ITEM 1. BUSINESS
Building Materials Holding Corporation ("BMHC") is a holding company engaged, through its wholly owned subsidiary, BMC West Corporation ("BMC West" or the "Company") in the distribution of building materials, selling primarily to professional contractors as well as to project-oriented consumers (including professional repair and remodel contractors hired by them). BMHC was formed to centralize, at the holding company, responsibilities for acquisitions, financial and administrative functions - including strategic, financial and capital planning, corporate governance and investor relations activities. In addition, the holding company structure is intended to focus operational management on day-to-day activities, to give local management more focused responsibility and enhance the opportunity to recommend the introduction of new products or services appropriate for a given market.
BMC West is a leading distributor and retailer of building materials, selling primarily to professional contractors in the western United States. In recent years, increased focus has been placed on selling higher margin value-added products which are customized to customer specifications. These value-added sales include pre-hung doors, millwork and roof trusses which are fabricated, pre-assembled windows which are selected and distributed and lumber that is pre-cut to meet customer specifications. BMC West's offering of value-added products both augments its ability to supply contractors with a full range of their building materials needs and reduces the sensitivity to commodity lumber prices. At December 31, 1998, the Company operated 58 building materials centers located in Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Texas, Utah, and Washington.
BMC West targets primarily the professional contractor market, which is a strategy distinct from that pursued by the high-volume, consumer-oriented home center retailers now found throughout the United States. The Company's professional contractor market consists of persons engaged principally in the construction of single-family homes and, to a lesser extent, multi-family units and light commercial and industrial construction. Professional contractors generally are large-volume, repeat customers requiring certainty of product availability and delivery and a number of specialized services typically not offered by home center retailers. The Company also targets the repair and remodel market which consists generally of project-oriented consumers and contractors hired by them, who engage primarily in substantial projects such as room additions, kitchen or bathroom remodeling and fence or deck installations.
BMC West develops long-term relationships with its customers by providing them with a broad range of high-quality products and services. Each of the Company's building materials centers tailors its product and service mix to meet the demands of the local market. The Company's products, which include lumber, panel products, roofing materials, pre-hung doors, millwork, roof trusses, pre-assembled windows, cabinets, hardware, paint and tools, are used primarily for new residential construction, light commercial construction and repair and remodeling projects. These products are sold by experienced professionals consisting of both field sales personnel and facility based sales and support personnel. The Company offers its customers various services, including assistance with project designs and materials specifications, coordination of delivery of orders to
job sites, provision of credit to pre-approved contractors and referral of retail customers to pre-qualified contractors. Complete home packages (delivered to the sites of the Company's builder customers according to their construction schedules) account for a significant amount of total sales. In each of the last three years, professional contractors accounted for approximately 77% to 81% of net sales, and project-oriented consumers or the contractors hired by them, accounted for approximately 18% to 22% of net sales.
RECENT EVENTS
The Company announced on March 24, 1999, that it has entered into a definitive agreement to acquire a 49% interest in Knipp Brothers, a framing company with operations in Phoenix and Tuscon, Arizona, and Las Vegas, Nevada, with 1998 annual sales of approximately $115 million. The transaction is expected to close in the second quarter of 1999. Certain assets of the Company's Phoenix facility will become part of the transaction.
The purchase price for the 49% interest is expected to be in the range of $28 million to $33 million. The transactions contemplated by the definitive agreement are subject to customary closing conditions. Under the agreement, BMHC will have the right to acquire the remaining 51% interest in Knipp Brothers. Larry Knipp will have a corresponding right to require BMHC to purchase Knipp Brothers 51% after five years.
INDUSTRY OVERVIEW The building materials distribution industry is characterized by its substantial size, highly fragmented ownership structure and dependence on the cyclical and seasonal home building industry.
Building materials distributors generally concentrate on serving either project-oriented professional contractors or price-oriented retail consumers. Contractor-oriented building materials distributors, such as BMHC, tend to focus on contractors and project-oriented consumers and compete principally on the basis of service, product quality and availability, on-time delivery, credit availability and reliability, as well as price. Home center retailers, on the other hand, target the mass consumer market, in which competition is based principally on price, merchandising, location and cooperative advertising. Typically, contractor-oriented distributors offer a greater range of services and a wider variety of high quality building products than home center retailers.
