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 September 30, 2000 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 incorporation or (IRS Employer
organization) Identification No.)
Building Materials Holding Corporation
One Market Plaza, Steuart Tower, Ste 2650, San Francisco, CA 94105
Telephone: (208)331-4382 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 November 7, 2000:
Common stock $.001 par value 12,820,465
1
<PAGE>
BUILDING MATERIALS HOLDING CORPORATION
INDEX
-----
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Income for the three and nine months ended
September 30, 2000 and 1999 3
Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999
4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30,
2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
PART II -- OTHER INFORMATION
Item 1 - Legal Proceedings 14
Item 4 - Submission of Matters to a Vote of Security Holders
14
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
INDEX TO EXHIBITS 16
EXHIBITS 17
</TABLE>
2
<PAGE>
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $270,536 $288,715 $775,407 $760,345
Cost of sales 197,156 218,910 571,944 572,264
-------- -------- -------- --------
Gross profit 73,380 69,805 203,463 188,081
Selling, general
and administrative
expense 60,580 54,257 170,586 153,453
Other income, net 504 614 3,667 1,587
-------- -------- -------- --------
Income from operations 13,304 16,162 36,544 36,215
Equity in earnings of
unconsolidated companies,
net of amortization 2,351 2,124 6,603 3,158
Interest expense 4,587 3,711 13,380 9,254
-------- -------- -------- --------
Income before income taxes 11,068 14,575 29,767 30,119
Income taxes 4,261 5,611 11,460 11,596
-------- -------- -------- --------
Net income $ 6,807 $ 8,964 $ 18,307 $ 18,523
======== ======== ======== ========
Net income per
common share:
Basic $ 0.53 $ 0.71 $ 1.44 $ 1.46
======= ======= ======= =======
Diluted $ 0.53 $ 0.70 $ 1.43 $ 1.45
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(UNAUDITED)
September 30, December 31,
2000 1999
------------- ------------
ASSETS
Current assets
Cash $ 11,909 $ 7,452
Receivables, net 126,353 110,123
Inventories 83,758 80,679
Prepaid expenses and other assets 3,903 10,433
-------- --------
Total current assets 225,923 208,687
Property, plant and equipment, net 167,647 153,598
Equity investments in unconsolidated companies 35,677 30,762
Goodwill, net 48,980 47,477
Deferred loan costs 4,294 4,873
Other 6,433 4,722
-------- --------
Total assets $488,954 $450,119
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 11,950 $ 3,200
Accounts payable and accrued expenses 74,624 66,204
-------- --------
Total current liabilities 86,574 69,404
Long-term debt 171,378 170,547
Other long-term liabilities 12,438 10,058
-------- --------
Total liabilities 270,390 250,009
-------- --------
Stockholders' equity
Common stock, $.001 par value, 20,000,000
shares authorized; 12,795,685 and
12,679,686 shares outstanding at
September 30, 2000 and December 31, 1999,
respectively 13 13
Additional paid-in capital 108,580 108,433
Retained earnings 109,971 91,664
-------- --------
Total stockholders' equity 218,564 200,110
-------- --------
Total liabilities and stockholders' equity $488,954 $450,119
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
Nine Months Ended
September 30,
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 18,307 $ 18,523
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 12,352 10,577
Net gain on sale of property, plant and
equipment (2,570) (320)
Equity in earnings of unconsolidated companies,
net of amortization (6,603) (3,158)
Distributions received from unconsolidated
companies
1,666 --
Changes in assets and liabilities, net of
effects of acquisitions
Receivables (14,243) (31,541)
Inventories (2,715) (8,206)
Prepaid expenses & other assets 6,547 (164)
Accounts payable and accrued expenses 17,329 16,118
Other long-term liabilities 1,480 1,399
Other, net (19) 1,807
-------- --------
Net cash flows from operating activities 31,531 5,035
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (27,976) (17,296)
Acquisitions, net of cash acquired (5,905) (34,211)
Proceeds from dispositions of property,
plant and equipment 7,981 2,174
Other, net (777) (876)
-------- --------
Net cash flows from investing activities (26,677) (50,209)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under term note 11,100 --
Net (payments) borrowings under revolving
credit agreement (2,208) 49,628
Decrease in book overdrafts (9,163) (5,519)
Other, net (126) 67
-------- --------
Net cash flows from financing activities (397) 44,176
-------- --------
Net change in cash 4,457 (998)
Cash, beginning of period 7,452 8,264
-------- --------
Cash, end of period $ 11,909 $ 7,266
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
BUILDING MATERIALS HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
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. Certain information and footnote disclosures
normally included in the consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") 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, these condensed consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto included in the Company's 1999 Annual Report. In the opinion of
management, all adjustments necessary to present fairly the results for the
periods presented have been included. The adjustments made were of a normal,
recurring nature.
