<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 SEPTEMBER 30, 1996 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
BMC WEST CORPORATION
Delaware 94-3050454
(State of other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
BMC West Corporation
1475 Tyrell Lane, Boise, Idaho 83706
Telephone: (208) 331-4410
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 1, 1996:
Common stock $.001 par value 11,820,220
----------
Index to exhibits at page __
<PAGE>
BMC WEST CORPORATION
INDEX
PAGE
NUMBER
------
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Statements of Income for the three months ended September 30,
1996 and 1995 and the nine months ended September 30, 1996
and 1995 4
Balance Sheets as of September 30, 1996 and December 31, 1995 5
Statements of Cash Flows for the nine months ended September 30,
1996 and 1995 6
Notes to the Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II -- OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
INDEX TO EXHIBITS 16
EXHIBITS 17
<PAGE>
PART I - FINANCIAL INFORMATION
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments necessary to present fairly, the results for the periods
presented have been included therein. The adjustments made were of a normal,
recurring nature. Certain information and footnote disclosure normally
included in the 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
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's 1995 Annual Report.
The results of operations for the periods presented are not necessarily
indicative of the results that might be expected for the fiscal year.
<PAGE>
BMC WEST CORPORATION
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands Except per Share Data)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Net sales $ 206,455 $ 178,502 $ 547,076 $ 465,188
Cost of sales 162,094 139,198 427,381 361,423
--------- --------- --------- ---------
Gross profit 44,361 39,304 119,695 103,765
Selling, general
and administrative
expense 34,780 31,237 97,493 86,591
Other income, net 289 424 1,270 1,145
--------- --------- --------- ---------
Income from
operations 9,870 8,491 23,472 18,319
Interest expense 2,330 2,932 8,297 7,893
--------- --------- --------- ---------
Income before income taxes 7,540 5,559 15,175 10,426
Income taxes 2,980 2,163 5,993 4,059
--------- --------- --------- ---------
Net income, before
extraordinary item $4,560 $3,396 $9,182 $6,367
Extraordinary item, net
of tax -- -- (342) --
Net income $4,560 $3,396 $8,840 $6,367
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per common and
common equivalent share
before extraordinary
item $ .38 $ .35 $ .86 $ .65
Extraordinary item, net
of tax -- -- (0.03) --
--------- --------- --------- ---------
Net income per common and
common equivalent share $ .38 $ .35 $ .83 $ .65
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of
common and common
equivalent shares 12,044,134 9,759,659 10,649,697 9,752,627
---------- --------- ---------- ---------
---------- --------- ---------- ---------
<PAGE>
BMC WEST CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
(Dollars in Thousands)
September 30, December 31,
1996 1995
------------- ------------
CURRENT ASSETS
Cash $ 8,479 $ 6,004
Receivables, net 87,166 65,820
Inventories 73,792 66,506
Deferred income tax benefit 1,668 1,668
Prepaid expenses 1,295 1,275
------------- ------------
Total current assets 172,400 141,273
PROPERTY AND EQUIPMENT, net 101,073 96,403
DEFERRED LOAN COSTS 1,577 2,440
GOODWILL, net 19,181 18,421
OTHER 6,560 6,433
------------- ------------
Total assets $300,791 $264,970
------------- ------------
------------- ------------
CURRENT LIABILITIES
Current portion of long-term debt $ 38 $ 129
Current redemption requirement on Class B
preferred stock 1,000 1,000
Accounts payable 40,597 29,383
Accrued expenses 14,437 10,565
------------- ------------
Total current liabilities 56,072 41,077
LONG-TERM DEBT, net of current portion 95,375 121,120
DEFERRED INCOME TAXES 3,161 3,161
OTHER LONG-TERM LIABILITIES 2,124 1,725
CLASS B REDEEMABLE PREFERRED STOCK 985 1,960
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000
shares authorized, 11,797,491 and
9,483,229 shares outstanding at
September 30, 1996 and December 31,
1995, respectively 12 9
Additional paid-in-capital 97,516 59,188
Retained earnings 45,546 36,730
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 143,074 95,927
------------- ------------
Total liabilities, redeemable preferred stock
and stockholders' equity $300,791 $264,970
------------- ------------
------------- ------------
<PAGE>
BMC WEST CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Nine Months Ended
----------------------
Sept. 30, Sept. 30,
