<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the quarterly period ended March 31, 1998 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 0-19335
BUILDING MATERIALS HOLDING CORPORATION
(Parent of BMC West Corporation)
Delaware 91-1834269
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Building Materials Holding Corporation
One Market Plaza, Steuart Tower, Ste 2650, San Francisco, CA 94105
Telephone: (208)331-4410 or (415)227-1650
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 month (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.
Yes X No
----- -----
CLASS Shares Outstanding as
of May 1, 1998:
Common stock $.001 par value 12,339,458
1
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BUILDING MATERIALS HOLDING CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated statements of Income for the
three months ended March 31, 1998 and 1997 4
Condensed Consolidated Balance Sheets as of March 31,
1998 and December 31, 1997 5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II -- OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 4 - Submission of Matters to a Vote of Security
Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
EXHIBITS 15
</TABLE>
2
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PART I - FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by Building Materials Holding Corporation ("BMHC" or the
"Company")on a consolidated basis, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. BMHC was formed on
September 23, 1997 in a holding company reorganization in which BMC West
Corporation, the former registrant, became a wholly owned subsidiary of BMHC.
This new structure was adopted to centralize certain administrative
functions as the Company expands its participation in the consolidation of
the contractor focused building materials distribution industry. All
references to the "Company" will mean BMHC on a consolidated basis if
referring to periods after September 23, 1997, or BMC West Corporation for
all preceding periods.
In the opinion of management, all adjustments necessary to present fairly the
results for the periods presented have been included therein in management's
discussion and analysis thereof. The adjustments made were of a normal,
recurring nature. Certain information and footnote disclosures normally
included in the consolidated financial statements have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission, although the Company believes that the disclosures are adequate
to make the information presented not misleading. It is recommended that
these condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 1997
Annual Report.
The condensed consolidated results of operations for the periods presented
are not necessarily indicative of the results that might be expected for the
fiscal year.
3
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BUILDING MATERIALS HOLIDNG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands, Except per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
Net sales $183,631 $146,769
Cost of sales 139,666 112,479
--------- ---------
Gross profit 43,965 34,290
Selling, general and
administrative expense 40,436 31,913
Other income 373 464
--------- ---------
Income from operations 3,902 2,841
Interest expense 2,497 2,088
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Income before income taxes 1,405 753
Income taxes 555 297
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Net income $ 850 $ 456
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--------- ---------
Net income per common share:
Basic: $0.07 $0.04
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Diluted: $0.07 $0.04
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</TABLE>
4
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BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
March 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets
Cash $ 7,306 $ 8,177
Receivables, net 84,437 84,872
Inventories 80,531 78,162
Deferred income tax benefit 2,131 2,131
Prepaid expenses 1,157 3,481
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Total current assets 175,562 176,823
Property, plant and equipment, net 119,101 118,240
Deferred loan costs 1,458 1,324
Goodwill, net 37,757 38,193
Other 5,777 5,793
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Total assets $339,655 $340,373
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----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 1,124 $ 1,150
Accounts payable 42,875 43,204
Accrued compensation 4,385 6,469
Sales tax payable 3,877 3,398
Other accrued expenses 5,649 3,990
----------- ------------
Total current liabilities 57,910 58,211
Long-term debt, net of current portion 112,610 113,410
Deferred income taxes 4,722 4,722
Other long-term liabilities 2,590 3,079
Shareholders' equity
Common stock, $.001 par value, 20,000,000
shares authorized, 12,333,762 and
12,331,088 shares outstanding at March 31,
1998 and December 31, 1997, respectively 12 12
Additional paid-in capital 104,127 104,107
Retained earnings 57,684 56,832
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Total shareholders' equity 161,823 160,951
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Total liabilities and shareholders' equity $339,655 $340,373
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</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 31, December 31,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 850 $ 456
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Depreciation and amortization 3,113 2,714
Gain on sale of assets (29) --
Stock option compensation 16 --
Changes in working capital items net of
effects of acquisitions and divestitures 115 (5,613)
Other (783) (463)
