UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the fiscal year ended December 31, 2003

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from              to             

COMMISSION FILE NUMBER 33-26991

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	5033	39-1413708
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)
ONE ABC PARKWAY, BELOIT, WISCONSIN		53511
(Address of principal executive offices)		(Zip Code)

608-362-7777

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

NONE

Indicate by check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

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.

PART I

ITEM 1. BUSINESS

General

American Builders & Contractors Supply Co., Inc. (the Company or 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 259 distribution centers located in 43 states and the District of Columbia. 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, 2003, the Company generated net sales of $1.8 billion.

The products distributed by the Company consist primarily 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 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 $1.2 billion for the year ended December 31, 1999 to $1.8 billion for the year ended December 31, 2003, representing a compound annual growth rate of 8.4%. In addition, comparable distribution center sales have grown at an average annual rate of 5.1% 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^®, Elk^®, GAF^®, Owens-Corning^®, and Tamko^®.

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^®, CertainTeed^®, Firestone^®, GAF^®, Johns Manville^®, Mule-Hide^®, and US Intec^®. Mule-Hide, a wholly owned subsidiary, 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, gutters, fiber cement, aluminum and wood siding. Principal vinyl siding brands include Alcoa^®, Amcraft^®, CertainTeed^®, Mastic^®, and Wolverine^®. Amcraft, a wholly owned subsidiary, exclusively sells its private label siding and accessories through ABC’s distribution centers.

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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^®, Weather-Shield^®, and Amcraft^®. Amcraft 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 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, 2003, 2002 and 2001:

	Total Net Sales
Product Categories	2003		2002		2001
	(in millions)
Steep slope	$	1,068.3	$	816.4	$	800.6
Low slope		324.5		275.0		294.3
Siding		259.9		217.5		176.7
Windows		80.1		67.4		61.2
Other		59.7		48.4		48.7
Total for all categories	$	1,792.5	$	1,424.7	$	1,381.5

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 259 local distribution centers located in 43 states and the District of Columbia. Since January 1, 2001 the Company has opened 39 distribution centers, closed 13 distribution centers and acquired an additional 62 distribution centers, while consolidating 29 distribution centers in connection with its selective acquisition program. A typical distribution center consists 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 2,000 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 various sales and office personnel, as well as 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. 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 5.1% over the past five years.

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The following table sets forth the Company’s growth in terms of distribution centers in each of the past three years:

	2003		2002		2001
Distribution centers on January 1	256		215		200
Distribution centers acquired	9		44		9
Distribution centers opened	13		15		11
Acquired distribution centers consolidated	(11	)	(16	)	(2	)
Distribution centers closed	(8	)	(2	)	(3	)
Distribution centers on December 31	259		256		215

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 a few national distributors. 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 14.0% of the Company’s 2003 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, 2003, the Company employed 4,024 full-time and 104 part-time employees, of whom 34 were members of unions. The Company’s collective bargaining agreements with its unions expire on various dates, from April 2004 through June 2006. The Company believes that its relations with its employees are good.

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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. PROPERTIES

The Company operates both owned and leased branches in 43 states and the District of Columbia. Its facilities range in size from approximately 2,000 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 forth the geographical location of the Company’s distribution centers as of December 31, 2003:

Region	Total Number of Locations
Midwest	58
Northeast	50
Southwest	40
Southeast	42
Western	35
Rocky Mountain	34
	259

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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during 2003.

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PART II

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, 2003.

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, 2003. 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.

	Year Ended December 31, (in thousands)
	2003			2002			2001			2000			1999
Income Statement Data
Net sales	$	1,792,518		$	1,424,705		$	1,381,530		$	1,238,937		$	1,197,509
Cost of sales		1,326,139			1,055,093			1,037,192			936,627			914,971
Gross profit		466,379			369,612			344,338			302,310			282,538
Operating expenses		382,579			312,770			280,647			262,719			244,627
Amortization of intangible assets		369			369			1,611			1,601			1,686
Non-recurring charges		—			—			—			—			7,030
Operating income		83,431			56,473			62,080			37,990			29,195
Net interest expense		(15,066	)		(14,383	)		(18,979	)		(23,650	)		(22,413	)
Income before provision for income taxes		68,365			42,090			43,101			14,340			6,782
Provision for income taxes (1)		1,102			981			865			280			171
Net income	$	67,263		$	41,109		$	42,236		$	14,060		$	6,611
Balance Sheet Data (at end of period)
Accounts receivable, net	$	218,869		$	209,813		$	167,253		$	142,768		$	143,864
Inventories		216,086			191,049			157,810			151,578			135,511
Total assets		595,262			562,640			449,633			417,270			408,458
Accounts payable and accrued liabilities		174,536			155,391			127,297			100,545			104,773
Long-term debt, less current maturities		274,983			296,857			236,929			271,480			270,429
Stockholder’s equity		134,104			101,671			75,162			39,178			27,674

(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.”

