ITEM 1. BUSINESS
General
American Builders & Contractors Supply Co., Inc. (the Company or ABC) is the largest wholesale distributor of roofing products and one of the largest wholesale distributors of vinyl siding materials in the United States, operating 200 distribution centers located in 42 states. ABC provides its customers with access to what it believes to be the largest selection of roofing and vinyl siding materials in the industry and with a knowledgeable staff capable of providing product specific information, delivery capabilities to the job site, as well as credit services and marketing support. For the year ended December 31, 2000, the Company generated net sales of $1.2 billion.
The products distributed by the Company consist exclusively of roofing and siding materials, windows and related tools and accessories for residential and, to a lesser extent, commercial applications. The Company markets these products on a wholesale basis primarily to small and medium-sized contractors that are involved in the replacement segment of the construction industry. ABC also distributes products to builders and subcontractors involved in new construction projects.
ABC was founded in 1982 by Kenneth A. Hendricks, the sole stockholder, Chief Executive Officer and Chairman of the Board, who as the owner of a successful roofing business, saw a market for the Company's services. Since its inception, ABC has experienced significant growth. The Company's net sales have increased from $789.1 million for the year ended December 31, 1996 to $1.2 billion for the year ended December 31, 2000, representing a compound annual growth rate of 11.4%. In addition, comparable distribution center sales have grown at an average annual rate of 5.8% over the same period.
Products, Customers and Markets
The roofing and vinyl siding products industry contains three primary distribution channels: manufacturers' direct sales; mass merchandisers, such as Home Depot; and wholesale distributors, such as the Company. Mass merchandisers primarily sell products to homeowners and small contractors, tend to stock items across a multitude of building supply categories and stock a relatively narrow selection of non-premium grade roofing and siding products. Typically, manufacturers do not sell products directly to retail customers or small contractors.
The products distributed by the Company consist primarily of roofing products, including both steep slope (commonly referred to as residential) and low slope (commonly referred to as commercial), siding products, windows, and related tools, equipment and accessories. ABC provides its customers with what it believes to be the largest selection of roofing and vinyl siding materials in the industry. The products that the Company distributes can be classified in the following five categories:
Steep slope roofing products and accessories. The Company distributes a broad selection of shingles, felt, roof tile, wood shakes, flashings, vents and other roofing products to residential roofing contractors. Principal brands of residential roofing products include CertainTeed(R), Elk(R), GAF(R), Owens- Corning(R), and Tamko(R).
Low slope roofing products and accessories. The Company distributes a broad selection of modified bitumen, EPDM, hypalon, PVC, TPO, other rolled roofing, felts, coatings, asphalt, flashings, vents, fasteners, roof insulation and other roofing products to commercial roofing contractors. Principal brands of commercial roofing products include Atlas(R), Firestone(R), GAF(R), Johns Manville(R), Mule-Hide(R), and US Intec(R). Mule-Hide primarily sells its private label roofing systems through ABC's distribution centers.
Siding products and accessories. The Company distributes a broad selection of siding products to siding contractors. The Company's siding products consist primarily of vinyl siding, soffits and accessories and, to a lesser extent, aluminum and wood siding. Principal vinyl siding brands include Alcoa(R), Amcraft(R), CertainTeed(R), Mastic(R), and Wolverine(R). Amcraft exclusively sells its private label siding and accessories through ABC's distribution centers.
Windows and accessories. The Company distributes a broad selection of window products and accessories to residential window installers, including vinyl, wood and aluminum window frames and single, double and triple glazed windows. Principal window brands include CertainTeed(R), Eagle Windows(R), Weather- Shield(R), and Amcraft(R). Amcraft also exclusively sells its private label windows and accessories through ABC's distribution centers.
Other building products and accessories. The Company distributes a variety of roofing and siding products to complement its primary product lines. Such products include gutters, sheet metal, roofing and siding equipment, tools and other related accessories.
The following table sets forth certain information regarding the Company's net sales by product for the years ended December 31, 2000, 1999 and 1998:
The Company distributes these products on a wholesale basis primarily to small and medium-sized contractors that are involved in the replacement segment of the construction industry. ABC also distributes products to builders and subcontractors involved in new construction projects.
Sales and Marketing
The Company's sales organization consists of outside sales personnel who report directly to their local distribution center manager and are supported by inside customer service representatives at the distribution center. A substantial portion of each of the outside sales personnel pay is derived from commissions. Additional support comes from a number of regional sales and merchandising managers who educate the Company's sales personnel and customers regarding technical specifications and marketability of certain products.
Distribution Center Operations
The Company operates 200 local distribution centers located in 42 states. Since January 1, 1998 the Company has opened 15 distribution centers, closed 18 distribution centers and acquired an additional 10 distribution centers, while consolidating 12 distribution centers in connection with its selective acquisition program. A typical distribution center is composed of showroom space, office space, warehouse and receiving space, secure outdoor holding space and a loading dock. ABC's distribution centers range in size from approximately 10,000 to approximately 110,000 square feet, with a typical size of approximately 40,000 square feet.
Each location is managed by a distribution center manager who oversees the center's employees, including a credit manager, various sales personnel, customer service representatives and delivery and warehouse personnel. The Company requires that each distribution center develop a core merchandising strategy, but allows each distribution center manager under the direction of the region staff and national director of merchandising to alter the product mix of a given center to meet local market demands and to stock regional products (such as roof tile in the Florida, Texas and California markets). Distribution center employees' bonus levels are largely driven by location profitability. The Company believes its incentive programs have contributed significantly to its growth and have helped it to achieve an average annual growth rate of comparable distribution center sales of 5.8% over the past five years.
The following table sets forth the Company's growth in terms of distribution centers in each of the past three years:
Competition
The roofing and siding products distribution industry is highly competitive and fragmented. The Company competes directly with a large number of local and regional building products distributors and, in certain markets and product categories, with two national distributors, Cameron Ashley Building Products and Allied Building Products. The Company also competes to a lesser extent with mass-merchandisers, such as Home Depot, and with direct sales from building products manufacturers.