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Net cash provided(used) by operating activities 3,282 (2,906)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,458) (2,429)
Payments for acquisitions -- (930)
Sale of property and equipment 128 319
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Net cash used in investing activities (3,330) (3,040)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under revolving
credit agreements (800) 7,160
Redemption of preferred stock -- (1,000)
Financing costs -- (200)
Other (23) (69)
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Net cash provided (used)by financing activities (823) 5,891
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Net increase in cash (871) (55)
Cash, beginning of period 8,177 7,066
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Cash, end of period $ 7,306 $ 7,011
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SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for -
Interest $768 $547
Income taxes -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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BUILDING MATERIALS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. WORKING CAPITAL CHANGES
Changes in working capital items, net of acquisitions, for the three months
ended March 31, 1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
(Increase)decrease in accounts
receivable $ 435 $(2,337)
(Increase) in inventories (2,369) (3,900)
(Increase) decrease in prepaid
expenses 2,324 (646)
(Decrease) in accounts payable and
accrued expenses (2,004) (271)
Increase in interest payable 1,729 1,541
-------- --------
$ 115 $(5,613)
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</TABLE>
2. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
Revolving credit agreement borrowings $ 33,910 $ 34,710
9.18% unsecured senior notes 50,000 50,000
8.10% unsecured senior notes 25,000 25,000
Other 4,824 4,850
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113,734 114,560
Less current portion 1,124 1,150
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$112,610 $113,410
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</TABLE>
The company is in compliance with all covenants and conditions related to the
above borrowings.
7
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3. EARNINGS PER SHARE
Net income per share was determined as follows (in thousands, except shares
and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 31, March 31,
1998 1997
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<S> <C> <C>
COMPUTATION OF BASIC EARNINGS PER SHARE
Net income $850 $456
Class B preferred stock
accretion -- (7)
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Net income available to
common shareholders $850 $449
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Weighted average shares
outstanding 12,333,405 11,827,254
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BASIC EARNINGS PER SHARE $0.07 $0.04
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---------- ----------
COMPUTATION OF DILUTED EARNINGS PER SHARE
Net income available to
common shareholders $850 $449
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---------- ----------
Weighted average shares outstanding 12,333,405 11,827,254
Net effect of dilutive stock options
based on the treasury stock method
using average market price 139,057 220,339
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Weighted average diluted
shares outstanding 12,472,462 12,047,593
---------- ----------
---------- ----------
DILUTED EARNINGS PER SHARE $0.07 $0.04
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---------- ----------
</TABLE>
8
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4. REPORTING COMPREHENSIVE INCOME
During first quarter 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME, which
establishes standards for reporting and display of comprehensive income and
its components in a full set of financial statements. The Company
currently has no components of comprehensive income.
5. NEW ACCOUNTING PRONOUNCEMENT
On April 3, 1998, the AICPA issued Statement of Position 98-5, REPORTING ON
THE COSTS OF START-UP ACTIVITIES. This Statement of Position provides
guidance on the financial reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to
be expensed as incurred. The Company plans to adopt this Statement in the
first quarter of 1999 and does not anticipate that it will have a material
impact on the Company's results of operations or financial condition.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain costs, expenses and income items. The
table and subsequent discussion should be read in conjunction with the
consolidated financial statements and the notes thereto appearing elsewhere
herein and in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
March 31, March 31,
1998 1997
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<S> <C> <C>
Net sales 100.0% 100.0%
Gross profit 23.9 23.4
Selling, general and
administrative expense 22.0 21.7
Other income, net 0.2 0.3
Income from operations 2.1 1.9
Interest expense 1.4 1.4
Income taxes 0.3 0.2
Net Income 0.5 0.3
</TABLE>
FIRST QUARTER OF 1998 COMPARED TO THE FIRST QUARTER OF 1997
Net sales for the three months ended March 31, 1998 were $183.6 million up 25%
from the first quarter of 1997 when sales were $146.8 million. The increase in
net sales resulted from 1997 acquisitions and a 12.5% increase from the first
quarter of 1997 in sales at facilities that operated for at least two months in
both the first quarter of 1997 and the first quarter of 1998 ("same-store
sales"). Same-store sales benefited from good weather in many markets and
robust building permit activity. Sales increased despite overall price
deflation of 3.6%, primarily attributable to commodity wood product prices.
