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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934: For the period ended March 31, 2003
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 33-26991
American Builders & Contractors Supply Co., Inc.
-----------------------------------------------------
(Exact names of registrant as specified in is charter)
Delaware 5033 39-1413708
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
One ABC Parkway
Beloit, Wisconsin 53511
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (608) 362-7777
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 filing requirements
for the past 90 days. [X] Yes [_] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ___ No X
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.01 par value, 147.04 shares as of May 1, 2003
The Registrant is filing this report pursuant to certain of its indenture
obligations and not as required under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Index
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 2003 and December 31,
2002
Condensed consolidated statements of operations and retained earnings -
Three months ended March 31, 2003 and March 31, 2002
Condensed consolidated statements of cash flows - Three months ended March
31, 2003 and March 31, 2002
Notes to condensed consolidated financial statements - March 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Certification of Periodic Report
1
Part I. Financial Information
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
March 31, December 31,
ASSETS 2003 2002
--------------- ---------------
Current assets:
Cash $ 3,207 $ 6,801
Accounts receivable 203,266 209,813
Inventories 266,333 191,049
Prepaid expenses and other 3,694 3,188
--------------- ---------------
Total current assets 476,500 410,851
Property and equipment, net 89,586 90,875
Receivable from affiliates 14,946 15,692
Goodwill 38,951 38,851
Other intangible assets 4,520 4,534
Security deposits 1,043 1,011
Other assets 993 826
--------------- ---------------
$ 626,539 $ 562,640
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 203,035 $ 119,941
Accrued payroll and benefits 16,536 15,586
Accrued liabilities 19,706 19,864
Current portion of long-term debt 9,026 8,721
--------------- ---------------
Total current liabilities 248,303 164,112
Long-term debt 287,344 296,857
Contingent liabilities (Note 2)
Stockholder's equity:
Common stock --- ---
Additional paid-in capital 3,779 3,779
Retained earnings 87,113 97,892
--------------- ---------------
Total stockholder's equity 90,892 101,671
--------------- ---------------
$ 626,539 $ 562,640
=============== ===============
See notes to unaudited condensed consolidated financial statements.
Note: The balance sheet at December 31, 2002 has been derived from the audited
balance sheet at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
2
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Retained Earnings
(Unaudited)
(in thousands)
Three months ended March 31,
-------------------------------------------
2003 2002
-------------------------------------------
Net sales $ 326,771 $ 266,362
Cost of sales 244,634 200,321
---------------- -----------------
Gross profit 82,137 66,041
Operating expenses 82,186 66,672
Amortization of intangible assets 92 92
---------------- -----------------
82,278 66,764
---------------- -----------------
Operating loss (141) (723)
Other income (expense):
Interest income 186 115
Interest expense (3,861) (3,427)
---------------- -----------------
(3,675) (3,312)
---------------- -----------------
Loss before provision for income taxes (3,816) (4,035)
Provision for income taxes 163 214
---------------- -----------------
Net loss (3,979) (4,249)
Retained earnings at beginning of period 97,892 71,383
Distributions to sole stockholder (6,800) -
---------------- -----------------
Retained earnings at end of period $ 87,113 $ 67,134
================ =================
See notes to unaudited condensed consolidated financial statements.
3
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three months ended March 31,
-------------------------------------------
2003 2002
-------------------------------------------
Operating activities
Net loss $ (3,979) $ (4,249)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation 3,997 3,609
Amortization 92 92
Amortization of deferred financing costs 93 69
Provision for doubtful accounts 1,601 1,487
Loss on disposal of property and equipment 157 64
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable 5,142 7,787
Inventories (74,725) (62,377)
Prepaid expenses and other (505) 458
Other assets (199) (261)
Accounts payable 83,094 84,687
Accrued liabilities 792 1,378
----------------- ----------------
Cash provided by operating activities 15,560 32,744
Investing activities
Additions to property and equipment (3,116) (3,820)
Proceeds from disposal of property and equipment 299 145
Acquisitions of businesses (904) (4,478)
----------------- ----------------
Cash used in investing activities (3,721) (8,153)
Financing activities
Net payments under line of credit (13,728) (18,402)
Proceeds from long-term debt 6,750 -
Payments on long-term debt (2,229) (1,032)
Change in net receivable from affiliates 745 (7,765)
Distributions to sole stockholder (6,800) -
Payments of debt financing costs (171) (313)
----------------- ----------------
Cash used in financing activities (15,433) (27,512)
----------------- ----------------
Net decrease in cash (3,594) (2,921)
Cash at beginning of period 6,801 6,114
----------------- ----------------
Cash at end of period $ 3,207 $ 3,193
================= ================
See notes to unaudited condensed consolidated financial statements.
