<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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 or any
amendment to this Form 10-K. 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 $115,888,388.*
* 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 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, 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.
<PAGE>
BMC WEST CORPORATION
TABLE OF CONTENTS
PART I
Item Page
- ---- ----
1. Business 1
2. Properties 13
3. Legal Proceedings 17
4. Submission of Matters to a Vote of Security Holders 17
PART II
5. Market for Registrant's Common Stock and Related
Stockholder Matters 18
6. Selected Financial Data 19
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 20
PART III
10. Directors and Executive Officers of the Registrant 21
11. Executive Compensation 21
12. Security Ownership of Certain Beneficial Owners and
Management 21
13. Certain Relationships and Related Transactions 21
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 28
<PAGE>
PART I.
ITEM 1. BUSINESS
BMC West Corporation ("BMC West" or the "Company") is a leading regional
distributor and retailer of building materials in the Western United States,
selling primarily to professional contractors, as well as to project-oriented
consumers. In addition to distributing products from manufacturers, the
Company conducts value-added conversion activities which include pre-hanging
doors, fabricating roof trusses, pre-assembling windows and pre-cutting
lumber to meet customer specifications. The Company operates 53 building
materials centers located in Arizona, California, Colorado, Idaho, Montana,
Nevada, Oregon, Texas, Utah, and Washington. Value-added activities
are conducted at 41 separate facilities, most of which are located at
building materials sites.
BMC West targets primarily the professional contractor market, which is a
strategy distinct from that pursued by the high-volume, consumer-oriented
home center retailers now found throughout the United States. The Company's
professional contractor market consists of persons engaged principally in the
construction of single-family homes and, to a lesser extent, multi-family
units and light commercial and industrial construction. Professional
contractors generally are large-volume, repeat customers requiring certainty
of product availability and delivery and a number of specialized services
typically not offered by home center retailers. The Company also targets the
repair and remodel market which consists generally of project-oriented
consumers and contractors hired by them, who engage primarily in substantial
projects such as room additions, kitchen or bathroom remodeling and fence or
deck installations.
BMC West develops long-term relationships with its customers by providing
them with a broad range of high-quality products and services. Each of the
Company's building materials centers tailors its product and service mix to
meet the demands of the local market. The Company's products, which include
lumber, panel products, roofing materials, pre-hung doors, roof trusses,
pre-assembled windows, cabinets, hardware, paint and tools, are used
primarily for new residential construction, light commercial construction and
repair and remodeling projects. These products are sold by experienced
professionals consisting of both field sales personnel and facility based
sales and support personnel. The Company offers its customers various
services, including assistance with project designs and materials
specifications, coordination of delivery of orders to job sites, provision of
credit to pre-approved contractors and referral of retail customers to
pre-qualified contractors. Complete home packages (delivered to the sites of
the Company's builder customers according to their construction schedules)
account for a significant amount of BMC West's total sales. In each of the
last three years, professional contractors accounted for approximately 75% to
77% of net sales, and project-oriented consumers accounted for approximately
22% to 24% of net sales.
On February 10, 1997, the Company announced that its existing operations will
become a subsidiary of a newly formed holding company The Company believes
that by creating the holding company it can centralize its responsibilities
of managing regional locations and day-to-day operations and assign the
holding company the responsibilities of financial and strategic management.
<PAGE>
INDUSTRY OVERVIEW
The building materials distribution industry is characterized by its
substantial size, highly fragmented ownership structure and dependence on the
cyclical and seasonal construction industry.
Building materials distributors generally concentrate on serving either
service-oriented professional contractors or price-oriented retail consumers.
Contractor-oriented building materials distributors, such as BMC West, tend
to focus on contractors and project-oriented consumers and compete
principally on the basis of service, product quality and availability,
on-time delivery, credit availability and reliability, as well as price.
Home center retailers, on the other hand, target the mass consumer market, in
which competition is based principally on price, merchandising, location and
cooperative advertising. Typically, contractor-oriented distributors offer a
greater range of services and a wider variety of high quality building
products than home center retailers.
The contractor-oriented building materials distribution industry is
characterized by a large number of privately owned, small, regional
distribution companies and single-site enterprises. These businesses are
typically family run, relationship-based operations which focus on offering
service, delivery and reliability to their customers. As a result of their
size, many of these businesses do not possess sophisticated working capital
management and control systems and generally lack the purchasing expertise of
a large entity, such as BMC West. Because of these factors, the Company
believes that these businesses include a number of attractive acquisition
candidates.
The building materials distribution industry is closely linked to the
economic cycles and seasonality associated with the construction industry.
The Company monitors the issuance of new housing permits as an important
indicator of its potential future sales volume. Construction expenditures
are largely a function of new residential, commercial and industrial building
demand and repair and remodeling projects undertaken. Residential
construction is closely linked to new job formation, household formation,
interest rates, housing affordability, availability of mortgage financing,
regional demographics and consumer confidence. Commercial construction is
significantly affected by vacancy and absorption rates, interest rates,
long-term regional economic outlooks and the availability of financing.
Industrial construction expenditures are linked to the industrial economic
outlook, corporate profitability, interest rates and capacity utilization.
In difficult economic environments, repair and remodeling expenditures
generally represent a greater percentage of housing construction expenditures
as new housing starts decline. BMC West centers target participants in all
of these sectors, although economic conditions frequently dictate which
sector they may emphasize at a given time. A key attribute of the
contractor-oriented building materials distribution industry is that
professional contractors typically use the same building materials supplier
for all of their projects. In order to generate and maintain this loyalty,
suppliers generally focus on providing the professional contractor with
service, quality, on-time delivery and value-added services.
GEOGRAPHIC MARKETS
The Company believes that it is well positioned in some of the most
attractive markets for building materials in the United States. Population
and migration trends in the Western markets served by
2
<PAGE>
BMC West, as well as the relative strength of many of the local economies it
serves, have resulted in the growth of residential housing in these markets
at rates faster than the United States as a whole. BMC West operates centers
in 8 of the top 10 fastest growing states over the last five years, based
upon U.S. Bureau of the Census estimates. In addition, according to the U.S.
Bureau of the Census, the Company's 12-state market area is forecast to
outpace the rest of the country in its rate of population growth between 1995
and 2000. The Company believes that these population and migration trends
provide a foundation for continued growth.
Furthermore, BMC West's 53 building materials centers operate in eighteen
distinct regional markets, which collectively have a diverse economic base of
manufacturing, agricultural, recreational and service-based industries. The
Company believes that this geographical diversification lessens the impact on
the Company of a downturn in any one of its regional markets.
OPERATING STRATEGY
BMC West's management has organized its 53 building materials centers as
autonomous, decentralized units capable of meeting local market needs and
offering competitive prices. Center managers have a substantial degree of
control over inventory, merchandising and pricing, and can develop their own
specific programs to meet the needs of their particular markets. The
Company's decentralized, microcomputer based, point-of-sale information
system provides each center manager with real-time pricing, inventory
availability and margin analysis. At the same time, the Company provides
centralized purchasing management, credit and financial controls, management
information systems, and training and marketing support. The compensation of
substantially all of the employees of each unit is based, in part, on the
performance of the individual unit.
BMC West believes that many of its building materials centers hold a first or
second place market share among professional contractors and that the
Company, as a whole, has the largest sales volume of any distributor of
building materials serving primarily professional contractors in its 12-state
market area. The Company intends to maintain its leadership position in these
markets by continuing to provide a broad range of high-quality products and
services to the professional contractor and the project-oriented consumer.
The services provided by the Company include assisting customers with project
designs and materials specifications, delivering orders to job sites,
providing credit to pre-approved contractors, and referring retail customers
to pre-qualified contractors. In addition to distributing products from
manufacturers, the Company currently conducts value-added operations at 41
facilities (most of which are located at building materials sites) in eight
states, as compared to 16 such facilities in six states at the end of 1991.
Value-added facilities generally are constructed or acquired at or near a
center and can service a sales area 35 to 45 miles in radius. The Company
plans to introduce value-added products such as pre-hung doors, roof trusses
and pre-assembled windows in more of the markets served by the Company.
These products generally carry higher gross margins and have less price
volatility than commodity wood products.
The Company continues to enhance and broaden its customer services to include
new programs and services developed by building materials center managers and
corporate management. For example, at certain of its locations the Company
conducts "How-To" seminars for consumers,
3
<PAGE>
refers retail customers to pre-qualified contractors and offers a private
label credit card. BMC West's decentralized operating philosophy permits unit
managers to respond to the needs of their local markets with creative new
products and services. The Company continues to upgrade its consumer
advertising and merchandising, particularly in smaller markets where it
places more focus on project-oriented consumers.
BMC West's total quality management program defines quality as providing the
best products and services at the right place at the right time. The program
provides an environment for employees to identify cost reduction and margin
improvement opportunities, empowers all employees to make significant
contributions and work together as a team, and measures BMC West's
performance and follow through on improvement efforts. Quality teams at BMC
West locations seek to make specific, measurable improvements in the
Company's critical processes, including order processing, inventory control,
delivery and customer assistance. These teams include employees from all
functional areas and backgrounds. The Company supports this program through
training and the sharing of ideas among locations.
ACQUISITION STRATEGY
BMC West continues to seek acquisitions of building materials centers and
value-added facilities that serve the professional contractor and the
project-oriented consumer in new and existing markets in the United States.
The Company believes that the fragmented nature of its industry presents
opportunities for additional acquisitions of strategically located building
materials centers and value-added facilities. The management of BMC West has
substantial experience in expanding building materials supply businesses
through acquisitions. Over the past several years, the Company's management
has contacted and visited many acquisition candidates in the western United
States. In addition, the Company is contacted regularly by persons seeking
to sell their business. The Company believes that, due to professional
contractor loyalty to existing centers, the most expedient way for BMC West
to enter new geographic markets is through acquisitions. The Company also
believes that the availability of a public market for its common stock
provides it with additional flexibility in pursuing acquisitions.
While the Company evaluates each potential acquisition candidate on its
individual merits, its primary objective has been to acquire profitable
building materials centers that meet certain general criteria. The typical
targeted acquisition candidate is located on a 5 to 10 acre site which
includes 8,000 to 15,000 square feet of indoor showroom and contractor sales
space and 20,000 to 50,000 square feet of covered storage area, with
reasonable access to the local road system and proximity to regional areas of
construction demand. Additional factors include the reputation of the center
among local contractors and the quality of the center's management and sales
organization.
Typically, after an acquisition of a center, the Company enhances the
center's sales and service capabilities and expands its product offerings,
including value-added products, in an effort to increase sales. In addition,
the Company seeks to implement its accounting and management systems into
each newly acquired center. These systems assist in the effective management
of the Company's inventories and accounts receivable and in efforts to
improve customer service. BMC
4
<PAGE>
West generally is able to use its centralized purchasing expertise to reduce
product costs following new acquisitions.
In 1996, the Company completed four acquisitions including one building
materials center and three value-added facilities. The aggregate purchase
price was $10,138,000, consisting of $8,426,000 cash and the assumption of
notes payable for $1,712,000. The notes issued in connection with these
acquisitions were paid by the company prior to December 31, 1996. The
following chart sets forth the number of building materials centers acquired
and consolidated by the Company during each of the last two fiscal years.
Year Ended Year Ended
Dec 31, 1996 Dec 31, 1995
------------ ------------
Beginning balance 52 49
Acquisitions 1 4
Other* -- (1)
------ ------
Ending balance 53 52
------ ------
------ ------
*In 1995, the Company consolidated its Oakhurst and Fresno, California,
centers.
It is the Company's objective to continue to acquire complementary
businesses. The Company continues to engage in discussions with potential
acquisition candidates. There can be no assurances that the Company will be
able to continue to identify and complete successful acquisitions in the
future.
PRODUCTS
Each BMC West unit carries a core of approximately 9,000 stock keeping units
("SKUs"), plus an average of an additional 6,000 SKUs, the product mix of
which varies by location. The Company's principal products include lumber,
panel products, roofing materials, pre-hung doors, roof trusses,
pre-assembled windows, cabinets, hardware, paint and tools. In addition to
distributing such products, the Company conducts value-added activities,
which include pre-hanging doors, fabricating roof trusses, pre-assembling
windows and pre-cutting lumber to meet customer specifications.
The following table sets forth information regarding the percentage of net
sales represented by the specified categories of products sold at the
Company's centers during each of the last two fiscal years. While the
Company believes that the percentages included in the table generally
indicate the mix of the Company's sales by category of product, the specific
percentages are affected year-to-year by changes in the prices of commodity
wood products as well as changes in unit volumes sold.