The contractor-oriented building materials distribution industry is characterized by a large number of privately owned, small, regional distribution companies and single-site enterprises. These businesses are typically family run, relationship-based operations which focus on offering service, delivery and reliability to their customers. As a result of their size, many of these businesses do not possess sophisticated working capital management and control systems and generally lack the purchasing expertise of a large entity, such as BMHC. Because of these factors, BMHC believes that these businesses include a number of attractive acquisition candidates.
The building materials distribution industry is closely linked to the economic cycles and seasonality associated with the home building industry. The Company monitors the issuance of new housing permits as an important indicator of its potential future sales volume. Construction
expenditures are largely a function of new residential, commercial and industrial building demand and repair and remodeling projects undertaken. Residential construction is closely linked to new job formation, household formation, interest rates, housing affordability, availability of mortgage financing, regional demographics and consumer confidence. Commercial construction is significantly affected by vacancy and absorption rates, interest rates, long-term regional economic outlooks and the availability of financing. Industrial construction expenditures are linked to the industrial economic outlook, corporate profitability, interest rates and capacity utilization. In difficult economic environments, repair and remodeling expenditures generally represent a greater percentage of housing construction expenditures as new housing starts decline. BMHC centers target participants in all of these sectors, although economic conditions frequently dictate which sector they may emphasize at a given time. A key attribute of the contractor-oriented building materials distribution industry is that professional contractors typically use the same building materials supplier for all of their projects. In order to generate and maintain this loyalty, suppliers generally focus on providing the professional contractor with service, quality, on-time delivery and value-added services.
GEOGRAPHIC MARKETS
BMHC believes that its subsidiary BMC West is well positioned in some of the most attractive markets for building materials in the United States. Population and migration trends in the Western markets served by BMC West, as well as the relative strength of many of the local economies it serves, have resulted in the growth of residential housing in these markets.
OPERATING STRATEGY
BMHC's operating strategy is to focus responsibility for day-to-day operations at the local level. The building materials centers operate as autonomous, decentralized units capable of meeting local market needs and offering competitive prices. Local managers have a substantial degree of control over inventory, merchandising and pricing, and can develop their own specific programs to meet the needs of their particular markets.
The Company's decentralized, microcomputer based, point-of-sale information system provides each center manager with real-time pricing, inventory availability and margin analysis. At the same time, the Company provides centralized purchasing management, credit and financial controls, management information systems, training and marketing support. The compensation of substantially all of the employees of each unit is based, in part, on the performance of the individual unit.
The Company believes that many of its building materials centers hold a first or second place market share among professional contractors and that the Company, as a whole, has the largest sales volume of any distributor of building materials serving primarily professional contractors in its market area. The Company intends to maintain its leadership position in these markets by continuing to provide a broad range of high-quality products and services to the professional contractor as well as the project-oriented consumers and professional repair and remodel contractors hired by them. The services provided by the Company include assisting customers
with project designs and materials specifications, delivering orders to job sites, providing credit to qualified contractors and referring retail customers to pre-qualified contractors. In addition to distributing products from manufacturers, the Company currently conducts value-added operations at facilities which are generally constructed or acquired at or near a center and can service a sales area depending on the market from 35 to 100 miles in radius. The Company plans to introduce value-added products such as pre-hung doors, roof trusses and pre-assembled windows in more of the markets served by the Company. These products generally carry higher gross margins and have less price volatility than commodity wood products.
BMHC's total quality management program defines quality as providing the best products and services at the right place at the right time. The program provides an environment for employees to identify cost reduction and margin improvement opportunities, empowers employees to make significant contributions and work together as a team, and measures BMHC's performance and follow-through on improvement efforts. Quality teams at BMHC locations seek to make specific, measurable improvements in the Company's critical processes, including order processing, inventory control, delivery and customer assistance. These teams include employees from all functional areas and backgrounds. The Company supports this program through training and the sharing of ideas among locations.
The Company focuses on improving efficiency and productivity at all locations with special attention and support to certain of the centers that the Company believes are under-performing. The Company seeks to anticipate changes in its market by adjusting the inventory product mix and services for the professional contractor and project-oriented consumer and the contractors hired by them. Such adjustments may have some minor impact on margins as the Company adjusts inventories. The Company is also exploring other alternatives for under performing centers including consolidation and liquidation of real property. The Company also is focusing on building new locations within markets where it has a presence.