Due to the seasonal nature of BMHC's business, the condensed consolidated
results of operations and resulting cash flows for the periods presented are not
necessarily indicative of the results that might be expected for the fiscal
year.
2. NET SALES BY PRODUCT (in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wood Products $110,660 40.9% $135,837 47.0% $330,342 42.6% $341,839 45.0%
Value-added 108,596 40.1 93,876 32.5 306,282 39.5 257,220 33.8
Building Materials 33,705 12.5 38,867 13.5 93,202 12.0 104,225 13.7
Other 17,575 6.5 20,135 7.0 45,581 5.9 57,061 7.5
-------- ----- -------- ----- -------- ----- -------- -----
$270,536 100.0% $288,715 100.0% $775,407 100.0% $760,345 100.0%
======== ======== ======== ========
</TABLE>
6
<PAGE>
3. NET INCOME PER COMMON SHARE (in thousands)
Net income per common share was determined using the following information:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income available to common
shareholders $ 6,807 $ 8,964 $18,307 $18,523
======= ======= ======= =======
Weighted average shares outstanding used
to determine basic net income per
common share 12,778 12,673 12,733 12,684
Net effect of dilutive stock options 56 119 80 129
------- ------- ------- -------
Weighted average shares used to
determine diluted net income per
common share 12,834 12,791 12,812 12,813
======= ======= ======= =======
</TABLE>
4. DEBT (in thousands)
At September 30, 2000, debt consisted of the following:
Term note $111,100
Revolving credit facility 68,000
Non-interest bearing term note, net of related
discount of $1,460 3,539
Other 689
--------
183,328
Less current portion (11,950)
--------
$171,378
========
7
<PAGE>
5. ACQUISITIONS
During the nine month period ended September 30, 2000 the Company completed the
acquisition of Alberta Sales, a millwork facility that was consolidated into the
Company's existing Carson Valley location, and the acquisition of four warehouse
distribution centers along with several sales offices doing business as Marvin
Windows Planning Center from Frontier Wholesale Company. Aggregate cash
consideration was $5.9 million.
Proforma net sales and net income giving effect to these acquisitions as if they
had occurred at the beginning of 1999 and 2000 is not presented because the
effect of the acquisitions to the Company's net sales and net income is not
material.
8
<PAGE>
BUILDING MATERIALS HOLDING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTION
Certain statements made in this Form 10-Q may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors are discussed in detail
in Building Materials Holding Corporation's Form 10-K for the fiscal year ended
December 31, 1999. Given these uncertainties, investors are cautioned not to
place undue reliance on such forward-looking statements. We disclaim any
obligation to update any such factors or to publicly announce the results of any
revisions to any of the forward-looking statements contained in the Annual
Report on Form 10-K or this Form 10-Q except as required by law.
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, 1999.
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 27.1 24.2 26.2 24.7
Selling, general and
administrative expense 22.4 18.8 22.0 20.2
Other income .2 .2 .5 .2
Income from operations 4.9 5.6 4.7 4.8
Equity in earnings of
unconsolidated companies .9 .7 .9 .4
Interest expense 1.7 1.3 1.7 1.2
Income taxes 1.6 1.9 1.5 1.5
Net income 2.5 3.1 2.4 2.4
</TABLE>
9
<PAGE>
THIRD QUARTER OF 2000 COMPARED TO THE THIRD QUARTER OF 1999
-----------------------------------------------------------
Net sales for the three months ended September 30, 2000 were $270.5 million down
6.3% from the third quarter of 1999 when sales were $288.7 million. The decrease
in net sales resulted primarily from the impact of deflation of commodity wood
product prices, which during the third quarter of 2000 were at an eight year
low. The Company expects that commodity wood product prices in BMHC's product
mix will remain, on average, at current levels and will adversely affect BMHC's
financial results in the fourth quarter of 2000. Same-store sales decreased 9.0%
as compared to the third quarter of 1999 in sales at facilities that operated
for at least two months in both the third quarter of 1999 and 2000. Value-added
products accounted for $108.6 million, or 40.1% of net sales for the third
quarter of 2000, an increase from $93.9 million, or 32.5% of net sales for the
third quarter of 1999.