5
<PAGE>
Category of Product 1996 1995
- ------------------- ---- ----
Wood products (lumber and panel products) 47% 47%
Building materials(roofing, siding, insulation and steel) 25 23
Millwork/Value-added (pre-hung doors, trusses,
windows & moldings) 20 18
Other (paint, hardware, tools, electrical and plumbing) 8 12
---- ----
100% 100%
---- ----
---- ----
The Company fabricates roof trusses used to form roof support systems and
pre-hung door units and pre-assembled window units for the residential and
light commercial building markets. Door units are purchased and
pre-assembled to contractor specifications using a variety of moldings. The
door, truss and window product lines are particularly attractive since they
generally bring higher margins, have less price volatility, and are not
offered by many building materials centers or home center retailers. The
Company believes that its ability to provide pre-hung doors, roof trusses and
pre-assembled windows in a number of locations is a competitive advantage
when soliciting business from contractors. Inventories of door units, roof
trusses and pre-assembled windows are predominantly work-in-process, as these
units are usually built-to-order.
The Company's customers generally order products, including pre-hung doors,
roof trusses, and pre-assembled windows on an as-needed basis. Therefore,
virtually all product shipments in a given fiscal quarter result from orders
received in that quarter. Consequently, order backlog represents only a very
small percentage of the product sales anticipated by the Company in a given
fiscal quarter and is not indicative of the Company's actual sales for any
future fiscal period.
As a distributor of building materials and products, the Company regularly
monitors innovations in product design to meet its customers' needs. The
Company test markets products that substitute for dimensional lumber and has
for a number of years distributed alternative products such as engineered
wood products and steel studs, and has provided its builder customers
information and instruction on the use of such products.
SALES AND MARKETING
Each of BMC West's 53 building materials centers tailors its product and
service mix to the local market and operates as a separate profit center.
The Company reaches its professional contractor customers, mainly through
field sales representatives, advertisements in trade journals and local
promotional events. The Company's customers include a broad base of
professional contractors and project-oriented consumers. No single customer
accounted for more than 2% of net sales in 1996.
PROFESSIONAL CONTRACTOR MARKET
The professional contractor market is comprised of three major customer
segments: two segments are the new housing contractors, and commercial and
industrial contractors. The Company's sales to these professional contractors
accounted for approximately 77% of net sales (this total includes 71% to new
residential contractors and 6% to commercial and industrial contractors).
Professional contractors accounted for approximately 75% to 77% of the
Company's net sales in
6
<PAGE>
each of the last three years. A significant amount of this business
consisted of sales of complete house packages, including framing lumber,
panel products, pre-hung doors and trim packages, roof trusses, pre-assembled
windows and other products required to construct or improve a home.
BMC West provides a wide range of customer services to contractors to meet
their needs for credit, delivery and expert assistance. While pricing is an
important purchasing criterion for these customers, the Company believes that
other factors such as coordinated, on-time deliveries, quality and
availability of products, relationships with salespeople, credit availability
and technical support are equally important. The Company believes that its
skills in these areas are important competitive advantages.
BMC West's principal channel for reaching the professional contractor market
is a sales force of approximately 225 field sales representatives supported
by approximately 191 facility-based salespeople. Field sales representatives
actively solicit business and work with the facility-based managers to
develop bids for contractor projects. The Company provides sales training
for all sales representatives, and sales management training for all sales
managers and center managers. Sales representatives are compensated through
a combination of salary and commission based on individual sales volume and
gross margin.
BMC West's center managers ensure that building materials are delivered
according to contractor specifications and schedules. Technical personnel
involved in purchasing, dispatching, invoicing and credit, support both field
sales force and center managers to enhance customer satisfaction.
REPAIR AND REMODEL MARKET
The third major customer segment is the repair and remodel market which
consists generally of project-oriented consumers and professional repair and
remodel contractors hired by them. The Company's sales to these customers
accounted for approximately 22% of 1996 net sales and for approximately 22%
to 24% of net sales in each of the last three years. The Company's sales to
this market generally carry higher margins than sales to the professional
contractor market and also carry higher costs. The volume of sales to this
market varies depending on location, with the Company actively pursuing
repair and remodel business in smaller markets which have not attracted large
home center retailers. Showroom space varies from store to store, typically
ranging from approximately 5,000 to 20,000 square feet. This space features
attractive displays and is frequently remerchandised to reflect product and
service improvements. Sales personnel are trained to service both the more
sophisticated contractor and the individual consumer, thereby providing the
consumer with professional advice for home improvement projects.
To enhance public exposure, BMC West frequently advertises in local
newspapers, incorporates special display signs in its stores and uses
promotional events such as "How-To" shows sponsored by manufacturers of
building materials. Management believes that these advertising and promotion
programs, in conjunction with the Company's experienced sales staff, enables
BMC West to compete effectively in the retail and remodel market.
7
<PAGE>
CREDIT
Overall credit policy for sales to contractors is established by corporate
management, but each center has responsiblity for overseeing local accounts.
The individual center managers and their staff are trained to have a thorough
understanding of state lien laws, which provide security for the Company's
accounts receivable. The Company's credit policies, together with daily
computer monitoring of customer balances, have resulted in average bad debt
expense of approximately 0.15% of net sales during the last five years, with
no single year exceeding 0.20%. The Company believes that its bad debt
expense levels are among the lowest in the industry.
In addition to the credit extended by the Company, the Company accepts
third-party credit cards such as MasterCard, Visa, American Express, and
Discover. BMC West also offers a private-label credit card to individual
customers. The BMC West card provides customers with rapid access to
revolving credit lines and offers them opportunities to take advantage of
deferred financing and other promotions. This program is owned and
administered by Household Retail Services, a division of Household Bank,
N.A., and is without recourse to BMC West. Household Retail Services handles
all credit approval and charge administration functions, and the Company
receives payment within two days of submitting charge data. Use of the
credit card program gives BMC West a low-cost means of extending credit to
these customers without credit exposure.
Approximately 89% of the Company's sales in 1996 were made to customers to
whom the Company had extended credit for such sales. The remaining 11% of
sales in 1996 included cash purchases, and purchases made with third-party
credit cards and the Company's private label credit card.
MANAGEMENT INFORMATION SYSTEMS
BMC West's financial information, operational data, and other related
statistical information are processed and maintained at its headquarters on a
network of server computers and work stations. The Company financial
reporting and relational database system was designed and customized for BMC
West by Oracle Corporation. The flexible nature of the Company's installed
network allows for accumulation, processing and distribution of information
using industry standard computing resources and programs. The point-of-sale
information systems used by BMC West operate on IBM RS6000 computers located
at each center, and are connected to the computers at headquarters via a high
speed frame relay network. These on-line systems provide real-time pricing,
inventory availability, and margin analysis, allowing each center's sales
staff to serve its customers better, while giving management the ability to
access and use timely information to improve operations. Management believes
that these systems also have enabled the Company to enhance profit margins,
improve inventory turnover through identification and elimination of
low-turnover items, accelerate analysis of sales trends, and better monitor
accounts receivable, employee productivity, customer credit limits and lien
protections.
8
<PAGE>
PURCHASING
The Company purchases merchandise from a large number of manufacturers and
suppliers. In 1996, the Company's largest supplier accounted for
approximately 7% of the Company's total purchases. The Company does not
believe that the loss of any single supplier would have a material adverse
effect on the Company.
The Company purchases a majority of its inventory on a centralized basis in
order to capitalize on economies of scale, although a limited amount of
purchasing and all ordering is controlled at individual centers in order to
respond to local needs. Purchasing is controlled at the location level in
order to maintain local product needs. A buying group located at the
Company's headquarters handles bulk commodity purchases, negotiates with
major lumber and panel products suppliers, and manages relations with the
Company's non-commodity suppliers. This group consolidates the Company's
purchase orders in order to negotiate the best possible prices and terms.
Although the Company seeks to time its purchases to take advantage of price
movements, BMC West has a policy not to speculate in the commodity wood
products market.
Approximately 47% of the Company's 1996 sales were attributable to commodity
wood products. Prices of commodity wood products are subject to significant
volatility and directly affect the Company's sales. During 1996, the prices
of commodity wood products purchased and sold by the Company were on average
7% higher than in 1995. (The company's total price inflator for 1996 was 3%)
The Company has established purchasing and pricing procedures to minimize
exposure to inventory write downs. The Company's commodity buyers monitor
inventory and sales levels in each location on a regular basis. With this
supply and demand information, buyers can avoid overstocking commodity wood
products. As a result, the Company turns its commodity product inventory
approximately 12 times per year. Such rapid inventory turnover limits the
Company's potential exposure to inventory loss from commodity price
fluctuations. In addition, the Company's real-time computer network allows
the Company to adjust sales prices as purchase prices of commodity products
change.
Historically, the Company's hardware products were purchased primarily from
Cotter & Company ("True Value"), Ace Hardware ("Ace") and Hardware
Wholesalers, Inc. ("HWI"). By serving as a True Value, Ace and HWI dealer,
the Company eliminated the need to maintain separate distribution centers for
such products. In July 1996, the Company entered into a merchandise supply
agreement with the Cotter & Company for hardware products. Under the
Agreement, BMC will terminate existing affiliations with other distributors.
COMPETITION
BMC West operates in a highly competitive environment. Due to the regional
nature of the industry, BMC West's competitive environment varies by location
and by market segment.
Within the professional contractor market, the Company competes primarily
with privately owned, single-site enterprises and local and regional building
materials chains. Professional contractors generally select building
materials centers on the basis of availability of knowledgeable personnel,
on-time delivery, reliable inventory levels, availability of credit and
competitive pricing. BMC West believes it competes favorably on each of these
bases. The Company's relatively large size
9
<PAGE>
also permits it to attract experienced and professional sales and service
personnel and provides BMC West the resources to offer Company-wide product
and service training programs. By working closely with its contractor
customers and utilizing the Company's real-time management information
system, BMC West's centers maintain appropriate inventory levels and are well
positioned to deliver completed orders on time to individual job sites. The
Company also competes to a lesser extent with certain larger home center
retailers such as Home Depot, HomeBase, and Lowe's in this market.
Competition from large home center retailers can prompt other local suppliers
to pursue professional contractor business more aggressively.
Within the repair and remodel market, BMC West competes primarily with local
lumber yards and hardware stores and, in certain of its markets, with larger
home center chains such as Home Depot, HomeBase and Lowe's. The Company
believes that it meets the needs of project-oriented consumers and repair and
remodel contractors more effectively than such competitors by (i) providing
primarily higher quality products within each category, (ii) offering
consumers and contractors access to knowledgeable staff and (iii) developing
contractor referral programs and "How-To" programs to address the
requirements of consumers on larger projects.
EMPLOYEES
The success of BMC West Corporation is highly dependent on the quality of its
personnel at all levels of the company. As a result, the Company maintains
well rounded and competitive compensation and fringe benefit programs to
attract, motivate and retain top performing individuals. In addition, the
company provides extensive product knowledge, customer service, supervisory
and managerial training programs to assure employee and customer satisfaction.
At December 31, 1996, BMC West employed approximately 3,150 persons, of which
approximately 255 were represented by unions. The Company has not experienced
any strikes or other work interruptions and has maintained generally
favorable relations with its employees. The following table shows the
approximate breakdown by job function of the Company's employees:
Officers, corporate and unit management
and administrative 27%
Field sales force (Outside/Inside Sales) 13%
Retail operations (Cashiers/Receiving/Sales Support) 13%
Delivery (Truck Drivers, Load Builders, Yard) 30%
Manufacturing (Truss, Door and Window) 17%
EXECUTIVE OFFICERS AS OF DECEMBER 31, 1996
Date First
Elected as
Name Age Position or Office An Officer
- ---- --- ------------------ ----------
George E. McCown 61 Chairman of the Board of 1987
Directors
10
<PAGE>
Donald S. Hendrickson 66 President, Chief Executive 1987
Officer and Director
Robert L. Becci 56 Vice President and Controller 1990
Richard F. Blackwood 59 Senior Vice President of Operations 1987
Leroy D. Custer 52 Vice President of Marketing 1990
and Purchasing
Ellis C. Goebel 55 Vice President and Treasurer 1987
Steven H. Pearson 49 Vice President of Human 1987
Resources
Mr. McCown (61) is Chairman of the Board of Directors of the Company and has
been a director since 1987. He was cofounder and has been a Managing General
Partner of MDC Management Company, the general partner of McCown De Leeuw &
Co., since 1984, and was instrumental in financing and executing the
leveraged buy-out of the Company in 1987. Mr. McCown currently serves as a
director of three publicly held companies, Nimbus CD International, Inc.,
Specialty Paperboard, Inc., and Vans, Inc. Mr. McCown also serves as a
director of several privately held companies.