Purchasing
ABC purchases its products directly from a wide variety of manufacturers, including GAF, Elk Corporation of America, Tamko, CertainTeed, Owens-Corning Fiberglass Corporation, Johns Manville Corporation and Alcoa Building Products, Inc. Payment, discount and volume purchase programs are negotiated directly by the Company with its major suppliers, with a significant portion of the Company's purchases made from suppliers offering these programs. The Company believes it is the largest or a significant customer to many of its primary suppliers, and, as a result, is able to negotiate volume discounts and other favorable terms. At 13.9% of the Company's 2000 product purchases, GAF (including its subsidiaries U.S. Intec, and Leatherback) was the only supplier which represented more than 10% of the Company's total purchases. The Company typically purchases its products from manufacturers pursuant to individual purchase orders, and does not generally enter into long-term contracts for the purchase of products.
Seasonality
Because of cold weather conditions in many of the markets in which the Company does business and the seasonal nature of the roofing and siding business generally, the Company's revenues vary substantially throughout the year, with its lowest revenues typically occurring in the months of December through February.
Employees
As of December 31, 2000, the Company employed 3,036 full-time and 85 part-time employees, of whom 36 were members of unions. The Company's collective bargaining agreements with its unions expire on various dates, from May 2001 through July 2003. The Company believes that its relations with its employees are good.
Environmental Matters
A number of roofing materials are considered environmentally hazardous. The Company typically handles and stores a variety of these materials at its distribution center locations. The Company maintains appropriate environmental compliance programs at each of its distribution centers and has never been the subject of any material enforcement action by any governmental agency.
Many of the Company's distribution centers are located in areas of current or former industrial activity, where environmental contamination may have occurred. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products located at such property, and may be held liable for property damage and for investigation and remediation costs in connection with the contamination.
The Company does not believe there are any material environmental liabilities at any of its distribution center locations. Nevertheless, there can be no assurance that the Company's knowledge is complete with regard to all material environmental liabilities and it could subsequently discover potential environmental liabilities arising from its sites or from neighboring facilities.
ITEM 2.
ITEM 2. PROPERTIES
The Company operates both owned and leased branches in 42 states. Its facilities range in size from approximately 10,000 to 110,000 square feet. This building space is used for warehousing and distribution purposes and, to a lesser extent, for sales and administrative purposes. The Company owns a 118,000 square foot office building where its corporate offices are located in Beloit, Wisconsin. The Company believes its facilities are adequately maintained and utilized and are suitable for the purposes for which they are used. See Note 5 to the Consolidated Financial Statements of the Company for a summary of payments due under the Company's leases.
The following table sets the geographical location of the Company's distribution centers as of December 31, 2000:
Total Number Region of Locations - ------------------------------------------------ Midwest 46 Northeast 33 Southwest 31 Southeast 39 Western 26 Rocky Mountain 25 --- ===
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the conduct of its business. The Company does not believe that the outcome of any of the matters in which it is currently involved will have a material adverse effect on its financial condition or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public market for the stock of the Company. There was one holder of record of the Company's common stock as of December 31, 2000.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected consolidated financial information of the Company for each of the five years in the period ended December 31, 2000. The information contained in the following table should be read in conjunction with, and is qualified in its entirety by reference to, the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's audited consolidated financial statements and related notes included elsewhere in this report.
(1) Consists of certain state and local income taxes. As Subchapter S Corporations under the Internal Revenue Code of 1986, as amended (the Code), the Company and its subsidiaries are not subject to U.S. federal income taxes or most state income taxes. Instead, such taxes have been paid by Mr. Hendricks. The Company has made periodic distributions to Mr. Hendricks in respect of such tax liabilities in accordance with the terms of the Tax Allocation Agreement (as defined herein). See "Certain Relationships and Related Transactions".
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table summarizes the Company's historical results of operations as a percentage of net sales for each of the three years ended December 31, 2000:
Comparison of the Year Ended December 31, 2000 to the Year Ended December 31,
Net sales for the year ended December 31, 2000 increased by 3.5% in 2000 to $1.2 billion. Comparable distribution center sales growth was 4.0% in 2000.
Gross profit for the year ended December 31, 2000 increased by 7.0% in 2000 to $302.3 million from $282.5 million in 1999. This increase in gross profit is primarily a result of profits associated with increased sales.
Gross profit, as a percentage of net sales in 2000 increased to 24.4% from 23.6% in 1999. Management believes the improvement in gross profit percentage relates primarily to strategic merchandising initiatives, including pricing, purchasing, and incentive programs, at the distribution centers to increase gross profit margin. The gross profit percentage increase is also due in part to management's continued focus on improving gross profit through increased sales of products with higher gross profit margins.
Distribution center operating expenses for the year ended December 31, 2000 increased by 4.8% in 2000 to $237.4 million from $226.6 million in 1999. As a percentage of net sales, distribution center operating expenses increased to 19.1% in 2000 from 18.9% in 1999. The increase is primarily the result of increased wages incurred as a result of increased sales, and increased fuel costs for delivery vehicles.
These two increases are partially offset by a reduction in the provision for doubtful accounts. Historically, the Company's provision for doubtful accounts has been in the range of .5% to .6% of net sales. After significant growth during 1997, the provision for doubtful accounts rose to .8% and .9% of net sales for the years ended December 31, 1998 and 1999, respectively. For the year ended December 31, 2000, the provision for doubtful accounts was .6% of net sales.
General and administrative expenses increased by $7.3 million to $25.3 million in 2000 from $18.0 million in 1999. The most significant increase in general and administrative expense is a result of costs associated with a comprehensive evaluation and design of new operating and administrative processes focused on better serving customer needs and improving efficiencies. Throughout this process, the Company had engaged a consulting firm and added internal project coordinators and financial analysts. This evaluation, which concluded during the third quarter of 2000, has resulted in the development and implementation of new policies and programs enabling more consistent merchandising, purchasing and pricing within local markets to improve gross profit. The Company expects additional improvements to its operating and administrative processes.
Another phase of this process was the evaluation of the Company's computer systems and review of potential replacement systems. Through this evaluation, management has decided to maintain and enhance its current computer system, and, at the present time, not to proceed with the development of a new system.
Amortization of intangible assets decreased by $0.1 million to $1.6 million in 2000 from $1.7 million in 1999.
Interest expense increased by $2.1 million to $25.0 million in 2000 from $22.9 million in 1999. The increase is primarily due to increased interest rates on the Company's LIBOR based borrowings partially offset by a reduction in the Company's average borrowings.
