<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(X) Annual report under Section 13 or 15 (d) of the Securities Exchange Act of
1934. For the fiscal year period ended December 31, 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
Incorporated in the State of Delaware I.R.S. Employer Number 94-3050454
BMC WEST CORPORATION
1475 Tyrell Lane, Boise, Idaho 83706
Telephone: (208) 331-4410
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
------------------------------
Title of class
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.
Yes X No
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. X
----------
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of the close of business on
March 17, 1997 was $115,793,700.*
* Excludes 2,557,917 shares of Common Stock held by directors, officers, and
holders of more than 5% of the Company's shares outstanding at March 17,
1997. Exclusion of shares held by any person should not be construed to
indicate that such person possesses the power, direct or indirect, to
direct or cause the direction of the management or policies of the
Registrant, or that such person is controlled by or under common control
with the Registrant.
Shares Outstanding
Class as of March 17, 1997
----- --------------------
Common Stock
$.001 par value 11,821,413
Documents Incorporated by reference
------------------------------------
Listed hereunder are the documents any portions of which are incorporated by
reference and the Parts of this Form 10-K/A into which such portions are
incorporated:
1. The registrant's annual report for the fiscal year ended December 31, 1996,
portions of which are incorporated by reference into Parts II and IV of
this Form 10-K/A, and
2. The registrant's definitive proxy statement dated March 28, 1997, for use
in connection with the annual meeting of shareholders to be held on May 13,
1997, portions of which are incorporated by reference into Part III of this
Form 10-K/A.
<PAGE>
BMC WEST CORPORATION
FORM 10-K/A
AMENDMENT NO. 1
BMC West Corporation (the "Corporation") hereby amends its Annual Report on
Form 10-K for the year ended December 31, 1996 (the "Form 10-K"), previously
filed with the Securities and Exchange Commission on March 31, 1997. The sole
purpose of the amendment is to correct a reference to the Corporation contained
in the footnotes to the audited financial statements of the Corporation for the
year ended December 31, 1996, which reference incorrectly identified the name of
the Corporation. Such financial statements and accompanying footnotes were
incorporated by reference into and filed with the Form 10-K and the corrected
financial statements and accompanying footnotes filed herewith are incorporated
by reference into and filed with this Form 10-K/A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boise,
County of Ada, State of Idaho, on the 2nd day of April, 1997.
BMC WEST CORPORATION
By /s/ Ellis C. Goebel
---------------
Ellis C. Goebel
Vice President & Treasurer
Pursuant to the requirement of the Securities Act of 1934, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
(i) Principal Executive Officer: (iv) Directors:
/s/ Donald S. Hendrickson* /s/ George E. McCown*
- -------------------------- ----------------------
Donald S. Hendrickson George E. McCown
President, Chief Executive Chairman of the Board
Officer and Director of Directors
March 17, 1997 March 17, 1997
(ii) Principal Financial Officer: /s/ Donald S. Hendrickson*
--------------------------
Donald S. Hendrickson
March 17, 1997
/s/ Ellis C. Goebel
- -------------------
Ellis C. Goebel /s/ Alec F. Beck*
Vice President and Treasurer -----------------
March 17, 1997 Alec F. Beck
March 17, 1997
/s/ H. James Brown*
-------------------
(iii) Principal Accounting Officer: H. James Brown
March 17, 1997
/s/ Wilbur J. Fix*
------------------
/s/ Robert L. Becci* Wilbur J. Fix
- --------------------- March 17, 1997
Robert L. Becci
Vice President & Controller /s/ Robert V. Hansberger*
March 17, 1997 -------------------------
Robert V. Hansberger
March 17, 1997
<PAGE>
/s/ Guy O. Mabry*
-----------------
Guy O. Mabry
March 17, 1997
/s/ Robert E. Mellor*
---------------------
Robert E. Mellor
March 17, 1997
/s/ Peter S. O'Neill*
---------------------
Peter S. O'Neill
March 17, 1997
*By /s/ Ellis C. Goebel
-------------------
Ellis C. Goebel
Attorney-in-Fact
<PAGE>
BMC WEST CORPORATION
17
FINANCIAL CONTENTS
FINANCIAL REVIEW 18
STATEMENTS OF INCOME 20
BALANCE SHEETS 21
STATEMENTS OF STOCKHOLDERS' EQUITY 22
STATEMENTS OF CASH FLOWS 23
NOTES TO THE FINANCIAL STATEMENTS 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 30
<PAGE>
BMC WEST CORPORATION
18
FINANCIAL REVIEW
This financial review covers management's discussion and analysis of financial
condition and operating results. The building materials industry historically
has been subject to substantial cyclical variation. The Company's operations
have reflected fluctuations from period to period as a consequence of various
factors, including general economic conditions, prices of commodity wood
products, levels of building activity, interest rates, the availability of
credit, and weather conditions.
OPERATING RESULTS
The following table sets forth for the years ended December 31, 1996, 1995 and
1994, 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 in this
annual report.
