<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934: For the period ended September 30, 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 its charter)
<TABLE>
Delaware 5033 39-1413708
Delaware 5033 39-1701778
Texas 5033 62-1277211
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
(State or other jurisdiction of (Primary Standard (I.R.S. Employer Identification No.)
incorporation or organization) Industrial Classification
Code Number)
</TABLE>
One ABC Parkway
Beloit, Wisconsin 53511
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (608) 362-7777
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, no par value, $0.01 par value, 147.04 shares as of October 31,
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 - September 30, 1999 and
December 31, 1998
Condensed consolidated statements of operations and retained earnings -
Three months ended September 30, 1999 and 1998; Nine months ended September
30, 1999 and 1998
Condensed consolidated statements of cash flows - Nine months ended
September 30, 1999 and 1998
Notes to condensed consolidated financial statements - September 30, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,018,000 $ 4,682,000
Accounts receivable 173,202,000 149,102,000
Inventories 165,014,000 130,802,000
Prepaid expenses and other 5,021,000 4,596,000
-------------- --------------
Total current assets 346,255,000 289,182,000
Property and equipment, net 67,909,000 69,190,000
Net receivable from sole stockholder 6,224,000 4,840,000
Goodwill 39,467,000 40,439,000
Other intangible assets 6,327,000 7,211,000
Security deposits 890,000 992,000
Other assets 1,819,000 1,047,000
--------------- --------------
$ 468,891,000 $ 412,901,000
=============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 147,069,000 $ 84,978,000
Accrued liabilities 27,490,000 22,061,000
Current portion of long-term debt 4,442,000 5,057,000
--------------- --------------
Total current liabilities 179,001,000 112,096,000
Long-term debt 261,739,000 281,658,000
Commitments and contingent liabilities (Note 2)
Stockholder's equity:
Common stock 0 0
Additional paid-in capital 3,780,000 1,864,000
Retained earnings 24,371,000 17,283,000
--------------- --------------
Total stockholder's equity 28,151,000 $ 19,147,000
--------------- --------------
$ 468,891,000 $ 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 September 30 Nine months ended September 30
1999 1998 1999 1998
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 347,663,000 $ 335,724,000 $ 895,921,000 $ 865,375,000
Cost of sales 265,929,000 258,232,000 686,235,000 665,486,000
---------------- -------------- --------------- ---------------
Gross profit 81,734,000 77,492,000 209,686,000 199,889,000
Operating expenses:
Distribution centers 60,123,000 57,562,000 167,265,000 167,407,000
General and administrative 4,454,000 3,776,000 12,956,000 12,164,000
Amortization of intangibles 414,000 434,000 1,280,000 1,301,000
Non-recurring charge (Note 2) 0 0 4,100,000 0
---------------- -------------- --------------- ---------------
64,991,000 61,772,000 185,601,000 180,872,000
---------------- -------------- --------------- ---------------
Operating income 16,743,000 15,720,000 24,085,000 19,017,000
Other income (expense):
Interest income 132,000 104,000 376,000 426,000
Interest expense (5,751,000) (6,491,000) (17,204,000) (19,213,000)
---------------- -------------- --------------- ---------------
(5,619,000) (6,387,000) (16,828,000) (18,787,000)
---------------- -------------- --------------- ---------------
Income before provision
for income taxes 11,124,000 9,333,000 7,257,000 230,000
Provision for income taxes 54,000 45,000 169,000 121,000
---------------- -------------- --------------- ---------------
Net income 11,070,000 9,288,000 7,088,000 109,000
Retained earnings at beginning
of period 13,301,000 10,749,000 17,283,000 19,928,000
---------------- -------------- --------------- ---------------
Retained earnings at end
of period $ 24,371,000 $ 20,037,000 $ 24,371,000 $ 20,037,000