ACQUISITION STRATEGY
BMHC seeks acquisitions of building materials centers and value-added facilities that serve the professional contractor and the project-oriented consumer (including professional repair and remodel contractors hired by them) in new and existing markets in the United States. The fragmented nature of the industry presents to BMHC opportunities to acquire other multi-center distributors that could be acquired as new stand-alone subsidiaries. In addition, BMHC focuses on opportunities to acquire additional centers in the geographic areas currently served by BMHC.
The management of BMHC have substantial experience in expanding building materials supply businesses through acquisitions. Over the past several years, management has contacted and visited many acquisition candidates. In addition, BMHC is contacted regularly by persons seeking to sell their business. BMHC believes that, due to professional contractor loyalty to existing centers, the most expedient way to enter new geographic markets is through acquisitions. BMHC also believes that the availability of a public market for its Common Stock provides it with additional flexibility in pursuing acquisitions.
While the Company evaluates each potential acquisition candidate on its individual merits, its primary objective has been to acquire profitable building materials centers that meet certain general criteria. The typical targeted acquisition candidate is located on a 5 to 10 acre site which includes 8,000 to 15,000 square feet of indoor showroom and contractor sales space and 20,000 to 50,000 square feet of covered storage area, with reasonable access to the local road system and proximity to regional areas of construction demand. Additional factors include the reputation of the center among local contractors and the quality of the center's management and sales organization.
Typically, after the acquisition of a center, the Company enhances the center's sales and service capabilities and may expand its product offerings, including value-added products, in an effort to increase sales. In addition, the Company seeks to implement its accounting and management systems into each newly acquired center. These systems assist in the effective management of the Company's inventories and accounts receivable, and in efforts to improve customer service. The Company has implemented purchasing on a consolidated basis to save costs.
In 1998, the Company completed eight acquisitions involving three building materials centers and eleven value-added facilities located in Colorado, Montana, Nevada, Oregon, Texas and Washington. Three of the value-added facilities were integrated into existing operations. The total consideration given was $33.9 million, consisting of $24.3 million in cash, a note payable for $5.0 million, 299,343 shares of common stock valued at $4.0 million, and other assumed operating liabilities of $625,000. The following chart sets forth the number of building materials centers acquired and consolidated by the Company during each of the last two fiscal years.
It is the objective of BMHC and the Company to continue to acquire complementary businesses. BMHC and the Company continue to engage in discussions with potential acquisition candidates. There can be no assurances that BMHC or the Company will be able to continue to identify and complete successful acquisitions in the future.
PRODUCTS
Each BMHC center carries a core of approximately 11,000 stock keeping units ("SKUs"), plus an average of an additional 4,000 SKUs, the product mix of which varies by location. The Company's principal products include lumber, panel products, engineered wood products, roofing materials, pre-hung doors, roof trusses, pre-assembled windows, cabinets, hardware, paint and tools. In addition to distributing such products, the Company conducts value-added activities,
which include fabricating pre-hung doors, roof trusses, pre-assembled windows and pre-cutting lumber to meet customer specifications.
The following table sets forth information regarding the percentage of net sales represented by the specified categories of products sold at the Company's centers during each of the last two fiscal years. While the Company believes that the percentages included in the table generally indicate the mix of the Company's sales by category of product, the specific percentages are affected year-to-year by changes in the prices of commodity wood products, as well as changes in unit volumes sold.
The Company fabricates roof trusses used to form roof support systems and pre-hung door units and pre-assembled window units for the residential and light commercial building markets. Door units are purchased and pre-assembled to contractor specifications using a variety of moldings. The door, truss and window product lines are particularly attractive since they generally bring higher margins, have less price volatility, and are not offered by many building materials centers or home center retailers. The Company believes that its ability to provide pre-hung doors, millwork, roof trusses and pre-assembled windows in a number of locations is a competitive advantage when soliciting business from contractors. Inventories of door units, roof trusses and pre-assembled windows are usually built-to-order.
The Company's customers generally order products, including pre-hung doors, millwork, roof trusses, and pre-assembled windows on an as-needed basis. Therefore, virtually all product shipments in a given fiscal quarter result from orders received in that quarter. Consequently, order backlog represents only a very small percentage of the product sales anticipated by the Company in a given fiscal quarter and is not indicative of the Company's actual sales for any future fiscal period.