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $8,840 $6,367
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization 7,720 6,739
(Gain) on sale of assets (366) (20)
Extraordinary item, net of tax 342 --
Stock options compensation -- 179
Changes in working capital items net of
effects of acquisitions (11,097) 9,850
Other (699) (1,190)
--------- ---------
Net cash provided by operating
activities 4,740 21,925
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (11,700) (14,266)
Payment for acquisitions (3,347) (36,363)
Sale of property and equipment 1,774 312
--------- ---------
Net cash used in investing activities (13,273) (50,317)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of 10% unsecured notes (20,000) --
Repayment of Note Payable (200) (10,659)
Borrowings under revolving credit agreement 173,350 169,650
Repayments under revolving credit agreement (180,780) (177,860)
Redemption of Class B Preferred Stock (1,000) (1,000)
Issuance of debt 1,685 50,000
Issuance of Common Stock, net of expenses 38,486 --
Financing costs (190) (793)
Capital lease payments (91) (63)
Other (252) --
--------- ---------
Net cash provided by financial activities 11,008 29,275
--------- ---------
NET INCREASE IN CASH 2,475 883
CASH, beginning of period 6,004 5,173
--------- ---------
CASH, end of period $8,479 $6,056
--------- ---------
--------- ---------
SUPPLEMENTAL INFORMATION:
Cash paid for interest $6,610 $4,098
Cash paid for income taxes $4,850 $1,402
<PAGE>
BMC WEST CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. WORKING CAPITAL CHANGES
Changes in working capital items, net of acquisitions, for the nine months ended
September 30, 1996 and 1995 are as follows (in thousands):
1996 1995
--------- ---------
Increase in accounts receivable ($19,613) ($10,419)
(Increase)decrease in inventories (6,555) 8,559
(Increase)decrease in prepaid expenses (13) 462
Increase in accounts payable and accrued expenses 13,397 7,975
Increase in interest payable 1,687 3,273
--------- ---------
($11,097) $9,850
--------- ---------
--------- ---------
2. LONG-TERM DEBT
Long-term debt consisted of the following at(in thousands):
September 30, December 31,
1996 1995
------------- ------------
Revolving credit agreement borrowings $18,690 $ 26,120
9.18% unsecured senior notes 50,000 50,000
8.10% unsecured senior notes 25,000 25,000
10% unsecured senior subordinated notes -- 20,000
Capital lease obligations 38 129
8.25% unsecured note 1,685 --
------- --------
95,413 121,249
Less current portion (38) (129)
------- --------
$95,375 $121,120
------- --------
------- --------
3. ACQUISITIONS
In the first quarter of 1996, the Company purchased substantially all of the
assets of two window distribution facilities in Texas. In the second quarter
of 1996, the Company purchased a truss plant in Utah. The total purchase
price for these facilities was $3,347,000. On October 1, 1996, the Company
<PAGE>
purchased a center located in Utah which sells pre-hung doors and other
building materials.
4. PUBLIC STOCK OFFERING
In the second quarter of 1996, the Company sold 2,300,000 shares of its
previously unissued common stock. The price of the stock to the public was
$18.00 per share. The proceeds from these offerings, less underwriting and
other issuance costs, were used principally to reduce debt.
5. EXTRAORDINARY ITEM
A portion of the proceeds of the public stock offering discussed above were
used to redeem the 10% unsecured senior subordinated notes. In connection
with this planned redemption, the Company wrote off the related deferred loan
costs. These write-offs are included in the 1996 statement of income as an
extraordinary item of $342,000, net of tax benefits.
<PAGE>
MANAGEMENT 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
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, 1995.
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Month Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 21.5 22.0 21.9 22.3
Selling, general and
administrative expense 16.8 17.5 17.8 18.6
Other income (expense) .1 .2 .2 .2
Income from operations 4.8 4.8 4.3 3.9
Interest expense 1.1 1.6 1.5 1.7
Income taxes 1.4 1.2 1.1 .9
Net Income 2.2 1.9 1.6 1.4
</TABLE>
THIRD QUARTER OF 1996 COMPARED TO THE THIRD QUARTER OF 1995
- -----------------------------------------------------------
Net sales for the three months ended September 30, 1996 were $206.5 million
up 16% from the third quarter of 1995 when sales were $178.5 million. The
growth in net sales resulted from an increase from the third quarter of 1995
in sales at facilities that operated for at least two months in both the
third quarter of 1995 and the third quarter of 1996 ("Same-Store Sales").