================ ============== =============== ===============
</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>
Nine months ended September 30
-----------------------------------------------------
1999 1998
----------------------- -----------------------
<S> <C> <C>
Operating activities
Net income $ 7,088,000 $ 109,000
Adjustments to reconcile net income to cash provided
by operating activities net of acquisitions:
Depreciation 10,709,000 10,461,000
Amortization 1,280,000 1,301,000
Amortization of deferred financing costs 576,000 328,000
Provision for doubtful accounts 7,997,000 5,058,000
Loss on disposal of property and equipment 183,000 157,000
Changes in operating assets and liabilities:
Accounts receivable (31,889,000) (39,161,000)
Inventories (33,444,000) (23,508,000)
Prepaid expenses and other (420,000) 216,000
Security deposits 102,000 11,000
Other assets (769,000) (2,011,000)
Accounts payable 62,090,000 59,782,000
Accrued liabilities 5,429,000 1,723,000
----------------------- -----------------------
Cash provided by operating activities 28,932,000 14,466,000
Investing activities
Additions to property and equipment (10,671,000) (9,666,000)
Proceeds from disposal of property and equipment 1,119,000 608,000
Acquisitions of business (1,042,000) (2,273,000)
----------------------- -----------------------
Cash used in investing activities (10,594,000) (11,331,000)
Financing activities
Net borrowings under line of credit (10,355,000) (6,319,000)
Proceeds from notes payable 0 3,683,000
Payments on notes payable (10,179,000) (3,517,000)
Contributions from stockholder 1,916,000 0
Net change in receivable from sole stockholder (1,384,000) 1,995,000
----------------------- -----------------------
Cash used in financing activities (20,002,000) (4,158,000)
----------------------- -----------------------
Net decrease in cash (1,664,000) (1,023,000)
Cash at beginning of period 4,682,000 4,140,000
----------------------- -----------------------
Cash at end of period $ 3,018,000 $ 3,117,000
======================= =======================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 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 and nine month periods ended September 30, 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. Commitments and Contingent Liabilities
At September 30, 1999 and December 31, 1998, the Company had guaranteed
debt of the sole stockholder in the amounts of $1,901,000 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 $3,664,000 at September 30, 1999 and $2,764,000
at December 31, 1998, with respect to debt of the Company's sole stockholder and
his affiliates.
In connection with the purchase of certain distribution business assets of
Viking Building Products, Inc. and Viking Aluminum Products, Inc. (VAP) in 1997,
the Company entered into a five year supply agreement with VAP, regarding the
sale to ABC of windows, awnings, doors and related products manufactured by VAP.
The supply agreement specified minimum annual purchases through May 2002 and
damages for shortfalls. The Company did not meet the required minimum annual
purchases for 1998. In February 1999, the Company filed a lawsuit in the U.S.
District Court for the Western District of Wisconsin seeking damages related to
warranty and quality issues, among other issues. VAP instituted a lawsuit in
the U.S. District Court for the Southern District of New York seeking
approximately $2,250,000 in damages under the terms of the supply agreement for
the period through December 31, 1998.
The Company and VAP are having ongoing discussions with the goal of
reaching a mutually acceptable settlement. As a result of these discussions, the
Company recorded a $4.1 million non-recurring charge relating to an estimated
settlement and estimated legal and other expenses during the second quarter of
1999. As part of this settlement, the Company anticipates receiving
substantially lower minimum purchase requirements and to conclude the supply
agreement on December 31, 2000. The Company believes it will meet these revised
requirements.