As a distributor of building materials and products, the Company regularly monitors innovations in product design to meet its customers' needs. The Company test markets products that substitute for dimensional lumber and has for a number of years distributed alternative products such as engineered wood products and steel studs, and has provided its builder customers information and instruction on the use of such products.
SALES AND MARKETING
Each of BMC West's 58 building materials centers tailors its product and service mix to the local market and operates as a separate profit center. The Company reaches its professional contractor
customers, mainly through field sales representatives, advertisements in trade journals and local promotional events. The Company's customers include a broad base of professional contractors and project-oriented consumers (including professional repair and remodel contractors hired by them). No single customer accounted for more than 1% of net sales in 1998.
PROFESSIONAL CONTRACTOR MARKET
The professional contractor market is comprised of three major customer segments: two segments are the new housing contractors, and commercial and industrial contractors. In 1998, the Company's sales to these professional contractors accounted for approximately 81% of net sales (this total includes 75% to new residential contractors and 6% to commercial and industrial contractors). Professional contractors accounted for approximately 77% to 81% of the Company's net sales in each of the last three years. A significant amount of this business consisted of sales of complete house packages, including framing lumber, panel products, pre-hung doors and trim packages, roof trusses, pre-assembled windows and other products required to construct or improve a home.
BMHC provides a wide range of customer services to contractors to meet their needs for trade credit, delivery and expert assistance. While pricing is an important purchasing criterion for these customers, the Company believes that other factors such as coordinated, on-time deliveries, quality and availability of products, relationships with salespeople, credit availability and technical support are equally important. The Company believes that its skills in these areas are important competitive advantages.
The Company's principal channel for reaching the professional contractor market is a sales force of approximately 262 field sales representatives supported by approximately 298 facility-based salespeople. Field sales representatives actively solicit business and work with the facility-based managers to develop bids for contractor projects. The Company provides sales training for all sales representatives, and sales management training for all sales managers and center managers. Sales representatives are compensated through a combination of salary and commission based on individual sales volume and gross margin.
BMC West's center managers ensure that building materials are delivered according to contractor specifications and schedules. Technical personnel involved in purchasing, dispatching, invoicing and credit, support both field sales force and center managers to enhance customer satisfaction.
REPAIR AND REMODEL MARKET
The third major customer segment is the repair and remodel market which consists generally of project-oriented consumers (including professional repair and remodel contractors hired by them). In 1998, the Company's sales to these customers accounted for approximately 18% of net sales and for approximately 18% to 22% of net sales in each of the last three years. The Company's sales to this market generally carry higher margins than sales to the professional contractor market and also carry higher costs. The volume of sales to this market varies depending on location, with the Company actively pursuing repair and remodel business in smaller markets.
CREDIT
Overall credit policy for sales to contractors is established by corporate management, but each center has responsibility for overseeing local accounts. The individual center managers and their staff are trained to have a thorough understanding of state lien laws, which provide security for the Company's accounts receivable. The Company's credit policies, together with daily computer monitoring of customer balances, have resulted in average bad debt expense of approximately 0.16% of net sales during the last five years, with no single year exceeding 0.21%. The Company believes that its bad debt expense levels are among the lowest in the industry. Approximately 91% of the Company's sales in 1998 were made to customers to whom the Company had extended credit for such sales.
MANAGEMENT INFORMATION SYSTEMS
BMHC's financial information, operational data and other related statistical information are processed and maintained at BMC West's headquarters on a network of server computers and work stations. The Company's financial reporting and relational database system was designed and customized for BMHC by Oracle Corporation. The flexible nature of the Company's installed network allows for the accumulation, processing and distribution of information using industry standard computing resources and programs. The point-of-sale information systems used by the Company operate on IBM RS6000 computers located at each center, and are connected to the computers at headquarters via a high speed frame relay network. These on-line systems provide real-time pricing, inventory availability and margin analysis. This allows each center's sales staff to offer a high level of customer service, while giving management the ability to access and use timely information to monitor operations. Management believes that these systems also have enabled the Company to enhance profit margins, improve inventory turnover through identification and elimination of low-turnover items, accelerate analysis of sales trends, and better monitor accounts receivable, employee productivity, customer credit limits and lien protections.
PURCHASING
The Company purchases merchandise from a large number of manufacturers and suppliers. In 1998, the Company's largest supplier accounted for approximately 9% of the Company's total purchases. The Company does not believe that the loss of any single supplier would have a material adverse effect on the Company.