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Gross profit 22.1 21.9 21.8
Selling, general and
administrative expense 18.3 18.5 16.7
Other income 0.2 0.3 0.3
Income from operations 4.0 3.7 5.4
Interest expense 1.5 1.7 1.2
Income taxes 1.0 0.8 1.6
Net income 1.5 1.2 2.6
- --------------------------------------------------------------------------------
1996 OPERATIONS COMPARED WITH 1995
Net sales for 1996 were $718.0 million, an increase of 14% or $87.8 million
from 1995. Increases in new home construction, as well as higher commodity wood
product prices, contributed to a increase of 13.7% for same-store sales. The
strongest year-over-year sales results were from units in Texas, Utah and
Colorado, with Texas reporting 31% higher same-store sales. On an overall basis,
sales prices for the Company's products increased about 3% for the year. This
price increase was primarily due to higher prices for commodity wood products.
Gross profit increased to 22.1% of net sales in 1996 from 21.9% in 1995. This
increase reflects favorable inventory shrinkage results and the ongoing efforts
of the Company to improve margins through its increased focus on value-added
products, such as roof trusses, pre-hung doors, pre-assembled windows, and
increased sales to the service-oriented consumer, all of which traditionally
have higher margins.
During 1996, selling, general and administrative expenses, as a percentage of
net sales, decreased to 18.3% in 1996 from 18.5% in 1995. This decrease was due
in part to favorable same-store sales increases and costs reductions associated
with integrating the 14 building materials centers acquired in 1994 and 1995.
Interest expense decreased to $10.5 million in 1996 from $10.7 million in
1995. The decrease was due to a reduction in the Company's outstanding debt with
the proceeds of the common stock offering in the second quarter of 1996.
The provision for income taxes increased 40.8% to $6.9 million in 1996 from
$4.9 million in 1995. The effective income tax rate was 38.7%. The increase in
the provision for income taxes was a result of increased income from
operations.
As a result of the foregoing factors, net income before an extraordinary item
in 1996 increased by $3.2 million or 42% to $11.0 million, or 1.5% of net sales,
as compared to $7.8 million, or 1.2% of net sales, in the prior year.
The Company retired all $20 million of the 10% unsecured senior subordinated
notes and reduced debt outstanding under the revolving credit agreement with the
net proceeds of the recent equity offering. In connection with this retirement,
the Company took a non-cash after-tax extraordinary charge of $342,000 or $.03
per share to write off the related deferred loan costs and unamortized debt
discount.
1995 OPERATIONS COMPARED WITH 1994
Net sales for 1995 were $630.2 million, an increase of 15% or $83.1 million
from 1994. The sales increase reflects $71.1 million attributable to 1995
acquisitions and $52.6 million for a full year of sales for acquisitions made in
1994. Decline in new home construction, as well as lower commodity wood product
prices, contributed to a decrease of $40.6 million, or nearly 8% for same-store
sales. (Excluding price deflation, same-store sales were down 1%). On an overall
basis, sales prices for the Company's products declined about 7%, causing a
reduction in sales of approximately $47.4 million. This decrease was due
primarily to lower prices for commodity wood products, which were approximately
14% lower in 1995 than in 1994.
Gross profit increased to 21.9% of net sales in 1995 from 21.8 % in 1994. This
slight increase reflects the ongoing efforts of the Company to improve margins
through its training programs as well as its increased focus on value-added
products, such as roof trusses, pre-hung doors, pre-assembled windows, and
increased sales to the service-oriented consumer, all of which generally have
higher margins.
During 1995, selling, general and administrative expenses, as a percentage of
net sales, increased to 18.5% in 1995 from 16.7% in 1994. This increase was
attributable primarily to costs incurred integrating locations acquired in 1994
and 1995. These costs included, but were not limited to, the conversion of
computerized point-of-sale systems, marketing and sales programs, employee
training and upgrading of equipment and facilities to improve operational
efficiencies.
In March 1995, the Company issued $50.0 million of 9.18% unsecured senior
notes. The proceeds from these notes were used to support the Company's capital
expenditure and acquisition activities and increased working capital levels.
Primarily due to the issuance of these notes, interest expense increased to
$10.7 million in 1995 from $6.5 million in 1994.
Income taxes were provided at an annual effective tax rate
<PAGE>
19
of 38.7% in 1995 and 38.0% in 1994, respectively. The increase in the
effective tax rate was the result of the income tax impact of acquisitions in
1993 and 1994.
As a result of the foregoing factors, net income in 1995 decreased by $6.5
million or 45.5% to $7.8 million, or 1.2% of net sales, as compared to $14.3
million, or 2.6% of net sales, in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital resources are for acquisitions and
capital expenditures as well as to finance its working capital which has been
increasing as the Company has grown in recent years. In 1996 and recent years,
the Company's capital sources have grown through earnings growth, increased
borrowing capacity and new equity offerings.
The Company had $90.2 million of long-term debt outstanding as of December 31,
1996 consisting principally of $14.1 million of variable rate borrowings under
its revolver and $76.1 million of fixed rate borrowings under various credit
facilities. More details with respect to these borrowings are discussed in Note
3 to the financial statements.
OPERATIONS
The Company generated $16.9 million of cash from operating activities
comprised primarily of net income plus depreciation and amortization charges.
Working capital at year-end 1996 was $110.5 million compared with $100.2 million
at the 1995 year-end. This increase in working capital was driven by increases
in receivables and inventories as a result of four acquisitions in 1996.