4
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2003
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
(consisting primarily of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended March 31, 2003 are not indicative of the results that may be expected for
the year ending December 31, 2003 due to the seasonality of the business. For
further information, refer to the consolidated financial statements and
footnotes thereto included in American Builders & Contractors Supply Co., Inc.'s
(ABC, or together with its subsidiaries, the Company) Annual Report on Form 10-K
for the year ended December 31, 2002.
2. Contingent Liabilities
At March 31, 2003 and December 31, 2002, the Company had guaranteed debt of
the stockholder in the amount of $1,264,000, for both periods. 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 in the
amount of $5,064,000 at March 31, 2003 and December 31, 2002, with respect to
debt of the Company's stockholder and affiliates.
3. Guarantor Subsidiaries
The following tables present condensed consolidating financial information
for the three months ended March 31, 2003 and 2002 for: (a) ABC 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.
5
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
3. Guarantor Subsidiaries (continued)
Condensed Consolidating Balance Sheet
March 31, 2003
(in thousands) Subsidiary
ABC Guarantors Eliminations Consolidated
---------------------------------------------------------
Assets
Current assets:
Cash $ 3,349 $ (142) $ - $ 3,207
Accounts receivable 200,259 15,901 (12,894) 203,266
Inventories 266,189 2,918 (2,774) 266,333
Intercompany advances 3,503 (3,503) - -
Prepaid expenses and other 1,830 1,864 - 3,694
--------------------------------------------------------
Total current assets 475,130 17,038 (15,668) 476,500
Property and equipment, net 83,298 6,288 - 89,586
Investment in subsidiaries 4,625 - (4,625) -
Receivable from affiliates 14,946 - - 14,946
Goodwill 38,951 - - 38,951
Other intangible assets 4,061 459 - 4,520
Security deposits 1,543 (500) - 1,043
Other assets 597 396 - 993
--------------------------------------------------------
$ 623,151 $ 23,681 $ (20,293) $ 626,539
========================================================
Liabilities and stockholder's equity
Current liabilities:
Accounts payable $ 206,202 $ 9,727 $ (12,894) $ 203,035
Accrued payroll and benefits 15,654 882 - 16,536
Accrued liabilities 17,749 1,957 - 19,706
Current portion of long-term debt 8,762 264 - 9,026
--------------------------------------------------------
Total current liabilities 248,367 12,830 (12,894) 248,303
Long-term debt 283,892 3,452 - 287,344
Contingent liabilities
Stockholder's equity:
Common stock - - - -
Additional paid-in capital 3,779 1 (1) 3,779
Retained earnings 87,113 7,398 (7,398) 87,113
--------------------------------------------------------
Total stockholder's equity 90,892 7,399 (7,399) 90,892
--------------------------------------------------------
$ 623,151 $ 23,681 $ (20,293) $ 626,539
========================================================
6
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
3. Guarantor Subsidiaries (continued)
Consolidating Balance Sheet
December 31, 2002
(in thousands) Subsidiary
ABC Guarantors Eliminations Consolidated
----------------------------------------------------------
Assets
Current assets:
Cash $ 6,897 $ (96) $ - $ 6,801
Accounts receivable, less allowance
for doubtful accounts 207,849 11,242 (9,278) 209,813
Inventories 190,971 2,703 (2,625) 191,049
Intercompany advances 2,873 (2,873) - -
Prepaid expenses and other 1,656 1,532 - 3,188
--------------------------------------------------------
Total current assets 410,246 12,508 (11,903) 410,851
Property and equipment, net 84,491 6,384 - 90,875
Investment in subsidiaries 4,927 - (4,927) -
Receivable from affiliates 15,692 - - 15,692
Goodwill 38,851 - - 38,851
Other intangible assets, net 4,059 475 - 4,534
Security deposits 1,511 (500) - 1,011
Other assets 741 85 - 826
--------------------------------------------------------
$ 560,518 $ 18,952 $ (16,830) $ 562,640
========================================================
Liabilities and stockholder's equity
Current liabilities:
Accounts payable $ 124,068 $ 5,151 $ (9,278) $ 119,941
Accrued payroll and benefits 14,834 752 - 15,586
Accrued liabilities 18,147 1,717 - 19,864
Current portion of long-term debt 8,460 261 - 8,721
--------------------------------------------------------
Total current liabilities 165,509 7,881 (9,278) 164,112
Long-term debt 293,338 3,519 296,857
Commitments and contingent liabilities
Stockholder's equity:
Common stock - - - -
Additional paid-in capital 3,779 1 (1) 3,779
Retained earnings 97,892 7,551 (7,551) 97,892
--------------------------------------------------------