Mr. Hendrickson is currently 66. He has served as President, Chief
Executive Officer, and a director of the Company since its inception in
November 1987. Mr. Hendrickson served in several management positions at
Boise Cascade Corporation from 1964 to 1987. Mr. Hendrickson received a B.A.
in economics from the Albertson College of Idaho and an M.B.A. from the
University of Chicago Graduate School of Business. He is also a certified
public accountant in the State of Idaho. Mr. Hendrickson currently serves as
Trustee for Albertson College of Idaho, and as Director-at-Large for Western
Building Materials Association.
Mr. Becci has served as the Company's Controller since its inception in 1987
and was elected Vice President in 1990. Mr. Becci was Controller of Boise
Cascade's Building Materials Distribution Division from 1985 to 1987.
Mr. Blackwood has served as Vice President of Operations of the Company since
1987. He was Operations Manager of nine wholesale distribution facilities of
Boise Cascade's Wholesale Building Materials Distribution Division from 1985
to 1987.
Mr. Custer has served as Marketing Manager of the Company since 1988 and was
elected Vice President of Marketing and Purchasing in 1990. Mr. Custer was
Manager of BMC West's Boise, Idaho, unit from 1987 to 1988. He served as
Boise Cascade's Manager of Commodity Lumber and Panel Procurement from 1981
to 1987.
11
<PAGE>
Mr. Goebel has served as Vice President and Treasurer of the Company since
its inception in November 1987. He was Division Credit Manager for Boise
Cascade's Building Materials Distribution Division from 1982 to 1987.
Mr. Pearson has served as Vice President of Human Resources of the Company
since its inception in November 1987. He was Employee Relations Manager for
Boise Cascade's Building Materials Distribution Division from 1985 to 1987.
12
<PAGE>
ITEM 2. PROPERTIES
BMC West's headquarters is in Boise, Idaho. In addition to administrative
buildings, the Company has four primary types of facilities: building
materials supply centers, pre-hung door plants, truss plants, and window
distribution facilities. The Company believes that its facilities are well
maintained and generally are adequate for the Company's needs for the
foreseeable future. All of the Company's material assets, including land and
facilities, are owned or leased by the Company.
<TABLE>
<CAPTION>
Showroom/
Office Warehouse
State and Date Owned Leased Square Square
City Acquired Acres Acres Feet Feet Primary Use
- --------- -------- ----- ------ ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA
Phoenix 1994 -- 12.7 4,000 81,000 Center
CALIFORNIA
Atwater 1990 -- 2.4 1,632 7,874 Center
Fresno (1) 1989 13.1 -- 12,334 24,314 Center,
Door Plant
Truss Plant
Merced *1977 2.9 1.0 9,499 54,122 Center,
Door Plant
Modesto 1989 14.0 -- 7,101 38,897 Center
Door Plant
Truss Plant
COLORADO
Aspen *1978 4.1 -- 9,000 21,088 Center
Boulder 1990 10.0 -- 12,600 19,800 Center
Colorado Springs 1994 3.3 -- 5,000 14,000 Center
Door Plant
Denver Door 1990 -- 1.6 4,000 66,400 Door Plant
Denver 1994 8.7 -- 17,064 23,000 Center
Door Plant
Englewood 1990 3.9 -- 3,200 14,900 Center
Evergreen 1990 3.7 -- 5,800 15,600 Center
Fort Collins 1990 4.6 .5 12,000 46,588 Center
Door Plant
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Showroom/
Office Warehouse
State and Date Owned Leased Square Square
City Acquired Acres Acres Feet Feet Primary Use
- --------- -------- ----- ------ ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
COLORADO (Cont)
Fort Lupton(2) 1994 10.5 -- 2,610 26,900 Truss Plant
Grand Junction 1994 3.5 .5 12,000 27,450 Center
Glenwood Springs 1990 2.0 -- 5,540 10,240 Center
Greeley 1994 11.0 -- 17,625 16,500 Center
Door Plant
Truss Plant
Pueblo 1994 10.7 -- 11,000 43,700 Center
Door Plant
Steamboat Springs *1978 1.4 2.8 7,580 19,645 Center
IDAHO
Boise(3) *1978 23.9 -- 18,664 56,300 Center
Truss Plant
Boise 1988 -- 0.2 24,066 -- Headquarters
Emmett *1957 2.6 -- 4,878 8,032 Center
Idaho Falls (4) *1957 11.5 1.0 10,652 55,234 Center
Door Plant
Truss Plant
Lewiston 1990 3.8 -- 7,260 24,390 Center
Door Plant
Meridian (5) *1979 3.8 1,000 18,416 Door Plant
Pocatello *1957 4.6 -- 12,000 10,600 Center
Rexburg *1957 1.9 -- 8,168 12,288 Center
Twin Falls 1993 0.5 -- 600 6,000 Door Plant
MONTANA
Great Falls 1993 9.0 -- 49,024 40,000 Center
NEVADA
Carson City(6) 1992 7.6 -- 17,225 40,924 Center
Door Plant
Gardnerville 1992 4.4 -- 8,850 17,222 Center
Reno 1992 -- 3.0 2,000 -- Center
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Showroom/
Office Warehouse
State and Date Owned Leased Square Square
City Acquired Acres Acres Feet Feet Primary Use
- --------- -------- ----- ------ ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
OREGON
Beaverton *1979 5.6 -- 6,800 25,260 Center
Door Plant
TEXAS
Abilene 1995 16.8 -- 13,750 22,500 Center
Door Plant
Truss Plant
El Paso 1991 7.0 -- 17,070 46,786 Center
Door Plant
Truss Plant
Fredericksburg 1993 4.0 -- 18,450 22,660 Center
Hurst 1994 5.3 2.3 9,480 72,000 Center
Door Plant
Killeen 1994 3.6 0.3 18,850 29,260 Center
Door Plant
Marble Falls 1993 5.2 -- 17,000 21,580 Center
New Braunfels(7) 1995 23.6 5.2 13,512 27,500 Center
Truss Plant
Window Distribution
North Austin(8) 1995 18.3 3.9 52,146 102,000 Center
Door Plant
Window Distribution
San Marcos 1993 3.0 -- 13,920 20,384 Center
Shiner 1993 1.2 0.4 6,400 12,615 Center
South Austin 1995 6.5 -- 34,255 19,767 Center
Temple 1993 11.3 -- 25,200 60,635 Center
UTAH
Ogden *1947 0.5 1.2 3,800 16,890 Center
Orem *1947 9.9 6.0 7,884 80,672 Center
Door Plant
Truss Plant
Salt Lake 1990 16.8 -- 12,744 64,088 Center
Door Plant
Truss Plant
Tooele *1947 1.5 0.7 2,000 5,320 Center
West Haven 1996 6.0 -- 12,200 42,800 Center
Door Plant
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Showroom/
Office Warehouse
State and Date Owned Leased Square Square
City Acquired Acres Acres Feet Feet Primary Use
- --------- -------- ----- ------ ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
WASHINGTON
Issaquah(9) 1994 16.4 -- 44,420 106,368 Center
Door Plant
Kent 1994 4.5 -- 19,200 26,200 Center
N. Everett(9) 1994 29.3 -- 100 85,446 Center
Truss Plant
Spokane 1990 5.0 -- 7,500 50,812 Center
Door Plant
Tacoma *1979 8.9 -- 8,050 39,770 Center
Door Plant
Truss Plant
Vancouver 1994 -- 5.4 4,800 12,000 Center
WYOMING
Jackson(10) 1996 -- 1.0 1,200 2,400 Satellite
</TABLE>
*These locations were purchased from Boise Cascade Corporation
in 1987.
(1) Oakhurst was consolidated with the Fresno facility.
(2) Supports the marketing efforts of the Colorado front range centers.
(3) The Boise facility is comprised of two locations. The center is located
at Fairview Avenue and the truss plant is located at Franklin Avenue.
(4) The Idaho Falls facility is comprised of two locations. The center and
door plant are located at N. Holmes and the truss plant is located at
Bombardier.
(5) The Boise facility includes a satellite located in Meridian, Idaho, which
serves as a door plant.
(6) The Carson City location includes a satellite facility also located in
Carson City, named Sticks N' Stones, which is across the street from the
center.
(7) The New Braunfels facility includes a satellite located in San Antonio,
which serves as a window distribution facility.
(8) The North Austin facility includes a satellite located in Round Rock,
which serves as a window distribution facility.
(9) Bellevue and Everett, Washington, facilities were consolidated with these
locations in early 1995.
(10) The Jackson facility is a satellite of the Idaho Falls, Idaho center.
BMC West and BMC are tradenames of the Company. Other brand names or
trademarks appearing in this Form 10-K are the property of their respective
holders.
16
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, the company is involved in certain 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 proceeding, would not materially affect its financial
condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The common stock of BMC West has been traded in the over-the-counter market
on the NASDAQ National Market System under the symbol "BMCW" since the
Company's initial public stock offering in August 1991. The following table
sets forth the range of high and low closing sales prices on the National
Market System for the Common Stock for the periods indicated, as reported by
NASDAQ. Such quotations represent inter-dealer prices without retail markup,
markdown or commission and may not necessarily represent actual transactions.
Common Stock Prices:
Fiscal 1996 High Low
- ----------- ---- ---
Quarter ended March 31, 1996 $16 1/4 $13
Quarter ended June 30, 1996 20 1/4 15 1/4
Quarter ended September 30, 1996 17 1/8 12 3/4
Quarter ended December 31, 1996 13 7/8 11 7/8
Fiscal 1995 High Low
- ----------- ---- ---
Quarter ended March 31, 1995 $15 1/4 $11 5/16
Quarter ended June 30, 1995 17 13 1/2
Quarter ended September 30, 1995 15 1/2 14
Quarter ended December 31, 1995 14 3/4 12 1/2
The Company has not paid any dividends on its Common Stock and the Board of
Directors presently intends to continue this policy in order to retain
earnings for use in its business. The amount of dividend payments is
restricted by the Company's loan agreements. At March 17, 1997, the Company's
common stock was held by approximately 5,815 shareholders of record or
through nominee or street name accounts with brokers (223 Registered
Holders). The last sales price for BMC West's Common Stock, as reported by
NASDAQ on March 17, 1997, was $12.50.
In February 1994, the Company declared a three-for-two stock split, effected
in the form of a stock dividend, payable March 4, 1994 to shareholders of
record as of February 25, 1994. All per share amounts, weighted average
number of common and common equivalent shares and stock prices presented in
the Form 10-K retroactively reflect the effect of the stock split.
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company for the
years indicated. It is derived from the Company's audited financial
statements, and should be read in conjunction with the disclosures in Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below and the financial statements and notes thereto presented
on pages 14 through 27 of the Company's 1996 Annual Report. (Expressed in
thousands, except per share and share figures.)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $718,024 $630,201 $547,109 $399,597 $290,957
Cost of sales 559,408 492,028 427,951 315,693 230,837
-------- -------- -------- -------- --------
Gross profit 158,616 138,173 119,158 83,904 60,120
Selling, general and
administrative expense 131,462 116,353 91,203 65,619 50,688
Other income 1,268 1,601 1,529 948 436
-------- -------- -------- -------- --------
Income from operations 28,422 23,421 29,484 19,233 9,868
Interest expense 10,496 10,746 6,486 4,554 4,948
-------- -------- -------- -------- --------
Income before income taxes 17,926 12,675 22,998 14,679 4,920
Income taxes 6,935 4,910 8,739 5,888 1,348
Income before -------- -------- -------- -------- --------
extraordinary item 10,991 7,765 14,259 8,791 3,572
Extraordinary item (342) -- -- -- (956)
-------- -------- -------- -------- --------
Net income $ 10,649 $ 7,765 $ 14,259 $ 8,791 $ 2,616
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income per share
before extraordinary item $1.00 $0.79 $1.62 $1.14 $0.62
Extraordinary item (0.03) -- -- -- (0.17)
-------- -------- -------- -------- --------
Net income per share $0.97 $0.79 $1.62 $1.14 $0.45
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average number of
common and common
equivalent shares 10,998,135 9,751,547 8,798,374 7,707,986 5,701,374
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
At Year End 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital $110,467 $100,196 $76,201 $ 60,321 $38,899
Total assets 288,369 264,970 222,450 142,297 92,021
Long-term debt (net of current maturities)
and redeemable preferred stock 90,203 123,080 79,336 57,168 37,201
Stockholders' equity 145,088 95,927 87,002 49,510 33,899
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations is presented under the caption "Financial Review" of the Company's
1996 Annual Report ("Annual Report"). The information under this caption is
incorporated herein by this reference.