Extraordinary item. During 2000 the Company repurchased and retired $11.6 million of the Senior Subordinated Notes. The purchase resulted in an extraordinary gain of $1.0 million net of the write-off of the applicable unamortized deferred financing costs and other expenses.
Comparison of the Year Ended December 31, 1999 to the Year Ended December 31,
Net sales for the year ended December 31, 1999 increased by 3.0% in 1999 to $1.2 billion. Comparable distribution center sales growth was 3.3% in 1999.
Gross profit for the year ended December 31, 1999 increased by 5.6% in 1999 to $282.5 million from $267.7 million in 1998. This increase is primarily a result of profits associated with increased sales. Gross profit, as a percentage of net sales in 1999 increased to 23.6% from 23.0% in 1998. The increase is principally due to management's continued focus on improving gross profit through increased sales of products with higher gross profit margins.
Distribution center operating expenses for the year ended December 31, 1999 increased by 1.3% in 1999 to $226.6 million from $223.6 million in 1998. As a percentage of net sales, distribution center operating expenses decreased to 18.9% in 1999 from 19.2% in 1998. This improvement is the result of two factors. The first factor is an increased focus on controlling operating expenses at all distribution centers. The majority of the focus is being placed on controlling payroll expenses, which comprise more than 50 percent of the operating expenses. Secondly, during 1998 distribution center operating expenses included the integration of over 50 distribution centers from the 1997 acquisitions.
Partially offsetting these two factors is an increase in the provision for doubtful accounts of $1.9 million in 1999 to $10.6 million from $8.7 million in 1998. This increase is a continuation of the collection trends experienced by the Company during the last half of 1998.
General and administrative expenses increased by $1.6 million to $18.0 million in 1999 from $16.4 million in 1998. This increase is the result of two factors. First, during the last half of 1998 the Company reevaluated the support needs of its distribution centers. This evaluation resulted in restructuring and adding staff that provides technical support (inventory, sales, fleet) to the distribution centers. This new structure was in place by the end of the first quarter of 1999. Second, this evaluation resulted in a formal training program for key branch personnel. This new training program was initiated during the third quarter of 1999.
Amortization of intangible assets remained at $1.7 million for both 1999 and 1998.
Non-recurring charge. In connection with the purchase of certain distribution business assets of Viking Building Products, Inc. and Viking Aluminum Products, Inc. (VAP) in 1997, the Company entered into a five year supply agreement with VAP, regarding the sale to ABC of windows, awnings, doors and related products manufactured by VAP. The supply agreement specified minimum annual purchases through May 2002 and damages for shortfalls. The Company did not meet the required minimum annual purchases for 1998. In February 1999, the Company filed a lawsuit in the U.S. District court for the Western District of Wisconsin seeking damages related to warranty and quality issues, among other issues. VAP instituted a lawsuit in the U.S. District Court for the Southern District of New York seeking approximately $2.3 million in damages under the terms of the supply agreement for the period through December 31, 1998.
In December 1999, the Company and VAP reached a final settlement whereby the Company paid $6.6 million to VAP. During 1999, the Company recorded a $7.0 million non-recurring charge related to this settlement and estimated legal and other expenses. As part of this settlement, VAP agreed to amend the supply agreement to substantially lower the minimum purchase requirements for 1999 and 2000 and to conclude the supply agreement on December 31, 2000. The Company has met the revised 1999 and 2000 purchase requirements.
Interest expense decreased by $2.2 million to $22.9 million in 1999 from $25.1 million in 1998. The reduction is due to decreased interest rates on the Company's LIBOR based borrowings and a reduction in the Company's average borrowings.
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash provided by operations was $14.8 million for the year ended December 31, 2000 compared to $23.3 million for the year ended December 31, 1999 and $11.8 million for the year ended December 31, 1998. The decrease in 2000 was due to an increase in inventories and a lower provision for doubtful accounts, being partially offset by improved earnings. The increase in 1999 over 1998 was principally due to improved earnings and improved accounts receivable collections.
Cash Flows from Investing Activities. Net cash used in investing activities was $16.7 million, $13.9 million and $13.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. The Company's investing activities consist primarily of costs associated with capital expenditures. Capital expenditures, comprised mainly of routine delivery vehicle replacements, were $15.9 million, $14.2 million and $12.4 million for the years ended December 31, 2000, 1999 and 1998, respectively. Other investing activities include the acquisition of building products distributors. Acquisitions of businesses were $2.5 million, $1.0 million and $2.3 million for the years ended December 31, 2000, 1999 and 1998, respectively.
Cash Flows from Financing Activities. Net cash provided by (used in) financing activities was $2.2 million, $(9.3) million and $1.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. The Company's financing activities consist primarily of the borrowings incurred in connection with the growth of its existing distribution centers as well as acquisition of building products distributors and, to a lesser extent, distributions to the Company's sole stockholder in respect of tax liabilities related to the Company.
Liquidity. The Company's principal sources of funds are anticipated to be cash flows from operating activities and borrowings under its revolving credit agreement. The Company believes that these funds will provide the Company with sufficient liquidity and capital resources to meet its financial obligations, as well as to provide funds for the Company's working capital, capital expenditures and other needs for the foreseeable future. No assurance can be given, however, that this will be the case.
Senior Subordinated Notes. As of December 31, 2000, the Company had $79.1 million of unsecured Senior Subordinated Notes outstanding bearing interest at 10 5/8%. These notes mature on May 15, 2007 and are subordinate to borrowings under the revolving credit agreement. During 2000 and 1999, the Company repurchased and retired $11.6 and $9.3 million, respectively, of the Senior Subordinated Notes. The notes purchased in 2000 resulted in an extraordinary gain of $1.0 million net of the write-off of the applicable unamortized deferred financing costs and other expenses.
Revolving Credit Agreement. The Company is party to a credit agreement which permits borrowings of up to $250 million under the revolving line of credit (the Revolver). Debt outstanding under this agreement as of December 31, 2000 was $172.5 million and borrowings under the Revolver are secured by accounts receivable and inventories. The initial term of the Revolver expires on June 30, 2002, but shall automatically extend for successive one year periods, unless written notice of termination is given by either party at least sixty days prior to the end of a period.