Gross profit as a percentage of sales increased to 27.1% in the third quarter of
2000 from 24.2% in the third quarter of 1999, primarily as a result of increased
sales of higher margin value-added products, such as roof trusses, pre-hung
doors, millwork, and pre-assembled windows. In addition, gross margins have
increased in our commodity wood products due to the impact of the deflationary
environment resulting in lower material costs.
Selling, general and administrative (SG&A) expense was $60.6 million in the
third quarter of 2000 as compared to $54.3 million in the third quarter of 1999,
and increased as a percentage of net sales from 18.8% in 1999 to 22.4% in 2000.
The Company attributes most of this dollar increase to the increase in
value-added product sales which generally require higher SG&A expenses and the
cost of integrating facility expansions and operations acquired during the
current year. Additionally, the percentage increase is a result of reduced net
sales due to the deflation of commodity wood product prices.
Equity in earnings of unconsolidated companies, net of amortization of goodwill,
was $2.4 million compared to $2.1 million in the third quarter of 1999. This
increase is attributed to improved sales and profitability of the unconsolidated
companies.
Interest expense of $4.6 million in the third quarter of 2000 increased from
$3.7 million in the same period of 1999, primarily due to higher interest rates
and debt levels. These higher debt levels are the result of recent
10
<PAGE>
acquisitions and capital expenditures related to expansion and remodeling of
certain building materials centers and value added facilities.
FIRST NINE MONTHS OF 2000 COMPARED WITH THE FIRST NINE MONTHS OF 1999
---------------------------------------------------------------------
Net sales for the first nine months ended September 30, 2000 were $775.4 million
up 2.0% from the first nine months of 1999 when sales were $760.3 million. Net
sales in the first nine months of 2000 were negatively impacted by deflation of
commodity wood product prices during the third quarter of 2000. Same-store sales
increased 0.3% from the nine months ended September 30, 1999 in sales at
facilities that operated for at least six months in the nine month period of
1999 and 2000. Value-added products accounted for $306.3 million, or 39.5% of
net sales for the first nine months of 2000, an increase from $257.2 million, or
33.8% of net sales for the first nine months of 1999.
Gross profit as a percentage of sales improved to 26.2% in the first nine months
of 2000 from 24.7% in the first nine months of 1999, primarily as a result of
increased sales of higher margin value-added products, such as roof trusses,
pre-hung doors, millwork, and pre-assembled windows. In addition, gross margins
have increased in our commodity wood products due to the impact of the
deflationary environment resulting in lower material costs.
SG&A expense was $170.6 million in the first nine months of 2000 as compared to
$153.5 million in 1999, and increased as a percentage of net sales to 22.0% in
2000 from 20.2% in 1999. The Company attributes most of this dollar increase to
the increase in value-added product sales which generally require higher SG&A
expenses, the cost of integrating facility expansions and operations acquired in
the first nine months of 2000 that were not included in the first nine months of
1999 and expenses incurred for its analysis of additional Internet, e-Business
and strategic initiatives. Additionally, the percentage increase is a result of
reduced net sales due to the deflation of commodity wood product prices.
Other income increased from $1.6 million in the first nine months of 1999 to
$3.7 million in the first nine months of 2000 primarily from the gain realized
during the first quarter of 2000, on the sale of real estate in Beaverton,
Oregon.
11
<PAGE>
Equity in earnings of unconsolidated companies, net of amortization of goodwill,
for the first nine months of 2000 was $6.6 million, compared to $3.2 million in
the first nine months of 1999. This increase is attributed to the investing
companies improved profitability and the inclusion of equity in earnings for
nine months of 2000 compared to only five months in 1999.