To facilitate industry comparisons, the Company elected in 1994 to change its
fiscal year-end from December 28 to December 31. This change did not have a
material impact on the comparability of the Company's results of operations
or cash flows for any of the three years presented.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes, together
with the report of the independent public accountants, are presented on pages
16 through 27 of the Company's Annual Report and are incorporated herein by
this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS
The nominees for directors of the Company are presented on pages 2 through 3
of the Company's definitive Proxy Statement dated March 28, 1997 ("Proxy
Statement"). This information is incorporated herein by this reference.
The information required by this Item concerning the Company's executive
officers is set forth in Part I, Section Titled "Executive Officers", of this
report and is incorporated herein by this reference.
The information required by this Item concerning compliance with Section
16(a) of the Exchange Act is presented under the caption entitled "Certain
Relationships and Other Transactions" of the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item concerning compensation of the Company's
executive officers for the year ended December 31, 1996, is presented under
the captions entitled "Executive Compensation and Other Information" of the
Proxy Statement. This information is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item concerning the security ownership of
certain beneficial owners, directors and executive officers, as of December
31, 1996, is set forth under the caption "Security Ownership of Certain
Beneficial Owners" of the Proxy Statement and is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item concerning certain relationships and
related transactions during 1996 is set forth under the caption "Certain
Relationships and Other Transactions" of the Proxy Statement and is
incorporated herein by this reference.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this annual
report on Form 10-K for BMC West Corporation:
(1) The Financial Statements, the Notes to Financial Statements,
and the Report of Independent Public Accountants listed below
are incorporated herein by this reference from pages 16
through 27 of the Annual Report.
- Statements of Income for the years ended December 31, 1996,
1995 and 1994.
- Balance Sheets as of December 31, 1996 and
December 31, 1995.
- Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994.
- Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994.
- Notes to Financial Statements.
- Report of Independent Public Accountants.
PAGE
----
(2) Financial Statement Schedules
- Report of Independent Public Accountants . . . . . . . . 23
VIII Reserves for the years ended December 31, 1996, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 26
Schedules other than those listed are omitted because they are not applicable
or because the required information is shown in the financial statements or
notes.
(3) Exhibits.
A list of the exhibits required to be filed as part of this
report is set forth in the Index to Exhibits, which immediately
precedes such exhibits, and is incorporated herein by this
reference.
(b) Reports on Form 8-K.
None
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BMC West Corporation:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in BMC West Corporation's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 10, 1997. Our audit was made for the purpose
of forming an opinion on those statements taken as a whole. The schedule
listed in Part IV, Item 14(a)(2) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boise, Idaho
February 10, 1997
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Donald S. Hendrickson
--------------------------
Donald S. Hendrickson
President, Chief Executive Officer and Director
Dated: March 17, 1997
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald S. Hendrickson, Ellis C. Goebel, and
Robert L. Becci, and each of them, as his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and
in his name, place, and stead, in any and all capacities, to sign any and all
amendments to this Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that all said attorneys-in-fact and agents, or any of them or
their or his substitutes or substituted, may lawfully do or cause to be done
by virtue hereof. This Form 10-K may be executed in multiple counterparts,
each of which shall be an original, but which shall together constitute but
one agreement.
24
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and 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
- ----------------------------- /s/ Alec F. Beck
Ellis C. Goebel -----------------------------
Vice President and Treasurer Alec F. Beck
March 17, 1997 March 17, 1997
/s/ H. James Brown
-----------------------------
(iii) Principal Accounting Officer: H. James Brown
March 17, 1997
/s/ Robert L. Becci
- ----------------------------- /s/ Wilbur J. Fix
Robert L. Becci -----------------------------
Vice President and Controller Wilbur J. Fix
March 17, 1997 March 17, 1997
/s/ Robert V. Hansberger
-----------------------------
Robert V. Hansberger
March 17, 1997
/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
25
<PAGE>
BMC WEST CORPORATION
SCHEDULE VIII - RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, and 1994
Column A Column B Column C Column D Column E
- -------- ---------- ---------- ---------- --------
Balance at Charged to Balance at
Beginning Costs and End
of Year Expenses Deductions of Year
---------- ---------- ---------- -----------
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
Year Ended
December 31, 1996 $(1,426,000) $(1,014,000) $1,209,000(1) $(1,231,000)
Year Ended
December 31, 1995 $(932,000) $(1,008,000) $514,000(1) $(1,426,000)
Year Ended
December 31, 1994 $(1,083,000) $(556,000) $702,000(1) $(932,000)
(1) Represents write-offs net of recoveries.
26
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 10, 1997, included or incorporated by reference in
this Form 10-K for the year ended December 31, 1996, into BMC West
Corporation's previously filed registration statements on Form S-8 (File No.
33-80952) and (File No. 33-52478).
ARTHUR ANDERSEN LLP
Boise, Idaho
March 28, 1997
27
<PAGE>
BMC WEST CORPORATION
INDEX TO EXHIBITS
Filed with the Annual Report
on Form 10-K for the
Year Ended December 31, 1996
Exhibit Exhibit
Footnote Number Description Page
- -------- ------- ----------- ----
(a) 3.1 Certificate of Incorporation of the Registrant
filed on November 9, 1987.
(a) 3.2 Amendment to the Certificate of Incorporation
of the Registrant filed on June 5, 1991.
3.3 Reference is made to Exhibit 4.8.
(a) 3.4 Amended and Restated Bylaws of the Registrant.
(h) 4.2 Form of Note.
(h) 4.3 Form of Indenture dated as of November 19, 1992,
between the Company and First Interstate Bank of
Washington, N.A., as Trustee.
(i) 4.6 Rights Agreement between the Company and American
Stock Transfer & Trust dated August 3, 1993.
(i) 4.7 Form of Right Certificate.
(i) 4.8 Form of Certificate of Designation.
(i)(j) 4.9 Form of Summary of Rights.
(a) 10.1 Purchase and Sale Agreement between Boise Cascade
Corporation and MDC Northwest Holdings, Inc., dated
August 1, 1987.
(a) 10.2 Addendum to Purchase and Sale Agreement between
Boise Cascade Corporation and MDC Northwest
Holdings, Inc., dated August 20, 1987.
28
<PAGE>
Page
----
(a) 10.3 Second Addendum to Purchase and Sale Agreement
between Boise Cascade Corporation and MDC
Northwest Holdings, Inc., dated November 1, 1987.
(a) 10.4** 1990 Bonus Plan of the Company
10.5** 1997 Executive Officer Bonus Pool
(a) 10.6** Stock Option Plan (Senior Original Shareholders
Management Plan), effective January 1, 1991.
(a) 10.7** Stock Option Plan (Field Management Plan),
effective January 1, 1991.
(a) 10.8 Lease between the Company and Danken Co., dated
January 1, 1988.
(a) 10.9 First Amendment to Lease between the Company and
Danken Co., dated August 11, 1990.
(l) 10.10 Second Amendment to Lease between the Company and
Danken Co. dated January 1, 1993.
(b) 10.11 Management Services Agreement between the Company
and MDC Management Company dated July 1, 1991.
(c) 10.12 Form of indemnity agreement between the Company and
its officers and directors.
(i) 10.13* Letter Agreement dated March 27, 1992 between the
Company and Boise Cascade Corporation.
(l) 10.14 Severance Plan for Certain Key Executive Officers,
Senior Management and Key Employees of the Company
and its subsidiaries as adopted by the Board of
Directors of the Company on July 20, 1993.
(l) 10.15 Senior Management and Key Employee Severance
Agreements between the Company and Certain
Executive Officers dated October 28, 1993.
29
<PAGE>
Page
----
(l) 10.16 Note Purchase Agreement between Teachers
Insurance and Annuity Association of America
and the Company dated October 25, 1993.
(l) 10.17 Form of Note.
(n) 10.18 Modification letter dated March 1, 1995, to the
Note Purchase Agreement between Teachers Insurance
and Annuity Association of America and the Company
dated October 25, 1993.
(n) 10.19** Supplemental Retirement Plan dated January 1, 1993.
(n) 10.20 Note Purchase Agreement between Teachers Insurance
and Annuity Association of America and the Company
dated March 1, 1995.
(n) 10.21 Note Purchase Agreement between Allstate Life
Insurance Company and the Company dated March 1, 1995.
(n) 10.22 Form of Notes under Note Purchase Agreement to
Allstate Life Insurance Company.
(n) 10.23 Form of Notes on Second Amended and Restated
Credit Agreement between Wells Fargo Bank, N.A.,
as Agent, the Company, and Wells Fargo
Bank, N.A., First Interstate Bank of Oregon, N.A.,
and West One Bank, Idaho, dated March 1, 1995.
(n) 10.24 Form of Note under Second Amended and Restated
Credit Agreement.
(o) 10.25 Purchase and Sale Agreement between Stripling-
Blake Lumber Company, Inc., and the Company dated
October, 21, 1994.
(o) 10.26 First Amendment to Purchase and Sale Agreement
between Stripling-Blake Lumber Company, Inc.,
and the Company dated March 6, 1995.
(o) 10.27 Second Amendment to Purchase and Sale Agreement
between Stripling-Blake Lumber Company, Inc.,
and the Company dated March 20, 1995.
30
<PAGE>
Page
----
(o) 10.28 Third Amendment to Purchase and Sale Agreement
between Stripling-Blake Lumber Company, Inc.,
and the Company dated April 3, 1995.
10.29** Amended and Restated 1992 Non-Qualified Stock
Plan.
10.30** Amended and Restated 1993 Employee Stock Option
Plan (amended to reflect 3 for 2 stock split
effective March 4, 1994 and the adoption of
Rule 16b-3, which was revised on May 31, 1996.
10.31 Amended and Restated 1993 Non-Employee Director
Stock Option Plan (amended to reflect 3 for 2
stock split effective March 4, 1994 and the
adoption of Rule 16b-3, which was revised on
May 31, 1996.
11.1 Statement regarding computation of earnings
per share.
13.1 BMC West Corporation's 1996 Annual Report.
Such report, except to the extent incorporated
herein by reference, is being furnished for the
information of the Securities and Exchange
Commission only and is not to be deemed filed as
part of this Annual Report on Form 10-K.
23.1 Independent Public Accountants Consent. Reference
is made to page 27.
24.1 Power of Attorney. Reference is made to page 24.
- -------------------
(a) Filed as an exhibit to the Registration Statement on Form S-1 filed
with the Commission on June 6, 1991 (Registration No. 33-41040) (the
"Registration Statement") and incorporated herein by reference.
(b) Filed as an exhibit to Amendment No. 1 to the Registration Statement,
filed with the Commission on July 15, 1991 and incorporated herein by
reference.
(c) Filed as an exhibit to Amendment No. 2 to the Registration Statement,
filed with the Commission on August 2, 1991 and incorporated herein by
reference.
31
<PAGE>
(d) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991, filed with the Commission on
March 27, 1992, and incorporated herein by reference.
(e) Filed as an exhibit to the Company's Report on Form 8-K, filed with the
Commission on August 22, 1992, and incorporated herein by reference.
(f) Filed as an exhibit to the Company's Registration Statement on Form
8-A, filed with the Commission on June 6, 1991, and incorporated herein
by reference.
(g) Filed as an exhibit to Amendment No. 2 to the Registration Statement on
Form S-1, filed with the Commission on November 6, 1992 (Registration
No. 33-52430), and incorporated herein by reference.
(h) Filed as an exhibit to Amendment No. 1 to the Registration Statement on
Form S-1, filed with the Commission on October 20, 1992 (Registration
No. 33-52432), and incorporated herein by reference.
(i) Filed as an Exhibit to Company's Report on Form 8-A, filed with
Commission on August 3, 1993, and incorporated herein by reference.
(j) Filed as an Exhibit to Company's Report on Form 8-K, filed with
Commission on October 5, 1993 and incorporated herein by reference.
(k) Filed as an Exhibit to Company's Report on Form 8-K, filed with
Commission on November 15, 1993 and incorporated herein by reference.
(l) Filed as an Exhibit to Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, filed with the Commission on
March 28, 1994, and incorporated herin by reference.
(m) Filed as an Exhibit to Company's Report on Form 8-K, filed with the
Commission on November 22, 1994 and incorporated herein by reference.
(n) Filed as an Exhibit to Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, filed with the Commission on
March 30, 1995, and incorporated herein by reference.