Seasonality
Because of cold weather conditions in many of the markets in which the Company does business and the seasonal nature of the roofing and siding business generally, the Company's revenues vary substantially throughout the year, with its lowest revenues typically occurring in the months of December through February.
Inflation
The Company believes that inflation did not have a material impact on its results of operations for the three years ended December 31, 2000.
Forward Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act). Such forward-looking statements are based on the beliefs of the Company's management as well as on assumptions made by and information currently available to the Company at the time such statements were made. When used in this MD&A, the words "anticipate," "believe," "estimate," "expect," "intends" and similar expressions, as they relate to the Company are intended to identify forward- looking statements, which include statements relating to, among other things: (i) the ability of the Company to continue to successfully compete in the roofing and vinyl siding products market; (ii) the anticipated benefits from its comprehensive evaluation of new operating and administrative processes (iii) the continued effectiveness of the Company's sales and marketing strategy; and (iv) the ability of the Company to continue to successfully develop and launch new distribution centers. Actual results could differ materially from those projected in the forward-looking statements as a result of the matters discussed herein and certain economic and business factors, some of which may be beyond the control of the Company.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates. The Company does not use derivative financial instruments for speculative or trading purposes.
Interest Rate Sensitivity. The Company's earnings are affected by changes in short-term interest rates as a result of its borrowings under the Revolver. If market interest rates for such borrowings average 1% more during 2001 than they did during 2000, the Company's interest expense would increase, and income before income taxes would decrease by approximately $1.7 million. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the Company's financial structure.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules are listed in Part IV, Item 14 of this Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to (i) each member of the Company's Board of Directors (the Board), (ii) each executive officer of the Company and (iii) certain key employees of the Company.
Kenneth A. Hendricks serves as Chief Executive Officer and Chairman of the Board. Prior to July 1998 when Mr. David Luck was hired, Mr. Hendricks also served as the President. Prior to 1982, Mr. Hendricks was the owner and operator of a number of successful exterior building contracting businesses and real estate businesses.
David Luck has served as President and Chief Operating Officer since July of 1998, and a director since May of 1999. Prior to joining ABC, he was the President of Bridgestone/Firestone Retail Operations Division, and the Senior Vice President of Bridgestone/Firestone, Inc. As president he was responsible for 1,550 retail stores selling tires and automotive services. Mr. Luck spent twenty-seven years with Bridgestone/Firestone and held a variety of positions with increasing responsibilities.
Diane Hendricks has served as Executive Vice President, Secretary and a director of the Company since its inception. Ms. Hendricks is also President of American Patriot Insurance Agency, Inc. Ms. Hendricks is primarily responsible for overseeing insurance, personnel matters, bonus programs, profit sharing and legal matters for the Company.
Kendra Story has served as the Chief Financial Officer, Treasurer and a director of the Company since its inception. Ms. Story is primarily responsible for overseeing finance, accounting, internal audit and inventory management for the Company.
Robert Bartels has served as the Company's Senior Vice President of Operations since September of 1997, prior to which, he was the Director of Purchasing since 1996. From 1971 to 1996, Mr. Bartels was employed by several leading manufacturers in the building materials industry with a variety of positions with increasing responsibilities, which included national marketing and sales and as vice president of sales.
Keith Rozolis has served as the Vice President of Strategic Marketing and Planning since July 1999. Prior to joining ABC, Mr. Rozolis was with Bridgestone/Firestone Retail Operations division since 1993, where he served in several capacities including a Director of Tire Marketing. He also directed key strategic initiatives related to tire marketing, automotive service (MasterCare), systems and process reengineering, and collaborative internet strategies for Bridgestone/Firestone.
Gil Aleman has served as a director of the Company since 1997. Mr. Aleman is currently the Director of Operations for American Mortgage Capital Inc., a major lender for all types of mortgages. Previously he served as President of the Celotex roofing division for Jim Walter Corporation from 1985 to 1997. Prior to 1985, Mr. Aleman served as President of Jim Walter Window Components, a division of Jim Walter Corporation.
Kent Nelson has served as a director of the Company since 1997. Mr. Nelson is currently Chief Executive Officer and President of TJ Adams Group, LLC, a regional insurance broker, and is an adjunct professor of management at the Graduate School of Business, Northern Illinois University. From 1989 to 1998, Mr. Nelson was Managing Director and a member of the Executive Committee of Aon Risk Services of Illinois, Inc., an international insurance broker.
Kenneth and Diane Hendricks are husband and wife. Kendra Story is a daughter of Mr. Hendricks.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The compensation of executive officers of the Company is determined by the Board. The following Summary Compensation Table includes individual compensation information for the Chief Executive Officer and each of the four other most highly compensated executive officers of the Company in the year ended December 31, 2000 for services rendered in all capacities to the Company and its subsidiaries during the year ended December 31, 2000.
(1) Consists of estimated amounts paid by the Company for automobiles and for matching payments under the Company's 401(k) Profit Sharing Plan, respectively, as follows: Mr. Hendricks-$2,912 and $1,600; Mr. Luck-$6,500 and $1,600; Ms. Hendricks-$1,905 and $1,600; Ms. Story-$821 and $1,600; and Mr. Bartels-$11 and $1,600.
Mr. Luck is party to an agreement with the Company dated May 18, 1998, which provides for his employment through April 30, 2005. As part of the agreement, Mr. Luck received a one-time bonus of $1,500,000, one half of which was paid in 1998 and the other half in 1999. The one-time bonus is subject to repayment under conditions specified in the agreement. The agreement provides a bonus program and severance package, and also contains noncompetition and nonsolicitation covenants covering the term of the agreement plus two years from the date of termination.
Mr. Bartels is party to an agreement with the Company dated November 30, 1998 and amended November 30, 1999, which provides for his employment for a five year period commencing on January 1, 1999. The agreement provides a bonus program and severance package, and also contains noncompetition and nonsolicitation covenants covering the term of the agreement plus two years from the date of termination.
For a description of the employment agreement entered into between Mr. Hendricks and the Company, see "Certain Relationships and Related Transactions."
