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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
---------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NO. 0-23442
CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1984957
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11651 PLANO ROAD, DALLAS TX 75243
(Address of principal executive offices)
(Zip Code)
214-860-5100
(Registrant's telephone number, including area code)
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
----- -----
The number of shares of Registrant's Common Stock outstanding at March
10, 1997 was 9,233,013.
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Exhibit Index on page 13.
Page 1 of 14.
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets as of
January 31, 1997 and October 31, 1996 3
Consolidated Condensed Statements of Income
for the three months ended January 31, 1997
and 1996 4
Consolidated Condensed Statements of Stockholders'
Equity for the three months ended January 31,
1997 5
Consolidated Condensed Statements of Cash Flows
for the three months ended January 31, 1997 and
1996 6
Notes to Consolidated Condensed Financial
Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
January 31, October 31,
1997 1996
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,735 $ 5,078
Accounts receivable, net 88,095 92,932
Inventories 84,494 64,644
Prepaid expenses and other assets 2,191 1,223
Deferred income taxes 1,191 1,141
-------- --------
Total current assets 179,706 165,018
PROPERTY, PLANT AND EQUIPMENT, NET 33,525 31,219
INTANGIBLES, NET 23,678 22,538
OTHER ASSETS 1,182 895
-------- --------
TOTAL $238,091 $219,670
-------- --------
-------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 49,128 $ 54,839
Accrued expenses 11,251 14,956
Current maturities of debt 933 790
-------- --------
Total current liabilities 61,312 70,585
LONG-TERM DEBT, LESS CURRENT MATURITIES 78,240 52,078
DEFERRED INCOME TAXES 1,413 1,398
-------- --------
Total liabilities 140,965 124,061
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock; authorized 100,000 shares,
no shares issued and outstanding
Common stock; no par value; authorized
20,000,000 shares; 9,510,665 shares issued
at January 31, 1997, 9,477,480 shares issued
at October 31, 1996 60,856 60,641
Retained earnings 40,566 39,143
Treasury stock, at cost, 440,521 shares (4,296) (4,175)
-------- --------
Total stockholders' equity 97,126 95,609
-------- --------
TOTAL $238,091 $219,670
-------- --------
-------- --------
See notes to consolidated condensed financial statements.
-3-
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended
----------------------------
January 31, January 31,
1997 1996
------------ ------------
NET SALES $140,848 $ 120,041
COST OF SALES 112,650 96,894
-------- ---------
GROSS PROFIT 28,198 23,147
OPERATING EXPENSES 24,853 20,837
-------- ---------
INCOME FROM OPERATIONS 3,345 2,310
OTHER INCOME 5 9
INTEREST EXPENSE (1,092) (746)
-------- ---------
INCOME BEFORE INCOME TAXES 2,258 1,573
PROVISION FOR INCOME TAXES 835 586
-------- ---------
NET INCOME $ 1,423 $ 987
-------- ---------
-------- ---------
NET INCOME PER SHARE $ .15 $ .11
-------- ---------
-------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING 9,347 9,117
-------- ---------
-------- ---------
See notes to consolidated condensed financial statements.