CAPITAL INVESTMENT AND ACQUISITIONS
Capital expenditures, exclusive of acquisitions, totaled $14.4 million in
1996. The principal property and equipment expenditures in 1996 included the
completion of the purchase of land at the Issaquah and Lewiston centers,
expansion and replacement of rolling stock and enhancements in the management
information systems.
Cash used for business acquisitions totaled $8.4 million in 1996, as the
Company completed four acquisitions in 1996 involving one building materials
center and three value-added facilities. In 1995, the Company used $36.4 million
in cash to complete two acquisitions involving four building materials centers.
FINANCING
In the second quarter of 1996, the Company sold 2,300,000 shares of common
stock. The proceeds of this offering, less underwriting and other issuance
costs, was approximately $38.5 million. The proceeds were used to retire the
$20 million of 10% unsecured senior subordinated notes and reduce debt
outstanding under the revolving credit agreement.
The borrowings under the revolver decreased to $14.1 million at year-end from
$26.1 million at year-end 1995 primarily due to proceeds of the stock offering.
The various agreements related to long-term borrowings contain financial
covenants and restrictions. These covenants require the Company to maintain
minimum financial measures as well as limiting additional debt, stock
repurchases, dividend payments, capital asset additions, liens on assets and
business combinations. These covenants and restrictions have not materially
hampered the Company's operations. At December 31, 1996, these agreements limit
the amount of dividends payable from retained earnings to $42.1 million of which
$2.7 million may be paid in fiscal year 1996.
Based on its ability to generate cash from operations and the borrowing
capacity at year-end of $70 million under the revolver, the Company believes it
will have sufficient funds to meet its currently anticipated requirements.
QUARTERLY RESULTS AND SEASONALITY
The Company's first and fourth quarters historically are adversely affected by
weather patterns in the Company's markets which result in decreases in levels of
building and construction activity. In addition, quarterly results do reflect,
and are expected in the future to reflect, fluctuation from period to period as
a consequence of the impact of various other factors, including general economic
conditions, consumer confidence, levels of building activity, interest rates and
the availability of credit.
The composition and level of working capital has typically changed with the
level of sales, with the Company requiring additional working capital during
periods of rapidly increasing sales as the Company carries more inventories and
receivables. Working capital levels (receivables and inventories) typically
increase in the second and third quarter of the year due to higher sales during
the peak building and construction season. These increases have historically
resulted in negative operating cash flows during this peak season, which have
been generally financed through the revolver. Collection of receivables and
reduction in inventory levels following the peak of the building and
construction season have more than offset this negative cash flow in recent
years. The Company believes it will continue to generate positive annual cash
flows from operating activities.
<PAGE>
BMC WEST CORPORATION
20
STATEMENTS OF INCOME
(FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 718,024 $ 630,201 $ 547,109
Cost of sales 559,408 492,028 427,951
- ------------------------------------------------------------------------------------------------------
Gross profit 158,616 138,173 119,158
Selling, general and administrative expense 131,462 116,353 91,203
Other income 1,268 1,601 1,529
- ---------------------------------------------------------------------------------------------------------
Income from operations 28,422 23,421 29,484
Interest expense 10,496 10,746 6,486
- ---------------------------------------------------------------------------------------------------------
Income before income taxes 17,926 12,675 22,998
Income taxes 6,935 4,910 8,739
- ---------------------------------------------------------------------------------------------------------
Income before extraordinary item 10,991 7,765 14,259
Extraordinary item, net of tax (342) - -
- ---------------------------------------------------------------------------------------------------------
Net income $ 10,649 $ 7,765 $ 14,259
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Net income per common and common equivalent share
Income before extraordinary item $ 1.00 $ .79 $ 1.62
Extraordinary item, net of tax (.03) - -
- ---------------------------------------------------------------------------------------------------------
Net income per common and common equivalent share $ .97 $ .79 $ 1.62
- ---------------------------------------------------------------------------------------------------------
Weighted average number of common and common 10,998,135 9,751,547 8,798,374
equivalent shares
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
BMC WEST CORPORATION
BALANCE SHEETS
21
<TABLE>
<CAPTION>
(AT DECEMBER 31)
- ------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 7,066 $ 6,004
Receivables, net 70,184 65,820
Inventories 76,415 66,506
Deferred income tax benefit 1,743 1,668
Prepaid expenses 1,874 1,275
- ------------------------------------------------------------------------------------------------------
Total current assets 157,282 141,273
Property and equipment, net 103,921 96,403
Deferred loan costs 1,438 2,440
Goodwill, net 19,679 18,421
Other 6,049 6,433
- ------------------------------------------------------------------------------------------------------
Total assets $ 288,369 $ 264,970
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------
Current liabilities
Current portion of long-term debt $ 568 $ 129
Current redemption requirement on Class B preferred stock 1,994 1,000
Accounts payable 33,954 29,383
Accrued compensation expense 3,908 4,205
Sales tax payable 2,589 2,657
Other accrued expenses 3,802 3,703
- ------------------------------------------------------------------------------------------------------
Total current liabilities 46,815 41,077
Long-term debt, net of current portion 90,203 121,120
Deferred income taxes 4,368 3,161
Other long-term liabilities 1,895 1,725
Class B preferred stock, mandatory redemption requirements
of $1,000,000 in 1996 and $2,000,000 in 1997 - 1,960
Stockholders' equity
Common stock, $.001 par value, 20,000,000 shares authorized;
11,825,106 and 9,483,229 shares outstanding at