<PAGE>
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>
September 30, 1999 December 31, 1998
--------------------------- ---------------------------
<S> <C> <C>
Current assets:
Accounts receivable from ABC $ 8,806,000 $ 3,596,000
Other current assets - third parties 3,355,000 3,633,000
--------------------------- ---------------------------
Total 12,161,000 7,229,000
Noncurrent assets 738,000 655,000
Current liabilities (8,908,000) (5,821,000)
Noncurrent liabilities --- ---
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30
------------------------------------------------------------
1999 1998
--------------------------- ---------------------------
<S> <C> <C>
Net sales:
To ABC $37,185,000 $36,739,000
To third parties 2,023,000 4,487,000
--------------------------- ---------------------------
Total 39,208,000 41,226,000
Gross profit 6,691,000 6,713,000
Net income 1,928,000 1,586,000
</TABLE>
4. Comprehensive Income
The Company's comprehensive income for the three and nine month periods
ended September 30, 1999 and 1998, as required to be reported by FASB Statement
No. 130, was identical to the actual income reported for those periods.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company. ABC is the largest wholesale distributor of roofing products
and one of the largest wholesale distributors of vinyl siding materials in the
United States, operating 200 distribution centers located in 40 states as of
September 30, 1999, as compared to 204 distribution centers located in 40 states
as of December 31, 1998.
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 is party to a Tax Allocation Agreement with the
sole stockholder, pursuant to which he will receive distributions from the
Company with respect to taxes associated with the Company's income.
Special Note Regarding Forward-Looking Statements
Certain matters discussed herein are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements can generally be identified as such because the context of
the statement will include words such as the Company "believes", "anticipates",
"expects", or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking statements. Such
forward looking-statements are subject to certain risks and uncertainties which
are described in close proximity to such statements and which could cause actual
results to differ materially from those currently anticipated. Readers are urged
to consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are only made as of the
date of this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
Results of Operations
The following table summarizes the Company's historical results of
operations as a percentage of net sales for the three and nine months ended
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Income statement data:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.5 76.9 76.6 76.9
------------------- ------------------- ------------------- -------------------
Gross profit 23.5 23.1 23.4 23.1
Operating expenses:
Distribution centers 17.3 17.2 18.7 19.3
General and administrative 1.3 1.1 1.4 1.4
Amortization 0.1 0.1 0.1 0.2
Non-recurring charge 0.0 0.0 0.5 0.0
------------------- ------------------- ------------------- -------------------
Total operating expenses 18.7 18.4 20.7 20.9
------------------- ------------------- ------------------- -------------------
Operating income 4.8% 4.7% 2.7% 2.2%
=================== =================== =================== ===================
</TABLE>
<PAGE>
Comparison of the Three and Nine Month Periods Ended September 30, 1999 to the
Three and Nine Month Periods Ended September 30, 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 September 30, increased by 3.6% in
1999 to $347.7 million from $335.7 million in 1998. Net sales for the nine
months ended September 30, increased by 3.5% in 1999 to $895.9 million from
$865.4 million in 1998. Comparable distribution center sales growth were 3.8%
and 3.6% for the three and nine month periods ended September 30, respectively.
Gross profit for the three months ended September 30, increased by 5.5% in
1999 to $81.7 million from $77.5 million in 1998. Gross profit for the nine
months ended September 30, increased by 4.9% in 1999 to $209.7 million from
$199.9 million in 1998. The increases for both the three and nine month periods
are primarily a result of profits associated with increased sales. Gross
profit, as a percent of net sales, for the three months ended September 30
increased to 23.5% in 1999, from 23.1% in 1998. Gross profit, as a percentage
of net sales, for the nine months ended September 30, increased to 23.4% in
1999, from 23.1% in 1998. The increases for both the three and nine month
periods are principally due to management's focus on improving gross profit
through increased sales of products with higher gross profit margins.
Distribution center operating expenses for the three months ended September
30, increased by $2.5 million to $60.1 million in 1999, from $57.6 million in
1998. As a percent of net sales, distribution center operating expenses for the
three months ended September 30, increased to 17.3% in 1999 from 17.2% in 1998.
The increase is due to an increase in the provision for doubtful accounts of
$1.1 million or 0.3% of net sales being partially offset by the actual third
quarter improvement in payroll related expenses as a percentage of net sales.