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the Company's capital stock is owned beneficially and of record by Mr. Hendricks. There are no outstanding options or other rights to purchase any shares of the Company's capital stock.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ABC transacts business with a number of entities, including Corporate Contractors, Inc. (CCI), Blackhawk Transportation, Inc. (Blackhawk), Amfinity Capital, LLC (Amfinity), Water Tower Industrial Properties (Water Tower), Hendricks Commercial Properties (HCP), Hendricks Carolina Properties, LLC (Carolina), Hendricks Peachtree, LLC (Peachtree), Hendricks Michigan Properties, LLC (Michigan), Hendricks Oregon Properties, LLC (Oregon), Patriot, Ltd. (Patriot) and American Patriot Insurance Agency, Inc. (APIA) (collectively, the Related Entities), which are owned by ABC's sole stockholder and his spouse. CCI performs construction work such as interior renovations and additions at ABC locations. Blackhawk provides transportation services for the Company. The Company leases properties from Water Tower, Carolina, Peachtree, Michigan, Oregon, and HCP. Amfinity provides business advisory services. APIA is an insurance broker who provides services and arranges insurance for ABC. The Company believes that the transactions between ABC and the Related Entities have generally been conducted on an arm's-length basis.
In connection with certain of the Company's acquisitions, the Company's sole stockholder or his affiliates have purchased the real estate of the acquired business, which the Company has then leased from Mr. Hendricks or his affiliates. In addition, certain of the distribution centers opened by the Company are located in facilities purchased by and leased from Mr. Hendricks or his affiliates. These real estate purchases have historically been financed with a combination of debt financing and equity, and a portion of the equity has sometimes been funded by Mr. Hendricks or his affiliates with borrowings from ABC. The aggregate amount of such borrowings from ABC outstanding as of December 31, 2000 was approximately $3.5 million and $5.3 million as of December 31, 1999. The Company and Mr. Hendricks currently intend to continue to acquire properties for the Company's occupancy using such method of financing. The Company's debt agreements will permit it to lend up to $10.0 million to Mr. Hendricks or his affiliates in connection with such transactions in the future. Interest is charged on such loans at a rate comparable to the rate the Company pays on its bank borrowings. The maximum amount of such borrowings at any time during the three years ended December 31, 2000, occurred in January 1998 and aggregated $7.4 million.
As described above, as of December 31, 2000, the Company leased 106 facilities from Mr. Hendricks or his affiliates compared to 102 facilities as of December 31, 1999, and 98 facilities as of December 31, 1998. For the years ended December 31, 2000, 1999 and 1998, the Company paid $11.7 million, $11.1 million and 8.8 million, respectively, in lease payments to Mr. Hendricks or his affiliates in respect of such properties. Annual payments due under these leases are based on the prevailing market rates in the areas in which such properties are located and are adjusted annually to reflect changes in the consumer price index.
As of December 31, 2000 and 1999, the Company had obligations outstanding under guarantees and letters of credit in respect of debt of Mr. Hendricks and his affiliates in the amounts of $5.4 million and $5.5 million, respectively. Such guarantees are related to certain indebtedness of the Company which was assumed by Mr. Hendricks. The maximum amount of such guarantees and letters of credit at any time during the past three years occurred in July 1999 and aggregated $5.5 million.
Patriot, an insurance captive owned by Mr. and Mrs. Hendricks, provides certain insurance coverage to the Company, as well as third party companies, which is subsequently reinsured in part by third-party insurance carriers. APIA, also owned by Mr. and Mrs. Hendricks, serves as a broker with respect to insurance coverage for the Company and the Related Entities. The Company paid APIA, net of reimbursements, $12.8 million, $11.8, and $9.5 million in 2000, 1999 and 1998, respectively, for claim liabilities, as determined by an independent actuarial service.
During 1997, the Company entered into an employment agreement (Employment Agreement) with Mr. Hendricks which provided for an annual salary of $1.0 million, subject to annual increases if approved by a majority of ABC's independent directors, of up to 20.0% of his salary in the preceding year. His Employment Agreement automatically renews unless ABC or Mr. Hendricks otherwise elect.
The Company has entered into a Tax Allocation Agreement with Mr. Hendricks pursuant to which he will receive distributions from each of the Company and its wholly owned subsidiaries with respect to taxes payable by Mr. Hendricks associated with the operations of each entity.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1.) FINANCIAL STATEMENTS
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
(2.) FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are not applicable and, therefore, have been omitted.
(3.) LISTING OF EXHIBITS
(b) CURRENT REPORTS ON FORM 8-K
During the quarter ended December 31, 2000, the Company had no current filings on Form 8-K.
(c) EXHIBITS
See Exhibit Index submitted as a separate section of this report.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors American Builders & Contractors Supply Co., Inc.
We have audited the accompanying consolidated balance sheets of American Builders & Contractors Supply Co., Inc., and subsidiaries (the Company) as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 consolidated financial position of the Company at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Milwaukee, Wisconsin March 2, 2001
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share and share amounts)
See accompanying notes.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)
See accompanying notes.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (in thousands)
See accompanying notes.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
See accompanying notes
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
The accompanying consolidated financial statements include the accounts of American Builders & Contractors Supply Co., Inc. (ABC) and its wholly owned subsidiaries, Mule-Hide Products Co., Inc. (Mule-Hide), and Amcraft Building Products Co., Inc. (Amcraft) (collectively, the Company). All significant intercompany profits, transactions, and balances have been eliminated in consolidation.
The Company is primarily engaged in the sale of roofing and siding products throughout the United States. There were 200, 200 and 204 distribution center locations at December 31, 2000, 1999 and 1998, respectively.
Inventories
Inventories, which consist primarily of purchased roofing and siding products, are stated at the lower of cost (average cost basis) or market.
Property and Equipment
Property and equipment additions (including leasehold improvements) are capitalized at cost. Depreciation on these assets is calculated using the straight-line method over the estimated useful lives of the related assets or, in the case of leasehold improvements, the life of the lease if shorter. Estimated useful lives are as follows:
Buildings and improvements 31 -39 years Warehouse equipment 5 - 7 years Vehicles 2 -10 years Office furniture and equipment 3 - 7 years Leasehold improvements Life of the lease, maximum 10 years
Goodwill
Goodwill is amortized over 25 to 35 years using the straight-line method.
Other Intangible Assets
Other intangible assets include noncompete agreements and deferred financing costs which are amortized over the term of the respective agreements or loans (ranging from 7 to 15 years).