December 31, 1996 and 1995, respectively 12 9
Additional paid-in capital 97,731 59,188
Retained earnings 47,345 36,730
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 145,088 95,927
- ------------------------------------------------------------------------------------------------------
Total liabilities, redeemable preferred stock and stockholders' equity $ 288,369 $ 264,970
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BMC WEST CORPORATION
22
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994)
- --------------------------------------------------------------------------------------------------------
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------
Common Stock Additional
--------------------- Paid-In Retained
Shares Amount Capital Earnings Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 28, 1993 7,848 $ 8 $ 34,728 $ 14,774 $ 49,510
Net income - - - 14,259 14,259
Accretion of redeemable preferred stock - - - (34) (34)
Accrual of stock option compensation - - 216 - 216
Stock issued for acquisitions 1,242 - 22,955 - 22,955
Stock options exercised 22 1 95 - 96
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 9,112 9 57,994 28,999 87,002
Net income - - - 7,765 7,765
Accretion of redeemable preferred stock - - - (34) (34)
Accrual of stock option compensation - - 213 - 213
Stock issued for acquisitions 365 - 938 - 938
Stock options exercised 6 - 43 - 43
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 9,483 9 59,188 36,730 95,927
NET INCOME - - - 10,649 10,649
ACCRETION OF REDEEMABLE PREFERRED STOCK - - - (34) (34)
NET PROCEEDS FROM PUBLIC STOCK OFFERING 2,300 2 38,486 - 38,488
STOCK OPTIONS EXERCISED AND OTHER 42 1 57 - 58
- --------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 11,825 $ 12 $ 97,731 $ 47,345 $ 145,088
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BMC WEST CORPORATION
23
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994)
- ------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 10,649 $ 7,765 $ 14,259
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 10,300 9,192 5,551
Deferred income taxes (75) (361) 135
Gain on sale of assets (449) (40) (133)
Stock option compensation 68 213 216
Provision for other long-term liabilities 313 398 332
Extraordinary item, net of tax 342 - -
Changes in working capital items net of effects
of acquisitions and divestitures (3,312) 5,099 (766)
Other (912) (1,007) (1,636)
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,924 21,259 17,958
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------
Purchase of property and equipment (14,424) (16,856) (15,072)
Payment for acquisitions (8,426) (36,363) (21,515)
Sale of property and equipment 1,822 400 285
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,028) (52,819) (36,302)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------------------------------
Borrowings under revolving credit agreements 222,810 223,360 186,144
Repayments under revolving credit agreements (234,850) (228,470) (162,874)
Issuance of common stock, net of expense 38,486 - -
Repayment of 10% unsecured senior subordinated notes (20,000) - -
Issuance of debt 1,685 50,000 -
Principal payments on debt (2,712) (11,665) (1,081)
Financing costs (190) (795) (208)
Capital lease payments (123) (83) (136)
Other 60 44 95
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,166 32,391 21,940
- ------------------------------------------------------------------------------------------------------
Net increase in cash 1,062 831 3,596
Cash, beginning of period 6,004 5,173 1,577
- ------------------------------------------------------------------------------------------------------
Cash, end of period $ 7,066 $ 6,004 $ 5,173
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
- ------------------------------------------------------------------------------------------------------
Cash paid during the year for--
Interest, net of interest capitalized $ 10,444 $ 9,238 $ 6,358
Income taxes 8,070 3,224 10,659
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BMC WEST CORPORATION
24
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
BMC West Corporation is a regional distributor and retailer of building
materials in the Western United States, selling primarily to professional
contractors, as well as to advanced, service-oriented consumers. The Company
also conducts value-added conversion activities which include pre-hung doors,
fabricated roof trusses, pre-assembled windows and pre-cut lumber to meet
customer specifications. The Company has 53 building materials centers located
in Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Texas,
Utah, and Washington.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.
NET INCOME PER COMMON SHARE
Net income per common share is determined by dividing net income, after
deducting the accretion of the discount on redeemable preferred stock, by the
weighted average of common and common equivalent shares. The weighted average
number of common and common equivalent shares include shares issued, shares
issuable under dilutive stock options and shares contingently issuable in
connection with acquisitions. At December 31, 1996, there were no contingently
issuable shares.
Fully diluted net income per share is not presented as the dilution was not
dilutive in 1996 and 1994 and not significant in 1995.
INCOME TAXES
Deferred income taxes are provided to reflect temporary differences between
the financial and tax bases of assets and liabilities using presently enacted
tax rates and laws.
EXTRAORDINARY ITEM
In 1996, the Company repaid $20 million of 10% unsecured senior subordinated
notes prior to maturity. In connection with this early debt retirement, the
Company wrote off $565,000 of related deferred loan costs and unamortized debt
discount. These write-offs are included in 1996 consolidated statement of income
as an extraordinary item, net of $223,000 tax benefit.
INVENTORIES
Inventories consist principally of merchandise purchased for resale and are
stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and improvements
are capitalized while maintenance and repairs which do not increase the useful
life of the property are expensed as incurred.
The net book value of property sold or retired is removed from the asset and
related depreciation accounts, and the net gain or loss is included in the
determination of income or loss.
The provision for depreciation is computed using the straight-line method. The
estimated useful lives are fifteen to thirty years for buildings and
improvements, seven to ten years for machinery and fixtures and three to seven
years for handling and delivery equipment.