-4-
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
COMMON STOCK
---------------- RETAINED TREASURY
SHARES VALUE EARNINGS STOCK TOTAL
------ ----- -------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE AS OF OCTOBER 31, 1996 9,477 $60,641 $39,143 $(4,175) $95,609
Proceeds from exercise of stock options,
including tax benefits of $148,000 31 185 - - 185
Proceeds from employee stock purchase plan 3 30 - - 30
Purchase of treasury stock - - - (121) (121)
Net income - - 1,423 - 1,423
----- ------- ------- ------- -------
BALANCE AS OF JANUARY 31, 1997 9,511 $60,856 $40,566 $(4,296) $97,126
----- ------- ------- ------- -------
----- ------- ------- ------- -------
</TABLE>
See notes to consolidated condensed financial statements
-5-
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
Three months ended
January 31, January 31,
1997 1996
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,423 $ 987
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,769 1,411
Loss (gain) on sale of property, plant and equipment (5) 1
Changes in operating assets and liabilities, net of
acquisitions:
Accounts Receivable 15,632 16,133
Inventories (10,393) (9,398)
Prepaid and deferred expenses (892) (262)
Accounts payable and accrued expenses (17,219) (5,973)
Other assets/liabilities (38) (602)
-------- -------
Net cash (used in) provided by operating activities (9,723) 2,297
INVESTING ACTIVITIES:
Acquisitions (14,877) -0-
Seller financing of acquired businesses 400 -0-
-------- -------
Cash paid at closing for acquisitions (14,477) -0-
Purchases of property, plant and equipment, net (2,976) (2,940)
Other 15 -0-
-------- -------
Net cash used in investing activities (17,438) (2,940)
FINANCING ACTIVITIES:
Net borrowings under revolving credit note 25,947 925
Repayments of seller financing of acquired business (148) (231)
Proceeds from employee stock purchase plan 30 18
Exercise of stock options 185 2
Purchase of treasury stock (121) -
Repayment of long term debt - (66)
Other (75) (32)
-------- -------
Net cash provided by financing activities 25,818 616
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,343) (27)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5.078 3,494
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,735 $ 3,467
-------- -------
-------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 213 $ 575
-------- -------
-------- -------
Cash paid for income taxes $ 562 $ 1,189
-------- -------
-------- -------
</TABLE>
See notes to consolidated condensed financial statements.
-6-
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1997
1. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements of Cameron Ashley
Building Products, Inc. and its subsidiaries (the "Company") have not been
audited, however, the balance sheet at October 31, 1996 has been derived from
the Company's audited financial statements. In the opinion of the Company's
management, the financial statements reflect all adjustments necessary to
present fairly the results of operations for the three-month periods ended
January 31, 1997 and 1996, the Company's financial position at January 31, 1997
and October 31, 1996, and the cash flows for the three-month periods ended
January 31, 1997 and 1996. These adjustments are of a normal recurring nature.
Certain notes and other information have been condensed in or omitted from the
interim financial statements presented in the Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
Company's 1996 Annual Report on Form 10-K.
The operating results for the first quarter of 1997 are not necessarily
indicative of the results that may be expected for the entire year.
2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per share is computed by dividing net income by the weighted average
shares outstanding. Weighted average shares include the actual shares
outstanding and the net additional shares which would be issuable upon the
exercise of stock options, assuming that the Company used the proceeds
(including related income tax benefits) to purchase additional shares at the
average market price during the interim periods of 1997 and 1996. Only the
primary method has been presented, since the number of shares derived under this
method is not significantly different from the fully-diluted method.
3. LONG-TERM DEBT
Long-term debt consists of the following at January 31, 1997:
<TABLE>
(In thousands)
<S> <C>
Senior Debt:
Unsecured Senior Notes with maturities and interest rates as follows:
$10,000,000 due April 15, 2001 bearing interest at 6.79%
$15,000,000 due April 15, 2002 bearing interest at 6.79%
$10,000,000 due April 15, 2003 bearing interest at 7.21%
$15,000,000 due April 15, 2006 bearing interest at 7.61%
Interest is due semi-annually, with an average interest rate of 7 1/8% $50,000
NationsBank of Texas, N.A. (as lead agent):
Revolving credit note due January 15, 2001; unsecured; interest is due
quarterly at the LIBOR rate plus 0.50% to 1.0%, or at a base rate
(defined in the agreement as prime)
At January 31, 1997, the average interest rate on advances was 7.3% 26,100
-7-
<PAGE>
Seller Financing of Acquired Businesses:
Various terms, interest rates ranging from 7% to 9% 2,524
Other, including capital leases 549
-------
79,173
Less Current Maturities (933)
-------
Long-term Debt $78,240
-------
-------
</TABLE>
In January 1997, the Company amended the credit facility with NationsBank
and other banks (collectively referred to as "NationsBank"). The financing
agreement with NationsBank covers a revolving line of credit up to $80 million
U.S. dollars and $25 million Canadian dollars. The financing agreement requires
compliance with certain financial ratios and covenants. The obligations of the
Company to NationsBank are unsecured.