Impairment of Long-Lived Assets
Property and equipment, goodwill, other intangible assets, and other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Such analyses necessarily involve significant judgment.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Nature of Business and Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue upon delivery of product and transfer of title to the customer, which typically occurs at the Company's distribution center locations.
Late Payment Charges
Late payment charges are recorded in connection with past due receivable balances and are classified as a reduction to distribution center operating expenses. Late payment charges were approximately $4,112,000, $3,861,000 and $4,654,000 in 2000, 1999 and 1998, respectively.
Shipping and Handling Costs
The Company classifies shipping and handling costs, consisting of driver wages and vehicle expenses, as distribution center expenses in the accompanying consolidated statements of operations. Shipping and handling costs were approximately $59,972,000, $54,452,000, and $53,657,000 for the years ended December 31, 2000, 1999, and 1998, respectively.
Advertising
Advertising costs are expensed in the period incurred. Total advertising expense was approximately $4,758,000, $4,001,000, and $3,990,000 for 2000, 1999 and 1998, respectively.
Income Taxes
ABC and its subsidiaries have elected to be treated as Subchapter S Corporations for federal and state income tax purposes. As a result, the Company's sole stockholder includes the taxable income of ABC and its subsidiaries in his personal income tax returns. Accordingly, with the exception of the amounts described in the following paragraph, the accompanying consolidated financial statements include no provision or liability for income taxes.
Certain states impose a corporate state tax on earnings of a Subchapter S Corporation. Provisions of approximately $280,000, $171,000, and $170,000 have been made for such income taxes for the years ended December 31, 2000, 1999 and 1998, respectively.
Net income (loss) differs from the amount currently taxable to the Company's sole stockholder due to certain items which are reported differently for financial reporting purposes than for income tax purposes, principally inventory costs capitalized, bad debts, depreciation, and amortization.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
2. Business Acquisitions
The following business acquisitions have been accounted for using the purchase method. Operations of such acquisitions are included in the Company's consolidated financial statements from the respective dates of acquisition.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Business Acquisitions (continued)
2000 Acquisitions
On December 31, 2000, the Company acquired certain assets and assumed certain liabilities of Central Building Supply, Inc. (Central) for a purchase price of approximately $2,200,000. Central was engaged primarily in the wholesale distribution of siding material and accessories in the Maryland market. The Company made one other acquisition of assets during the year with a purchase price of approximately $271,000. The cost of both acquisitions approximated the fair value of the net assets acquired.
1999 Acquisitions
During 1999, the Company made three acquisitions, with an aggregate cost of approximately $1,000,000. The cost of the acquisitions approximated the fair value of the net assets acquired.
Unaudited pro forma financial information for the acquisitions in 2000 and 1999 is not presented because these acquisitions did not have a material impact on the Company's results of operations.
1998 Acquisitions
On January 19, 1998, the Company acquired certain assets and assumed certain liabilities of U.S.A. Roofing Supply, Inc. (USA) for a purchase price of approximately $2,300,000. USA was engaged primarily in the wholesale distribution and sale of roofing material and supplies primarily in the Florida market. The excess of cost over the fair value of the net assets acquired totaled $1,000,000.
3. Long-Term Debt
Long-term debt consists of the following:
December 31, 2000 1999 ---------------------------- (in thousands)
Revolving line of credit $172,513 $157,935 Senior Subordinated Notes 79,100 90,650 Equipment loans 20,078 21,425 Mortgage notes payable 5,856 6,001 ---------------------------- 277,547 276,011 Less current maturities 6,067 5,582 ---------------------------- $271,480 $270,429 ============================
The Company has a financing agreement with a group of banks (Revolver) under which the Company may borrow, on a revolving credit basis, up to a maximum of $250,000,000. The initial term of the Revolver expires on June 30, 2002, but shall automatically extend for successive one year periods, unless written notice of termination is given by either party at least sixty days prior to the end of a period. At December 31, 2000, the Company had $6,100,000 of availability under the Revolver. The average availability during 2000 was approximately $53,700,000 based on a percentage of eligible accounts receivable and inventories. Interest on the Revolver at December 31, 2000 was primarily based on LIBOR plus 1.25%. The weighted average interest rate on all borrowings outstanding under the Revolver at December 31, 2000 and 1999, was 8.2% and 7.7%, respectively.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Long-Term Debt (continued)
The Revolver contains various covenants, including, among other things, provisions that place restrictions on ABC's ability to merge or sell its business, sell assets, make investments other than in the ordinary course of business, repurchase stock, or pay dividends. Additional provisions require the Company to maintain specified tangible net worth and cash flow amounts and require that the Company's sole stockholder continue to own at least 51% of the Company's common stock.
The Company's 10 5/8% Senior Subordinated Notes are due in 2007. During 2000, the Company repurchased and retired $11,550,000 of the Senior Subordinated Notes. The purchase resulted in an extraordinary gain of $1,043,000 net of the write-off of the applicable portion of the unamortized deferred financing costs and other expenses. During 1999, the Company repurchased and retired $9,350,000 of the Senior Subordinated Notes. The difference between the par value of the Senior Subordinated Notes repurchased in 1999 and the repurchased price, net of the applicable portion of the unamortized deferred financing costs written off, was not material. Funds used to repurchase the Senior Subordinated Notes were obtained primarily from borrowings under the Revolver.
In 1999, the Company obtained a $5,000,000 note due in 48 monthly principal and interest installments beginning in February 2000. The note is collateralized by specific equipment (delivery trucks, trailers and forklifts) and bears interest at 8.01%. In 1998, the Company refinanced its previous equipment loans with a $16,300,000 note, collateralized by specific equipment (delivery trucks, trailers, and forklifts). A principal payment of $4,075,000 is due in July 2001 with the remaining principal balance due in July 2002. The note bears interest at 7.1% and is payable monthly.
The mortgage notes payable principally relate to ABC's corporate offices, and are due in monthly principal and interest installments of approximately $50,000 through April 2002, with a final maturity date of May 31, 2002. Interest on the mortgage notes was 8.375% through February 1, 1999. From February 2, 1999 through February 1, 2001 the rate is 7.75%, and is adjusted annually thereafter.