For the nine months ended September 30, distribution center operating
expenses decreased by $0.1 million to $167.3 million in 1999, from $167.4
million in 1998. As a percent of net sales, distribution center operating
expenses for the nine months ended September 30, decreased to 18.7% in 1999 from
19.3% in 1998. The improvement for the nine month period 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 during the first half of 1998.
Partially offsetting these two factors is an increase in the provision for
doubtful accounts of $2.9 million to $8.0 million for the nine months ended
September 30, 1999 from $5.1 million for the same period in 1998. This increase
is a continuation of the collection trends experienced by the Company during the
last half of 1998.
General and administrative expenses for the three months ended September
30, increased by $0.7 million to $4.5 million in 1999, from $3.8 million in
1998. For the nine months ended September 30, general and administrative
expenses increased by $0.8 million to $13.0 million in 1999 from $12.2 million
in 1998.
<PAGE>
Non-recurring charge of $4.1 million relates to the estimated settlement
with VAP and related legal and other expenses. See Note 2, Commitments and
Contingent Liabilities, to the condensed consolidated financial statements.
Operating income for the three months ended September 30, increased by $1.0
million to $16.7 million in 1999, from $15.7 million in 1998. Operating income
for the nine months ended September 30, increased by $5.1 million to $24.1
million in 1999 from $19.0 million in 1998. The increase for the nine months
ended September 30, is due to the improvement in gross profit being partially
offset by the non-recurring charge of $4.1 million related to the estimated VAP
settlement.
Interest expense for the three months ended September 30, decreased by $0.7
million or 11.4% to $5.8 million in 1999 from $6.5 million in 1998. For the nine
months ended September 30, interest expense decreased by $2.0 million or 10.5%
to $17.2 million in 1999 from $19.2 million in 1998. The reduction for both the
three and nine month periods 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 $28.9 million for the nine months ended September 30, 1999, as
compared to $14.5 million for the same period in 1998. The increase was due in
part to the net income improvement of $7.0 million, a $2.3 million increase in
accounts payable, a $3.7 million increase in accrued liabilities, as well as a
reduction in cash used for accounts receivable of $7.3 million. These items were
partially offset by a $9.9 million increase in cash used for inventory
purchases.
Cash Flows from Investing Activities. Net cash used in investing activities
was $10.6 million and $11.3 million for the nine months ended September 30, 1999
and 1998, respectively. The reduction is due principally to reduced expenditures
for acquisitions.
Cash Flows from Financing Activities. Net cash used in financing activities
was $20.0 million for the nine months ended September 30, 1999 as compared to
$4.2 million for the nine months ended September 30, 1998. The increase is due
primarily to reductions in long-term debt, offset by the sole stockholder's $1.9
million remittance of tax refunds 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 assurances
can be given, however, that this will be the case.
During November 1999, the Company executed an extension of its revolving
credit agreement with its lending institutions. The agreement extended the
expiration date from June 2000 to June 2002, with terms similar to those which
are currently in place.
<PAGE>
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 100% complete 98% complete
Expected completion Complete Complete Complete November 1999
Non-IT System 100% complete 100% complete 97% complete 90% complete
Expected completion Complete Complete November 1999 November 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. Expenditures to date
have not been material, and 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 1. Legal Proceedings
See Note 2, Commitments and Contingent Liabilities, to the Condensed
Consolidated Financial Statements
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Third Amendment to the Second Amended and Restated Loan and
Security Agreement among American Builders and Contractors Supply Co.,
Inc., and Bank of America, N.A., as Agent and a Lender.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended September 30, 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.
November 9, 1999 /s/ Kendra A. Story
------------------------- -------------------
Date: Kendra A. Story
Chief Financial Officer and Director
<PAGE>
Exhibit Index
Exhibit No. Description
- ----------- -----------
10.1 Third Amendment to the Second Amended and Restated Loan and
Security Agreement among American Builders and Contractors Supply
Co., Inc., and Bank of America, N.A. as Agent and a Lender.