DEFERRED LOAN COSTS
Loan costs are capitalized upon the issuance of long-term debt and amortized
over the life of the related debt using the effective interest rate method.
Interest expense includes amortization of deferred loan costs of $628,000 in
1996, $602,000 in 1995 and $530,000 in 1994.
GOODWILL
Goodwill is amortized on a straight-line basis over 30 years. Accumulated
amortization of goodwill is $1,605,000 at December 31, 1996, and $941,000 at
December 31, 1995.
Annually, the Company reviews the recoverability of goodwill. The measurement
of possible impairment is based primarily on the ability to recover the balance
of the goodwill from expected future operating cash flows on an undiscounted
basis. In management's opinion, no such impairment existed at December 31, 1996.
OTHER ASSETS
The majority of other assets consist of non-compete covenants arising from
acquisitions and investments in cooperative supplier organizations. The
non-compete covenants are amortized over the life of related agreements (three
to five years).
CASH AND CASH EQUIVALENTS
For purpose of the statement of cash flows, the Company considers all highly
liquid debt instruments that had a maturity of three months or less at the date
of purchase to be cash equivalents.
<PAGE>
25
2. ACQUISITIONS
Businesses acquired in 1996, 1995 and 1994 were accounted for using the
purchase method of accounting. Under this accounting method, the value of the
consideration was allocated to the assets acquired and liabilities assumed based
on the estimated fair values at date of acquisition. Any excess of the purchase
price over the estimated fair value of the net assets acquired and liabilities
assumed was recorded as goodwill. Operating results of the acquired businesses
are included in the statements of income from date of acquisition.
In 1996, the Company completed four acquisitions involving one building
materials center and three value-added facilities. These operations are located
in Ogden and Orem, Utah; and Austin and San Antonio, Texas. The aggregate
purchase price was $10,138,000 consisting of $8,426,000 cash and the assumption
of notes payable of $1,712,000. The notes payable were paid by the Company prior
to December 31, 1996.
In 1995, the Company completed two acquisitions involving four building
materials centers. These centers are located in Abilene, New Braunfels, and two
in Austin, Texas. The aggregate purchase price for these centers was $36,363,000
consisting entirely of cash.
In 1994, the Company completed eight acquisitions involving ten building
materials centers. These centers are located in Killeen and Hurst, Texas;
Vancouver, Washington; Phoenix, Arizona; Grand Junction, Denver, Greeley, Pueblo
and, Colorado Springs, Colorado; and Kent, Washington. The aggregate purchase
price for these centers was $55,135,000, consisting of $21,515,000 cash,
1,242,133 shares of the Company's common stock valued at $22,955,000 and notes
payable of $10,665,000 and the assumption of certain liabilities. The common
stock issued in connection with certain acquisitions was guaranteed by the
Company to retain a value of between $20 and $25.25 per share by specified
dates. In 1996 and 1995, shares issued in connection with prior year
acquisitions totaled 17,594 and 364,975, respectively.
The following summarized unaudited pro forma results of operations assume the
acquisitions occurred as of the beginning of their respective acquisition year
and the immediately proceeding year. The pro forma data has been prepared for
comparative purposes only. It does not purport to be indicative of the results
of operations that would have resulted had the acquisitions been consummated at
the beginning of the years presented, or that may occur in the future.
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Net sales $ 730,273 $ 683,416
Net income 10,996 8,463
Per share 1.00 0.87
- --------------------------------------------------------------------------------
3. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, (in thousands):
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Revolving credit
agreement borrowings $ 14,080 $ 26,120
8.10% unsecured senior notes 25,000 25,000
9.18% unsecured senior notes 50,000 50,000
10% unsecured senior
subordinated notes - 20,000
Capital lease obligations and other 1,691 129
- --------------------------------------------------------------------------------
90,771 121,249
Less current portion 568 129
- --------------------------------------------------------------------------------
$ 90,203 $121,120
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In 1996, the Company redeemed the 10% unsecured senior subordinated notes with
the net proceeds of the Company's equity offering.
The Company's borrowing capacity under the revolving credit agreement is
$70,000,000, limited by eligible receivables and inventories. The agreement's
expiration date is 2000. Interest is due monthly at prime or LIBOR plus 1.25% -
1.50%. A fee of .25% - .375% per annum is charged on the unused portion of the
loan commitment. At year-end, the Company had $55,920,000 of unborrowed capacity
under this agreement.
The 8.10% unsecured senior notes issued in 1993 require annual principal
payments beginning in 1998 through 2000. The notes may be redeemed, in whole or
in part, at the option of the Company, at anytime at the principal amount plus
accrued interest and a make-whole payment. The make-whole payment is due only if
the interest rate (as measured by agreement with the creditor) at the date of
redemption is less than 8.10%. Interest is payable semi-annually on April 30 and
October 31. In connection with the extension of the revolving credit agreement,
the collateral for the 8.10% senior notes was eliminated in March 1995.
<PAGE>
26
The 9.18% unsecured senior notes issued in 1995 are due in 2006. The notes
require annual principal payments beginning in 2001 through 2006. The notes may
be redeemed, in whole or in part, at the option of the Company at anytime, at
the principal amount plus accrued interest and a make-whole payment. The
make-whole payment is due only if the interest rate (as measured by agreement
with the creditor) at the date of redemption is less than 9.18%. Interest is
payable semi-annually on April 30 and October 31.