NOTE 4. ACQUISITIONS - COMPLETED AND PENDING
On December 9, 1996, the Company acquired the assets of Metro Roofing
Supply, Inc. located in Arkansas for an estimated purchase price of
$1,300,000. The purchase price is subject to certain adjustments and was
funded with cash.
On December 13, 1996, the Company acquired the assets of Midwest Thermal
Products, Inc., Midwest Insulation and Siding, Inc. and Midwest Insulation and
Roofing, Inc. located in Arkansas, Missouri and Oklahoma for an estimated
purchase price of $3,300,000. The purchase price is subject to certain
adjustments and was funded with seller financing of $400,000 and cash.
On January 30, 1997, the Company acquired the assets of Boyd
Distributors, a division of Ince Holdings, Ltd. with 17 locations across
Canada for an estimated purchase price of $12,000,000. The purchase price is
subject to certain adjustments and was funded by the NationsBank revolving
credit note.
In February 1997, the Company signed a letter of intent to acquire
Bois Daigle Ltee (Daigle Lumber, Ltd.), a subsidiary of Simard-Beaudry Inc.
headquartered in Montreal, Quebec, Canada. The operations to be acquired
include 3 locations in Quebec and 4 in the Atlantic provinces of Eastern
Canada. The estimated purchase price is $4,900,000 plus assumption of debt
of approximately $7,000,000. The transaction is subject to completion of due
diligence.
-8-
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth items from Cameron Ashley Building Products,
Inc.'s Consolidated Condensed Statements of Income as percentages of net
sales.
Three Months Ended
------------------------------------
January 31, 1997 January 31, 1996
---------------- ----------------
Net Sales 100.0% 100.0%
Cost of Sales 80.0 80.7
----- -----
Gross Profit 20.0 19.3
Operating Expenses 17.6 17.4
----- -----
Income from Operations 2.4 1.9
Other Income 0.0 0.0
Interest Expense 0.8 0.6
----- -----
Income Before Income Taxes 1.6 1.3
Provision for Income Taxes 0.6 0.5
----- -----
Net Income 1.0% 0.8%
----- -----
----- -----
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
FIRST QUARTER ENDED JANUARY 31, 1997 COMPARED TO FIRST QUARTER ENDED
JANUARY 31, 1996
Net sales increased 17.3% from $120.0 million in the three months ended January
31, 1996 to $140.8 million in the three months ended January 31, 1997, an
increase of $20.8 million. Acquisitions and "de novo" branches contributed
additional sales for the period of $21.6 million; while same branch sales
comparisons for the first quarter were level as the Company's operations in the
Western United States were impacted by severe weather conditions.
Gross profit for the quarter increased 21.8% or $5.1 million. Gross margin as a
percentage of net sales also increased from 19.3% in the first quarter of fiscal
1996 to 20.0% in the recent period due to improved selling margins in both the
Company's Cameron and Ashley divisions.
Operating expenses increased 19.3% from $20.8 million in the 1996 period to
$24.9 million in the 1997 period. Operating expenses as a percentage of net
sales increased modestly to 17.6% for the quarter from 17.4% in 1996 on a $20.8
million increase in net sales. The increase is attributable to acquisitions and
"de novo" branches. The increase as a percentage of sales is primarily due to
increased trucking and service costs.
Income from operations increased 44.8% from $2.3 million in the 1996 period to
$3.3 million in the 1997 period, and increased as a percentage of net sales from
1.9% to 2.4% primarily due to the increases in the selling margin and higher
sales.
As a result of the above factors and an increase in interest expense of $0.3
million, income before income taxes increased
-9-
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43.5% from $1.6 million in the 1996 period to $2.3 million in the 1997
period. Net income increased 44.2% from $1.0 million in the 1996 period to
$1.4 million in the 1997 period. Net income as a percentage of net sales
increased from 0.8% in the 1996 period to 1.0% in the 1997 period. Earnings
per share increased $.04 per share to $.15 per share on 230,000 more weighted
average shares outstanding.
