<PAGE> 1
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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, 1999
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
----- -----
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
Outstanding at March 5, 1999: 8,652,119
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<PAGE> 2
CAMERON ASHLEY BUILDING PRODUCTS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets as of January 31, 1999 and
October 31, 1998 3
Consolidated Condensed Statements of Income for the three months
ended January 31, 1999 and 1998 4
Consolidated Condensed Statement of Stockholders' Equity for the
Three months ended January 31, 1999 5
Consolidated Condensed Statements of Cash Flows for the three months
ended January 31, 1999 and 1998 6
Notes to Consolidated Condensed Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition 9-12
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
January 31, October 31,
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,458 $ 3,706
Accounts receivable, net 120,441 148,392
Inventories 114,633 99,810
Prepaid expenses and other assets 2,848 1,999
Deferred income taxes 3,704 3,703
---------- ----------
Total current assets 244,084 257,610
PROPERTY, PLANT AND EQUIPMENT, NET 53,330 50,454
INTANGIBLES, NET 56,276 48,865
OTHER ASSETS 4,392 4,804
---------- ----------
TOTAL $ 358,082 $ 361,733
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 67,689 $ 80,950
Accrued expenses 17,285 24,052
Current maturities of debt 2,699 2,346
---------- ----------
Total current liabilities 87,673 107,348
LONG-TERM DEBT, LESS CURRENT MATURITIES 150,679 135,051
DEFERRED INCOME TAXES 4,388 4,369
---------- ----------
Total liabilities 242,740 246,768
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; 9,842,000 shares
issued January 31, 1999, and
9,834,000 shares issued at October 31, 1998 64,449 64,329
Retained earnings 65,713 65,756
Treasury stock, at cost, 1,190,000 shares (13,633) (13,633)
Accumulated other comprehensive income (loss), net of tax (1,187) (1,487)
---------- ----------
Total stockholders' equity 115,342 114,965
---------- ----------
TOTAL $ 358,082 $ 361,733
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
January 31, January 31,
1999 1998
---------- ----------
<S> <C> <C>
REVENUE $ 223,417 $ 167,090
COST OF SALES 178,677 133,172
---------- ----------
GROSS PROFIT 44,740 33,918
OPERATING EXPENSES 42,167 31,324
---------- ----------
INCOME FROM OPERATIONS 2,573 2,594
INTEREST EXPENSE 2,582 1,656
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (9) 938
PROVISION FOR INCOME TAXES 34 298
---------- ----------
NET INCOME (LOSS) $ (43) $ 640
========== ==========
NET INCOME PER SHARE:
BASIC $ .00 $ .07
========== ==========
DILUTED $ .00 $ .07
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 8,646 9,321
========== ==========
DILUTED 8,646 9,579
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK RETAINED TREASURY COMPREHENSIVE
SHARES VALUE EARNINGS STOCK INCOME (LOSS) TOTAL
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF NOVEMBER 1, 1998 9,834 $ 64,329 $ 65,756 $ (13,633) $ (1,487) $ 114,965
Exercise of stock options,
including tax benefits of $1,000 1 5 -- -- -- 5
Stock issued from employee stock
purchase plan 7 70 -- -- -- 70
Management and director stock plan
compensation expense -- 45 -- -- -- 45
Net income (loss) -- -- (43) -- -- (43)
Other comprehensive income (loss),
net of tax:
Foreign currency translation adjustment -- -- -- -- 300 300
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AS OF JANUARY 31, 1999 9,842 $ 64,449 $ 65,713 $ (13,633) $ (1,187) $ 115,342
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements
5
<PAGE> 6
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
January 31, January 31,
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (43) $ 640
Adjustments to reconcile net income (loss) to cash
Provided by operating activities:
Depreciation and amortization 2,884 2,202
Loss on sale of property, plant and equipment 17 7
Deferred income taxes 18 --
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 32,530 27,873
Notes receivable held for resale -- 5,513
Inventories (10,399) (13,226)
Prepaid and deferred expenses (558) 5
Accounts payable and accrued expenses (23,262) (30,961)
Warehouse line of credit -- (6,322)
Other assets/liabilities (2,034) (46)
---------- ----------
Net cash used in operating activities (847) (14,315)
INVESTING ACTIVITIES:
Payment for acquisitions (10,479) --
Purchases of property, plant and equipment, net (4,132) (1,997)
Investment in affiliate 116 (134)
Other 3 2
---------- ----------
Net cash used in investing activities (14,492) (2,129)
FINANCING ACTIVITIES:
Net borrowings under long-term debt 15,500 17,576
Repayments of seller financing of acquired business (1,473) (132)
Proceeds from employee stock purchase plan 70 62
Exercise of stock options 50 261
Other (56) (91)
---------- ----------
Net cash provided by financing activities 14,091 17,676
NET INCREASE (DECREASE) CASH AND CASH
EQUIVALENTS (1,248) 1,232
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 3,706 899
---------- ----------
END OF PERIOD $ 2,458 $ 2,131
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 172 $ 425
========== ==========
Cash paid for income taxes $ 3,995 $ 221
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE> 7
CAMERON ASHLEY BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 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, 1998 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, 1999 and 1998, the Company's financial position at January 31, 1999
and October 31, 1998, and the cash flows for the three month periods ended
January 31, 1999 and 1998. 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 1998 Annual Report on Form 10-K.