The scheduled principal payments of long-term debt are $568,000 in 1997,
$22,975,000 in 1998, $8,895,000 in 1999, $8,333,000 in 2000, $8,333,000 in 2001
and $41,667,000 thereafter.
The agreements related to the above borrowings contain financial covenants and
restrictions which require the Company to maintain a minimum net worth, debt-
service coverage, debt-to-equity ratio and current ratio, as well as limiting
additional debt, stock repurchases, dividend payments, capital asset additions
and retirements, liens on assets, stock ownership changes and business
combinations. Currently, $42,087,000 of retained earnings is available for the
payment of common dividends under these agreements of which a maximum of
$2,662,000 may be paid in 1997.
4. CLASS B PREFERRED STOCK
In 1987, the Company authorized and issued 50,000 shares of Class B preferred
stock with a total mandatory redemption requirement of $5,000,000, due
$1,000,000 annually through 1996 and $2,000,000 in 1997. As of December 31,
1996, 20,000 shares of Class B preferred stock remain outstanding.
Class B preferred stock has a preference in liquidation of $100 per share,
$2,000,000 in the aggregate at December 31, 1996. The difference between the
carrying value of the preferred stock and its redemption value is being added to
the preferred stock account ratably to 1997 through a charge to retained
earnings.
5. INCOME TAXES
Income taxes for the years ended December 31, 1996, 1995 and 1994 consisted of
the following (in thousands):
- -------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------
Current
Federal $ 5,611 $ 4,648 $ 7,710
State 837 727 1,156
- -------------------------------------------------------
6,448 5,375 8,866
- -------------------------------------------------------
Deferred
Federal 423 (404) (110)
State 64 (61) (17)
- -------------------------------------------------------
487 (465) (127)
- -------------------------------------------------------
$ 6,935 $ 4,910 $ 8,739
- -------------------------------------------------------
- -------------------------------------------------------
A reconciliation of the statutory Federal income tax rate to the rate provided
in the statements of income follows:
------------------------------------------------------
1996 1995 1994
------------------------------------------------------
Statutory rate 35.0% 35.0% 35.0%
State income taxes 3.3 3.3 3.3
Other .4 .4 (.3)
------------------------------------------------------
38.7% 38.7% 38.0%
------------------------------------------------------
------------------------------------------------------
The components of deferred income taxes included in the Company's year-end
balance sheets were as follows (expressed in thousands):
- --------------------------------------------------------------
1996 1995
- --------------------------------------------------------------
Deferred tax assets
Property and equipment $ 30 $ 877
Inventories 1,734 1,392
Reserves 1,175 1,099
Other 2,086 716
- --------------------------------------------------------------
Total deferred tax assets 5,025 4,084
Less valuation allowance (563) (877)
- --------------------------------------------------------------
4,462 3,207
- --------------------------------------------------------------
Deferred tax liabilities
Property and equipment 6,062 4,105
Deferred charges 1,025 595
- --------------------------------------------------------------
Total deferred tax liabilities 7,087 4,700
- --------------------------------------------------------------
$(2,625) $(1,493)
- --------------------------------------------------------------
- --------------------------------------------------------------
Classified as
Deferred income tax benefit
(current assets) $ 1,743 $ 1,668
Deferred income taxes
(long-term liabilities) (4,368) (3,161)
- --------------------------------------------------------------
$(2,625) $(1,493)
- --------------------------------------------------------------
- --------------------------------------------------------------
<PAGE>
27
The valuation allowance relates to the difference in tax and book basis of the
land acquired in conjunction with the initial acquisition of the Company.
6. STOCKHOLDERS' EQUITY
PUBLIC STOCK OFFERING
In the second quarter of 1996, the Company issued 2,300,000 shares of common
stock at $18.00 per share. The proceeds from this offering, less underwriting
and other issuance costs, of $38.5 million were used principally to reduce debt.
STOCK SPLIT
In February 1994, the Company declared a three-for-two stock split, effected
in the form of a stock dividend, paid March 4, 1994 to shareholders of record as
of February 25, 1994. All per share amounts and weighted average number of
common and common equivalent shares presented in this report reflect the effect
of the stock split. The stock split has been reflected as a 1993 transaction in
the statement of stockholders' equity.
SHAREHOLDERS' RIGHTS PLAN
Under the shareholder rights plan adopted in July 1993, holders of common
stock received a distribution of one right to purchase common stock for each
common share held. The rights will generally become exercisable ten days after a
person or group acquires 15% of the Company's outstanding voting securities or
ten business days after a person or group commences or announces an intention to
commence a tender or exchange offer that could result in the acquisition of 15%
of these securities. Ten days after a person acquires 15% or more of the
Company's outstanding voting securities (unless this time period is extended by
the board of directors) each right would, subject to certain adjustments and
alternatives, entitle the rightholder to purchase common stock of the Company or
the acquiring company having a market value of twice the $33.33 exercise price
of the right (except that the acquiring person or group and other related
holders would not be able to purchase common stock of the company on these
terms). The rights are nonvoting, expire in 2003 and may be redeemed by the
Company at a price of two-thirds of a cent per right at any time prior to the
tenth day after an individual or group acquired 15% of the Company's voting
stock, unless extended. Additional details are set forth in the Rights Plan
filed with the Securities and Exchange Commission on August 3, 1993.
