<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 JUNE 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 (IRS Employer Identification No.)
incorporation or organization)
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 August 8, 1996:
Common stock $.001 par value 11,802,626
----------
Index to exhibits at page 16
This is Page 1 of 17 Pages
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BMC WEST CORPORATION
INDEX
-----
Page
Number
------
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Statements of Income for the three months ended
June 30, 1996 and 1995 and the six months ended
June 30, 1996 and 1995 4
Balance Sheets as of June 30, 1996 and December 31, 1995 5
Statements of Cash Flows for the six months ended
June 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
This is Page 2 of 17 Pages
<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.
This is Page 3 of 17 Pages
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BMC WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands Except per Share Data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ---------
Net sales $193,022 $166,167 $340,621 $286,686
Cost of sales 150,772 128,943 265,287 222,225
---------- ---------- ---------- ---------
Gross profit 42,250 37,224 75,334 64,461
Selling, general
and administrative
expense 33,087 30,587 62,713 55,354
Other income, net 244 405 981 721
---------- ---------- ---------- ---------
Income from
operations 9,407 7,042 13,602 9,828
Interest expense 3,011 3,002 5,967 4,961
---------- ---------- ---------- ---------
Income before income
taxes 6,396 4,040 7,635 4,867
Income taxes 2,524 1,573 3,013 1,896
---------- ---------- ---------- ---------
Net income before
extraordinary item $ 3,872 $ 2,467 $ 4,622 $ 2,971
Extraordinary item (342) -- (342) --
---------- ---------- ---------- ---------
Net Income $ 3,530 $ 2,467 $ 4,280 $ 2,971
========== ========== ========== ==========
Net income per
common and common
equivalent share
before extraordinary
charge $ .38 $ .25 $ .46 $ .30
Extraordinary item,
net of tax ($ .03) $ -- ($ .03) $ --
--------- --------- --------- --------
Net income per
Common and Common
Equivalent Shares $ .35 $ .25 $ .43 $ .30
========= ========= ========= ========
Weighted average
number of common
and common
equivalent shares 10,191,541 9,757,423 9,960,980 9,750,654
---------- --------- --------- ---------
---------- --------- --------- ---------
This is Page 4 of 17 Pages
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BMC WEST CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
(Dollars in Thousands)
June 30, December 31,
1996 1995
-------- ------------
CURRENT ASSETS
Cash $ 4,630 $ 6,004
Receivables, net 85,048 65,820
Inventories 74,118 66,506
Deferred income tax benefit 1,668 1,668
Prepaid expenses 1,935 1,275
-------- --------
Total current assets 167,399 141,273
PROPERTY AND EQUIPMENT, net 95,349 96,403
DEFERRED LOAN COSTS 1,716 2,440
GOODWILL, net 18,969 18,421
OTHER 6,683 6,433
-------- --------
Total assets $290,116 $264,970
-------- --------
-------- --------
CURRENT LIABILITIES
Current portion of long-term debt $20,267 $ 129
Current redemption requirement on Class B
preferred stock 1,976 1,000
Accounts payable 38,450 29,383
Accrued expenses 10,591 10,565
-------- --------
Total current liabilities 71,284 41,077
LONG-TERM DEBT, net of current portion 75,000 121,120
DEFERRED INCOME TAXES 3,161 3,161
OTHER LONG-TERM LIABILITIES 1,869 1,725
CLASS B PREFERRED STOCK -- 1,960
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000
shares authorized, 11,797,491 and
9,483,229 shares outstanding at June 30,
1996 and December 31, 1995, respectively
12 9
Additional paid-in-capital 97,795 59,188
Retained earnings 40,995 36,730
-------- --------
TOTAL STOCKHOLDERS' EQUITY 138,802 95,927
-------- --------
Total liabilities, redeemable preferred stock
and stockholders' equity $290,116 $264,970
-------- --------
-------- --------
This is Page 5 of 17 Pages
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BMC WEST CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Six Months Ended
--------------------
June 30, June 30,
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,279 $ 2,971
Adjustments to reconcile net income to cash used
in operating activities:
Depreciation and amortization 5,117 4,297
(Gain) loss on sale of assets (335) (1)
Extraordinary item Net of tax 342 --
Stock Options compensation 106
Changes in working capital items net of effects