The operating results for the first quarter and for the three month period ended
January 31, 1999 are not necessarily indicative of the results that may be
expected for the entire year.
NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS
On November 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in the financial statements. During the three month
periods ended January 31, 1999 and 1998 the Company's total comprehensive
earnings were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net income (loss) $ (43) $ 640
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 300 (241)
-------- --------
Comprehensive income $ 257 $ 399
======== ========
</TABLE>
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information" which
establishes standards for the way public companies disclose information about
operating segments, products and services, geographic areas and major customers.
The Company has adopted these standards to commence in the annual report for
fiscal year 1999. The Company does not expect the adoption of these standards to
have any impact on the Company's financial position or results of operations.
7
<PAGE> 8
NOTE 3. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following at January 31, 1999:
(In thousands)
<S> <C>
Senior Debt:
Unsecured Senior Notes with maturities and interest rates as follows:
$10,000 due April 15, 2001 bearing interest at 6.79% $15,000 due
April 15, 2002 bearing interest at 6.79%
with scheduled payments of $5.0 million
on April 15, 2000 and April 15, 2001
$10,000 due April 15, 2003 bearing interest at 7.21% $15,000 due
April 15, 2006 bearing interest at 7.61% $3,000 due April 7, 2004
bearing interest at 6.71% $63,000 due April 7, 2010 bearing
interest at 6.90%
with payments of $12.6 million beginning April 7, 2006
$10,000 (Canadian $) due October 7, 2004 bearing interest at 6.45%
$7,000 due October 7, 2004 bearing interest at 6.71%
Interest is due semi-annually, with an average interest rate of 6.93% $129,326
NationsBank of Texas, N.A. (as agent):
Revolving credit note due January 15, 2002; unsecured; interest is due quarterly
at the LIBOR rate or Banker's acceptance rate plus 0.50% to 1.0%, or at a base rate
(defined in the agreement as prime) at January 31, 1999, the interest rate was 7.03% 18,000
Seller financing of acquired businesses:
Various terms, interest at 7%, collateralized by certain land and buildings 326
Other, including capital leases 5,726
--------
153,378
Less current maturities (2,699)
--------
Long-term debt $150,679
========
The seller notes payable are subordinated to the obligations under the
NationsBank agreement.
At January 31, 1999, the Company had $2,317,000 of letters of credit issued
under the NationsBank revolving credit facility.
</TABLE>
NOTE 4. ACQUISITIONS
On November 2, 1998, the Company acquired all of the outstanding common stock of
Ibex Industries, Inc. d.b.a. Washington Roofing Co. for $11.5 million in cash
subject to final purchase price adjustments. Ibex is a distributor of building
products in the Maryland, Virginia and Washington D.C. areas.
NOTE 5. SUBSEQUENT EVENTS
On February 1, 1999, the Company acquired certain assets and assumed certain
liabilities of Performance Materials Supply Incorporated, a Kansas City, Kansas
distributor of building products. The purchase price, subject to post closing
adjustments, was approximately $1.5 million.
On February 12, 1999, the Company increased its ownership from 33% to 53.5% of
the issued and outstanding stock of Field Marketing, Inc. for approximately $2.2
million.
8
<PAGE> 9
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table sets forth items from the Company's Consolidated Condensed
Statements of Income as percentages of revenue.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
January 31, 1999 January 31, 1998
---------------- ----------------
<S> <C> <C>
Revenue 100.0% 100.0%
Cost of Sales 80.0 79.8
------ ------
Gross Profit 20.0 20.2
Operating Expenses 18.9 18.6
------ ------
Income from Operations 1.1 1.6
Interest Expense 1.1 1.0
------ ------
Income Before Income Taxes 0.0 0.6
Provision for Income Taxes 0.0 0.2
------ ------
Net Income 0.0% 0.4%
====== ======
</TABLE>
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
FIRST QUARTER ENDED JANUARY 31, 1999 COMPARED TO FIRST QUARTER ENDED JANUARY 31,
1998
Revenue increased 33.7% from $167.1 million in the three months ended January
31, 1998 to $223.4 million in the three months ended January 31, 1999, an
increase of $56.3 million. Revenue growth in the quarter was principally due to
additional sales from acquisitions completed after January 31, 1998 and same
branch sales growth of 10.9%.
