<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, 1997 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 August 11, 1997:
Common stock $.001 par value 11,833,031
----------
Index to exhibits at page
----
This is Page 1 of 17 Pages
<PAGE>
BMC WEST CORPORATION
INDEX
Page
Number
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements
Statements of Income for the three months ended June 30, 1997
and 1996 and the six months ended June 30, 1997 and 1996 4
Balance Sheets as of June 30, 1997 and December 31, 1996 5
Statements of Cash Flows for the six months ended
June 30, 1997 and 1996
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 1996 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
<PAGE>
BMC WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands Except per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales $190,616 $193,022 $337,385 $340,621
Cost of sales 147,129 150,772 259,608 265,287
---------- ---------- ---------- ---------
Gross profit 43,487 42,250 77,777 75,334
Selling, general
and administrative
expense 35,832 33,087 67,745 62,713
Other income, net 427 244 891 981
---------- ---------- ---------- ---------
Income from
operations 8,082 9,407 10,923 13,602
Interest expense 2,362 3,011 4,450 5,967
---------- ---------- ---------- ---------
Income before income
taxes 5,720 6,396 6,473 7,635
Income taxes 2,260 2,524 2,557 3,013
---------- ---------- ---------- ---------
Net income before
extraordinary item $3,460 $ 3,872 $ 3,916 $ 4,622
Extraordinary item -- (342) -- (342)
---------- ---------- ---------- ---------
Net Income $3,460 $ 3,530 $ 3,916 $ 4,280
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Net income per
common and common
equivalent share
before extraordinary
item $ .29 $ .38 $ .33 $ .46
Extraordinary item,
net of tax -- ($ .03) -- ($ .03)
-------- -------- -------- --------
Net income per
Common and Common
Equivalent Shares $ .29 $ .35 $ .33 $ .43
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average
number of common
and common
equivalent shares 12,046,094 10,191,541 12,045,862 9,960,980
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
This is Page 4 of 17 Pages
<PAGE>
BMC WEST CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
(Dollars in Thousands)
June 30, December 31,
1997 1996
-------- ------------
CURRENT ASSETS
Cash $ 9,144 $ 7,066
Receivables, net 85,145 70,184
Inventories 80,099 76,415
Deferred income tax benefit 1,743 1,743
Prepaid expenses 1,187 1,874
-------- --------
Total current assets 177,318 157,282
PROPERTY AND EQUIPMENT, net 106,687 103,921
DEFERRED LOAN COSTS 1,323 1,438
GOODWILL, net 20,500 19,679
OTHER 6,257 6,049
-------- --------
Total assets $312,085 $288,369
-------- --------
-------- --------
CURRENT LIABILITIES
Current portion of long-term debt $ 562 $ 568
Current redemption requirement on Class B
preferred stock 1,000 1,994
Accounts payable 41,499 33,954
Accrued expenses 13,419 10,299
-------- --------
Total current liabilities 56,480 46,815
LONG-TERM DEBT, net of current portion 100,133 90,203
DEFERRED INCOME TAXES 4,368 4,368
OTHER LONG-TERM LIABILITIES 2,133 1,895
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000
shares authorized, 11,831,031 and 11,825,106
shares outstanding at June 30, 1997 and
December 31, 1996, respectively 12 12
Additional paid-in-capital 97,703 97,731
Retained earnings 51,256 47,345
-------- --------
TOTAL STOCKHOLDERS' EQUITY 148,971 145,088
-------- --------
-------- --------
Total liabilities and stockholders' equity $312,085 $288,369
-------- --------
-------- --------
This is Page 5 of 17 Pages
<PAGE>
BMC WEST CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Six Months Ended
-----------------------
June 30, June 30,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,916 $ 4,280
Adjustments to reconcile net income to cash used
in operating activities:
Depreciation and amortization 5,457 5,117
(Gain) loss on sale of assets (423) (335)
Extraordinary item Net of tax -- 342
Changes in working capital items net of effects
of acquisitions (4,190) (15,940)
Other (684) (755)
-------- --------