27 Financial Data Schedule
<PAGE>
Exhibit 10.1
THIRD AMENDMENT
to
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Third Amendment to Second Amended and Restated Loan and Security
Agreement ("Amendment") , dated effective as of November 3, 1999 (the "Effective
Date"), is entered into among American Builders & Contractors Supply Co., Inc.,
a Delaware corporation (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 Bank of America, N.A., a national banking association and
successor in interest to Bank of America, N.A., formerly NationsBank, N.A.,
successor in interest to NationsBank of Texas, N.A., as Agent for the Lenders
(in such capacity, the "agent"):
Recitals
--------
a. The Borrower, the Lenders and the 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 and the Second
Amendment to Second Amended and Restated Loan and Security Agreement dated
effective as of May 5, 1999 (the "Loan Agreement") pursuant to which the
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, the Agent, and the Lenders desire once again to modify
the Loan Agreement in certain respects, in accordance with the 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. Amendment to Section 1.1 of the Loan Agreement. Section 1.1
("Requisite Lenders") of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
1.1 "Requisite Lenders" shall mean Lenders having, in the aggregate,
Pro Rata Shares of at least 66.67%.
<PAGE>
1.2. Amendment to Section 2.8 of the Loan Agreement. Section 2.8 ("Term
of this Agreement") of the Loan Agreement is hereby amended and restated to read
in its entirety as follows:
2.8 Term of this Agreement. Subject to all other terms and
conditions hereof, this Agreement shall be effective until June 30, 2002
(the "Initial Term") and shall automatically extend for successive one year
periods (each a "Term") of one year (each extending through the next
succeeding June 30) unless terminated by the Borrower or the Agent or any
of the Lenders by written notice of intention to terminate this Agreement
as of the end of the Initial Term or any such Term, as the case may be,
which, in order to be effective, must be delivered to all other parties to
this Agreement at least sixty (60) days prior to the end of the Initial
Term or any such Term, as the case may be. Following timely delivery of
any such notice, unless otherwise agreed in writing by the Borrower, the
Agent and all the Lenders, this Agreement shall terminate as of the
expiration of the Initial Term or any such Term, as the case may be,
provided that (a) all of the Agent's and each of the Lenders' rights and
remedies under this Agreement and (b) the security interests reaffirmed and
created under Section 5.1 and under any of the other Financing Agreements,
shall survive any such termination until all of the Liabilities under this
Agreement and the other Financing Agreements have been paid in full. In
addition, the Agent may at any time demand repayment of the Liabilities and
the Liabilities may be accelerated as set forth in Section 9.1. Upon the
effective date of termination, all of the Liabilities shall become
immediately due and payable without notice or demand. Notwithstanding any
termination, until all of the Liabilities hereunder shall have been fully
paid and satisfied, the Agent shall be entitled to retain its security
interests, for the benefit of the Lenders, in and to all existing and
future Collateral and the Borrower shall continue to remit collections of
Accounts and proceeds as provided herein.
