 distribution centers and closed 3.
Provision for Income Taxes. ABC and its subsidiaries are operated as
Subchapter S corporations under the Internal Revenue Code. As a result, these
entities do not incur federal and state income taxes (except with respect to
certain states) and, accordingly, no discussion of income taxes is included in
"Results of Operations" below. Federal and state income taxes (except with
respect to certain states) on the income of such corporations are incurred and
paid directly by the Company's sole stockholder. Such corporations have
historically made periodic distributions to the stockholder with respect to such
tax liabilities. The Company entered into the Tax Allocation Agreement with the
sole stockholder, pursuant to which he will receive distributions from the
Company with respect to taxes associated with the Company's income.
Special Note Regarding Forward-Looking Statements
Certain matters discussed herein are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements can generally be identified as such because the context of
the statement will include words such as the Company "believes", "anticipates",
"expects", or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking statements. Such
forward looking-statements are subject to certain risks and uncertainties which
are described in close proximity to such statements and which could cause actual
results to differ materially from those currently anticipated. Readers are urged
to consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are only made as of the
date of this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
Results of Operations
The following table summarizes the Company's historical results of
operations as a percentage of net sales for the three months ended March 31,
1999 and 1998:
<TABLE>
<CAPTION>
Three Months ended
March 31
-------------------
1999 1998
-------------------
Income statement data:
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 76.9 77.3
------ -----
Gross profit 23.1 22.7
Operating expenses:
Distribution centers 21.6 24.2
General and administrative 1.8 1.9
Amortization .2 .2
------ -----
Total operating expenses 23.6 26.3
------ -----
Operating loss (0.5)% (3.6)%
====== =====
</TABLE>
<PAGE>
Comparison of the Three-Month Period Ended March 31, 1999 to the Three-Month
Period Ended March 31, 1998
The Company's results of operations are affected by the seasonal nature of
the roofing and siding business. See "Seasonality."
Net sales for the three months ended March 31, 1999 increased by 7.8% to
$232.2 from $215.4 million for the three months ended March 31, 1998. Comparable
distribution centers sales growth was 7.4%. Increases in comparable distribution
center sales are almost entirely due to increases in volume as opposed to price
increases. Such volume increases are due in part to the introduction of new
products such as commercial roofing and siding into certain distribution
centers.
Gross profit for the three months ended March 31, 1999 increased by 9.7%,
to $53.7 from $49.0 million for the three months ended March 31, 1999, primarily
as a result of profits associated with increased sales. Gross profit, as a
percent of net sales, increased to 23.1% in 1999, from 22.7% in 1998,
principally due to management's focus on improving gross profit through
increased sales of higher profit margin products.
Distribution center operating expenses decreased by $2.0 million to $50.2
million from $52.2 for the three months ended March 31, 1999 and 1998,
respectively. As of percent of net sales, distribution center operating expenses
for the three months ended March 31, decreased to 21.6 % in 1999 from 24.2% in
1998.
This improvement is the result of two factors. The first factor is an
increased focus on controlling operating expenses at all distribution centers.
This effort began in mid 1998 and continues today. The majority of the focus is
being placed on controlling payroll expenses which comprise more than 50 percent
of the operating expenses. Second, the Company has historically selected
acquisition candidates based, in part, on the opportunity to improve their
operating results. As a result of over 50 distribution center acquisitions in
1997, the 1998 distribution center operating expenses included distribution
centers that were not yet fully integrated into the Company's operations.
General and administrative expenses for the three months ended March 31,
1999 and 1998 remained at $4.2 million, while decreasing as a percentage of net
sales to 1.8% in 1999 from 1.9% in 1998.
Operating loss for the three months ended March 31, 1999 was reduced by
$6.7 million to a loss of $1.1 million for the three months ended March 31,
1999, from a $7.8 million loss for the same period in 1998. This improvement is
a result of both increased gross profit, as well as the reduction in
distribution center operating expenses.
Interest expense for the three months ended March 31, 1999 decreased by
$0.5 million or 8.5% to $5.7 million from $6.2 million for the three months
ended March 31, 1998. This reduction is due to decreased interest rates on the
Company's LIBOR based borrowings, a reduction in the Company's average
borrowings, and the refinancing of several equipment and other notes.