of acquisitions (15,940) 1,429
Other (754) (1,261)
-------- --------
Net cash provided from (used in) operating activities (7,291) 7,541
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,878) (9,876)
Payment for acquisitions (3,287) (36,363)
Sale of property and equipment 1,705 123
Purchase of other long-term assets -- (265)
-------- --------
Net cash used in investing activities (5,460) (46,381)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable -- (10,659)
Borrowings under revolving credit agreement 91,560 124,539
Repayments under revolving credit agreement (117,680) (124,140)
Issuance of debt -- 50,000
Redemption of Class B preferred stock (1,000) (1,000)
Financing costs (191) (787)
Capital lease payments (62) (41)
Issuance of Common Stock 38,711 --
Other 39 11
-------- --------
Net cash provided by financing activities 11,377 37,923
-------- --------
NET INCREASE (DECREASE) IN CASH (1,374) (917)
CASH, beginning of period 6,004 5,173
-------- --------
CASH, end of period $ 4,630 $ 4,256
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 6,019 $ 2,799
Income taxes $ -- $ 145
This is Page 6 of 17 Pages
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BMC WEST CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. WORKING CAPITAL CHANGES
Changes in working capital items, net of acquisitions, for the six months ended
June 30, 1996 and 1995 are as follows (in thousands):
1996 1995
------- --------
(Increase)in accounts receivable ($17,495) ($7,413)
(Increase)decrease in inventories (6,881) 3,212
Increase in prepaid expenses (654) (197)
Increase in accounts payable and accrued
expenses 9,142 4,009
Increase (decrease) in interest payable (52) 1,818
------- --------
$15,940 $1,429
======= ========
2. LONG-TERM DEBT
Long-term debt consisted of the following at (in thousands):
June 30, December 31,
1996 1995
------- -----------
Revolving credit agreement borrowings $ 0 $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 20,000
Capital lease obligations 67 129
------- -------
95,067 121,249
Less current portion (20,067) (129)
------- -------
$75,000 $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. The total purchase price
of these facilities was $1,810,000. In the second quarter of 1996, the Company
purchased a truss plant in Utah. The total purchase price for this facility was
$1,477,000.
This is Page 7 of 17 Pages
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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
In the second quarter, the Company obligated itself to
redeem the 10% unsecured senior subordinated notes early in the third quarter of
1996. 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.
This is Page 8 of 17 Pages
<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.
For The Three Months Ended For The Six Month Ended
-------------------------- -----------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 21.9 22.4 22.1 22.5
Selling, general and
administrative expense 17.1 18.4 18.4 19.3
Other income (expense) .1 .2 .3 .3
Income from operations 4.9 4.2 4.0 3.4
Interest expense 1.6 1.8 1.8 1.7
Income taxes 1.3 1.0 .9 .7
Net Income 1.8 1.5 1.3 1.0
SECOND QUARTER OF 1996 COMPARED TO THE SECOND QUARTER OF 1995
Net sales for the three months ended June 30, 1996 were $193.0 million up 16%
from the second quarter of 1995 when sales were $166.2 million. The growth in
net sales resulted from an increase from the second quarter of 1995 in sales at
facilities that operated for at least two months in both the second quarter of
1995 and the second 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 5%, the effect of
which increased sales by approximately $8.4 million. Excluding price inflation,
same-store sales increased 11%.
Gross profit as a percentage of sales declined slightly to 21.9% in the second
quarter of 1996 from 22.4% in the second quarter of 1995, primarily as a result
of a higher percentage of sales to professional contractors (which generally
carry lower margins) in the 1996 period compared to 1995.
This is Page 9 of 17 Pages
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Selling, general and administrative (SG&A) expense, was $33.1 million in the
second quarter of 1996 as compared to $30.6 million in 1995, but decreased as a
percentage of net sales from 18.4% in 1995 to 17.1% in 1996. The Company
believes this reduction was due to improvements in costs associated with
integrating the 14 building materials centers acquired in 1994 and 1995.