Total stockholder's equity 101,671 7,552 (7,552) 101,671
--------------------------------------------------------
$ 560,518 $ 18,952 $ (16,830) $ 562,640
========================================================
7
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
3. Guarantor Subsidiaries (continued)
Condensed Consolidating Statement of Operations
for the Three Months Ended March 31, 2003
(in thousands)
Subsidiary
ABC Guarantors Eliminations Consolidated
--------------------------------------------------------------
Net sales $ 321,762 $ 22,796 $ (17,787) $ 326,771
Cost of sales 242,569 19,660 (17,595) 244,634
--------------------------------------------------------------
Gross profit 79,193 3,136 (192) 82,137
Operating expenses 79,375 2,854 (43) 82,186
Amortization of intangible assets 76 16 - 92
--------------------------------------------------------------
79,451 2,870 (43) 82,278
--------------------------------------------------------------
Operating income (loss) (258) 266 (149) (141)
Other income (expense):
Interest income 186 - - 186
Interest expense (3,827) (34) - (3,861)
--------------------------------------------------------------
(3,641) (34) - (3,675)
--------------------------------------------------------------
Income (loss) before provision for income
taxes and equity in earnings of (3,899) 232 (149) (3,816)
subsidiaries
Provision for income taxes 163 - - 163
--------------------------------------------------------------
(4,062) 232 (149) (3,979)
Equity in earnings of subsidiaries 83 - (83) -
--------------------------------------------------------------
Net income (loss) $ (3,979) $ 232 $ (232) $ (3,979)
==============================================================
8
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
3. Guarantor Subsidiaries (continued)
Condensed Consolidating Statement of Operations
for the Three Months Ended March 31, 2002
(in thousands)
Subsidiary
ABC Guarantors Eliminations Consolidated
--------------------------------------------------------------
Net sales $ 264,774 $ 15,168 $ (13,580) $ 266,362
Cost of sales 201,026 12,740 (13,445) 200,321
--------------------------------------------------------------
Gross profit 63,748 2,428 (135) 66,041
Operating expenses 64,547 2,125 - 66,672
Amortization of intangible assets 76 16 - 92
--------------------------------------------------------------
64,623 2,141 - 66,764
--------------------------------------------------------------
Operating income (loss) (875) 287 (135) (723)
Other income (expense):
Interest income 115 - - 115
Interest expense (3,404) (23) - (3,427)
--------------------------------------------------------------
(3,289) (23) - (3,312)
--------------------------------------------------------------
Income (loss) before provision for income
taxes and equity in earnings of
subsidiaries (4,164) 264 (135) (4,035)
Provision for income taxes 214 - - 214
--------------------------------------------------------------
(4,378) 264 (135) (4,249)
Equity in earnings of subsidiaries 129 - (129) -
--------------------------------------------------------------
Net income (loss) $ (4,249) $ 264 $ (264) $ (4,249)
==============================================================
9
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
3. Guarantor Subsidiaries (continued)
Condensed Consolidating Statement of Cash Flows
for the Three Months Ended March 31, 2003
(in thousands) Subsidiary
ABC Guarantors Eliminations Consolidated
------------------------------------------------------------
Operating activities
Net income (loss) $ (3,979) $ 232 $ (232) $ (3,979)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation 3,820 177 - 3,997
Amortization 76 16 - 92
Amortization of deferred financing costs 93 - - 93
Provision for doubtful accounts 1,601 - - 1,601
Loss on disposal of property and equipment 152 5 - 157
Change in operating assets and liabilities:
Accounts receivable 6,186 (4,659) 3,615 5,142
Inventories (74,658) (216) 149 (74,725)
Prepaid expenses and other (174) (331) - (505)
Other assets (517) 318 - (199)
Accounts payable 82,133 4,576 (3,615) 83,094
Accrued liabilities 422 370 - 792
------------------------------------------------------------
Cash provided by (used in) operating activities 15,155 488 (83) 15,560
Investing activities
Additions to property and equipment (2,990) (126) - (3,116)
Proceeds from disposal of property and equipment 258 41 - 299
Acquisitions of businesses (904) - - (904)
Investment in subsidiaries (83) - 83 -
------------------------------------------------------------
Cash provided (used in) investing activities (3,719) (85) 83 (3,721)
Financing activities
Net payments under line of credit (13,728) - - (13,728)
Proceeds from long-term debt 6,750 - - 6,750