(o) Filed as an Exhibit to Company's Report on Form 8-K, filed with
Commission on April 3, 1995, and incorporated herein by reference.
* Confidential treatment has been requested with respect
to portions of the Exhibit.
** Component of executive compensation.
32
<PAGE>
SUMMARY
COMPENSATION SYSTEM CHANGES
1. LOCATION BONUS
PROPOSED: 6.0% times location EBT (AFTER WORKING CAPITAL)
CHANGE: None
2. DISTRICT MANAGER BONUS POOL
PROPOSED: A. 2% of Corporate net earnings after tax.
B. 50% of amount derived in "A" to be paid out based on
their district's performance.
CHANGE: Previous plan was based on .13% of Corporate EAT for each
district manager plus .5% of their unit's operating income.
The new method would more equitably distribute bonuses based
on both corporate and individual district performance.
3. CORPORATE DEPARTMENT MANAGER AND OTHER KEY EMPLOYEE BONUES
PROPOSED: 1.8% times corporate net income divided among participants
based on salary.
CHANGE: Consolidate existing practice of two different pools of
corporate key department managers and other key personnel
into one pool.
4. OFFICER BONUS
PROPOSED: A. 5.2% times corporate net income divided among
participants based on salary.
B. An additional 1.0% times corporate net income for the
CEO.
CHANGE: None
5. OUR 401(K) PROGRAM INCLUDES A 50% MATCH OF THE 1ST 2% AND 25% OF THE
NEXT 3% AN EMPLOYEE SAVES.
PROPOSED: A. Effective 4-1-97 (if company performance is on budget)
improve the match to 50% of the first 3% and 25% of the
next 2% in order to improve employee participation.
B Cost is estimated to be $100,000 to $150,000 depending
upon participation. This improvement (WHICH WAS
ORIGINALLY PLANNED AS IMPROVING THE MATCH FROM 50% OF
THE FIRST 2% TO 75% ON 7-1-95 AND HAS BEEN DELAYED
SINCE THAT TIME) is a necessary step in our gradual
effort to improve nonunion retirement plans. Current
costs for our nonunion 401(k) plan is $350.00 per year
for an employee earning $20,000. A similar union
employee costs $2400 - 3600 per year.
CHANGED: None
6. 401(K) PROFIT SHARING STOCK PLAN
PROPOSED: 5.0% times corporate net income
CHANGE: None
7. SUPPLEMENTAL RETIREMENT PLANS
PROPOSED: 6.0% times corporate net income.
CHANGE: None
<PAGE>
AMENDED AND RESTATED 1992 NON-QUALIFIED
STOCK OPTION PLAN
SECTION 1
STATEMENT OF PURPOSE
The purpose of this Amended and Restated 1992 Stock Option Plan is to aid
BMC West Corporation ("BMC") in securing and retaining key employees and
directors and to motivate such employees and directors to exert their best
efforts on behalf of BMC and its stockholders. In addition, BMC expects that
the corporation and its stockholders will benefit from the added interest which
the employees and directors will have in the welfare of BMC as a result of their
proprietary interest in the corporation's success. Stock options encourage
longevity in service to the corporation and give employees and directors
incentive to maximize their efforts to enhance the profitability of the
corporation.
SECTION 2
DEFINITIONS
2.1 "BMC" shall mean BMC West Corporation, a Delaware corporation.
2.2 "Board" shall mean the Board of Directors of BMC.
2.3 "Change in Control." A "Change in Control" of BMC shall be deemed to
have occurred if (i) there shall be consummated (x) any consolidation or merger
of BMC in which BMC is not the continuing or surviving corporation or pursuant
to which BMC's Shares would be converted into cash, securities or other
property, other than a merger of BMC in which the holders of BMC's Shares
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (y) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of BMC, or
(ii) the stockholders of BMC approve a plan or proposal for the liquidation or
dissolution of BMC, or (iii) any "person" (as defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
shall become the "beneficial owner" (as defined in Rule l3d-3 under the Exchange
Act), directly or indirectly, of fifty (50%) percent or more of BMC's
outstanding Shares, or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board of
BMC shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by BMC's stockholders, of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.
Notwithstanding the above, a Change in Control shall not be deemed to have
occurred in connection with a transaction resulting in a merger, consolidation,
sale of assets or sale of securities if such transaction has been initiated (in
contrast to an action in response to or resulting
<PAGE>
from receipt of an offer or its equivalent from a third party) at the direction
of the Board of BMC acting with the approval of a majority of the independent
directors.
2.4 "Compensation Committee" shall mean the Compensation Committee of the
Board of Directors of BMC which shall be composed of not fewer than two (2)
members, all of which shall be Non-Employee Directors, if required. Any
requirement that an administrator of the Plan be a Non-Employee Director shall
not apply if the Board or the Compensation Committee expressly declares that
such requirement shall not apply.
2.5 "Non-Employee Director" shall mean a director who: (i) is not
currently an officer or otherwise employed by BMC, or a parent or subsidiary of
BMC, (ii) has not received within the fiscal year more than $60,000 for services
as a consultant to or in another capacity (other than a director) with BMC or a
parent or subsidiary of BMC, (iii) does not possess an interest in a transaction
with BMC that is disclosable under Item 404(a) of Regulation S-K, and (iv) is
not engaged in a business relationship with BMC that is disclosable under Item
404(b) of Regulation S-K, and is otherwise considered to be a "non-employee
director" in accordance with Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 as amended (the "Exchange Act").
2.6 "Eligible Participant" shall mean
(a) an officer of BMC;
(b) an employee of BMC; or
(c) a director of BMC.
2.7 "Option" shall mean the right of a Participant to purchase Shares
under this Plan.
2.8 "Option Shares" shall mean the Shares subject to the Plan that are
described in Section 5.
2.9 "Participant" shall mean an Eligible Participant to whom an Option has
been granted pursuant to this Plan.
2.10 "Plan" means this Amended and Restated 1992 Non-Qualified Stock Option
Plan.
2.11 "Shares" shall mean all shares of BMC's authorized common stock as
described in the amended Certificate of Incorporation of BMC. The Shares may be
Treasury Shares or authorized but unissued Shares.
SECTION 3
ADMINISTRATION OF THE PLAN
3.1 The Compensation Committee or the Board shall have full power and
authority, subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be issued or adopted by the
Board, to interpret the provisions and supervise the
2
<PAGE>
administration of the Plan, and waive any vesting provisions of this Plan or any
Option granted pursuant to this Plan. In accordance with the provisions of this
Plan, the Compensation Committee or Board shall select the Eligible Participants
to whom Options shall be granted and shall determine the number of shares to be
embraced in each option and the time at which the option is to be granted. The
Compensation Committee or Board shall also determine the Option Period, the
Option Price, the manner in which Options become exercisable, and fix such other
provisions of the Options as the Compensation Committee or Board may deem
necessary or desirable. All determinations and selections made by the
Compensation Committee or Board shall be by the affirmative vote of a majority
of its members, but any determination reduced to writing and signed by a
majority of the members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held.
3.2 Each Option shall be evidenced by a written instrument duly executed
by BMC and Participant, containing such terms and conditions not inconsistent
with the Plan as the Compensation Committee or Board shall determine.
SECTION 4
ELIGIBILITY AND PARTICIPATION
4.1 Options may be granted pursuant to the Plan to Eligible Participants.
Each Option to be granted and the number of Shares to be covered thereby shall
be determined by the Compensation Committee or the Board.
4.2 The Compensation Committee or the Board shall independently fix the
Options to be granted to the president of the corporation, based upon the
president's duties, responsibilities, experience, salary and other benefits
received, and upon consideration of the compensation provided to similarly
situated executives.
SECTION 5
SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8, the aggregate number of
Shares to be delivered upon exercise of all Options granted pursuant to the Plan
shall not exceed 180,000 Shares. If an Option expires or terminates for any
reason during the term of this Plan and prior to the exercise thereof in full,
the Shares subject to, but not delivered under, such Option shall, except as
hereinafter provided, be available for Options thereafter granted.
SECTION 6
TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be subject to the following terms and
conditions:
6.1 OPTION PRICE.
3
<PAGE>
The price at which Shares may be purchased upon exercise of an Option shall
be set by the Compensation Committee or the Board.
6.2 OPTION PERIOD.
No Option Shares may be purchased pursuant to an Option after the
expiration of ten (10) years from the date the Shares may first be purchased.
6.3 ACCELERATION OF EXERCISABILITY.
Unless otherwise specifically provided in any written instrument issued
under this Plan by the Compensation Committee or the Board that evidences any
Option(s) granted under this Plan, any Option(s) held by any Eligible
Participant shall become immediately exercisable upon a Change in Control of
BMC.
6.4 TRANSFERABILITY OF OPTION.
Options shall not be transferable or assignable by a Participant otherwise
than by will or by the laws of descent and distribution, and during the lifetime
of the Participant shall be exercisable only by the Participant.
6.5 EXPIRATION OF OPTION PERIOD UPON TERMINATION OF EMPLOYMENT.
Options shall expire ninety (90) days after a Participant's termination of
employment with BMC for any reason, and no Shares may thereafter be issued
pursuant to an Option, except as set forth below:
(a) If a Participant's employment is terminated by reason of the
Participant's death, the Participant's personal representative may exercise any
option rights granted pursuant to an Option, to the extent vested, at any time
within one (1) year after the Participant's death, but in any event not after
the expiration of the Option Period prescribed in Section 6.2.
(b) If a Participant's employment is terminated by reason of the
Participant's disability or retirement, the Participant may exercise any option
rights granted pursuant to an Option, to the extent vested, at any time within
one (1) year after such termination, but in any event not after the expiration
of the Option Period prescribed in Section 6.2.
SECTION 7
TERM OF PLAN
This Plan shall be effective from January 1, 1992, provided the Plan is
ratified by the stockholders of BMC within 12 months after such date. The term
during which Options may be granted pursuant to this Plan shall expire on
December 31, 2000.
4
<PAGE>
SECTION 8
ANTIDILUTION PROVISIONS
The Option Shares shall be subject to adjustment from time to time as
follows:
8.1 If at any time during the term of this Plan the total number of Shares
of BMC's common stock outstanding is increased by a stock dividend or
subdivision or split-up of such outstanding Shares, then concurrently with the
effectiveness of such subdivision or split-up, the number of Option Shares of
common stock (calculated to the nearest whole share) shall be proportionately
increased.
8.2 If at any time during the term of this Plan the total number of Shares
of BMC's common stock outstanding is decreased by a combination or reverse stock
split of such outstanding Shares, then concurrently with the effectiveness of
such combination, the number of Option Shares (calculated to the nearest whole
share) shall be proportionately decreased.
SECTION 9
MISCELLANEOUS
9.1 Neither the establishment of this Plan or any amendments thereto, nor
the grant of any Options pursuant to this Plan, shall be construed as in any way
modifying or affecting or evidencing any intention or understanding with respect
to the terms of employment or consulting relationship of an Eligible Participant
with BMC, or any subsidiary or parent of BMC. An Eligible Participant's
employment may be terminated at will at any time by BMC, and such termination of
employment may be voluntary or involuntary. The grant of any Option to an
Eligible Participant shall not be construed to grant to the Eligible Participant
the right to acquire any additional Shares in the future. The granting of
Options under the Plan shall be entirely discretionary with the Compensation
Committee or the Board and nothing in the Plan shall be deemed to give any
Eligible Participant any right to participate in the Plan or to receive Options.
9.2 BMC hereby agrees to indemnify and hold the Board members,
Compensation Committee members and officers of BMC harmless from any claims by
any person arising out of or in any way involving the Plan, the administration
of the Plan or the interpretation of the Plan.
9.3 This Plan shall be construed and interpreted under the laws of the
State of Idaho.
9.4 BMC's failure, at any time or times hereafter, to require a strict
performance of any provision of this Plan shall not waive, affect, or diminish
any right of BMC thereafter to demand strict compliance and performance
herewith.
9.5 The Compensation Committee or the Board may alter, suspend, or
discontinue the Plan, but may not, without the approval of a majority of the
holders of the corporations common stock, make any alteration or amendment
thereof which operates to increase the total number of
5
<PAGE>
shares reserved for purposes of this Plan except as provided in Section 8, or to
extend the term of the Plan or the maximum Option period.
6
<PAGE>
Amended, by approval of the Board, on January ___, 1997.