Interest expense of $3.0 million in the second quarter of 1996 was flat compared
to the same period of 1995.
Income taxes were provided at estimated annual effective tax rates of 39.5% and
38.9% for the periods ended June 30, 1996 and June 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 extraordinary item
increased by $1,405,000, or 57% to $3,872,000, or 2.0% of net sales in the
second quarter of 1996, as compared to $2,467,000, or 1.5% of net sales, in the
second quarter of 1995.
In the second quarter, the Company obligated itself to redeem, with the net
proceeds of the recent equity offering, the 10% unsecured senior
subordinated notes early in the third quarter of 1996. In connection
with this planned redemption, the Company wrote off the related deferred
loan cost. These write-offs were recorded as an extraordinary charge of
$342,000 in the second quarter. This charge reduced net income to
$3,530,000 or 1.8% of sales.
FIRST SIX MONTHS OF 1996 COMPARED WITH THE FIRST SIX MONTHS OF 1995
Net sales for the six months ended June 30, 1996 were $340.6 million up 19% from
the first half of 1995 when sales were $286.7 million. The growth in net sales
resulted from an increse of 10% in same-store sales, over the first six months
of 1995 and from the acquisition of new building materials centers.
This is Page 10 of 17 Pages
<PAGE>
Sales in the 1996 period were positively affected by higher commodity wood
product prices. The price increase contributed to an overall price inflator
of 1% the effect of which increased sales by approximatley $3.5 million.
Excluding price inflation, same-store sales increased 9%.
Gross profit as a percentage of sales declined slightly to 22.1% in the first
half of 1996 from 22.5% in the first six months of 1995, primarily 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 $62.7 million in the
first six months of 1996 as compared to $55.4 million in 1995, but decreased as
a percentage of net sales from 19.3% in 1995 to 18.4% in 1996. The Company
believes this reduction was due to improvements in costs associated with
integrating the 14 building materials centers acquired in 1994 and 1995.
Interest expense increased to $6.0 million in the first six months of 1996 from
$5.0 million in the same period of 1995, primarily due to additional borrowings
to finance working capital growth and acquisitions.
Other income increased to $981,000 from $721,000 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
39.0% for the six month period ended June 30, 1996 and June 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 $1,651,000, or 55.6% to $4,622,000, or 1.4% of net sales in the
first half of 1996, as compared to $2,971,000, or 1.0% of net sales, in the
first six months of 1995.
This is Page 11 of 17 Pages
<PAGE>
In the second quarter, the Company obligated itself to redeem, with the net
proceeds of the recent equity offering, the 10% unsecured senior
subordinated notes early in the third quarter of 1996. In connection
with this planned redemption, the Company wrote off the related deferred
loan cost. These write-offs were recorded as an extraordinary charge of
$342,000 in the second quarter. This charge reduced net income for the
six months ended June 30, 1996 to $4,280,000 or 1.3% 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 net proceeds of this offering of $38.5 million, less
underwriting and estimated other issuance costs, were temporarily used to reduce
the revolving credit agreement balance to zero. A portion of the revolving
credit agreement balance will be used to retire the $20 million of 10% unsecured
senior subordinated notes which will be retired early in the third quarter of
1996.
At June 30, 1996 the Company had $75 million of long-term debt outstanding,
consisting of $75.0 million of term borrowings under fixed rate notes. In
addition, the Company had $20.0 million of short term debt outstanding. This
primarily represents the 10% unsecured senior subordinated notes.
In the second quarter of 1996, the Company used $7.3 million of cash in
operating activities. Working capital decreased from $100.2 million at December
31, 1995 to $96.1 million at June 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 June 30, 1996 of $70.0 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.
This is Page 12 of 17 Pages
<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
The Company held its annual shareholder meeting on April 30, 1996. A
Total of 9,488,383 shares of common stock were outstanding and
entitled to vote at the meeting. Of the total outstanding, 7,866,684
shares were represented at a meeting and 1,621,699 shares were not
voted.