Sales in the 1996 period were positively affected by higher commodity wood
product prices. The price increase contributed to an overall price inflator
of 6%, the effect of which increased sales by approximately $10.7 million.
Excluding price inflation, same-store sales increased 10%.
Gross profit as a percentage of sales declined slightly to 21.5% in the third
quarter of 1996 from 22.0% in the third quarter of 1995. The decrease was a
result of a competitive environment, along with our efforts to substantially
increase market share in certain markets. Also, margins decreased as a result
<PAGE>
of a higher percentage of sales to professional contractors (which generally
carry lower margins) in the 1996 period compared to 1995.
Selling, general and administrative (SG&A) expense, was $34.8 million in the
third quarter of 1996 as compared to $31.2 million in 1995, but decreased as
a percentage of net sales from 17.5% in 1995 to 16.8% in 1996. This reduction
was somewhat due to improvements in costs associated with integrating the 14
building materials centers acquired in 1994 and 1995.
Interest expense of $2.3 million in the third quarter of 1996 decreased from
$2.9 million in the same period of 1995. This decrease was due to a
reduction in the Company's outstanding debt in the third quarter of 1996 with
the proceeds of an equity offering.
Income taxes were provided at estimated annual effective tax rates of 39.5%
and 38.9% for the periods ended September 30, 1996 and September 30, 1995,
respectively. This increase in the effective tax rate from 1995 was
primarily due to book/tax differences in accounting for goodwill in
connection with acquisitions in 1994 and 1995.
As a result of the foregoing factors, net income increased by $1.2 million,
or 34% to $4.6 million or 2.2% of net sales in the third quarter of 1996, as
compared to $3.4 million or 1.9% of net sales, in the third quarter of 1995.
FIRST NINE MONTHS OF 1996 COMPARED WITH THE FIRST NINE MONTHS OF 1995
- ---------------------------------------------------------------------
Net sales for the nine months ended September 30, 1996 were $547.1 million up
18% from the first nine months of 1995 when sales were $465.2 million. The
growth in net sales resulted from an increase of 12% in Same-Store Sales,
over the first nine months of 1995 and from the acquisition of new building
materials centers. Sales in the 1996 period were positively affected by
higher commodity wood product prices. The price increase contributed to an
overall price inflator of 3% the effect of which increased sales by
approximately $13.7 million.
<PAGE>
Gross profit as a percentage of sales declined slightly to 21.9% in the first
nine months of 1996 from 22.3% in the first nine months of 1995. The
decrease was a result of a competitive environment, along with our efforts to
substantially increase market share in certain markets. Also, margins
decreased as a result of a higher percentage of sales to professional
contractors (which generally carry lower margins) in the 1996 period compared
to 1995.
Selling, general and administrative (SG&A) expense, was $97.5 million in the
first nine months of 1996 as compared to $86.6 million in 1995, but decreased
as a percentage of net sales from 18.6% in 1995 to 17.8% in 1996. This
reduction was somewhat due to improvements in costs associated with
integrating the 14 building materials centers acquired in 1994 and 1995.
Interest expense increased to $8.3 million in the first nine months of 1996
from $7.9 million in the same period of 1995, primarily due to additional
borrowings to finance working capital growth and acquisitions.
Other income increased to $1.3 from $1.2 in the 1995 period. This increase
in 1996 was the result of a gain of $395,000 on the sale of real property in
1996 made available by the consolidation of operations in the Puget Sound
market.
Income taxes were provided at estimated annual effective tax rates of 39.5%
and 38.9% for the nine month period ended September 30, 1996 and September
30, 1995, respectively. This increase in the effective tax rate from 1995
was primarily due to book/tax differences in accounting for goodwill in
connection with acquisitions in 1994 and 1995.
As a result of the foregoing factors, net income before an extraordinary
item, increased by $2.8 million, or 44% to $9.2 million, or 1.7% of net sales
in the first nine months of 1996, as compared to $6.4 million, or 1.4% of net
sales, in the first nine months of 1995.