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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, 2003:

	Year Ended December 31,
	2003		2002		2001
Income Statement Data
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	74.0		74.1		75.1
Gross profit	26.0		25.9		24.9
Operating expenses	21.4		21.9		20.3
Amortization of intangible assets	0.0		0.0		0.1
Total operating expenses	21.4		21.9		20.4
Operating income	4.6	%	4.0	%	4.5	%

Comparison of the Year Ended December 31, 2003 to the Year Ended December 31, 2002

Net sales for the year ended December 31, 2003 increased by 25.8%, or $367.8 million in 2003 to $1.8 billion primarily as a result of the 2002 acquisition activity. Comparable distribution center sales increased by 9.9% in 2003. The increase in comparable distribution center sales is due to increases in volume.

Gross profit for the year ended December 31, 2003 increased by 26.2% in 2003 to $466.4 million from $369.6 million in 2002, as a result of increased sales. Gross profit as a percentage of net sales in 2003 increased to 26.0% from 25.9% in 2002.

Operating expenses for the year ended December 31, 2003 increased by 22.3% in 2003 to $382.6 million from $312.8 million in 2002. As a percentage of net sales, operating expenses decreased to 21.4% in 2003 from 21.9% in 2002. The decrease in operating expenses as a percentage of net sales is primarily due to the Company’s ability to administer continued growth without incrementally increasing operating expenses at its distribution centers, as well as at the corporate and regional levels.

Amortization of intangible assets remained level at $0.4 million in 2003 and 2002.

Interest expense increased by $0.8 million to $15.8 million in 2003 from $15.0 million in 2002. The increase is primarily due to an increase in the Company’s average borrowings during the year, being partially offset by decreased rates on the Company’s LIBOR based borrowings.

Comparison of the Year Ended December 31, 2002 to the Year Ended December 31, 2001

Net sales for the year ended December 31, 2002 increased by 3.1%, or $43.2 million in 2002 to $1.42 billion as a result of an increase in the number of distribution center locations. Comparable distribution center sales declined by 1.6% in 2002. The decrease in comparable distribution center sales is due to an overall economic slowdown in the building products industry primarily in the commercial, low slope, roofing market and not a loss of market share.

Gross profit for the year ended December 31, 2002 increased by 7.3% in 2002 to $369.6 million from $344.3 million in 2001. Gross profit, as a percentage of net sales in 2002 increased to 25.9% from 24.9% in 2001. Gross profit, as a percentage of net sales, increased primarily due to a higher percentage of distribution center warehouse sales versus “direct” sales (product shipped from the vendor directly to the customer’s job site), which have significantly lower gross profit margins.

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Operating expenses for the year ended December 31, 2002 increased by 11.4% in 2002 to $312.8 million from $280.6 million in 2001. As a percentage of net sales, operating expenses increased to 21.9% in 2002 from 20.3% in 2001. The increase in operating expenses is primarily due to the higher percentage of distribution center warehouse sales, which require greater operating expense, and to a lesser extent, the increase in operating expenses is due in part to the one time start up costs of new locations, as well as the initial costs associated with acquisitions and subsequent consolidations into existing distribution centers.

Amortization of intangible assets decreased to $0.4 million in 2002 from $1.6 million in 2001. The decrease was due to the adoption of Statement of Financial Accounting Standards (SFAS) No. 142 as of January 1, 2002. Under SFAS No. 142, goodwill is no longer amortized, but instead, is reviewed for impairment on an annual basis.

Interest expense decreased by $4.3 million to $15.0 million in 2002 from $19.3 million in 2001. The decrease is primarily due to decreased interest rates on the Company’s LIBOR based borrowings as well as a reduction in the Company’s average borrowings during the year.

Liquidity and Capital Resources

Cash Flows from Operating Activities. Net cash provided by operations was $75.2 million for the year ended December 31, 2003 compared to $56.0 million for the year ended December 31, 2002 and $60.6 million for the year ended December 31, 2001. The increase in 2003 from 2002 was due to increases in earnings and accounts payable being partially offset by increases in accounts receivable and inventories. These increases are the result of higher sales volumes in the fourth quarter of 2003 as compared to the same period of 2002. The decrease in 2002 from 2001 was principally due to a lesser increase in accounts payable and an increase in the provision for doubtful accounts, being partially offset by a smaller increase in accounts receivable and an increase in inventories.