STOCK OPTION PLAN
The Company has four stock option plans, the 1991 Senior Shareholders
Management and Field Management Plan, and 1992 Non-Qualified Stock Option Plan,
the 1993 Employee Stock Option Plan and the 1993 Non-Employee Stock Option Plan
(the Stock Option Plans). A total of 990,000 shares of common stock have been
reserved for potential grants under the Stock Option Plans. The Company accounts
for these plans under APB Opinion No. 25. Under this opinion, the only
compensation cost recognized is for options granted at an exercise price below
the options fair market value on the date the option is granted.
Had compensation cost for these plans been determined consistent with SFAS
Statement No. 123, the Company's pro forma 1996 net income would have been
reduced by $204,000 and pro forma earnings per share would have been reduced by
$.02. The 1995 pro forma impact was not material to the Company's net income.
Because SFAS Statement No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The 1991 Senior Shareholders Management and Field Management Plan provides for
the granting of options to purchase shares of the Company's common stock at
exercise prices below fair market value. The difference is being recognized
ratably over the vesting period as compensation expense and was $68,000 in 1996,
$213,000 in 1995 and $216,000 in 1994. At December 31, 1996, options to purchase
222,887 remain outstanding that were granted at less than fair market value.
The 1992 Non-Qualified Stock Option Plan and the 1993 Employee Stock Option
Plan provides for the granting of options, at the discretion of the Board of
Directors, to purchase shares of the Company's common stock. The exercise price
is equal to the fair market value of the Company's common stock on the date the
options were granted. Options vest over five years and expire at the end of ten
years if unexercised.
The 1993 Non-Employee Stock Option Plan is available only to nonemployee
directors. Options granted under this plan are equal to the fair market value of
the Company's common stock on the date the options were granted. The options are
exercisable one year following the date of grant and expire at the end of ten
years if unexercised.
<PAGE>
28
A summary of the status of the Stock Option Plans at December 31, 1996, 1995
and 1994, and changes during the years then ended is presented in the table and
narrative below (shares expressed in thousands):
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares
- --------------------------------------------------------------------------------
Balance at
beginning of year 542,286 $ 8.96 472,482 $ 8.49 427,241
Options granted 94,055 19.39 79,385 14.12 88,415
Options exercised (24,283) 2.44 (5,837) 4.14 (21,410)
Options forfeited (8,998) 15.27 (3,744) 13.21 (21,764)
- --------------------------------------------------------------------------------
603,060 $10.76 542,286 $ 8.96 472,482
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exerciseable at
end of the year 455,437 $8.58 403,160 $7.35 283,635
Weighted average
fair value of
options granted $9.49 $7.30 N/A
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------------------------------------------
Number Number
Outstanding Wtd. Avg. Exercisable
Range Of At Remaining Wtd. At Wtd.
Exercise Dec. 31, Contractural Avg. Dec. 31, Avg.
Prices 1996 Life Ex. Price 1996 Ex. Price
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.21 to $5.67 286,021 4.5 Yrs. $ 2.95 282,421 $ 2.97
$8.67 to $17.00 192,309 7.0 14.94 128,702 14.88
$19.50 to $29.75 124,730 8.3 22.21 44,314 26.24
- ------------------------------------------------------------------------------------
$1.21 to $29.75 603,060 6.1 $10.76 455,437 $8.58
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
Beginning in 1995, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 1996 and 1995 risk-free interest
rates of 6.2% and 6.8%; estimated life of 5.7 years for both years; and expected
stock price volatility of 41.2% and 44.4%.
7. RETIREMENT PLANS
The Company has a Savings and Retirement Plan for its salaried and certain of
its hourly employees whereby the eligible employees may contribute a percentage
of their salaries to a trust, i.e. a 401(k) plan. The Company also makes
contributions to the trust based on a percentage of the contributions made by
the participating employees. The Company's contributions are charged against
operations and were $826,000 in 1996, $703,000 in 1995, and $544,000 in 1994.
In 1993, the Company established a supplemental retirement plan for selected
key management employees and directors. The cost is based on the Company
achieving certain operating earnings levels. The Company charged operations for
$313,000 in 1996, $414,000 in 1995, and $597,000 in 1994 pursuant to this plan.
In 1994, the Company purchased company-owned life insurance on the participants
in order to have a funding mechanism for this Plan. Retirement payments will be
paid to the participants or their beneficiary over a 15-year period subsequent
to retirement or death.
The Company does not provide any other postretirement benefits for its
employees.
8. RELATED PARTY TRANSACTIONS
The Company pays a management fee to MDC Management Company (MDC), the general
partner of the Chairman of the Board of Directors. These management fees were
$100,000 in 1996, $155,000 in 1995, and $195,000 in 1994.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases real property, vehicles and office equipment under
operating leases. Rental expense was $4,162,000 in 1996, $3,871,000 in 1995, and
$2,496,000 in 1994. Certain of the leases are noncancellable and have minimum
lease payment requirements of $2,246,000 in 1997, $1,442,000 in 1998, $1,019,000
in 1999 and $798,000 in 2000 and $532,000 in 2001.
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.