The Company purchases some of its inventory on a centralized basis in order to capitalize on economies of scale, although a limited amount of purchasing and all ordering is controlled at individual centers in order to respond to local needs. Purchasing is controlled at the location level in order to maintain local product needs and inventory turns. Although the Company seeks to time its purchases to take advantage of price movements, BMHC has a policy not to speculate in the commodity wood products market.
Approximately 44% of the Company's 1998 sales were attributable to commodity wood products. Prices of commodity wood products are subject to significant volatility and directly affect the
Company's sales. During 1998, the prices of commodity wood products purchased and sold by the Company were on average 1.3% lower than in 1997 (the Company's total price deflator for 1998 was about 1%). The Company has established purchasing and pricing procedures to reduce exposure to inventory write-downs. The Company's commodity buyers monitor inventory and sales levels in each location on a regular basis. With this supply and demand information, buyers generally can avoid overstocking commodity wood products. As a result, the Company turns its commodity product inventory approximately 10 to 12 times per year. Such rapid inventory turnover limits the Company's potential exposure to inventory loss from commodity price fluctuations. In addition, the Company's real-time computer network allows the locations to adjust sales prices as purchase prices of commodity products change.
In July 1996, the Company entered into a merchandise supply agreement with TruServe for hardline products. Under the agreement, BMC West terminated existing affiliations with other distributors.
COMPETITION
BMHC operates in a highly competitive environment. Due to the nature of the industry, BMHC's competitive environment varies by location and by market.
Within the professional contractor market, the Company competes primarily with privately owned, single-site enterprises and local and regional building materials chains. Professional contractors generally select building materials centers on the basis of availability of knowledgeable personnel, on-time delivery, reliable inventory levels, availability of credit and competitive pricing. BMHC believes it competes favorably on each of these bases. The Company's relatively large size also permits it to attract experienced and professional sales and service personnel and provides BMHC the resources to offer Company-wide product and service training programs. By working closely with its contractor customers and utilizing the Company's real-time management information system, BMHC's centers maintain appropriate inventory levels and are well positioned to deliver completed orders on time to individual job sites. Large home center retailers could prompt other local suppliers to more aggressively pursue professional contractor business.
Within the repair and remodel market, BMHC competes primarily with local lumberyards and hardware stores and, in certain of its markets, with larger home center chains such as Home Depot, HomeBase and Lowe's. The Company believes that it meets the needs of project-oriented consumers and repair and remodel contractors more effectively than such competitors by (i) providing primarily higher quality products within each category, (ii) offering consumers and contractors access to knowledgeable staff and (iii) developing contractor referral programs to address the requirements of consumers on larger projects.
EMPLOYEES
The success of BMHC is highly dependent on the quality of its personnel at all levels of the Company. The Company is facing increased competition in attracting and retaining qualified employees. As a result, the Company maintains well rounded and competitive compensation and
fringe benefit programs to attract, motivate and retain top performing individuals. In addition, the Company provides extensive product knowledge, customer service, supervisory and managerial training programs to assure employee and customer satisfaction.
At December 31, 1998, BMHC employed approximately 4,100 persons, of which approximately 300 were represented by unions. The Company has not experienced any strikes or other work interruptions and has maintained generally favorable relations with its employees. The following table shows the approximate breakdown by job function of the Company's employees:
EXECUTIVE OFFICERS AS OF FEBRUARY 28, 1999
Mr. McCown is Chairman of the Board of Directors of the Company and has been a director since 1987. He was co-founder and has been a Managing General Partner of the MDC Management Companies, the general partner of the McCown De Leeuw & Co., since 1984, and was instrumental in financing and executing the leveraged buy-out of BMC West Corporation in 1987. Mr. McCown currently serves as the Vice-Chairman of the Board of Directors of Vans, Inc. and as a director of the following publicly held companies: FiberMark, Inc. and Dimac. Mr. McCown also serves as a director of several privately held companies.
Mr. Mellor serves as the President and Chief Executive Officer of BMHC. Mr. Mellor was previously Of Counsel with the law firm of Gibson, Dunn & Crutcher LLP from 1990 through February 15, 1997. He previously served as the Executive Vice President and Chief Administrative Officer, and as a director of Di Giorgio Corporation from 1987 to 1990. He joined Di Giorgio Corporation in 1976. Mr. Mellor also serves as a director of Coeur d' Alene Mines Corporation.