Net cash provided from (used in)operating activities 4,076 (7,291)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (6,153) (3,878)
Payment for acquisitions (5,738) (3,287)
Sale of property and equipment 1,232 1,705
-------- --------
Net cash used in investing activities (10,659) (5,460)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under revolving credit agreement 80,840 91,560
Repayments under revolving credit agreement (70,910) (117,680)
Redemption of Class B preferred stock (1,000) (1,000)
Financing costs (201) (191)
Issuance of Common Stock -- 38,711
Other (68) (23)
-------- --------
Net cash provided by financing activities 8,661 11,377
-------- --------
NET INCREASE (DECREASE) IN CASH 2,078 (1,374)
CASH, beginning of period 7,066 6,004
-------- --------
CASH, end of period $ 9,144 $ 4,630
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 4,378 $ 6,019
Income taxes $ 487 $ --
This is Page 6 of 17 Pages
<PAGE>
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, 1997 and 1996 are as follows (in thousands):
1997 1996
--------- ---------
(Increase)in accounts receivable ($13,021) ($17,495)
(Increase)decrease in inventories (1,994) (6,881)
Increase in prepaid expenses 687 (654)
Increase in accounts payable and accrued
expenses 10,066 9,142
Increase (decrease) in interest payable 72 (52)
------- --------
($4,190) ($15,940)
------- --------
------- --------
2. LONG-TERM DEBT
Long-term debt consisted of the following at (in thousands):
June 30, December 31,
1997 1996
-------- ------------
Revolving credit agreement borrowings $24,010 $14,080
9.18% unsecured senior notes 50,000 50,000
8.10% unsecured senior notes 25,000 25,000
Capital lease obligations and other 1,685 1,691
-------- -------
100,695 90,771
Less current portion 562 568
-------- -------
$100,133 $90,203
-------- -------
-------- -------
3. ACQUISITIONS
In the first quarter of 1997, the Company purchased substantially all of the
assets of a building supply firm in Utah. The total purchase price for this
facility was $930,000. In the second quarter of 1997, the Company completed two
acquisitions of facilities located in Colorado and Washington. The total
purchase price for these facilities was $4,808,000, consisting entirely of cash.
This is Page 7 of 17 Pages
<PAGE>
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement 128, EARNINGS PER SHARE, which will be implemented in the fourth
quarter of 1997. Primary earnings per share will be replaced with basic
earnings per share and fully diluted earnings per share will be renamed
diluted earnings per share, neither of which will be significantly different
than previously reported primary and fully diluted earnings per share. All
previously reported amounts will be restated.
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, 1996.
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Month Ended
-------------------------- -----------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 22.8 21.9 23.1 22.1
Selling, general and
administrative expense 18.8 17.1 20.1 18.4
Other income (expense) .2 .1 .3 .3
Income from operations 4.2 4.9 3.2 4.0
Interest expense 1.2 1.6 1.3 1.8
Income taxes 1.2 1.3 .8 .9
Net Income 1.8 1.8 1.2 1.3
</TABLE>
SECOND QUARTER OF 1997 COMPARED TO THE SECOND QUARTER OF 1996
Net sales for the three months ended June 30, 1997 were $190.6 million down
1% from the second quarter of 1996 when sales were $193.0 million. The
decrease in net sales resulted from a 3 percent decrease from the second
quarter of 1996 in sales at facilities that operated for at least two months
in both the second quarter of 1996 and the second quarter of 1997
("Same-Store Sales"). Sales decreased due to unusually wet weather
conditions in Texas and lower building permit activity in the majority of its
10-state market area. Sales in the 1997 period were not significantly
impacted by commodity wood product prices.
Gross profit as a percentage of sales increased to 22.8% in the second quarter
of 1997 from 21.9% in the second quarter of 1996, primarily as a result of on
going efforts by the Company to improve margins through its increased focus on
value-added products, such as roof trusses, pre-hung doors and pre-assembled
windows.