CONCENTRATIONS OF CREDIT RISK
The Company sells building materials, primarily to professional contractors,
as well as to advanced, service oriented consumers through its 53 building
materials centers located in ten western states. No one customer exceeds 2% of
net sales. Because the customers are disbursed amongst the Company's various
markets, the Company's credit risk to any one customer or state economy is not
considered significant. The Company performs ongoing credit evaluations of its
customers and provides an allowance for doubtful accounts.
<PAGE>
29
10. OTHER DATA
Other income consisted of the following (in thousands):
- ------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------
Interest income, primarily
from outstanding accounts
receivable $ 1,351 $ 1,251 $ 1,159
Gain on sale of assets 449 40 133
Other income (expense) (532) 310 237
- ------------------------------------------------------------------
$ 1,268 $ 1,601 $ 1,529
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Receivables consisted of the following at December 31, (in thousands):
- ------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------
Trade receivables $ 67,970 $ 64,613
Allowance for doubtful accounts (1,231) (1,426)
- ------------------------------------------------------------------
66,739 63,187
Other 3,445 2,633
- ------------------------------------------------------------------
$ 70,184 $ 65,820
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Property and equipment consisted of the following at December 31, (in
thousands):
- ------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------
Land $ 29,845 $ 23,898
Buildings and improvements 57,467 53,908
Machinery and fixtures 20,951 18,226
Handling and delivery equipment 21,457 18,981
Construction in progress 1,803 1,936
- ------------------------------------------------------------------
131,523 116,949
Less accumulated depreciation (27,602) (20,546)
- ------------------------------------------------------------------
$103,921 $ 96,403
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Changes in working capital items, net of acquisitions
and divestitures, in the statement of cash flows is as follows (in thousands):
- ----------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------
(Increase) decrease in receivables $ (472) $(4,316) $ 4,544
(Increase) decrease in inventories (7,103) 9,994 (3,868)
(Increase) decrease in prepaid
expenses (593) 229 (555)
Increase (decrease) in accounts
payable and accrued expenses 4,856 (808) (887)
- ----------------------------------------------------------------------
$(3,312) $ 5,099 $ (766)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
11. FINANCIAL INSTRUMENTS
The book value compared with the fair value of financial instruments at
December 31 is as follows (in thousands):
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
BOOK FAIR Book Fair
VALUE VALUE Value Value
- --------------------------------------------------------------------------------
Cash and cash equivalents $ 7,066 $ 7,066 $ 6,004 $ 6,004
- --------------------------------------------------------------------------------
Long-term debt:
Variable rate debt $ 14,080 $ 14,080 $ 26,120 $ 26,120
Fixed rate debt 76,691 77,653 95,000 95,037
- --------------------------------------------------------------------------------
$ 90,771 $ 91,733 $ 121,120 $ 121,157
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The fair value of variable interest rate long-term debt is deemed to
approximate book value.
The fair value of fixed rate debt has been estimated based upon relative
changes in the Company's variable borrowing rates since the date interest rates
were fixed. At December 31, 1996, the Company had no derivative financial
instruments.
12. SUBSEQUENT EVENTS
On February 10, 1997, the Company announced plans to reorganize its existing
operations as a subsidiary of a newly-formed holding company. Upon completion
of the reorganization, the publicly traded securities will be listed under the
name of the new holding company.
13. RESULTS OF QUARTERLY OPERATIONS
Unaudited operating results by quarter for 1996 and 1995 are as follows (in
thousands, except per share amounts):
- --------------------------------------------------------------------------------
First Second Third Fourth
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
NET SALES $147,599 $193,022 $206,455 $170,948
GROSS PROFIT 33,084 42,250 44,361 38,921
INCOME FROM OPERATIONS 4,195 9,407 9,870 4,950
NET INCOME 750 3,530(1) 4,560 1,809
NET INCOME PER SHARE(2) .08 .35(1) .38 .15
STOCK PRICES PER SHARE-
HIGH $ 16 1/4 $ 20 1/4 $ 17 1/8 $ 13 7/8
LOW 13 15 1/4 12 3/4 11 7/8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
Net Sales $120,519 $166,167 $178,502 $165,013
Gross profit 27,237 37,224 39,304 34,408
Income from operations 2,786 7,042 8,491 5,102
Net income 504 2,467 3,396 1,398
Net income per share(2) .05 .25 .35 .14
Stock prices per share-
High $ 15 1/4 $ 17 $ 15 1/2 $ 14 3/4
Low 11 5/16 13 1/2 14 12 1/2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Includes a non-cash extraordinary loss of $342,000, net of tax or, $.03
per share, arising from the early retirement of debt. (2) Net income per share
calculations are based on the average common and common equivalent shares
outstanding for each period presented. Accordingly, the total of the per share
figures for the quarter may not equal the per share figures reported for the
year.
<PAGE>
30
BMC WEST CORPORATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BMC West Corporation:
We have audited the accompanying balance sheets of BMC West Corporation (a
Delaware corporation) as of December 31, 1996 and 1995, and the related
statements of income, stockholders' equity and cash flows each of the three
years ended December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BMC West Corporation as of
December 31, 1996 and 1995, and the results of its operations and cash flows for
each of the three years ended December 31, 1996 in conformity with generally
accepted accounting principles.
Boise, Idaho
February 10, 1997