Mr. Becci has served as the Company's Controller since its inception in 1987 and was elected Vice President in 1990.
Mr. Blackwood is currently Senior Vice President and has served as Vice President of Operations of the Company since 1987.
Mr. Goebel was promoted to Senior Vice President, Finance & Treasurer of Building Materials Holding Corporation in August 1997. He served as Vice President and Treasurer of the Company since its inception in November 1987.
Mr. Pearson has served as Vice President of Human Resources of the Company since its inception in November 1987.
Mr. Smith has served as President of the SouthCentral Division since November 1997. Before joining BMC West, he held the position of President and Chief Operating Officer of Lone Star Plywood & Door Corp., which was purchased by the Company in November 1997.
Mr. Street joined the Company in January 1999 as Senior Vice President, General Counsel, & Secretary. He previously served as Outside General Counsel & Secretary to the Company while employed by Moffatt, Thomas, Barrett, Rock & Fields.
Mr. Wilson has served as President of the Pacific Division since November 1997. He was previously district manager of the West Coast district from April 1993 to 1998. Prior to 1993 he was the location manager of the Bellevue, Washington location.
ITEM 2.
ITEM 2. PROPERTIES
BMHC's headquarters is in San Francisco, California and BMC West's headquarters is in Boise, Idaho. In addition to administrative buildings, the Company has four primary types of facilities: building materials supply centers, pre-hung door facilities, truss facilities, and pre-assembled window distribution facilities. The Company believes that its locations are well maintained and generally are adequate for the Company's needs for the foreseeable future. All of the Company's material assets, including land and facilities, are owned or leased by the Company.
*These locations are satellites of existing locations. BMHC and BMC are tradenames of the Company. Other brand names or trademarks appearing in this Form 10-K are the property of their respective holders.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation and other legal matters arising in the normal course of business. In the opinion of management, the Company's recovery or liability, if any, under any of these matters will not have a material effect on the Company's financial position, liquidity or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Common Stock of BMC West was traded on the Nasdaq National Market under the symbol "BMCW" since the Company's initial public stock offering in August 1991. In September 1997, the Common Stock started trading under the symbol "BMHC". The following table sets forth the range of high and low closing sales prices on the Nasdaq National Market for the Common Stock for the periods indicated. Such quotations represent inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions.
The Company has not paid any dividends on its Common Stock and the Board of Directors presently intends to continue this policy in order to retain earnings for use in the business. The amount of dividend payments is restricted by the Company's loan agreements. At March 22, 1999, BMHC's Common Stock was held by approximately 5,629 shareholders of record or through nominee or street name accounts with brokers (185 registered holders). The last sales price for BMHC's Common Stock, as reported by Nasdaq on March 22, 1999, was $10.625.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the Company for the years indicated. It is derived from the Company's audited consolidated financial statements, and should be read in conjunction with the disclosures in Item 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of operations is presented under the caption "Financial Review" in the Company's 1998 Annual Report ("Annual Report"). The information under this caption is incorporated herein by this reference.
To facilitate industry comparisons, the Company elected in 1994 to change its fiscal year-end from December 28 to December 31. This change did not have a material impact on the comparability of the Company's results of operations or cash flows for any of the periods presented.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes, together with the report of the independent public accountants, are presented on pages 14 through 24 of the Company's Annual Report and are incorporated herein by this reference.
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 DIRECTORS
The nominees for directors of the Company are presented on pages 3 through 4 of the Company's definitive Proxy Statement ("Proxy Statement"). This information is incorporated herein by this reference.
The information required by this Item concerning the Company's executive officers is set forth in Part I, Section Titled "Executive Officers", of this report and is incorporated herein by this reference.