EFFECTS OF INFLATION
Management does not believe that inflation has had a material impact on results
of operations for the periods presented. Substantial increases in costs,
however, could have a significant impact on the Company and the industry.
Management believes that, to the extent inflation affects its costs in the
future, the Company can generally offset inflation by increasing prices if
competitive conditions permit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for capital resources are to finance acquisitions,
inventories, accounts receivable, and capital expenditures. Borrowings for
working capital typically increase during periods of sales expansion when higher
levels of inventory and receivables are needed and decrease as inventories and
receivables are converted to cash which is then used to pay down debt. The
Company had $78.2 million of long-term debt, less current maturities,
outstanding as of January 31, 1997, consisting of the facilities described in
the 1996 Annual Report, Form 10-K and in the notes to the accompanying interim
financial statements.
Net cash used in operating activities was $9.7 million for the three months
ended January 31, 1997 compared to net cash generated from operations of $2.3
million for three months ended January 31, 1996. The decrease in cash generated
from operating activities was primarily due to increases in payments of accounts
payable resulting from increased working capital requirements and the timing of
payments.
Capital expenditures have remained level at $3.0 and $2.9 million for the three
months ended January 31, 1997 and 1996, respectively. The Company has budgeted
$8.1 million for capital expenditures in fiscal 1997 relating to its current
operations, including property, plant and equipment additions and replacements.
The Company's fiscal 1997 budget for capital expenditures does not include any
amounts that may be attributable to acquisitions.
Management believes that funds generated from operations and funds available
from bank lines of credit will be sufficient to meet the needs of the Company's
current operations for the next 12 months.
SEASONALITY
The Company's first and, to a lesser extent, its second quarter, are typically
adversely affected by winter construction cycles and weather patterns as the
level of activity in both the home improvement and new construction markets
decreases. Management closely monitors operating expenses and inventory levels
during seasonal periods and, to the extent possible, controls variable operating
costs.
-10-
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits required to be filed with this Report on Form 10-Q are
listed on the Exhibit Index following the signature page hereof.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the
quarter ended January 31, 1997.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Registrant)
Date:
----------------------- --------------------------------------
F. Dixon McElwee
Vice President/Chief Financial Officer
-12-
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
EXHIBIT INDEX
EXHIBITS PAGE NO.
- -------- --------
11 Computation of Earnings per Share 14
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EXHIBIT 11
CAMERON ASHLEY BUILDING PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
(THOUSANDS)
Three Months Ended
-------------------------
January 31, January 31,
1997 1996
----------- -----------
Average common stock outstanding 9,062 8,726
Average options outstanding 1,131 1,218
Effects of treasury stock method
(based on exercise proceeds and tax benefits) (846) (827)
------ ------
Weighted average common shares outstanding 9,347 9,117
------ ------
------ ------
Net income $1,423 $ 987
------ ------
------ ------
Net income per share $ .15 $ .11
------ ------
------ ------
- -------------------
The fully diluted computation of earnings per share is not presented since fully
diluted earnings per share and primary earnings per share do not differ by more
than 3%.
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED JANUARY 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 3,735
<SECURITIES> 0
<RECEIVABLES> 90,559
<ALLOWANCES> 2,882
<INVENTORY> 84,494
<CURRENT-ASSETS> 179,706
<PP&E> 46,588
<DEPRECIATION> 13,063
<TOTAL-ASSETS> 238,091
<CURRENT-LIABILITIES> 61,312
<BONDS> 0
0
0
<COMMON> 60,856
<OTHER-SE> 36,270
<TOTAL-LIABILITY-AND-EQUITY> 238,091
<SALES> 140,848
<TOTAL-REVENUES> 140,848
<CGS> 112,650
<TOTAL-COSTS> 24,313
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 540
<INTEREST-EXPENSE> 1,009
<INCOME-PRETAX> 2,258
<INCOME-TAX> 835
<INCOME-CONTINUING> 1,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,423
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