Payments on long-term debt (2,165) (64) - (2,229)
Change in net receivable from affiliates 745 - - 745
Distributions to stockholder (6,415) (385) - (6,800)
Payments of debt financing costs (171) - - (171)
------------------------------------------------------------
Cash used in financing activities (14,984) (449) - (15,433)
------------------------------------------------------------
Net decrease in cash (3,548) (46) - (3,594)
Cash at beginning of period 6,897 (96) - 6,801
------------------------------------------------------------
Cash at end of period $ 3,349 $ (142) $ - $ 3,207
============================================================
10
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
3. Guarantor Subsidiaries (continued)
Condensed Consolidating Statement of Cash Flows
for the Three Months Ended March 31, 2002
(in thousands) Subsidiary
ABC Guarantors Eliminations Consolidated
------------------------------------------------------------
Operating activities
Net income (loss) $ (4,249) $ 264 $ (264) $ (4,249)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation 3,501 108 - 3,609
Amortization 76 16 - 92
Amortization of deferred financing costs 69 - - 69
Provision for doubtful accounts 1,487 - - 1,487
Loss on disposal of property and equipment 63 1 - 64
Change in operating assets and liabilities:
Accounts receivable 7,559 (1,529) 1,757 7,787
Inventories (62,305) (207) 135 (62,377)
Prepaid expenses and other 463 (5) - 458
Other assets 133 (394) - (261)
Accounts payable 84,551 1,893 (1,757) 84,687
Accrued liabilities 1,321 57 - 1,378
-------------------------------------------------------------
Cash provided by (used in) operating activities 32,669 204 (129) 32,744
Investing activities
Additions to property and equipment (3,674) (146) - (3,820)
Proceeds from disposal of property and equipment 131 14 - 145
Acquisitions of businesses (4,478) - - (4,478)
Investment in subsidiaries (129) - 129 -
-------------------------------------------------------------
Cash provided (used in) investing activities (8,150) (132) 129 (8,153)
Financing activities
Net payments under line of credit (18,402) - - (18,402)
Payments on long-term debt (1,032) - - (1,032)
Change in net receivable from affiliates (7,765) - - (7,765)
Payments of debt financing costs (313) - - (313)
-------------------------------------------------------------
Cash used in financing activities (27,512) - - (27,512)
-------------------------------------------------------------
Net increase (decrease) in cash (2,993) 72 - (2,921)
Cash at beginning of period 6,040 74 - 6,114
-------------------------------------------------------------
Cash at end of period $ 3,047 $ 146 $ - $ 3,193
=============================================================
11
American Builders & Contractors Supply Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Continued)
4. Comprehensive Income (Loss)
The Company's comprehensive income (loss) for the three months ended March
31, 2003 and 2002, as required to be reported by Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 130, was
identical to the actual income (loss) reported for those periods.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company. ABC is a distributor of exterior building products and is the
largest wholesale distributor of roofing products and one of the largest
wholesale distributors of vinyl siding materials in the United States, operating
256 distribution centers located in 43 states as of March 31, 2003. Since
January 1, 2003, the Company has completed one acquisition of 2 locations which
were consolidated into existing ABC locations, opened three distribution
centers, consolidated two additional distribution centers and closed one
distribution center.
Provision for Income Taxes. ABC and its subsidiaries are operated as
Subchapter S corporations under the Internal Revenue Code. As a result, these
entities do not incur federal and state income taxes (except with respect to
certain states) and, accordingly, no discussion of income taxes is included in
"Results of Operations" below. Federal and state income taxes (except with
respect to certain states) on the income of such corporations are incurred and
paid directly by the Company's sole stockholder. Such corporations have
historically made periodic distributions to the stockholder with respect to such
tax liabilities. The Company entered into the Tax Allocation Agreement with the
sole stockholder, pursuant to which he will receive distributions from the
Company with respect to taxes associated with the Company's income.
Special Note Regarding 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 continued effectiveness
of the Company's sales and marketing strategy; and (iii) 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.