Shareholders cast votes for the election of the following directors,
whose term expire in 1997:
For Withheld
--- --------
George E. McCown 7,852,569 14,113
Donald S. Hendrickson 7,852,232 14,449
Alec F. Beck 7,843,701 22,981
H. James Brown 7,852,435 14,247
Wilber J. Fix 7,852,407 14,275
Robert V. Hansberger 7,851,692 14,990
Guy O. Mabry 7,852,442 14,240
Robert E. Mellor 7,852,442 14,240
Peter S. O'Neill 7,852,469 14,213
The shareholders also ratified the appointment of Arthur Andersen LLP
as the Company's independent auditors for the year 1996 with votes
cast 7,836,796 for, 8,393 against, 21,492 abstained.
This is Page 13 of 17 Pages
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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.
This is Page 14 of 17 Pages
<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: August __, 1996 /s/ Donald S. Hendrickson
------------------------------------------
Donald S. Hendrickson
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: August __, 1996 /s/ Ellis C. Goebel
------------------------------------------
Ellis C. Goebel
Vice President and Treasurer
(Principal Financial Officer)
This is Page 15 of 17 Pages
<PAGE>
INDEX TO EXHIBITS
BMC WEST CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1996
Page
Exhibit Description Number
- ------- ----------- ------
11 Computation of Earnings Per Share 14
27 Financial Data Schedule
This is Page 16 of 17 Pages
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EXHIBIT 11
BMC WEST CORPORATION
Computation of Earnings Per Share
<TABLE>
<CAPTION>
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended Six Months Ended
------------------------ -------------------------
June 30, June 30, June 30, June 30
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $3,530,000 $2,467,000 $4,280,000 $2,971,000
Class B preferred stock
accretion (8,500) (8,500) (17,000) (17,000)
---------- ---------- ---------- ----------
Adjusted net income $3,521,500 $2,458,500 $4,263,000 $2,954,000
========== ========== ========== ==========
Weighted average shares
outstanding 9,914,685 9,496,056 9,700,702 9,494,972
Net effect of dilutive
stock options based on
the treasury stock
method using average
market price 276,859 261,367 260,282 255,682
---------- ---------- ---------- ----------
Total common shares and
equivalents 10,191,544 9,757,423 9,960,984 9,750,654
========== ========== ========== ==========
PRIMARY INCOME PER SHARE $ .35 $ .25 $ .43 $ .30
========== ========== ========== ==========
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Adjusted net income $3,521,500 $2,458,500 $4,263,000 $2,954,000
========== ========== ========== ==========
Weighted average shares
outstanding 9,914,685 9,496,056 9,700,702 9,494,972
Net effect of dilutive
stock options based on
the treasury stock method
using the higher of
quarter-end market price
or average market price 276,859 262,362 270,522 259,906
---------- ---------- ---------- ----------
Total shares and
equivalents 10,191,544 9,758,418 9,971,224 9,754,878
========== ========== ========== ==========
FULLY DILUTED EARNINGS PER
SHARE $ .35 $ .25 $ .43 $ .30
========== ========== ========== ==========
</TABLE>
This is Page 17 of 17 Pages
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 4,630
<SECURITIES> 0
<RECEIVABLES> 87,135
<ALLOWANCES> 2,087
<INVENTORY> 74,118
<CURRENT-ASSETS> 167,399
<PP&E> 95,349
<DEPRECIATION> 22,292
<TOTAL-ASSETS> 290,116
<CURRENT-LIABILITIES> 70,308
<BONDS> 75,000
976
0
<COMMON> 12
<OTHER-SE> 138,790
<TOTAL-LIABILITY-AND-EQUITY> 290,116
<SALES> 340,621
<TOTAL-REVENUES> 340,621
<CGS> 265,287
<TOTAL-COSTS> 328,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,967
<INCOME-PRETAX> 7,635
<INCOME-TAX> 3,013
<INCOME-CONTINUING> 4,622
<DISCONTINUED> 0
<EXTRAORDINARY> (342)
<CHANGES> 0
<NET-INCOME> 4,280
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