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash provided by operating
activities was $20.8 and $7.8 million for the three months ended March 31, 1999
and 1998, respectively. The increase was due primarily to the reduction in net
loss, and the increase in accounts payable partially offset by the reduction of
accrued liabilities.
Cash Flows from Investing Activities. Net cash used in investing
activities was $2.8 million and $5.9 million for the three months ended March
31, 1999 and 1998, respectively, due principally to reduced expenditures for
acquisitions and fewer additions to property and equipment.
Cash Flows from Financing Activities. Net cash used in financing activities
was $19.6 million and $5.7 million for the three months ended March 31, 1999 and
1998, respectively, due primarily to the net paydown of the Revolver.
<PAGE>
Liquidity. The Company's principal sources of funds are anticipated to be
cash flows from operating activities and borrowings under its revolving credit
agreement. The Company believes that these funds will provide the Company with
sufficient liquidity and capital resources for the Company to meet its financial
obligations, as well as to provide funds for the Company's working capital,
capital expenditures, and other needs for the foreseeable future. No assurances
can be given, however, that this will be the case.
Year 2000 Compliance
The Company utilizes information technology and a number of computer
programs in its internal operations including financial systems and various
administrative functions ("IT" systems). The Company also uses a variety of
equipment in its business which contain embedded technology such as
microcontrollers ("Non-IT" systems).
To the extent that the source code of the software applications of these IT
systems or the embedded technologies of these Non-IT systems are unable to
appropriately interpret and process the upcoming calendar year 2000 ("Year
2000"), some level of modification or possible replacement of such applications
would be necessary for proper continuous performance. Without such modification
or replacement, the normal course of the Company's business could be disrupted
or otherwise adversely impacted.
State of readiness. The Company has developed a four step plan to modify
or replace its IT and Non-IT systems. The four steps include assessment,
remediation, testing, and implementation.
<TABLE>
<CAPTION>
Assessment Remediation Testing Implementation
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
IT System 100% complete 100% complete 75% complete 70% complete
Expected completion Complete Complete July 1999 September 1999
Non-IT System 100% complete 100% complete 60% complete 50% complete
Expected completion Complete Complete September 1999 October 1999
</TABLE>
The Company has queried its significant suppliers. To date, the Company is
not aware of any supplier with a Year 2000 issue that would materially impact
the Company's results of operations, liquidity, or capital resources. However,
the Company has no means of ensuring that all suppliers will be Year 2000 ready.
Due to the availability of alternative suppliers, the inability of any one
supplier to complete their Year 2000 resolution process in a timely fashion is
not expected to have a material impact on the Company.
Risks. The Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the Year 2000 program. Management
believes that expenditures to complete the Year 2000 compliance will not be
material to its operations. In the event that the Company does not complete any
additional phases, the Company would have to manually process customer orders,
invoice customers and collect payments. In addition, disruptions in the economy
generally resulting from Year 2000 issues could also materially adversely affect
the Company. The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
Contingency plans. The Company has developed contingency plans for certain
applications and is working on such plans for others. These plans include, among
other actions, manual work arounds, increasing staffing, increasing inventories,
and shifting processes to compliant locations.
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.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Consent and Second Amendment to Second Amended and Restated Loan
and Security Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1999.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
American Builders and Contractors Supply
Co., Inc.
April 30, 1999 /s/ Kendra A. Story
------------------------- ----------------------------------------
Date: Kendra A. Story
Chief Financial Officer and Director
<PAGE>
Exhibit Index
Exhibit No. Description
- ----------- -----------
10.1 Consent and Second Amendment to Second Amended and Restated Loan
and Security Agreement
27 Financial Data Schedule
<PAGE>
Exhibit 10.1
CONSENT AND SECOND AMENDMENT
to
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Consent and Second Amendment to Second Amended and Restated Loan and
Security Agreement ("Amendment"), dated effective as of May 5, 1999 (the
"Effective Date"), is entered into among American Builders & Contractors Supply
Co., Inc., a Delaware corporation ("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, N.A. ("NationsBank"), as Agent for the Lenders (in
such capacity, the "Agent"):
Recitals
--------
a. The Borrower, the Lenders and Agent are party to that certain Second
Amended and Restated Loan and Security Agreement dated as of May 12, 1998, as
amended by the First Amendment to Second Amended and Restated Loan and Security
Agreement dated effective as of January 15, 1999 (the "Loan Agreement") pursuant
to which Lenders have agreed to make certain loans and extend certain other
financial accommodations to the Borrower 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).