Substantially all of the Company's assets are collateral for the Company's indebtedness. Future maturities of long-term debt as of December 31, 2000, are as follows:
Amount --------------- (in thousands) Year ending December 31, 2001 $ 6,067 2002 191,130 2003 1,250 2004 - 2005 - Thereafter 79,100 --------------- $277,547 ===============
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Property and Equipment
Property and equipment consists of the following:
December 31, 2000 1999 -------------------------- (in thousands)
Land $ 3,556 $ 3,610 Buildings and improvements 13,329 13,497 Warehouse equipment 11,627 11,048 Vehicles 72,845 69,840 Office furniture and equipment 12,456 12,821 Leasehold improvements 16,106 14,488 -------------------------- 129,919 125,304 Less accumulated depreciation 63,819 57,789 -------------------------- $ 66,100 $ 67,515 ==========================
5. Lease Commitments
The Company conducts the majority of its operations in leased facilities under operating leases expiring at various dates through 2010. Generally, the leases provide that the Company pay all insurance, maintenance, and other costs and expenses associated with use of the buildings. Some of the leases also require the Company to pay real estate taxes.
As of December 31, 2000, the real estate for 106 of the distribution centers was owned by a related party. The total rent expense for these related- party leases was approximately $11,742,000, $11,146,000, and $8,832,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Rent expense under all leases totaled $20,516,000, $20,743,000 and $20,872,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Future minimum rental payments required as of December 31, 2000, under all leases with initial or remaining terms of more than one year are as follows:
Amount ---------------- (in thousands) Year ending December 31, 2001 $ 19,534 2002 18,128 2003 14,775 2004 13,138 2005 12,023 Thereafter 30,517 ---------------- $108,115 ================
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Related-Party Transactions
The Company is related to certain other affiliates by common ownership and management. Transactions and balances with these entities are as follows at December 31 or for the years ended December 31:
2000 1999 1998 ------------------------- (in thousands) Accounts receivable $ 58 $ 49 $ 14 Security deposits 314 320 361 Sales 120 76 94 Purchases 225 385 110 Rent expense 11,742 11,146 8,832 Interest income 300 467 531
Interest on the receivable from the sole stockholder is charged at a rate comparable to the interest rate the Company pays on its Revolver.
At December 31, 2000 and 1999, the Company had guaranteed debt of the sole stockholder in the amounts of approximately $1,742,000 and $1,870,000, respectively. Certain assets owned by the Company serve as collateral as part of an overall guaranty of this debt by the Company. The Company also had outstanding letters of credit of approximately $3,664,000 at December 31, 2000 and 1999 with respect to debt of the sole stockholder and affiliates.
An insurance captive, owned by the sole stockholder and his spouse, provides certain insurance coverage to the Company, which is subsequently reinsured in part by third-party insurance carriers. The Company paid an insurance broker, also owned by the sole stockholder and his spouse, net of reimbursements, approximately $12,832,000, $11,762,000 and $9,499,000 in 2000, 1999 and 1998, respectively, for claim liabilities, as determined by an independent actuarial service. The Company has a $5,000,000 letter of credit outstanding at December 31, 2000 with respect to its potential exposure under certain coverages provided by the affiliated insurance captive.
7. Contingent Liabilities
The Company is involved in various legal matters arising in the normal course of business. In the opinion of management and legal counsel, the amount of losses that may be sustained, if any, would not have a material effect on the financial position and results of operations of the Company.
8. Employee Benefit Plan
The Company sponsors a 401(k) plan covering substantially all employees. Contributions, which are at the discretion of the Company, approximated $408,000 in 2000 and $204,000 in 1998. No discretionary contributions were made in 1999.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, accounts payable and borrowings under the Revolver approximated fair value at December 31, 2000 and 1999. The value of the Senior Subordinated Notes, based on quoted market prices, is as follows:
December 31, 2000 1999 ----------------------- (in thousands) Par Value $79,100 $90,650 Fair Value 62,489 84,305
Substantially all of the Company's accounts receivable are due from contractors located throughout the United States. Credit is extended based on an evaluation of the customer's financial condition and projects, where applicable, and collateral is required in certain situations. Credit losses are provided for in the consolidated financial statements and have consistently been within management's expectations.
10. Non-Recurring Charges
In connection with the purchase of certain distribution business assets of Viking Building Products, Inc. and Viking Aluminum Products, Inc. (VAP) in 1997, the Company entered into a five year supply agreement with VAP, regarding the sale to ABC of windows, awnings, doors and related products manufactured by VAP. The supply agreement specified minimum purchases of approximately $20,000,000 per year through May 2002 and damages for shortfalls. The Company did not meet the required minimum annual purchases for 1998. In February 1999, the Company filed a lawsuit in the U.S. District court for the Western District of Wisconsin seeking damages related to warranty and quality issues, among other issues. VAP instituted a lawsuit in the U.S. District Court for the Southern District of New York seeking approximately $2,250,000 in damages under the terms of the supply agreement for the period through December 31, 1998.
In December 1999, the Company and VAP reached a final settlement whereby the Company paid $6,550,000. The Company recorded a $7,030,000 non-recurring charge related to this settlement including legal and other expenses. As part of this settlement, VAP agreed to amend the supply agreement to substantially lower the minimum purchase requirements for 1999 and 2000 and to conclude the supply agreement on December 31, 2000. The Company has exceeded both the revised 1999 purchase requirements of $8,000,000, and the 2000 purchase requirements of $10,000,000.
For many years, the Company had done a significant volume of business with a large roofing contractor in Chicago. In 1998, the contractor's assets and business were foreclosed upon by its bank. At that time, the Company had notes receivable for $4,698,000 from the contractor. In an effort to reduce its loss as well as for other business reasons, the Company purchased the contractor's assets from the bank, finished the contracts in process, collected the receivables and sold the remaining assets. The company incurred a loss of $3,900,000 related to these activities.