Results of Operations
The following table summarizes the Company's historical results of
operations as a percentage of net sales for the three months ended March 31,
2003 and 2002:
Three months ended March 31,
-------------------------------------------
2003 2002
-------------------------------------------
Income statement data:
Net sales 100.0% 100.0%
Cost of sales 74.9 75.2
---------------- -----------------
Gross profit 25.1 24.8
Operating expenses 25.1 25.1
Amortization of intangible assets 0.0 0.0
---------------- -----------------
Total operating expenses 25.1 25.1
---------------- -----------------
Operating loss (0.0)% (0.3)%
================ =================
13
Comparison of the Three-Month Period Ended March 31, 2003 to the Three-Month
Period Ended March 31, 2002
The Company's results of operations are affected by the seasonal nature of
the roofing and siding business. See "Seasonality."
Net sales for the three months ended March 31, 2003 increased by 22.7% to
$326.8 million from $266.4 million for the three months ended March 31, 2002,
primarily due to the 2002 acquisition activity. Comparable distribution centers
sales growth was 2.0%. Increases in comparable distribution center sales are due
primarily to increases in volume.
Gross profit for the three months ended March 31, 2003 increased by 24.4%,
to $82.1 million from $66.0 million for the three months ended March 31, 2002,
primarily as a result of profits associated with increased sales. Gross profit,
as a percent of net sales, was 25.1% in 2003, as compared to 24.8% for the three
months ended March 31, 2002. Gross profit, as a percentage of net sales,
increased primarily due to management's continued focus on selling higher gross
profit margin products.
Operating expenses increased by $15.5 million to $82.2 million from $66.7
million for the three months ended March 31, 2003 and 2002, respectively,
primarily as a result of increased sales. As a percent of net sales, operating
expenses for the three months ended March 31, remained constant at 25.1% in 2003
and 2002.
Operating loss for the three months ended March 31, 2003 decreased by $0.6
million to a loss of $0.1 million from a $0.7 million loss for the same period
in 2002 as a result of the factors discussed above.
Interest expense for the three months ended March 31, 2003 increased by
$0.4 million or 12.7% to $3.8 million from $3.4 million for the three months
ended March 31, 2002, primarily as a result of an increase in the Company's
average borrowing levels, being partially offset by a decrease in rates on the
Company's LIBOR and prime rate borrowings
Liquidity and Capital Resources
Cash Flows from Operating Activities. Net cash provided by operating
activities was $15.6 million and $32.7 million for the three months ended March
31, 2003 and 2002, respectively. The decrease was due primarily to an increase
in inventories, primarily as a result of the 2002 acquisition activity, as well
as a reduction in the increase of accounts receivable.
Cash Flows from Investing Activities. Net cash used in investing activities
decreased to $3.7 million from $8.2 million for the three months ended March 31,
2003 and 2002, respectively, due to a lesser number of acquisitions of
businesses.
Cash Flows from Financing Activities. Net cash used in financing activities
was $15.4 million and $27.5 million for the three months ended March 31, 2003
and 2002, respectively, due to a decrease in the net payment under the line of
credit and a distribution made to the stockholder, which were offset by proceeds
from long-term debt and the change in receivable from affiliates.
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 for the Company 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 assurances
can be given, however, that this will be the case.
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.
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's quantitative and qualitative disclosures about market risk
are incorporated by reference from Item 7A of the Company's Annual Report on
Form 10-K for the year ended December 31, 2002, and have not materially changed
since that report was filed.
Item 4. Controls and Procedures
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and the
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to the Exchange Act Rules
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings.
15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 2003.
16
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, in the City of Beloit, State of
Wisconsin, on May 7, 2003.
AMERICAN BUILDERS & CONTRACTORS
SUPPLY CO., INC.
By: /s/ Kendra A. Story
----------------------------------
Kendra A. Story
Chief Financial Officer, Treasurer, Director
17
Section 302 Certification Requirements
CERTIFICATIONS
I, Kenneth A. Hendricks, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Builders &
Contractors Supply Co., Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 7, 2003
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/s/ Kenneth A. Hendricks
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[Signature]
Chief Executive Officer
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Section 302 Certification Requirements
CERTIFICATIONS
I, Kendra A. Story, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Builders &
Contractors Supply Co., Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 7, 2003
- ---------------------
/s/ Kendra A. Story
- ---------------------------
[Signature]
Chief Financial Officer
19