Gross profit for the quarter increased 31.9% or $10.8 million on higher sales
levels. As a percentage of net sales, gross margin decreased from 20.2% in the
first quarter of fiscal 1998 to 20.0% in the recent period due principally to a
higher cost sales mix from newly acquired locations.
Operating expenses increased 34.6% from $31.3 million in the 1998 period to
$42.2 million in the 1999 period. Operating expenses as a percentage of net
sales increased to 18.9% for the quarter from 18.6% in 1998 on a $56.3 million
increase in net sales. This increase is partly attributable to amortization of
intangibles associated with prior year acquisitions, increased depreciation and
project expenses from the new computer system being implemented in the Cameron
division, and costs associated with the withdrawal of the 1998 stock offering.
Excluding the impact of the stock offering costs and computer project expenses,
operating expenses would have remained unchanged at 18.6% of sales as compared
to the same quarter in 1998.
Income from operations was $2.6 million in the 1999 period, unchanged from the
1998 period, and decreased as a percentage of net sales from 1.6% to 1.1% due to
the changes in gross profit and operating expenses referenced above. Excluding
the impact of the stock offering costs and computer project expenses, income
from operations for the period would have been $3.1 million, or 1.4% of net
sales, an increase of 19.3% over the prior year period.
Interest expense increased 55.9% from $1.7 million in the 1998 period to $2.6
million in the current period due to additional debt of approximately $50
million incurred for acquisitions during the latter part of 1998.
9
<PAGE> 10
As a result of the above factors income before income taxes decreased from $0.9
million in the 1998 period to a loss of $9,000 in the 1999 period. Net income
decreased from $0.6 million in the 1998 period to a net loss of $43,000 in the
1999 period. Diluted earnings per share decreased from $0.07 in the 1998 period
to breakeven in the 1999 period. Weighted average diluted shares outstanding
decreased 933,000 shares from 9,579,000 in 1998 to 8,646,000 in 1999 due to the
Company's repurchases in 1998.
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,
working capital 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
$150.7 million of long-term debt, less current maturities, outstanding as of
January 31, 1999, consisting of the facilities described in the 1998 Annual
Report, Form 10-K and in the notes to the accompanying interim financial
statements.
Net cash used in operating activities was $0.8 million for the three months
ended January 31, 1999 compared to net cash used in operations of $14.3 million
for three months ended January 31, 1998. The decrease in cash used in operating
activities was due to: a decrease in payments of accounts payable due primarily
to timing; discontinued funding of consumer loans made under the warehouse line
of credit; reduced working capital needs.
Capital expenditures were $4.1 million up from $2.0 million for the three months
ended January 31, 1999 and 1998, respectively. The Company has budgeted $13.0
million for capital expenditures in fiscal 1999 relating to its currents
operations, including property, plant and equipment additions and replacements
and the costs of implementation of the Company's new enterprise information
systems. Management estimates the new system will have a total cost of
approximately $16 million of which $12.7 million is capital. Of the total cost,
approximately $12 million had been incurred as of January 31, 1999, and the
remainder will be incurred by the end of fiscal 1999 when management expects the
system to be fully operational. The Company's fiscal 1999 budget for capital
expenditures does not include any amounts that may be attributable to
acquisitions.
Management believes that funds generated from operations, funds available from
bank lines of credit, and other sources 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 to match seasonally adjusted revenues in both the U.S. and Canada.
YEAR 2000 COMPLIANCE
The Company utilizes a significant number of computer software programs and
information systems in its internal operations, including applications used in
financial business systems and various administration functions ("IT systems").
The Company also makes use of a variety of machinery and equipment in its
business which are operated by or reliant upon non-information technology
systems ("non-IT systems"), for example equipment or mechanical systems which
contain embedded technology such as microcontrollers. To the extent that the
source code of the software applications of these IT systems or the embedded
technologies of these non-IT systems are unable to appropriately interpret and
process the upcoming calendar year 2000 ("Year 2000"), some level of
modification or possible replacement of such applications would be necessary for
proper continuous performance.