11. Summarized Financial Information about Guarantor Subsidiaries
The following tables present consolidating financial information for 2000, 1999 and 1998 for: (a) the Company and (b) on a combined basis, the guarantors of the Senior Subordinated Notes, which include all of the wholly owned subsidiaries of the Company (Subsidiary Guarantors). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are jointly, severally and unconditionally liable under the guarantees, and the Company believes separate financial statements and other disclosures regarding the Subsidiary Guarantors are not material to investors.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
Consolidating Statement of Operations for the Year Ended December 31, 2000 (in thousands)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
Consolidating Statement of Operations for the Year Ended December 31, 1999 (in thousands)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
Consolidating Statement of Operations for the Year Ended December 31, 1998 (in thousands)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Summarized Financial Information about Guarantor Subsidiaries (continued)
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Quarterly Results of Operations (Unaudited)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registration has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Beloit, State of Wisconsin, on March 21, 2001.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
By: /s/ Kendra A. Story -------------------------- Kendra A. Story Chief Financial Officer, Treasurer
EXHIBITS INDEX --------------
3.1 Certificate of Incorporation of the Company [Incorporated by reference to exhibit 3.1 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
3.2 By-laws of the Company [Incorporated by reference to exhibit 3.2 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
3.3 Articles of Incorporation of Mule-Hide [Incorporated by reference to exhibit 3.3 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
3.4 By-laws of Mule-Hide [Incorporated by reference to exhibit 3.4 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
3.5 Certificate of Incorporation of Amcraft [Incorporated by reference to exhibit 3.5 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
3.6 By-laws of Amcraft [Incorporated by reference to exhibit 3.6 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
10.1 Employment Agreement, dated as of May 1, 1997, between the Company and Kenneth A. Hendricks [Incorporated by reference to exhibit 10.3 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
10.2 Tax Allocation Agreement, dated as of May 1, 1997, among the Company, Mule-Hide and Amcraft and Kenneth A. Hendricks [Incorporated by reference to exhibit 10.4 to the Company's Registration Statement on Form S-4 (File No. 33-26991)].
10.3 Form of lease agreement between the Company and Hendricks Real Estate Properties and schedule of lease terms for all properties leased pursuant thereto [Incorporated by reference to exhibit 10.5 to the Company's Registration on Form S-4 (File No. 33-26991)].
10.4 Amended and Restated Loan and Security Agreement among American National Bank and Trust Company of Chicago, NationsBank of Texas, N.A., Bankamerica Business Credit, Inc. and the Company, as amended to date (the "Credit Agreement") [Incorporated by reference to exhibit 10.6 to the Company's Registration on Form S-4 (File No. 33-26991)].
10.5 Amended and Restated Patent, Trademark and License Mortgage by the Company in favor of NationsBank of Texas, N.A., as agent for the lenders under the Credit Agreement, as amended [Incorporated by reference to exhibit 10.7 to the Company's Registration on Form S-4 (File No. 33- 26991)].
10.6 Amended and Restated Limited Guaranty Agreement by Kenneth A. Hendricks, dated as of February 8, 1996, in favor of NationsBank of Texas, N.A., individually or as agent for the lenders under the Credit Agreement [Incorporated by reference to exhibit 10.8 to the Company's Registration on Form S-4 (File No. 33-26991)].
10.7 Continuing Guarantee Agreement, dated July 20, 1996, between Mule-Hide and Heritage for the benefit of Kenneth A. Hendricks [Incorporated by reference to exhibit 10.9 to the Company's Registration on Form S-4 (File No. 33-26691)].
10.8 Guaranty, dated December 22, 1992, between the Company and Transohio Savings Bank, for the benefit of Kenneth A. Hendricks [Incorporated by reference to exhibit 10.10 to the Company's Registration on Form S-4 (File No. 33-26991)].
10.9 Guaranty, dated December 22, 1996, between the Company and Met Life Capital Corporation, for the benefit of Kenneth A. Hendricks [Incorporated by reference to exhibit 10.11 to the Company's Registration on Form S-4 (File No. 33-26991)].
10.10 Second Amended and Restated Loan and Security Agreement between NationsBank, N.A. , American National Bank and Trust Company of Chicago, and the Company (the "Credit Agreement"). [Incorporated by reference to exhibit 10.1 to the Company's Form 10-Q for the period ending March 31, 1998 (File No. 33-26991)]
10.11 First Amendment to the Second Amended and Restated Loan and Security Agreement between NationsBank N.A., American National Bank and Trust Company of Chicago, and the Company, as amended to date (the "Credit Agreement"). [Incorporated by reference to exhibit 10.11 to the Company's Form 10-K for the period ending December 31, 1998 (File No. 33-26991)]
10.12 Employment Agreement, dated as of May 1, 1998 between the Company and David Luck. [Incorporated by reference to exhibit 10.1 to the Company's Form 10-Q for the period ending June 30, 1998 (File No. 33-26991)]
10.13 Employment Agreement, dated as of November 30, 1998, between the Company and Robert Bartels. [Incorporated by reference to exhibit 10.11 to the Company's Form 10-K for the period ending December 31, 1998 (File No. 33- 26991)]
10.14 Consent and Second Amendment to the Second Amended and Restated Loan and Security Agreement [Incorporated by reference to exhibit 10.1 to the Company's Form 10-Q for the period ending March 31, 1999 (File No. 33- 26991)]
10.15 Third Amendment to the Second Amended and Restated Loan and Security Agreement among American Builders & Contractors Supply Co., Inc., and Bank of America, N.A. as Agent and a Lender [Incorporated by reference to exhibit 10.1 to the Company's Form 10-Q for the period ending September 30, 1999 (File No. 33-26991)]
10.16 Amendment to Executive Employment Agreement, dated as of November 30, 1999 between the Company and Robert Bartels. [Incorporated by reference to exhibit 10.16 to the Company's form 10-K for the period ending December 31, 1999 (File No. 33-26991)]
10.17 Restated Third Amendment to Second Amended and Restated Loan and Security Agreement among American Builders & Contractors Supply Co., Inc, and Bank of America, N.A. as Agent and a Lender. [Incorporated by reference to exhibit 10.17 to the Company's form 10-K for the period ending December 31, 1999 (File No. 33-26991)]
10.18 Consent Agreement, dated August 10, 2000, among the Company, the Lenders, and Bank of America, National Association [Incorporated by reference to exhibit 10.1 to the Company's Form 10-Q for the period ending September 30, 2000 (File No. 33-26991)]
21.1 Subsidiaries of the Company, Mule-Hide and Amcraft [Incorporated by reference to exhibit 21.1 Company's Registration on Form S-4 (File No. 33-26991)].
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC. SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999 and 1998 (in thousands)
(1) Consist of charge-offs, net of recoveries (2) Allowance for doubtful accounts recorded in connection with acquisitions