This is Page 9 of 17 Pages
<PAGE>
Selling, general and administrative (SG&A) expense, was $35.8 million in the
second quarter of 1997 as compared to $33.1 million in 1996, and increased as a
percentage of net sales from 17.1% in 1996 to 18.8% in 1997. The Company
believes this increase was partially due to inclement weather in Texas which
made it difficult to manage payroll expenses in that state and increases in
value-added sales that carry higher SG&A expenses.
Interest expense of $2.4 million in the second quarter of 1997 decreased from
$3.0 million in the same period of 1996, primarily due to less debt outstanding
in the second quarter of 1997 compared to the second quarter of 1996.
Income taxes were provided at estimated annual effective tax rates of 39.5% for
the periods ended June 30, 1997 and June 30, 1996.
As a result of the foregoing factors, net income before extraordinary item
decreased by $412,000, or 10.6% to $3,460,000, or 1.8% of net sales in the
second quarter of 1997, as compared to $3,872,000, or 2.0% of net sales, in the
second quarter of 1996.
In the second quarter of 1996, 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 1997 COMPARED WITH THE FIRST SIX MONTHS OF 1996
Net sales for the six months ended June 30, 1997 were $337.4 million down 1%
from the first half of 1996 when sales were $340.6 million. The decrease in
net sales resulted from a decrease of 3% in Same-Store Sales, over the first
six months of 1996 partially offset by the acquisition of new building
materials centers, unusually wet weather conditions in Texas and lower
building permit activity in the majority of its 10-state market area. Sales
in the 1997 period were positively affected by
This is Page 10 of 17 Pages
<PAGE>
slightly higher commodity wood product prices. The price increase
contributed to an overall price inflator of 2% the effect of which increased
sales by approximately $5.3 million. Excluding price inflation, same-store
sales decreased 5%.
Gross profit as a percentage of sales improved to 23.1% in the first half of
1997 from 22.1% in the first six months of 1996, primarily as a result of on
going efforts by the Company to improve margins through its increased focus on
value-added products, such as roof trusses, pre-hung doors and pre-assembled
windows.
Selling, general and administrative (SG&A) expense, was $67.7 million in the
first six months of 1997 as compared to $62.7 million in 1996, and increased
as a percentage of net sales to 20.1% in 1997 from 18.4% in 1996. The
Company believes this increase was partially due to inclement weather in
Texas which made it difficult to manage payroll expenses in that state,
acquisition costs, and increases in value-added sales that carry higher SG&A
expenses.
Interest expense decreased to $4.5 million in the first six months of 1997 from
$6.0 million in the same period of 1996, primarily due to less debt outstanding
in the six months of 1997 compared to the first six months of 1996.
Income taxes were provided at estimated annual effective tax rates of 39.5% for
the six month period ended June 30, 1997 and June 30, 1996.
As a result of the foregoing factors, net income before extraordinary item,
decreased by $706,000, or 15.3% to $3,916,000, or 1.2% of net sales in the first
half of 1997, as compared to $4,622,000, or 1.4% of net sales, in the first six
months of 1996.
In the second quarter of 1996, 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
This is Page 11 of 17 Pages
<PAGE>
second quarter of 1996. 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 used to retire the $20
million of 10% unsecured senior subordinated notes in the third quarter of 1996
and reduce the debt under the revolving credit agreement.
At June 30, 1997 the Company had $100.1 million of long-term debt outstanding,
consisting of $76.1 million of term borrowings under fixed rate notes, and $24.0
million of variable rate debt under the revolving credit agreement.
In the first half of 1997, the Company generated $4.1 million of cash from
operating activities. Working capital increased from $110.5 million at December
31, 1996 to $120.8 million at June 30, 1997, 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, 1997 of $46.0 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.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement 128,
EARNINGS PER SHARE, which will be implemented in the fourth quarter of 1997.