BMC WEST CORPORATION
By:__________________________
Donald S. Hendrickson,
President
7
<PAGE>
BMC WEST CORPORATION
AMENDED AND RESTATED
1993 EMPLOYEE STOCK OPTION PLAN
(AMENDED TO REFLECT 3 FOR 2 STOCK SPLIT EFFECTIVE MARCH 4, 1994 AND THE ADDTION
OF RULE 16b-3, WHICH WAS REVISED ON MAY 31, 1996)
1. PURPOSE.
The purpose of this 1993 Employee Stock Option Plan (this "Plan")
of BMC West Corporation (the "Company") is to provide incentive to, and to
encourage stock ownership by, selected employees, officers and consultants of
the Company and/or any of its parents or subsidiaries, so that such employees,
officers and consultants may acquire a proprietary interest in, or increase
their proprietary interest in, the Company.
2. ADMINISTRATION.
The following provisions shall govern the administration of this
Plan:
(a) THE COMMITTEE. This Plan shall be administered by the Board
of Directors of the Company (the "Board") or a committee (the "Committee")
consisting of two or more directors, each of whom is a "non-employee director"
(as such term is defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and an "outside director" under
Section 162(m) of the Internal Revenue Code and the regulations adopted
thereunder. Once appointed, the Committee will continue to serve until
otherwise directed by the Board. The Board may from time to time remove members
from or add members to the Committee, provided that, the number of members on
the Committee shall not be less than two. Vacancies on the Committee, howsoever
caused, shall be filled by the Board. The Board may designate a Chairman and
Vice-Chairman of the Committee from among any of the Committee members. Acts of
the Committee (i) at a meeting, held at a time and place and in accordance with
rules adopted by the Committee, at which a quorum of the Committee is present
and acting, or (ii) reduced to and approved of in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.
(b) OPTION AGREEMENTS. The Company shall effect the grant of
options under this Plan (the "Options") by execution of instruments in writing
in a form approved by the Committee or the Board (the "Option Agreements").
Each Option Agreement shall be in such form and shall contain such provisions
which are not inconsistent with this Plan as the Committee or the Board shall,
from time to time, approve. The provisions of the various Options and Option
Agreements entered into under this Plan need not be identical.
(c) POWERS OF COMMITTEE AND THE BOARD. Subject to the express
terms and conditions of this Plan and the terms of any Option outstanding under
this Plan, the Committee or the Board shall be authorized and shall have full
power to do all things necessary or desirable in connection with the
administration of this Plan, including, without limitation, the following:
(i) construe this Plan and the terms of any Option
granted under this Plan (subject to the provisions of Section 9(c) herein);
<PAGE>
(ii) prescribe, amend and rescind rules and regulations
relating to this Plan or the Options;
(iii) determine which persons meet the requirements of
Section 3 hereof for selection as participants in this Plan;
(iv) determine to whom of the eligible persons, if any,
Options shall be granted under this Plan;
(v) establish the terms and conditions required or
permitted to be included in each Option Agreement or any amendments thereto,
including whether Options to be granted thereunder shall be "incentive stock
options", as defined in Section 422A of the Internal Revenue Code, as amended
(the "Code"), or "non-statutory stock options";
(vi) specify the number of shares to be covered by each
Option, provided, however, that no individual may be granted an option in any
12-month period in excess of 30,000 shares of Common Stock, as presently
constituted;
(vii) determine and incorporate such terms and provisions,
as well as amendments thereto, as shall be required in the judgment of the
Committee or the Board, so as to provide for or conform such Option to any
change in any law, regulation, ruling or interpretation applicable thereto; and
(viii) to make all other determinations deemed necessary or
advisable for administering this Plan.
The Committee or Board's determination on the foregoing matters
shall be conclusive.
(d) PROHIBITED OPTIONEES. No member of the Committee shall be
eligible to receive any Options under this Plan.
3. PARTICIPANTS.
(a) GENERAL RULE. Participants in this Plan shall be those
selected full-time employees, officers and consultants of the Company and/or any
of its parents or subsidiaries to whom Options may be granted from time to time
by the Committee or the Board (the "Participants").
(b) LIMITATIONS WITH RESPECT TO INCENTIVE STOCK OPTIONS.
(i) No incentive stock option shall be granted under this
Plan except to employees of the Company or its parents or subsidiaries, who
shall be the only persons eligible to receive such incentive stock options.
(ii) No incentive stock option shall be granted to any
particular individual if the Fair Market Value (as defined in Section 3(c)
below) of the Shares to be granted (determined on the proposed date of grant)
with respect to which incentive stock options are first exercisable by such
individual during any calendar year under this Plan and all similar plans of the
Company and its parents and subsidiaries exceeds one hundred thousand dollars
($100,000).
(iii) Each incentive stock option granted under this Plan
to an employee who owns, on the date of grant of such incentive stock option,
more than 10% of the total combined voting power of all classes of stock of the
Company or of its parents or subsidiaries (x) shall not be exercisable after the
expiration of five (5) years from the date such incentive stock option is
granted, and (y) shall have an
2
<PAGE>
exercise price that is not less than one hundred ten percent (110%) of the
aggregate Fair Market Value of the Shares on the date of grant of such incentive
stock option.
(c) "FAIR MARKET VALUE" when used in reference to the purchase
of Shares pursuant to the exercise of an Option shall mean (i) if the Common
Stock of the Company (the "Common Stock") is listed on the New York Stock
Exchange or any other established stock exchange or on the NASDAQ National
Market, the closing sales price of the Common Stock on the relevant date as
reported in the WALL STREET JOURNAL, (ii) if the Common Stock is not then listed
on an exchange or traded on the NASDAQ National Market, the average of the
closing bid and asked prices per share for the Common Stock in the
over-the-counter market as quoted on NASDAQ on such date, or (iii) if the Common
Stock is not then listed on an exchange or quoted on NASDAQ, an amount
determined in good faith by the Board or the Committee.
4. THE SHARES.
The initial shares of stock subject to Options authorized to be
granted under this Plan shall consist of three hundred seventy-five thousand
(375,000) shares of the Common Stock (the "Shares"), or the number and kind of
shares of stock or other securities which shall be substituted for such Shares
or to which such Shares shall be adjusted as provided in Section 5(i) hereof.
The Shares subject to this Plan may be set aside out of the authorized but
unissued shares of Common Stock not reserved for any other purpose or out of
shares of Common Stock subject to an Option which, for any reason, terminates
unexercised as to the Shares.
5. GRANT, TERMS AND CONDITIONS OF OPTIONS.
Options may be granted at any time prior to the termination of
this Plan to selected full-time employees, officers and consultants of the
Company and/or its parents or subsidiaries who, in the judgment of the Committee
or the Board, contribute to the successful conduct of the Company's operation
(or the operation of any of its parents or subsidiaries) through their judgment,
interest, ability and special efforts; provided, however, that: (i) except in
the case of termination by death or disability, certain retirements after age
65, or termination for Cause as set forth in Section 5(d) below, the granted
Option must be exercised by the Participant no later than three (3) months after
any termination of employment or association with the Company and/or its parents
or subsidiaries and such employment or association must have been continuous
since the granting of the Option, except for Board or Committee approved leaves
of absence; and (ii) the total number of Shares subject to Options granted to
any one Participant, at any one time, shall not exceed ten percent (10%) of the
then issued and outstanding shares of Common Stock. In addition, Options
granted pursuant to this Plan shall be subject to the following terms and
conditions:
(a) OPTION PRICE. The purchase price under each Option shall be
determined by the Committee or the Board; provided that, the purchase price
shall not be less than one hundred percent (100%) of the Fair Market Value of
the Shares subject thereto on the date the Option is granted. The Fair Market
Value of such Shares shall be determined in accordance with the provisions set
forth in Section 3(c) above. If, however, an employee owns stock of the Company
or of its parents or subsidiaries possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its
parents or subsidiaries, the Option price of any incentive stock option granted
to such employee shall be not less than the amount set forth in Section
3(b)(iii) above.
(b) DURATION OF OPTIONS. Each Option shall vest in such manner
and at such time up to but not exceeding ten (10) years from the date the Option
is granted as the Committee or Board shall determine in its sole discretion;
provided also, however, that the Committee or Board may, in its sole discretion,
accelerate the time of exercise of any Option; provided further, that each
Option shall immediately vest in full upon a Change in Control (as defined in
Section 5(j) herein); and provided further, that if an
3
<PAGE>
incentive stock option is granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, such Option by its terms shall not be exercisable after
the expiration of five (5) years from the date such Option is granted. The
termination of this Plan shall not alter the maximum duration, the vesting
provisions, or any other term or condition of any Option granted prior to the
termination of this Plan.
(c) EXERCISE OF OPTIONS AND PAYMENT FOR SHARES. To the extent
the right to purchase Shares has vested under a Participant's Option Agreement,
Options may be exercised from time to time by delivering payment in full at the
Option Price for the number of Shares being purchased: (1) in cash or cash
equivalents; (2) by delivery of shares of Common Stock, valued at the Fair
Market Value on the date of exercise; provided, however, that Options may not be
exercised by the delivery of Common Stock more frequently than at six-month
intervals; or (3) by delivery of a properly executed exercise notice together
with such other documentation as the Committee or the Board, and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale proceeds required to pay the exercise price; together
with written notice to the Secretary of the Company identifying the Option or
part thereof being exercised and specifying the number of Shares for which
payment is being tendered. The Company shall deliver to the Participant, which
delivery shall be not less than fifteen (15) days and not more than thirty (30)
days after the giving of such notice, without transfer or issue tax to the
Participant (or other person entitled to exercise the Option) at the principal
office of the Company, or such other place as shall be mutually acceptable, a
certificate or certificates for such Shares; provided, however, that the date of
issuance and time of such delivery may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with any
requirements of law. If an Option covers both incentive and non-statutory stock
options, separate stock certificates will be issued; one or more for the
incentive stock options and one or more the non-statutory stock options.
(d) TERMINATION OF EMPLOYMENT. Upon the termination of a
Participant's status as an employee (including officers) of the Company and/or
its parents or subsidiaries ("Employment") or as a consultant of the Company
and/or its parents or subsidiaries ("Association"), his or her rights to
exercise an Option then held shall be only as follows:
(i) DEATH OR PERMANENT DISABILITY. If a Participant's
Employment or Association is terminated by reason of death or permanent
disability, such Participant or his or her estate shall have the right for a
period of twelve (12) months following the date of death or permanent disability
to exercise the Option to the extent the Participant was entitled to exercise
such Option on the date of the Participant's death or permanent disability,
provided that the actual date of exercise is in no event after the expiration of
the term of the Option.
As used herein, Participant's "estate" shall mean the
Participant's legal representative or any person who acquires the right to
exercise an Option by reason of the Participant's death.
(ii) RETIREMENT AFTER AGE 65. A Participant shall be
entitled to exercise any of such Participant's non-statutory stock options for a
period of twenty-four (24) months from the date of such Participant's retirement
from Employment after age 65 in accordance with the Company's then-current
retirement policy (or the then-current retirement policy of any parent or
subsidiary, if applicable), to the extent the Participant was entitled to
exercise such non-statutory stock options on the date of the Participant's
retirement, and provided that the actual date of exercise is in no event after
the expiration of the term of the Option. In the event that a Participant
intends to retire from Employment after age 65 and such Participant is the
holder of one or more incentive stock options, then such Participant shall be
entitled, for a period of sixty (60) days ending on the date which is six (6)
months prior to the Participant's date of retirement, to elect to convert one or
more incentive stock options into non-statutory stock options by written request
received by the Company within such sixty (60) day period and, thereafter, such
newly converted non-statutory stock options shall be issued by the Company to
such Participant in exchange for such incentive stock options and shall be
4
<PAGE>
subject to the twenty-four (24) month exercise period set forth herein; provided
that, such Participant actually retires on his or her retirement date. In the
event a Participant fails to convert any incentive stock option hereunder, then
such incentive stock options shall be governed by the provisions of subparagraph
(iv) below.
(iii) TERMINATION FOR CAUSE. If a Participant's Employment
or Association is terminated for Cause (as defined below), then all Options
previously granted to such Participant and remaining unexercised as of such
Participant's termination date shall immediately terminate. Employment or
Association shall be deemed to have been terminated for "Cause" if a Participant
is determined by the Board to have willfully breached his or her duty in the
course of Employment or Association or to have committed an act of embezzlement,
fraud, dishonesty or deliberate disregard of the rules of the Company or engaged
in any conduct which constitutes unfair competition with the Company (as
determined by the Board acting in its sole discretion).