b. The Borrower has informed the Agent that Borrower proposes to use the
proceeds of Revolving Loans to repurchase and reacquire, at a discount, up to
$10,000,000 face amount of Senior Subordinated Notes (collectively referred to
hereinbelow as the "Proposed Actions"). The Proposed Actions are prohibited by
(without limitation) Section 7.12 ("Use of Proceeds"), Section 8.4 ("Investments
or Loans") and Section 8.21 ("Senior Subordinated Notes and Related Guaranties")
of the Loan Agreement without the prior consent of Agent Requisite Lenders as
required by Section 10.15 ("Entire Agreement; Amendments") of the Loan
Agreement. The Borrower has requested the Agent to consent to the Proposed
Actions and amend the Loan Agreement in certain respects, and the Agent is
willing to do so, subject to consent by Requisite Lenders and the other terms
and conditions contained herein.
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:
ARTICLE I
AMENDMENT TO LOAN AGREEMENT
1.1. Amendments to Section 1.1 of the Loan Agreement. Section 1.1
("Definitions") of the Loan Agreement is hereby amended as follows:
a. A new definition of "Outstanding Senior Subordinated Notes" and a new
definition of "Repurchased Senior Subordinated Notes" each hereby is added,
which shall be deemed inserted into Section 1.1 alphabetically and which
shall read as follows, respectively:
"Outstanding Senior Subordinated Notes" means Senior Subordinated
Notes other than Repurchased Senior Subordinated Notes.
"Repurchased Senior Subordinated Notes" means Senior Subordinated
Notes that are held by Borrower following repurchase thereof not
prohibited by this Agreement.
<PAGE>
b. The first sentence of the definition of "Tangible Net Worth" hereby is
amended and restated to read as follows:
"Tangible Net Worth" means, at any time, total assets minus total
liabilities (excluding from such total liabilities the Outstanding
Senior Subordinated Notes and the Subordinated Seller Obligations, if
any) decreased by the Affiliates Investments Limit and decreased by
the book value of all intangible assets (other than Accounts),
including without limitation, patents, brand names, trademarks,
licenses, goodwill, customer lists, mailing lists, subscription lists,
organization expenses, and deferred costs, determined as of such time
on a consolidated basis for the Borrower and its Subsidiaries in
accordance with GAAP.
The remaining portion of such definition shall remain unchanged.
1.2. Amendment to Section 2.9 of the Loan Agreement. Section 2.9
("Optional Prepayments") of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
2.9 Optional Prepayments. The Borrower may, at its option, prepay at
any time during the Initial Term or any subsequent Term all or any portion
of the Liabilities. Subject to Section 2.10 and the requirements of
Section 2.11(c), prepayments of a portion of the Liabilities may be made by
the Borrower without incurring a premium or prepayment fee; provided, if
the Borrower prepays all of the Liabilities in full and terminates this
Agreement as of an effective time prior to June 30, 2000, the Borrower
shall pay the Agent, for the account of the Lenders, as liquidated damages
and compensation for the costs of the Lenders' being prepared to make funds
available to the Borrower under this Agreement, a prepayment fee equal to
one quarter of one percent (.25%) of the Maximum Facility. Notwithstanding
the foregoing, no fee shall be payable under this Section 2.9 with respect
to a prepayment occurring (i) after the Revolving Loans have been
accelerated or (ii) after the Agent, on behalf of the Lenders, has
requested in writing that the Borrower attempt to prepay the Revolving
Loans.
1.3. Amendment to Section 8.8 of the Loan Agreement. Section 8.8 ("Capital
Expenditures Limitation") of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:
8.8 Capital Expenditure Limitations. The Borrower and its
Subsidiaries, if any, shall not purchase, invest in or otherwise acquire,
additional real estate, Equipment, Rolling Stock or other fixed assets,
which, in the aggregate, cost the Borrower and its Subsidiaries, if any,
more than Twenty Six Million Five Hundred Thousand Dollars ($26,500,000.00)
during the calendar year ending December 31, 1997, Twenty Seven Million
Dollars ($27,000,000.00) during the calendar year ending December 31, 1998,
and Twenty Million Dollars ($20,000,000.00) during the calendar year ending
December 31, 1999 and any calendar year thereafter. For purposes of the
foregoing, there shall be excluded therefrom capital expenditures made to
finance Store Acquisitions pursuant to Section 8.3.