Primary earnings per share will be replaced with basic earnings per share and
fully diluted earnings per share will be renamed diluted earnings per share,
neither of which will be significantly different than previously reported
primary and fully diluted earnings per share. All previously reported amounts
will be restated.
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 May 13, 1997. A
total of 11,821,413 shares of common stock were outstanding at the
date of record and entitled to vote at the meeting. Of the total
outstanding, 10,076,637 shares were represented at a meeting and
1,744,776 shares were not voted.
Shareholders cast votes for the election of the following
directors, whose term expire in 1998:
For Against
--- -------
George E. McCown 9,993,338 83,299
Robert E. Mellor 9,994,204 82,433
Donald S. Hendrickson 9,993,472 83,165
Alec F. Beck 9,985,422 91,215
H. James Brown 9,994,204 82,433
Wilbur J. Fix 9,994,204 82,433
Robert V. Hansberger 9,994,204 82,433
Guy O. Mabry 9,994,204 82,433
Peter S. O'Neill 9,994,054 82,583
The shareholders also ratified the appointment of Arthur Andersen
LLP as the Company's independent auditors for the year 1997 with
votes cast 10,045,329 for, 14,270 against, 17,038 abstained.
This is Page 13 of 17 Pages
<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.
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 12, 1997 /s/ Donald S. Hendrickson
---------------------------------------------
Donald S. Hendrickson
President, Chief Executive Officer
and Director (Principal Executive Officer)
Date: August 12, 1997 /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, 1997
Page
Exhibit Description Number
- ------- ----------- ------
11 Computation of Earnings Per Share 17
27 Financial Data Schedule 18
This is Page 16 of 17 Pages
<PAGE>
EXHIBIT 11
BMC WEST CORPORATION
Computation of Earnings Per Share
<TABLE>
<CAPTION>
COMPUTATION OF PRIMARY EARNINGS PER SHAREc
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 $3,460,000 $3,530,000 $3,916,000 $4,280,000
Class B preferred stock
accretion -- (8,500) (6,500) (17,000)
---------- ---------- ----------- ----------
Adjusted net income $3,460,000 $3,521,500 $3,909,500 $4,263,000
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Weighted average shares
outstanding 11,830,141 9,914,685 11,828,690 9,700,702
Net effect of dilutive
stock options based on
the treasury stock method
using average
market price 215,953 276,859 217,172 260,282
---------- ---------- ---------- ----------
Total common shares and
equivalents 12,046,094 10,191,544 12,045,862 9,960,984
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PRIMARY INCOME PER SHARE $ .29 $ .35 $ .33 $ .43
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Adjusted net income $3,460,000 $3,521,500 $3,909,500 $4,263,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
outstanding 11,830,141 9,914,685 11,828,690 9,700,702
Net effect of dilutive
stock options based on
the treasury stock method
using the higher of
quarter-end market price
or average market price 215,953 276,859 217,172 270,522
---------- ---------- ---------- ----------
Total shares and
equivalents 12,046,094 10,191,544 12,045,862 9,971,224
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED EARNINGS PER
SHARE $ .29 $ .35 $ .33 $ .43
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
This is Page 17 of 17 Pages
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 9,144
<SECURITIES> 0
<RECEIVABLES> 86,840
<ALLOWANCES> 1,695
<INVENTORY> 80,099
<CURRENT-ASSETS> 177,318
<PP&E> 138,086
<DEPRECIATION> 31,398
<TOTAL-ASSETS> 312,085
<CURRENT-LIABILITIES> 56,480
<BONDS> 100,133
1,000
0
<COMMON> 12
<OTHER-SE> 148,959
<TOTAL-LIABILITY-AND-EQUITY> 312,085
<SALES> 337,385
<TOTAL-REVENUES> 337,385
<CGS> 259,608
<TOTAL-COSTS> 327,353
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,450
<INCOME-PRETAX> 6,473
<INCOME-TAX> 2,557
<INCOME-CONTINUING> 3,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,916
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