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, Thirty Million Dollars
($30,000,000.00) during the calendar year ending December 31, 1998, Twenty
Million Dollars ($20,000,000.00) during the calendar year ending December
31, 1999, Thirty Million Dollars ($30,000,000.00) during the calendar year
ending December 31, 2000 and Thirty Five Million Dollars ($35,000,000.00)
during the calendar year ending December 31, 2001, and any calendar year
thereafter. For purposes of the foregoing, there shall be
<PAGE>
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:
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:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
December 31, 1998 $60,000,000.00
December 31, 1999 $70,000,000.00
December 31, 2000 $75,000,000.00
December 31, 2001 $80,000,000.00
</TABLE>
1.5. 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:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
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 8.50 to 1.0
December 31, 1998 8.00 to 1.0
March 31, 1999 7.75 to 1.0
June 30, 1999 7.50 to 1.0
September 30, 1999 7.25 to 1.0
December 31, 1999 7.00 to 1.0
March 31, 2000 6.90 to 1.0
June 30, 2000 6.80 to 1.0
September 30, 2000 6.50 to 1.0
December 31, 2000 6.40 to 1.0
March 31, 2001 6.30 to 1.0
</TABLE>
<PAGE>
<TABLE>
<S> <C>
June 30, 2001 6.20 to 1.0
September 30, 2001 6.10 to 1.0
December 31, 2001 6.00 to 1.0
March 31, 2002 5.95 to 1.0
June 30, 2002 5.90 to 1.0
</TABLE>
1.6. Amendment to Section 8.19 of the Loan Agreement. Section 8.19
("Minimum Fixed Charge Coverage Ratio") of the Loan Agreement is hereby amended
and restated to read in its entirety as follows:
8.19 Minimum Fixed Charge Coverage Ratio. The ratio of (i) EBITDA to
(ii) the sum of interest expense plus the principal portion of current
maturities of long term indebtedness (determined on a consolidated basis
for the Borrower and its Subsidiaries), determined as of the last day of
each calendar quarter and measured for the preceding period of four
calendar quarters, shall not be less than the following prescribed amounts,
as applicable:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
December 31, 1997 1.25 to 1.0
March 31, 1998 1.00 to 1.0
June 30, 1998 1.05 to 1.0
September 30, 1998 1.15 to 1.0
December 31, 1998 1.20 to 1.0
March 31, 1999 1.20 to 1.0
June 30, 1999 1.25 to 1.0
September 30, 1999 1.35 to 1.0
Each Quarter Thereafter 1.35 to 1.0
</TABLE>
ARTICLE II
MISCELLANEOUS
2.1. Conditions to Effectiveness. This Amendment, including the
amendments 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 of the Lenders 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.
<PAGE>
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.
2.2. 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.
2.3. 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.
2.4. Amendment Fee. Subject to the terms of the Loan Agreement, in
consideration of this Amendment the Borrower agrees to pay to the Agent, for the
benefit of the Lenders, an amendment fee in the amount of $50,000.
2.5. 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.
<PAGE>
2.6. 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.
2.7. Effectiveness. This Amendment shall be deemed effective
prospectively as of the Effective Date specified in the preamble upon execution
by the Borrower, the Agent 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).
2.8. No Oral Agreements. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURES FOLLOW]
<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:_____________________ Kendra A. Story, Chief Financial Officer
Title:____________________
BANK OF AMERICA, 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: David Weislogel
Title:_____________________________
BANK OF AMERICA, 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: David Weislogel
Title:_____________________________
LASALLE BUSINESS CREDIT, INC.
By:________________________________
Name: Bent Hammeleff
Title:_____________________________
HARRIS TRUST AND SAVINGS BANK
By:________________________________
Name: Venkata Ramani
Title:_____________________________
FLEET CAPITAL CORPORATION
By:________________________________
Name: Dan Hughes
Title:_____________________________
FLEET BUSINESS CREDIT CORPORATION
By:________________________________
Name: Dan Hughes
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:__________________________
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABC SUPPLY'S
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,018
<SECURITIES> 0
<RECEIVABLES> 181,718
<ALLOWANCES> (8,516)
<INVENTORY> 165,014
<CURRENT-ASSETS> 346,255
<PP&E> 122,821
<DEPRECIATION> (54,912)
<TOTAL-ASSETS> 468,891
<CURRENT-LIABILITIES> 179,001
<BONDS> 261,739
0
0
<COMMON> 0
<OTHER-SE> 28,151
<TOTAL-LIABILITY-AND-EQUITY> 468,891
<SALES> 895,921
<TOTAL-REVENUES> 895,921
<CGS> 686,235
<TOTAL-COSTS> 686,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,997
<INTEREST-EXPENSE> 17,204
<INCOME-PRETAX> 7,257
<INCOME-TAX> 169
<INCOME-CONTINUING> 7,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,088
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