1.4. 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:
<PAGE>
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, 1998 $60,000,000.00
Each fiscal year-end thereafter An amount, determined as of the end of
any such fiscal year end, equal to
$75,000,000.00 less the aggregate face
amount, if any, of Repurchased Senior
Subordinated Notes
1.5. Amendment to Section 8.20 of the Loan Agreement. Section 8.20
("Minimum Average Unused Availability") of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
8.20 Minimum Average Unused Availability. The Borrower will not
permit Average Unused Availability for any of the following specified
calendar months of each year to be less than the following prescribed
amount for such calendar month:
Specified Calendar Month Minimum Average Unused Availability
------------------------ -----------------------------------
<TABLE>
<CAPTION>
<S> <C>
January $ 5,000,000
February $ 5,000,000
March $ 5,000,000
April $ 5,000,000
May $10,000,000
June $15,000,000
July $15,000,000
August $15,000,000
September $15,000,000
October $15,000,000
November $10,000,000
December $ 5,000,000
</TABLE>
ARTICLE II
CONSENT TO PROPOSED ACTIONS
2.1. Consent to Proposed Actions. Subject to the terms hereof and
conditioned as provided by Section 2.2, the Agent hereby consents to the
Borrower (a) using the proceeds of Revolving Loans to finance (b) the repurchase
and reacquire up to $10,000,000 face amount of Senior Subordinated Notes.
2.2. Conditions. The Agent's consent under Section 2.1 is expressly
conditioned on satisfaction of each of the following conditions precedent:
a. No Event of Default or Default shall be in existence as of the time
of such repurchase, or would result therefrom;
b. The maximum aggregate face amount of Senior Subordinated Notes
repurchased by the Borrower shall not exceed $10,000,000;
c. The maximum aggregate consideration paid by the Borrower in respect
of such repurchase and reacquisition, including cash and all other forms,
if any, of consideration, shall not exceed $9,000,000 plus unpaid accrued
interest payable at the time of such repurchase;
<PAGE>
d. Such repurchase shall be in compliance with all applicable laws and
regulations and shall not be prohibited by the Indenture; and
e. Promptly upon consummating such repurchase the Borrower shall give the
Agent written notice thereof, therein specifying the aggregate face amount
of Senior Subordinated Notes repurchased and the aggregate consideration
paid by the Borrower therefor and certifying to the Lender that all
conditions specified by this Section 2.2 have been satisfied.
2.3 Limitation. The consent granted by the Agent pursuant to Section 2.1
is expressly limited as provided herein and shall not extend to any other
actions or proposed actions or impair any provision of any of the Financing
Agreements. Nothing in this Amendment shall constitute a waiver of any rights of
Agent or the Lenders under any of the Financing Agreements.
ARTICLE III
MISCELLANEOUS
3.1. Conditions to Effectiveness. This Amendment, including the
amendments, consent and other terms set forth herein, shall become effective as
of the Effective Date upon the satisfaction of each the following conditions
precedent, all of which must be satisfied and acceptable in form and substance
to the Agent and each Lender signatory hereto in each of their sole discretion.
a. Execution and Delivery. This Amendment shall have been executed and
delivered by each of the Borrower, the Agent and Requisite Lenders.
b. Consent and Agreement of Guarantors. Each of Amcraft Building
Products Co., Inc. and Mule-Hide Products Co., Inc. shall have executed the
Consent and Agreement of Guarantors which is attached to and made a part of
this Amendment, in form and substance satisfactory to the Agent.
c. Consent and Agreement by Validity Guarantors. Each of Kendra A. Story
and Kenneth A. Hendricks shall have executed the Consent and Agreement by
Validity Guarantors which is attached to and made a part of this Amendment,
in form and substance satisfactory to the Agent.
d. Other. The Borrower shall have executed and delivered all other
agreements, documents, certifications or opinions as the Agent may
reasonably request in connection with implementation of this Amendment.