(iv) OTHER REASONS. If a Participant's Employment or
Association is terminated for any reason other than those described under
subparagraphs (i), (ii) or (iii) above, the Participant may, within three (3)
months following such termination, exercise the Option to the extent such Option
was exercisable by the Participant on the date of termination of the
Participant's Employment or Association, provided that the actual date of
exercise is in no event after the expiration of the term of the Option.
(e) TRANSFERABILITY OF OPTIONS. Each Option shall be
transferable only by will or the laws of descent and distribution and shall be
exercisable during the Participant's lifetime only by the Participant. The
transfer by the Participant to a trust created by the Participant for the
benefit of the Participant or the Participant's family which is revocable at any
and all times during the Participant's lifetime by the Participant and as to
which the Participant is the sole trustee during his or her lifetime, will not
be deemed to be a transfer for purposes of this Plan. Under such rules and
regulations as the Committee or the Board may establish pursuant to the terms of
this Plan, a beneficiary may be designated with respect to an Option grant in
the event of the death of a Participant. If the estate of the Participant is
the beneficiary with respect to the grant, any rights with respect to such grant
may be transferred to the person or entity (including a trust) entitled thereto
under the will of such Participant or pursuant to the laws of descent and
distribution.
(f) OTHER TERMS AND CONDITIONS. Options may also contain such
other provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee or the Board shall deem appropriate. No Option,
however, nor anything contained in this Plan, shall confer upon any Participant
any right to continue in the employ of the Company or its parents or
subsidiaries, nor limit in any way the right of the Company or its parents or
subsidiaries to terminate a Participant's employment at any time.
(g) USE OF PROCEEDS FROM STOCK. Proceeds from the sale of
Shares pursuant to the exercise of Options granted under this Plan shall
constitute general funds of the Company.
(h) RIGHTS AS A STOCKHOLDER. The Participant shall have no
rights as a stockholder with respect to any Shares until such shares are
actually issued and delivered to Participant. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date of such
issuance, except as provided in Section 5(i) hereof.
(i) ADJUSTMENTS. If the outstanding shares of the Common Stock
are increased, decreased or changed into, or exchanged for a different number or
kind of shares or securities of the Company, without receipt of consideration by
the Company, through reorganization, merger, recapitalization, reclassification,
stock split-up, stock dividend, stock consolidation, or otherwise, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares and the exercise price per share allocated to unexercised Options, or
portions thereof, which shall have been granted prior to any such change. Any
such adjustment, however, in an outstanding Option shall be made without change
in the total price applicable to the unexercised portion of the Option but with
a corresponding adjustment in the price for each
5
<PAGE>
share subject to the Option. Adjustments under this Section shall be made by
the Committee or the Board, whose determination as to what adjustments shall be
made and the extent thereof, shall be final and conclusive. No fractional
shares of stock shall be issued under this Plan on account of any such
adjustment.
(j) CHANGE IN OWNERSHIP OR CONTROL. In the event of a Change in
Control (as defined below), all Options outstanding hereunder shall become
immediately exercisable in full. A "Change in Control" of the Company shall be
deemed to have occurred if (i) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company, or (iii) any "person" (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), shall become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of fifty (50%) percent or more
of the Company's outstanding Common Stock, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board shall cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period. Notwithstanding the above, a Change of Control shall not be deemed to
have occurred in connection with a transaction resulting in a merger,
consolidation, sale of assets or sale of securities if such transaction has been
initiated (in contrast to an action in response to or resulting from receipt of
an offer or its equivalent from a third party) at the direction of the Board
acting with the approval of a majority of the independent directors.
In the event of (i) a dissolution or liquidation of the Company
or (ii) a merger or consolidation in which the Company is not the surviving
corporation, the Company shall give to the Participant, at the time of adoption
of the plan for liquidation, dissolution, merger or consolidation, either: a
reasonable time thereafter within which to exercise the Option, prior to the
effectiveness of such liquidation, dissolution, merger or consolidation, at the
end of which time the Option shall terminate; or the right to exercise the
Option as to an equivalent number of shares of stock of the corporation
succeeding the Company or acquiring its business by reason of such liquidation,
dissolution, merger or consolidation.
(k) WITHHOLDING TAXES. Whenever Shares are to be issued under
this Plan, the Company shall have the right to require payment to the Company by
the person to receive such Shares of an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to delivery of any
certificate or certificates representing such Shares. Payment of withholding
taxes may be made by delivery of Company stock (valued at such stock's Fair
Market Value on the date of delivery) or Options to the Company.
6. LISTING, QUALIFICATION AND COMPLIANCE WITH SECURITIES LAWS.
All Options granted under this Plan are subject to the
requirement that if at any time the Committee or the Board shall determine in
its sole discretion that the listing and/or qualification of the Shares subject
thereto on any securities exchange or under any applicable law, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the issuance of Shares under the Option, the
Option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any condition not acceptable to the Committee or the Board. The Company shall
diligently endeavor to comply with all applicable securities laws before any
Options are granted under this Plan and before any Shares are issued pursuant to
the exercise of such Options.
6
<PAGE>
7. BINDING EFFECT OF CONDITIONS.
The conditions and stipulations contained herein, or in any
Option granted pursuant to this Plan, shall be, and constitute, a covenant
running with all the Shares acquired by the Participant pursuant to this Plan,
directly or indirectly, whether such Shares have been issued or not, and those
Shares owned by the Participant shall not be sold, assigned or transferred by
any person save and except in accordance with the terms and conditions herein
provided, and the Participant shall agree to use the Participant's best efforts
to cause the officers of the Company to refuse to record on the books of the
Company any assignment or transfer made or attempted to be made except as
provided in this Plan and to cause said officers to refuse to cancel old
certificates or to issue or deliver new certificates therefore where the
purchaser or assignee has acquired certificates for the Shares represented
thereby, except strictly in accordance with the provisions of this Plan.
8. ADDITIONAL OPTIONS AND REGRANTS.
The Committee or the Board may grant to a Participant, if the
Participant is otherwise eligible, additional Options or, at its discretion with
the consent of the Participant, amend an Option or grant a new Option in lieu of
an outstanding Option to take into account a decrease in the Fair Market Value
of the Common Stock, or for any other reason the Committee or the Board shall
deem appropriate, subject to the limitations of Section 5 hereof and provided
that, any new or amended Option granted hereunder shall have an exercise price
not less than one hundred percent (100%) of the Fair Market Value at the date of
regrant or amendment.
9. AMENDMENT AND INTERPRETATION OF THIS PLAN.
(a) STOCKHOLDER APPROVAL REQUIRED. The Board or the Committee
may amend this Plan at any time. No amendment adopted without stockholder
approval may (i) increase the number of shares as to which Options may be
granted, (ii) reduce the exercise price below the price provided in this Plan,
(iii) modify the requirements as to eligibility for participation, or (iv)
materially increase the benefits accruing under this Plan.
(b) PROHIBITED AMENDMENTS. No amendment shall affect the
rights of the holder of any Option, except with that holder's consent.
(c) INTERPRETATION. Questions of interpretation of any of the
provisions of this Plan not specifically reserved in this Agreement for
interpretation by the Committee or the Board shall be resolved by legal counsel
for the Company selected by the Chief Executive Officer of the Company.
10. TERMINATION OR SUSPENSION OF THIS PLAN.
The Board at any time may suspend or terminate this Plan. This
Plan, unless sooner terminated, shall terminate on the tenth (10th) anniversary
of its adoption by the Board. No Option may be granted under this Plan while
this Plan is suspended or after it is terminated. Suspension or termination of
this Plan shall not affect the rights of the holder of any outstanding Option,
except with that holder's consent.
11. APPLICABLE LAW.
7
<PAGE>
This Plan shall be governed by, interpreted under, and construed
and enforced in accordance with the laws of the State of Delaware, excluding
choice of law provisions thereof.
12. OTHER PLANS.
Nothing in this Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan, practice
or arrangement for the payment of compensation or benefits to Participants
generally, which the Company or its parents or subsidiaries now has or may
hereafter lawfully put into effect, including, without limitation, any
retirement, pension, insurance, stock purchase, incentive compensation or bonus
plan.
13. SUCCESSORS AND ASSIGNS.
This Plan and any agreement with respect to an Option granted
hereunder shall be binding upon the successors and assigns of the Company and
upon each Participant and such Participant's heirs, executors, administrators,
personal representatives, and permitted successors and assigns.
14. EFFECTIVENESS OF THE PLAN.
This Plan shall become effective only upon approval by the Board
and the stockholders of the Company. The exercise of any Options granted
pursuant to this Plan shall be conditioned upon the approval of this Plan by the
holders of a majority of the outstanding shares of Common Stock of the Company
within twelve (12) months after the date such Plan is adopted by the Board.
Approved by the Board on October 28, 1993.
Approved by the stockholders of the Company on May 5, 1994.
Amended to reflect 3 for 2 stock split effective March 4, 1994.
Amended, by approval of the Board, on January ___, 1997.
8
<PAGE>
BMC WEST CORPORATION
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(AMENDED TO REFLECT 3 FOR 2 STOCK SPLIT EFFECTIVE MARCH 4, 1994 AND THE ADOPTION
OF RULE 16b-3, WHICH WAS REVISED ON MAY 31, 1996)
1. PURPOSE.
The purpose of the 1993 Non-Employee Director Stock Option Plan (the
"Plan") of BMC West Corporation (the "Company") is to promote the interests of
the Company by attracting and retaining highly qualified independent directors
by providing such individuals with an investment interest in the Company's
future success.
2. DEFINITIONS.
The following definitions shall apply to this Plan:
(a) "ANNUAL GRANT DATE" shall mean, for each fiscal year, the date on
which the stockholders of the Company have their regular annual meeting.
(b) "BOARD" or "BOARD OF DIRECTORS" shall mean the Board of Directors
of the Company.
(c) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or Federal or California state holiday.
(d) "CHANGE OF CONTROL." A "Change in Control" of the Company shall
be deemed to have occurred if (i) there shall be consummated (x) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of the Company's Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (y) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (ii) the stockholders of the Company approve a plan or proposal for
the liquidation or dissolution of the Company, or (iii) any "person" (as defined
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), shall become the "beneficial owner" (as defined in Rule
l3d-3 under the Exchange Act), directly or indirectly, of fifty (50%) percent or
more of the Company's outstanding Common Stock, or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
<PAGE>
(e) "ELIGIBLE DIRECTOR" shall mean any person who is a member of the
Board and who is not a full or part-time employee of the Company or of any
parent or subsidiary corporation (as defined in Section 424 of the Internal
Revenue Code of 1986, as amended) of the Company, and who has not been an
employee of the Company or of any parent or subsidiary of the Company within one
(l) year prior to participation in the Plan.
(f) "FAIR MARKET VALUE" when used in reference to the purchase of
Shares pursuant to the exercise of an option shall mean (i) if the Common Stock
is listed on the New York Stock Exchange or any other established stock exchange
or on the NASDAQ National Market, the closing sales price of the Common Stock on
the relevant date as reported in the WALL STREET JOURNAL, (ii) if the Common
Stock is not then listed on an exchange or traded on the NASDAQ National Market,
the average of the closing bid and asked prices per share for the Common Stock
in the over-the-counter market as quoted on NASDAQ on such date, or (iii) if
the Common Stock is not then listed on an exchange or quoted on NASDAQ, an
amount determined in good faith by the Board of Directors of the Company.
(g) "GRANT DATE" shall mean the Initial Grant Date or the Annual
Grant Date, as appropriate.
(h) "INITIAL GRANT DATE" shall mean the later of (i) the date on
which an Eligible Director is first elected as a member of the Board by action
of the stockholders of the Company, (ii) in the case of a director who has been
an employee of the Company or a parent or subsidiary of the Company, the date on
which such director becomes an Eligible Director, and (iii) October 27, 1993.
(i) "OPTION" shall mean an option to purchase Shares granted under
this Plan.
(j) "OPTION AGREEMENT" shall mean the written agreement described in
Section 7.
(k) "SHARES" shall mean shares of the Common Stock of the Company.
3. ADMINISTRATION.
(a) GENERAL. This Plan shall be administered by the Board in
accordance with the express provisions of this Plan.
(b) POWERS OF BOARD. The Board shall have full and complete
authority to adopt such rules and regulations and to make all such other
determinations not inconsistent with the Plan as may be necessary for the
administration of the Plan. Notwithstanding the foregoing, the Company shall
have no authority or discretion as to the persons eligible to receive Options
under the Plan, or the number of Shares covered by Options under the Plan, which
matters are specifically governed by the provisions of this Plan.