Interest expense increased to $13.4 million in the first nine months of 2000
from $9.3 million in the same period of 1999, primarily due to higher interest
rates and higher debt levels. These higher debt levels are the result of
acquisitions and capital expenditures related to expansion and remodeling of
certain building materials centers and value added facilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital resources is to fund future growth and
capital expenditures, as well as to finance working capital needs which have
been increasing as the Company has expanded operations in recent years. Capital
resources have primarily consisted of cash flows from operations and the
incurrence of debt.
OPERATIONS
In the first nine months of 2000, net cash provided by operations was $31.5
million compared to net cash provided by operations of $5.0 million in the first
nine months of 1999. The increase in cash provided by operations is primarily
due to timing of the collection of receivables, purchases of inventory, and
payments on payables.
CAPITAL INVESTMENT AND ACQUISITIONS
Capital expenditures, exclusive of acquisitions, were $28.0 million in the first
nine months of 2000. Capital expenditures were incurred to acquire additional
property and expand and remodel existing building materials centers and
value-added facilities. Proceeds from the dispositions of property, plant and
equipment were $8.0 million during the first nine months of 2000, related
primarily to the sale of the Beaverton and South Austin locations.
12
<PAGE>
During the first nine months of 2000 the Company completed the acquisition of
Alberta Sales, a millwork facility that was consolidated into the Company's
existing Carson Valley location, and the acquisition of four warehouse
distribution centers along with several sales offices doing business as Marvin
Windows Planning Center from Frontier Wholesale Company. Aggregate cash
consideration was $5.9 million.
FINANCING
Net cash used by financing activities was $0.4 million in the first nine months
of 2000 compared to cash provided of $44.2 million in the same period in 1999.
The Company utilized its available borrowing capacity for capital expenditures
related to expansion and remodeling of building materials centers and
value-added facilities during the first nine months of 1999.
At September 30, 2000 the Company's existing senior credit facility provided for
borrowings of up to $250.0 million which includes $111.1 million provided for by
the term loan all of which was outstanding at September 30, 2000, and $138.9
million provided for by the revolving credit facility, $68.0 million of which
was outstanding at September 30, 2000. Borrowings under the facility bear
interest at prime plus 0.50% to 1.50%, or Offshore Rate plus 2.0% to 3.0%. The
agreement expires in 2004.
In the third quarter of 1998, a shelf registration was filed with the Securities
and Exchange Commission to register 2,000,000 shares of common stock. The
Company may issue these shares from time to time in connection with future
business combinations, mergers and/or acquisitions.
Based on the Company's ability to generate cash flows from operations, its
borrowing capacity under the revolver and its access to equity markets, the
Company believes it will have sufficient capital to meet its anticipated needs.
DISCLOSURES OF CERTAIN MARKET RISKS
The Company experiences changes in interest expense when market interest rates
change or changes are made to its debt structure. Previously, the Company has
managed its exposure to market interest rate changes through periodic
refinancing of its variable rate debt with fixed rate term debt obligations.
Based on debt outstanding at September 30, 2000, a 25 basis point increase in
13
<PAGE>
interest rates would result in approximately $457,000 of additional annual
interest costs.
Commodity wood products, including lumber and panel products, accounted for
approximately 42.6% and 45.0% of net sales in the first nine months of 2000 and
1999, respectively. Prices of commodity wood products, which are subject to
significant volatility, could directly affect net sales. The Company does not
utilize any derivative financial instruments.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
------ -----------------
The Company is involved in litigation and other legal matters
arising in the normal course of business. In the opinion of
management, the Company's recovery or liability, if any,
under any of these matters will not have a material effect on
the Company's financial position, liquidity or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
------ --------------------------------
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
14
<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.
BUILDING MATERIALS HOLDING CORPORATION
Date: November 7, 2000 /s/ Robert E. Mellor
--------------------------------------------
Robert E. Mellor
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: November 7, 2000 /s/ Ellis C. Goebel
--------------------------------------------
Ellis C. Goebel
Senior Vice President - Finance
and Treasurer
(Principal Financial Officer)
15
<PAGE>
INDEX TO EXHIBITS
BUILDING MATERIALS HOLDING CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2000
Page
Exhibit Description Number
------- ----------- ------
27 Financial Data Schedule
16