3.2. Representations, Warranties, Covenants of Borrower. The Borrower
hereby represents and warrants that as of the date of this Amendment and after
giving effect thereto (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 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.
The Borrower covenants and agrees that, as of the effective time of any
repurchase of any Senior Subordinated Notes, each such repurchase as
contemplated by this Agreement will be in compliance with all applicable laws
and regulations and will not be prohibited by the Indenture.
<PAGE>
3.3. 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.
3.4. 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.
3.5. 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.
3.6. Effectiveness. This Amendment shall be deemed effective
prospectively as of the Effective Date specified in the preamble upon execution
by the Borrower, the 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 other conditions for effectiveness as specified by
Section 3.1).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first written above.
[SIGNATURES FOLLOW]
<PAGE>
AMERICAN BUILDERS &
ATTEST: CONTRACTORS SUPPLY CO., INC.
By:___________________________ By:____________________________________
Name:_________________________ Kendra A. Story, Chief Financial Officer
Title:________________________
NATIONSBANK, N.A.
In its capacity as Agent
By:____________________________________
Doug Motl, Vice President
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
In its capacity as Co-Agent
By:____________________________________
Name:__________________________________
Title:_________________________________
NATIONSBANK, N.A.
In its capacity as a Lender
By:____________________________________
Doug Motl, Vice President
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
In its capacity as a Lender
By:____________________________________
Name:__________________________________
Title:_________________________________
LASALLE BUSINESS CREDIT, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
HARRIS TRUST AND SAVINGS BANK
By:____________________________________
Name:__________________________________
Title:_________________________________
FLEET CAPITAL CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
FLEET BUSINESS CREDIT CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
CONSENT AND AGREEMENT BY GUARANTORS
Each of the undersigned consents to the foregoing Amendment and each of the
undersigned agrees to the continued effectiveness of the Amended and Restated
Guaranty Agreement dated as of May 12, 1998, executed and delivered by each of
the undersigned, respectively, to the Agent for the benefit of the Lenders. All
references in each such Guaranty, respectively, to the Loan Agreement shall be
deemed to be to the Loan Agreement as amended by the foregoing Amendment and all
prior and subsequent amendments thereof. This Consent and Agreement is executed
as of the Effective Date specified in the Amendment.
AMCRAFT BUILDING PRODUCTS CO., INC.
By:__________________________________
Name:________________________________
Title:_______________________________
MULE-HIDE PRODUCTS CO., INC.
By:__________________________________
Name:________________________________
Title:_______________________________
CONSENT AND AGREEMENT BY VALIDITY GUARANTORS
Each of the undersigned consents to the foregoing Amendment and each of the
undersigned agrees to the continued effectiveness of the Validity Certification
dated as of May 12, 1998, executed and delivered by each of the undersigned,
respectively, to the Agent for the benefit of the Lenders. All references in
each such Validity Certification, respectively, to the Loan Agreement shall be
deemed to be to the Loan Agreement as amended by the foregoing Amendment and all
prior and subsequent amendments thereof. This Consent and Agreement is executed
as of the Effective Date specified in the Amendment.
_____________________________________
Kenneth A. Hendricks
____________________________________
Kendra A. Story
<PAGE>
FINANCIAL DATA SCHEDULE
EXHIBIT 27
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABC SUPPLY'S
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1999, AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
ABC Supply's Consolidated Balance Sheet at March 31, 1999, and Consolidated
Statement of Operations for the three months ended March 31, 1999, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,092
<SECURITIES> 0
<RECEIVABLES> 153,487
<ALLOWANCES> (8,990)
<INVENTORY> 177,072
<CURRENT-ASSETS> 329,320
<PP&E> 118,251
<DEPRECIATION> (50,496)
<TOTAL-ASSETS> 453,398
<CURRENT-LIABILITIES> 177,334
<BONDS> 263,590
0
0
<COMMON> 0
<OTHER-SE> 12,474
<TOTAL-LIABILITY-AND-EQUITY> 453,398
<SALES> 232,178
<TOTAL-REVENUES> 232,178
<CGS> 178,442
<TOTAL-COSTS> 178,442
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,826
<INTEREST-EXPENSE> 5,699
<INCOME-PRETAX> (6,631)
<INCOME-TAX> 42
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,637)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