4. RESTRICTIONS.
2
<PAGE>
All Options granted under the Plan shall be subject to the requirement
that, if at any time the Company shall determine, in its discretion, that the
listing, registration or qualification of the Shares subject to Options granted
under the Plan upon any securities exchange or under any state or federal law,
or the consent or approval of any government regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the issuance, if any, or purchase of Shares in connection therewith, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
5. SHARES SUBJECT TO PLAN.
(a) AGGREGATE NUMBER. Subject to adjustment in accordance with
Section 7(g), an aggregate of 97,500 Shares is reserved for issuance under this
Plan. Shares sold under this Plan may be unissued Shares or reacquired Shares.
If any Options shall for any reason be canceled, terminate or expire without
having been exercised in full, Shares not purchased thereunder shall be
available again for grant under this Plan.
(b) RIGHTS AS STOCKHOLDER. No Eligible Director and no beneficiary
or other person claiming under or through such Eligible Director shall have any
rights as a stockholder with respect to Shares acquired by exercise of an Option
until the issuance (as evidenced by the appropriate entry on the books of the
Company or a duly authorized transfer agent) of a stock certificate evidencing
the Shares. Subject to Section 7(g), no adjustment shall be made for dividends
or other events for which the record date is prior to the date the certificate
is issued.
(c) RIGHTS WITH RESPECT TO SHARES. No Eligible Director and no
beneficiary or other person claiming under or through such Eligible Director
shall have any right, title or interest in or to any Shares subject to any
Option unless and until such Option is duly exercised pursuant to the terms of
this Plan.
6. NONDISCRETIONARY GRANTS
(a) INITIAL GRANT. On the Initial Grant Date, each Eligible Director
shall automatically receive the grant of an Option to purchase 2,250 Shares.
(b) REGULAR ANNUAL GRANTS. On each Annual Grant Date, immediately
after the annual election of directors, each Eligible Director then in office
shall automatically receive the grant of an Option to purchase 2,250 Shares.
(c) ADJUSTMENT. The number of Shares for which Options are granted
in accordance with this Section 6 and the number of Shares subject to any Option
shall be subject to adjustment in accordance with Section 7(g).
7. TERMS OF OPTION AGREEMENTS.
Upon the grant of each Option, the Company and the Eligible Director shall
enter into an Option Agreement which shall specify the Grant Date, the number of
Shares to which the option
3
<PAGE>
pertains, the exercise price per share, and shall include or incorporate by
reference the substance of all of the following provisions and such other
provisions consistent with this Plan as the Board may determine:
(a) OPTION TERM. Unless terminated earlier pursuant to the
provisions of Sections 7(f) or 7(h), each Option shall expire and no longer be
exercisable on a date which is ten (10) years after the Grant Date of such
Option.
(b) EXERCISE SCHEDULE. The Option shall be exercisable on the
earlier of the first anniversary of the Grant Date or the day immediately prior
to the date on which the stockholders have their annual meeting following the
Grant Date of the Option, providing that the Eligible Director is still serving
as a director of the Company at such time. Notwithstanding the foregoing, an
Option held by an Eligible Director shall become immediately exercisable in full
upon the death or disability of such Eligible Director, upon retirement after
age sixty-five (65) of such Eligible Director from the Board, upon an
unsuccessful attempt by such Eligible Director to win reelection to the Board,
or upon a Change of Control of the Company. The Initial Grant set forth in
Section 6(a) shall vest on the day of the Company's 1994 annual meeting of the
stockholders.
(c) PURCHASE PRICE. The purchase price of the Shares subject to each
Option shall be the Fair Market Value of Shares on the Grant Date of such
Option, or on the last preceding Business Day if such Grant Date is not a
Business Day.
(d) PAYMENT OF PURCHASE PRICE. The purchase price of Shares acquired
pursuant to an Option shall be paid in full at the time the Option is exercised:
(1) in cash or cash equivalents; (2) by delivery of shares of Common Stock of
the Company, valued at the Fair Market Value on the date of exercise; provided,
however, that Options may not be exercised by the delivery of Common Stock more
frequently than at six-month intervals or (3) by delivery of a properly executed
exercise notice together with such other documentation as the Board and the
broker, if applicable, shall require to effect an exercise of the option and
delivery to the Company of the sale proceeds required to pay the exercise price.
(e) TRANSFERABILITY. No Option shall be transferable otherwise than
by will or the laws of descent and distribution, and an Option shall be
exercisable during the Eligible Director's lifetime only by the Eligible
Director. The transfer by an Eligible Director to a trust created by the
Eligible Director for the benefit of the Eligible Director or the Eligible
Director's family which is revocable at any and all times during the Eligible
Director's lifetime by the Eligible Director and as to which the Eligible
Director is the sole trustee during his or her lifetime, will not be deemed to
be a transfer for purposes of the Plan. Under such rules and regulations as the
Board may establish pursuant to the terms of the Plan, a beneficiary may be
designated with respect to an Option grant in the event of the death of an
Eligible Director. If the estate of the Eligible Director is the beneficiary
with respect to the grant, any rights with respect to such grant may be
transferred to the person or entity (including a trust) entitled thereto under
the will of such Eligible Director or pursuant to the laws of descent and
distribution.
4
<PAGE>
(f) TERMINATION OF MEMBERSHIP ON THE BOARD. If an Eligible
Director's membership on the Board terminates for any reason, an Option held at
the date of termination may be exercised in whole or in part at any time within
the remaining term of the Option but only to the extent exercisable in
accordance with Section 7(b).
(g) CAPITALIZATION CHANGES. If any change is made in the Shares
subject to the Plan or subject to any Option granted under the Plan, through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure, or any
other capital reorganization, the Board shall make appropriate adjustments as to
the maximum number of Shares subject to the Plan, the number of Shares for which
Options may be granted to any Eligible Director, and the number of Shares and
price per Share covered by outstanding Options.
(h) CHANGE OF OWNERSHIP. In the event of (i) a dissolution or
liquidation of the Company or (ii) a merger or consolidation in which the
Company is not the surviving corporation, the Company shall give to the Eligible
Director, at the time of adoption of the plan for liquidation, dissolution,
merger or consolidation, either: a reasonable time thereafter within which to
exercise the Option, prior to the effectiveness of such liquidation,
dissolution, merger or consolidation, at the end of which time the Option shall
terminate; or the right to exercise the Option as to an equivalent number of
shares of stock of the corporation succeeding the Company or acquiring its
business by reason of such liquidation, dissolution, merger or consolidation.
(i) WITHHOLDING TAXES. Whenever Shares are to be issued under the
Plan, the Company shall have the right to require payment to the Company by the
person to receive such Shares of an amount sufficient to satisfy federal, state
and local withholding tax requirements prior to delivery of any certificate or
certificates representing such Shares. Payment of withholding taxes may be made
by delivery of Company stock or options to the Company.
8. USE OF PROCEEDS.
Proceeds from the sale of Shares pursuant to this Plan shall be used by the
Company for general corporate purposes.
9. LEGAL REQUIREMENTS.
Shares shall not be offered or issued under this Plan unless the offer,
issuance and delivery of such Shares shall comply with all applicable provisions
of law. domestic or foreign, Including, without limitation, the Securities Act
of 1933, as amended, and the requirements of any stock exchange upon which the
Shares may then be listed. As a condition precedent to the issuance of Shares
pursuant to a grant under this Plan, the Company may require an Eligible
Director to take any reasonable action to comply with such requirements. Any
certificates representing Shares purchased upon exercise of an Option shall bear
appropriate legends.
10. AMENDMENT AND INTERPRETATION OF PLAN.
5
<PAGE>
(a) STOCKHOLDER APPROVAL REQUIRED. The Board may amend the Plan at
any time. No amendment adopted without stockholder approval may (i) increase
the number of shares as to which Options may be granted, (ii) reduce the
exercise price below the price provided in the Plan, (iii) modify the
requirements as to eligibility for participation, or (iv) materially increase
the benefits accruing under the Plan.
(b) PROHIBITED AMENDMENTS. No amendment shall (i) change the
nondiscretionary manner in which grants are made under Section 6, or (ii) affect
the rights of the holder of any Option, except with that holder's consent.
(c) INTERPRETATION. Questions of interpretation of any of the
provisions of the Plan shall be resolved by legal counsel for the Company
selected by the Chief Executive Officer of the Company.
11. TERMINATION OR SUSPENSION OF PLAN.
The Board at any time may suspend or terminate this Plan. This Plan,
unless sooner terminated, shall terminate on the fifth anniversary of its
adoption by the Board. No Option may be granted under this Plan while this Plan
is suspended or after it is terminated. Suspension or termination of this Plan
shall not affect the rights of the holder of any Option, except with that
holder's consent.
12. EFFECTIVE DATE; STOCKHOLDER APPROVAL.
This Plan has been approved by the Board and shall become effective on
October 27, 1993, subject to its approval by the stockholders of the Company
within 12 months after the Board approval date, by the affirmative vote of the
holders of a majority of the voting-power of the shares of the Company. Options
may be granted, but not exercised, before such stockholder approval. If the
stockholders fail to approve this Plan within the required time period, any
Options granted under this Plan shall be void, and no additional Options shall
be granted.
13. DIRECTOR STATUS.
Nothing in this Plan or in any instrument executed pursuant hereto shall
confer upon any Eligible Director any right to continue as a member of the Board
of the Company or any parent or subsidiary thereof.
14. OTHER PLANS.
Nothing in this Plan is intended to be a substitute for, or shall preclude
or limit the establishment or continuation of, any other plan, practice or
arrangement for the payment of compensation or benefits to directors generally,
which the Company now has or may hereafter lawfully put into effect, including,
without limitation, any retirement, pension, insurance, stock purchase,
incentive compensation or bonus plan.
6
<PAGE>
15. APPLICABLE LAW.
This Plan shall be governed by, interpreted under, and construed and
enforced in accordance with the laws of the State of Delaware, excluding choice
of law provisions thereof.
16. SUCCESSORS AND ASSIGNS.
This Plan and any agreement with respect to an Option shall be binding upon
the successors and assigns of the Company and upon each Eligible Director and
such Eligible Director's heirs, executors, administrators, personal
representatives, permitted assignees and successors in interest.
Amended, by approval of the Board, on January ___, 1997.
7
<PAGE>
EXHIBIT 11.1
BMC WEST CORPORATION
Computation of Earnings Per Share
FOR THE YEAR ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Net income $10,649,000 $ 7,765,000 $14,259,000
Class B preferred stock
accretion (34,000) (34,000) (34,000)
----------- ----------- -----------
Net Income available
to common stock $10,615,000 $ 7,732,000 $14,225,000
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares
outstanding 10,759,892 9,498,375 8,504,609
Net effect of dilutive
stock options based on
the treasury stock
method using average
market price 238,243 253,172 293,765
----------- ----------- -----------
Total common shares and
equivalents 10,998,135 9,751,547 8,798,374
----------- ----------- -----------
----------- ----------- -----------
Primary Earnings Per Share $0.97 $0.79 $1.62
----- ----- -----
----- ----- -----
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Net Income Available
to Common Stock $10,615,000 $ 7,732,000 $14,225,000
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares
outstanding 10,759,892 9,498,375 8,504,609
Net effect of dilutive
stock options based on
the treasury stock
method using the higher
of quarter-end market
price or average
market price 238,243 257,113 293,765
----------- ----------- -----------
Total shares and
equivalents 10,998,135 9,755,488 8,798,374
----------- ----------- -----------
----------- ----------- -----------
Fully Diluted Earnings Per Share $0.97 $0.79 $1.62
----- ----- -----
----- ----- -----
</TABLE>
33
<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, BMC Holdings, Inc.
Upon completion of the reorganization, BMC Holdings, Inc. will be the name of
the publicly traded securities.
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,066
<SECURITIES> 0
<RECEIVABLES> 67,970
<ALLOWANCES> 1,231
<INVENTORY> 76,415
<CURRENT-ASSETS> 157,282
<PP&E> 103,921
<DEPRECIATION> 27,602
<TOTAL-ASSETS> 288,369
<CURRENT-LIABILITIES> 46,815
<BONDS> 90,203
0
0
<COMMON> 12
<OTHER-SE> 145,076
<TOTAL-LIABILITY-AND-EQUITY> 288,369
<SALES> 718,024
<TOTAL-REVENUES> 718,024
<CGS> 559,408
<TOTAL-COSTS> 690,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,496
<INCOME-PRETAX> 17,926
<INCOME-TAX> 6,935
<INCOME-CONTINUING> 10,991
<DISCONTINUED> 0
<EXTRAORDINARY> (342)
<CHANGES> 0
<NET-INCOME> 10,649
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
</TABLE>