10
<PAGE> 11
Without such modification or replacement, the normal course of the Company's
business could be disrupted or otherwise adversely impacted. This potential
problem is commonly referred to as the Year 2000 compliance issue.
State of Readiness. Management of the Company is actively engaged in
the process of evaluating the status of the Company's internal IT and non-IT
systems for compliance with the Year 2000 issue. In addition, the Company is
attempting to verify the readiness for Year 2000 of third party systems with
whom the Company has a material relationship, such as its largest vendors and
suppliers. The first phase, evaluating the Company's internal systems, is
substantially complete. The second phase, evaluating third party systems, was
commenced in the third quarter of 1998 and is expected to be substantially
complete by June 1999.
Non-IT Systems. Management believes that the failure of any internal
non-IT system to become timely compliant for Year 2000 would not have a material
effect on the business, operations or financial condition of the Company as a
whole. Nevertheless, the Company will continue to take steps to modify or
replace all non-IT systems which are not Year 2000 compliant during the 1999
calendar year. The anticipated expenses for such conversions are not expected to
be material.
Major IT Systems. The Company has determined that its major internal IT
systems, including the primary DMSI system used in its Cameron division, and
certain other systems running independently at a number of recently acquired
operations, would require modification or replacement to become Year 2000
compliant. The Company initiated a major re-engineering project in late 1997,
centered around a new information system for the Cameron division, which is
scheduled to be completed by the end of 1999 and will replace all existing major
systems with a Year 2000 compliant system.
The Company's business process re-engineering project is aimed at improving and
standardizing Company processes, using a "best practices" approach to reduce
operating costs. This project incorporates an IT system using J. D. Edwards
software and IBM hardware to be implemented in the Cameron division,
representing approximately 82.4% of the Company's total revenues in fiscal 1998.
The new IT system and re-engineered processes are expected to enhance the
Company's competitive position by reducing operating and administrative costs
and improving customer service, pricing management and inventory and logistics
management. J.D. Edwards has represented the new software to be fully Year 2000
compliant. The Company will test for such compliance prior to final
implementation.
Development of the new enterprise system is virtually complete, and the Cameron
division began the roll-out of the system implementation to its branches in
November 1998. As of March 1, 1999, all of the Company's Canadian operations
were operating on the new system. The Company will continue the system rollout
to its Cameron division U.S. operations in the second and third fiscal quarters.
The Company has devoted and redirected substantial resources to the system
installation and training process.
The Cameron division has also begun the process of bringing the DMSI system into
Year 2000 compliance as a contingency plan. This process will be completed by
June 1999.
In the Ashley division, the Company operates a Data General Aviion system, which
has been determined to be Year 2000 compliant and has been tested on a
preliminary basis. The Company will test this system again for Year 2000
compliance in 1999.
Other IT Systems. The Company has assessed its telecommunications
systems with its third party providers and has been assured that they are or
will be made Year 2000 compliant without significant expense to the Company. The
Company is also assessing the requirements and expense to make Year 2000
compliant all third party IT-system application software typically used in
desktop formats, such as financial, accounting, spreadsheet, E-mail and word
processing programs, and management believes that these costs will not be
material to the Company.
Third Party Systems. The Company has not yet completed a review of the
issues related to Year 2000 compliance by its largest suppliers and vendors.
However, due to the nature of the Company's business, management believes that
the loss of any single supplier or vendor as a result of Year 2000 system
problems would not materially impact the Company's business, operations or
financial condition.
11
<PAGE> 12
Costs to Address Year 2000 Issues. As of January 31, 1999, the costs to
date of the system re-engineering project in the Cameron division are
approximately $12 million. The Company currently expects that the final projects
costs to be approximately $16 million. The Company's results of operation
reflect the amount of re-engineering and system conversion costs that have been
expensed and not capitalized. The Company's source of funds for the system
re-engineering project is cash generated by operations and borrowings under
existing bank facilities.
It is important to note that, although Year 2000 compliance is a necessary
byproduct of the system re-engineering project, it is only one portion of the
benefit to be derived by the Company from the new system conversion. While cost
of the re-engineering project constitutes the vast majority of the Company's IT
budget for the relevant periods, such cost is not confined solely to the Year
2000 issue and is not displacing other critical IT projects. It is not possible
to segregate the total expense to the Company strictly for Year 2000 compliance
within the system conversion project budget.
The costs of Year 2000 compliance verification and testing in the Company are
expected to be minimal. In addition, as stated above, management believes that
the costs for making other IT systems and non-IT systems Year 2000 compliant are
not material.