The information required by this Item concerning compliance with Section 16(a) of the Exchange Act is presented under the caption entitled "Certain Relationships and Other Transactions" of the Proxy Statement.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item concerning compensation of the Company's executive officers for the year ended December 31, 1998, is presented under the captions entitled "Executive Compensation and Other Information" of the Proxy Statement. This information is incorporated herein by this reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item concerning the security ownership of certain beneficial owners, directors and executive officers, as of December 31, 1998, is set forth under the caption "Security Ownership of Certain Beneficial Owners" of the Proxy Statement and is incorporated herein by this reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item concerning certain relationships and related transactions during 1999 is set forth under the caption "Certain Relationships and Other Transactions" of the Proxy Statement and is incorporated herein by this reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this annual report on Form 10-K for Building Materials Holding Corporation:
(1) The Consolidated Financial Statements, the Notes to Consolidated Financial Statements and the Report of Independent Public Accountants listed below are incorporated herein by this reference from pages 14 through 24 of the Annual Report.
- Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996. - Consolidated Balance Sheets as of December 31, 1998 and December 31, 1997. - Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, 1997 and 1996. - Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996. - Notes to Consolidated Financial Statements. - Report of Independent Public Accountants.
Schedules other than those listed are omitted because they are not applicable or because the required information is shown in the financial statements or notes.
(3) Exhibits. A list of the exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which immediately precedes such exhibits, and is incorporated herein by this reference.
(b) Reports on Form 8-K
None
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Building Materials Holding Corporation:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Building Materials Holding Corporation's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 25, 1999. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Part IV, Item 14(a)(2) are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. The schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP Boise, Idaho January 25, 1999
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BUILDING MATERIALS HOLDING CORPORATION
By /s/ Robert E. Mellor -------------------- Robert E. Mellor President, Chief Executive Officer and Director
Dated: March 2, 1999
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert E. Mellor, Ellis C. Goebel, and Robert L. Becci, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitutes or substituted, may lawfully do or cause to be done by virtue hereof. This Form 10-K may be executed in multiple counterparts, each of which shall be an original, but which shall together constitute but one agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
(i) Principal Executive Officer: (iv) Directors:
/s/ Robert E. Mellor /s/ George E. McCown - -------------------- -------------------- Robert E. Mellor George E. McCown President, Chief Executive Chairman of the Board Officer and Director of Directors March 2, 1999 March 2, 1999
(ii) Principal Financial Officer: /s/ Robert E. Mellor -------------------- Robert E. Mellor March 2, 1999 /s/ Ellis C. Goebel - ------------------- Ellis C. Goebel /s/ Alec F. Beck ---------------- Senior Vice President - Finance and Treasurer Alec F. Beck March 2, 1999 March 2, 1999
/s/ H. James Brown ------------------ (iii) Principal Accounting Officer: H. James Brown March 2, 1999 /s/ Robert L. Becci - ------------------- Robert L. Becci /s/ Wilbur J. Fix ----------------- Vice President and Controller Wilbur J. Fix March 2, 1999 March 2, 1999
/s/ Robert V. Hansberger ------------------------ Robert V. Hansberger March 2, 1999
/s/ Donald S. Hendrickson ------------------------- Donald S. Hendrickson March 2, 1999
/s/ Guy O. Mabry ---------------- Guy O. Mabry March 2, 1999
/s/ Peter S. O'Neill -------------------- Peter S. O'Neill March 2, 1999
BUILDING MATERIALS HOLDING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
AT DECEMBER 31, 1998 AND 1997 (IN THOUSANDS)
CONDENSED BALANCE SHEETS
BUILDING MATERIALS HOLDING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONDENSED STATEMENTS OF INCOME
BUILDING MATERIALS HOLDING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (IN THOUSANDS)
CONDENSED STATEMENTS OF CASH FLOWS
BUILDING MATERIALS HOLDING CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
(1) Represents write-offs, net of recoveries.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports dated January 25, 1999, included and incorporated by reference in Building Materials Holding Corporation's Form 10-K for the year ended December 31, 1998, into Building Materials Holding Corporation's previously filed Registration Statements File No. 33-52478 and 33-80952 on Form S-8, Registration Statements File No. 33-52478-99 and 033-80952-99 on Form S-8A and Registration Statements File No. 333-36387 and 333-61221 on Form S-4.
ARTHUR ANDERSEN LLP
Boise, Idaho March 22, 1999
BUILDING MATERIALS HOLDING CORPORATION
INDEX TO EXHIBITS Filed with the Annual Report on Form 10-K for the Year Ended December 31, 1998
- -------------------------------
( a) Filed as an exhibit to the Registration Statement on Form S-1 filed with the Commission on June 6, 1991 (Registration No. 33-41040) (the "Registration Statement") and incorporated herein by reference.
*Component of executive compensation.