Adjusting for the price deflation, real same-store sales were approximately
16.1% ahead of the year-ago quarter.
Gross profit as a percentage of sales increased to 23.9% in the first quarter of
1998 from 23.4% in the first quarter of 1997, primarily as a result of on going
efforts by the Company to improve margins through its increased focus on
10
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value-added products, such as roof trusses, pre-hung doors and pre-assembled
windows.
Selling, general and administrative (SG&A) expenses, were $40.4 million in the
first quarter of 1998 as compared to $31.9 million in 1997, and increased as a
percentage of net sales from 21.7% in 1997 to 22.0% in 1998. The Company
attributes this partially to increases in value-added sales that carry higher
SG&A expenses and the continuing effort in integrating new operating locations
that were not included in the comparable period.
Interest expense of $2.5 million in the first quarter of 1998 increased from
$2.1 million in the same period of 1997, primarily due to increased borrowings
under the Company's revolving line of credit after the acquisitions made in the
second half of 1997.
Income taxes were provided at estimated annual effective tax rates of 39.5% for
the periods ended March 31, 1998 and March 31, 1997.
As a result of the foregoing factors, net income increased by $394,000 or 86.4%
to $850,000, or .5% of net sales in the first quarter of 1998, as compared to
$456,000, or 0.3% of net sales, in the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 the Company had $113.7 million of long-term debt outstanding,
consisting of $79.8 million of term borrowings under fixed rate notes, and $33.9
million of variable rate debt under the revolving credit agreement.
In the first three months of 1998, the Company generated $3.3 million of cash
from operating activities. Working capital decreased from $118.6 million at
December 31, 1997 to $117.7 million at March 31, 1998, due primarily to the
seasonality in the Company's accounts receivable, inventory and accounts
payable.
11
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Based on its ability to generate cash from operations and the available
borrowing capacity at March 31, 1998 of $36.1 million under the revolving
credit agreement (availability of which is subject to the satisfaction of
certain customary borrowing conditions), the Company believes it will have
sufficient funds to meet its currently anticipated requirements.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation and administrative proceedings
primarily arising in the normal course of its business. In the
opinion of management, the Company's recovery, if any, or the
Company's liability, if any, under any pending litigation or
administrative proceedings would not materially affect its financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
12
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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.
BUILDING MATERIALS HOLDING CORPORATION
Date: May 7, 1998 /s/ Robert E. Mellor
------------------------------------------
Robert E. Mellor
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: May 7, 1998 /s/ Ellis C. Goebel
------------------------------------------
Ellis C. Goebel
Senior Vice President - Finance and Treasurer
(Principal Financial Officer)
13
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INDEX TO EXHIBITS
BUILDING MATERIALS HOLDING CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 1998
<TABLE>
<CAPTION>
Page
Exhibit Description Number
- ------- ----------- ------
<S> <C> <C>
27 Financial Data Schedule 15
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 7,306
<SECURITIES> 0
<RECEIVABLES> 86,819
<ALLOWANCES> 2,382
<INVENTORY> 80,531
<CURRENT-ASSETS> 175,562
<PP&E> 155,667
<DEPRECIATION> 36,566
<TOTAL-ASSETS> 339,655
<CURRENT-LIABILITIES> 57,910
<BONDS> 112,610
0
0
<COMMON> 12
<OTHER-SE> 161,811
<TOTAL-LIABILITY-AND-EQUITY> 339,655
<SALES> 183,631
<TOTAL-REVENUES> 183,631
<CGS> 139,666
<TOTAL-COSTS> 180,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,497
<INCOME-PRETAX> 1,405
<INCOME-TAX> 555
<INCOME-CONTINUING> 850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