The Company redeemed the 10% unsecured senior subordinated notes with the net
proceeds of the recent equity offering. In connection with this redemption,
the Company wrote off the related deferred loan cost. These write-offs were
<PAGE>
recorded as an extraordinary charge of $342,000, after tax. This charge
reduced net income for the nine months ended September 30, 1996 to $8.9
million or 1.6% of sales.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
In the second quarter of 1996, the Company sold 2,300,000 shares of
previously unissued common stock. The price to the public was $18.00 per
share. The proceeds of this offering, less underwriting and estimated other
issuance costs, was approximately $38.5 million. The proceeds were
temporarily used to reduce the revolving credit agreement balance in the
third quarter of 1996. The Company also retired the $20 million of 10%
unsecured senior subordinated notes.
At September 30, 1996 the Company had $95.4 million of long-term debt
outstanding, consisting of $75.0 million of term borrowings under fixed rate
notes, $18.7 million of variable rate borrowings under the revolving credit
agreement and $1.7 million of fixed rate borrowings under a note.
For the nine months ended September 30 1996, the Company provided $4.7
million of cash from operating activities. Working capital increased from
$100.2 million at December 31, 1995 to $116.3 million at September 30, 1996,
due primarily to the seasonality in the Company's accounts receivable and
inventories.
Based on its ability to generate cash from operations and the available
borrowing capacity at September 30, 1996 of $51.3 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 current anticipated requirements.
<PAGE>
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 operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Statement regarding computation of per share earnings.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
<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.
BMC WEST CORPORATION
Date: November __, 1996 /s/ Donald S. Hendrickson
--------------------------------------
Donald S. Hendrickson
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: November __, 1996 /s/ Ellis C. Goebel
--------------------------------------
Ellis C. Goebel
Vice President and Treasurer
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
BMC WEST CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1996
PAGE
EXHIBIT DESCRIPTION NUMBER
- ------- ----------- ------
11 Computation of Earnings Per Share 17
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
BMC WEST CORPORATION
Computation of Earnings Per Share
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended Nine Months Ended
---------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net income $4,560,000 $3,396,000 $8,840,000 $6,367,000
Class B preferred stock
accretion (8,500) (8,500) (25,500) (25,500)
---------- ---------- ---------- ----------
Adjusted net income $4,551,500 $3,387,500 $8,814,500 $6,341,500
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
outstanding 11,807,613 9,497,482 10,401,785 9,495,885
Net effect of dilutive
stock options based on
the treasury stock
method using average
market price 236,521 262,117 247,912 256,742
---------- ---------- ---------- ----------
Total common shares and
equivalents 12,044,134 9,759,659 10,649,697 9,752,627
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PRIMARY INCOME PER SHARE $ .38 $ .35 $ .83 $ .65
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Adjusted net income $4,551,500 $3,387,500 $8,814,500 $6,341,500
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
outstanding 11,807,613 9,497,482 10,401,785 9,495,885
Net effect of dilutive
stock options based on
the treasury stock
method using the higher
of quarter-end market
price or average market
price 236,522 262,117 247,912 256,742
---------- ---------- ---------- ----------
Total shares and
equivalents 12,044,135 9,759,659 10,649,697 9,752,627
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED EARNINGS
PER SHARE $ .38 $ .35 $ .83 $ .65
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 8,479
<SECURITIES> 0
<RECEIVABLES> 89,675
<ALLOWANCES> 2,510
<INVENTORY> 73,792
<CURRENT-ASSETS> 172,400
<PP&E> 126,685
<DEPRECIATION> 25,612
<TOTAL-ASSETS> 300,791
<CURRENT-LIABILITIES> 56,072
<BONDS> 95,375
985
0
<COMMON> 12
<OTHER-SE> 143,062
<TOTAL-LIABILITY-AND-EQUITY> 300,791
<SALES> 547,076
<TOTAL-REVENUES> 547,076
<CGS> 427,381
<TOTAL-COSTS> 524,874
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,297
<INCOME-PRETAX> 15,175
<INCOME-TAX> 5,993
<INCOME-CONTINUING> 9,182
<DISCONTINUED> 0
<EXTRAORDINARY> (342)
<CHANGES> 0
<NET-INCOME> 8,840
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