Risks to the Company for Year 2000 Issues. The most reasonable worst
case scenario to the Company associated with its Year 2000 compliance efforts
would be the failure of the re-engineering project in the Cameron division to be
completed on schedule in 1999. This would require the Company to take immediate
steps to implement its contingency plans described below. It is not feasible at
this time to predict the impact, if any, on the Company's financial condition or
results of operations as a result of this scenario. However, management believes
that the implementation of its contingency plan could be achieved with minimum
disruption to the business and operations of the Company.
Contingency Plans. It would be an unlikely event that the Cameron
division's new IT system will not be fully operational in 1999; however, to
ensure Year 2000 readiness, the Company has begun to take the steps necessary to
upgrade its current system. The implementation of this contingency plan is
taking place in stages and is scheduled for completion in June 1999. Management
believes that the costs associated with the DMSI upgrade are not material and
that the upgrade will be completed by the required deadline.
FORWARD-LOOKING INFORMATION
The matters discussed in this Report on Form 10-Q, other than historical
information, and, in particular, information regarding future revenue, earnings
and business plans and goals, consist of forward-looking information under the
Private Securities Litigation Reform Act of 1995, and are subject to and involve
risks and uncertainties which could cause actual results to differ materially
from the forward-looking information. Forward-looking statements may be
indicated by phrases such as "believes", "anticipates", "expects", "intends",
"foresees", "projects", "predicts", "forecasts" or similar words and involve
known and unknown risks and uncertainties which may cause the Company's actual
results in future periods to differ materially from forecasted results. Among
the factors that could cause results to differ materially are the following: (i)
business and economic conditions in North America, (ii) business and economic
conditions in the regional markets in which the Company operates, (iii) adverse
homebuilding conditions including those related to weather and interest rates,
(iv) the ability to make acquisitions at reasonable prices and achieve synergies
upon integration, (v) reliable and cost-effective supply of products from
manufacturers, and (vi) technology risks in integrating information systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material exposure to market risk associated with
activities involving derivative financial instruments, other financial
instruments and derivative commodity instruments. The majority of the Company's
debt is at a fixed rate and, thus, is not exposed to interest rate risk.
12
<PAGE> 13
CAMERON ASHLEY BUILDING PRODUCTS, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Bradco Supply Corporation v. Cameron Ashley Building Products, Inc.,
first reported in the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1997. The Company's motion to dismiss was not heard by the
Federal District Court during the fiscal quarter ended January 31, 1999. There
were no other material developments in the quarter.
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, 1999.
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: March 15, 1999 /s/ J. Andrew Kerner
-------------------------------------
J. Andrew Kerner
Executive Vice President/
Chief Financial Officer
13
<PAGE> 14
CAMERON ASHLEY BUILDING PRODUCTS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Descriptions
- ------- ------------
<S> <C>
11 Computation of Earnings per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
CAMERON ASHLEY BUILDING PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
(THOUSANDS)
<TABLE>
<CAPTION>
Three Month Ended January 31, 1999 Three Months Ended January 31, 1998
---------------------------------------------- -------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income (loss) attributable to
common stockholders $ (43) 8,646 $ 0.00 $ 640 9,321 $ 0.07
============ ============
EFFECT OF DILUTIVE SECURITIES
Average options outstanding
Effects of treasury stock 0(a) 1,255
method (based on exercise
proceeds and tax benefits) 0(a) (997)
------------ ------------ ------------ ------------
DILUTED EPS
Income (loss) attributable to
common stockholders
assuming dilution $ (43) 8,646 $ 0.00 $ 640 9,579 $ 0.07
============ ============ ============ ============ ============ ============
</TABLE>
(a) During the loss period the dilutive securities would have an anti-dilutive
effect and have therefore been excluded from the calculation.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 2,458
<SECURITIES> 0
<RECEIVABLES> 124,836
<ALLOWANCES> 4,395
<INVENTORY> 114,633
<CURRENT-ASSETS> 244,084
<PP&E> 81,919
<DEPRECIATION> 28,589
<TOTAL-ASSETS> 358,082
<CURRENT-LIABILITIES> 87,673
<BONDS> 0
0
0
<COMMON> 64,449
<OTHER-SE> 50,893
<TOTAL-LIABILITY-AND-EQUITY> 358,082
<SALES> 223,417
<TOTAL-REVENUES> 223,417
<CGS> 178,677
<TOTAL-COSTS> 41,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,107
<INTEREST-EXPENSE> 2,582
<INCOME-PRETAX> (9)
<INCOME-TAX> 34
<INCOME-CONTINUING> (43)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