Cash Flows from Investing Activities. Net cash used in investing activities was $19.7 million, $84.1 million and $20.4 million for the years ended December 31, 2003, 2002 and 2001, respectively. The Company’s investing activities consist primarily of costs associated with capital expenditures and acquisitions of businesses. Capital expenditures, comprised mainly of routine delivery vehicle replacements, were $15.2 million, $26.5 million and $15.8 million for the years ended December 31, 2003, 2002 and 2001, respectively. Other investing activities include the acquisition of building products businesses. Acquisitions of businesses were $6.3 million, $58.3 million and $5.5 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Cash Flows from Financing Activities. Net cash provided by (used in) financing activities was $(56.2) million, $28.7 million and $(39.1) million for the years ended December 31, 2003, 2002 and 2001, 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 product businesses, repayment of debt with cash flows from operations and, to a lesser extent, distributions to the Company’s stockholder in respect of tax liabilities related to the Company. The increase in the receivable from affiliates in 2002 is a result of twelve new properties purchased by the affiliates that are leased by the Company for its distribution center operations.

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, 2003, the Company had $63.7 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 2001, the Company repurchased and retired $15.5 million, of the Senior Subordinated Notes. No repurchases of the Senior Subordinated Notes occurred in 2003 or 2002. The difference between the par value of the notes repurchased in 2001 and the repurchase price, net of expenses and the applicable portion of the unamortized deferred financing costs written off, was not material.

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Revolving Credit Agreement. The Company is party to a credit agreement which permits borrowings of up to $325 million under the revolving line of credit (the Revolver), reduced by outstanding letters of credit. Debt outstanding under the Revolver as of December 31, 2003 was $162.4 million and borrowings under the Revolver are secured primarily by accounts receivable and inventories. As amended in March 2002, the initial term of the Revolver expires on June 30, 2005, 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.

Contractual Obligations

The following table includes the Company’s significant contractual obligations as of December 31, 2003.

	Payments due by period (in thousands)
	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Long-Term Debt Obligations	$	286,622	$	11,639	$	189,633	$	85,350	$	—
Operating Lease Obligations		125,299		28,791		48,023		30,891		17,594
	$	411,921	$	40,430	$	237,656	$	116,241	$	17,594

As of December 31, 2003, the Company had no material purchase obligations other than those created in the ordinary course of business related to inventory and property and equipment, which generally have terms of 60 days or less.

Critical Accounting Policies

Accounts Receivable. The Company evaluates the collectibility of its accounts receivable based on a number of factors. For larger accounts greater than 90 days past due, an allowance for doubtful accounts is recorded based on a customer’s ability and likelihood to pay based on management’s review of the facts. A weighted average of these evaluations is applied to all smaller accounts greater than 90 days past due. For all other customers, the Company recognizes an allowance based on length of time the receivable is past due based on historical experience.

Acquisition Purchase Price Allocation. The Company records assets and liabilities, including goodwill and other intangibles, acquired through acquisitions at estimated fair market value. When necessary, fair market value is determined by an independent appraisal or quote to purchase a similar asset from a third party. Lives are assigned to these assets based on the Company’s property and equipment policies stated in Note 1 of the Consolidated Financial Statements. Lives assigned to identifiable intangible assets are either set by contractual agreements or determined by management based on the facts and circumstances. Should the fair market value or actual useful life differ from those estimated at the time of the acquisition, results from operations, financial position and cash flows, could be materially impacted.

Related Party Transactions. The Company transacts business with a number of affiliated companies owned by Mr. Hendricks and his spouse, Diane Hendricks. The Company believes that these transactions between ABC and related entities have been conducted on an arm’s length basis. See Item 13 and Note 6 to the Consolidated Financial Statements.

New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which expands upon and strengthens existing accounting guidance concerning when a company should include in its financial statements the assets,

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liabilities and activities of another entity. A variable interest entity (VIE) does not share economic risk and reward through typical equity ownership arrangements. Instead, contractual or other relationships re-distribute economic risks and rewards among equity holders and other parties. Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. FIN 46 also requires disclosures about VIEs that a company is not required to consolidate but in which it has a significant variable interest. The adoption of applicable provisions of FIN 46 in 2003 did not have a material impact on the Company’s results of operations or financial position. The Company does not expect the adoption of the remaining provisions related to FIN 46 to have a material impact on the Company’s results of operations or financial position.

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, 2003.

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. 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 exterior building 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.

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 2004 than they did during 2003, the Company’s interest expense would increase, and income before income taxes would decrease by approximately $2.4 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. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and schedules are listed in Part IV, Item 15 of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Company’s chief executive officer and chief financial officer have performed an evaluation of the Company’s disclosure controls and procedures (as that term is defined in Rule 13a-15(e) issued under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2003. Based on that evaluation, the chief executive officer and chief financial officer each have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the Company’s periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and regulation.

Changes in internal controls. There were no changes in the Company’s internal controls over financial reporting that could materially affect, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting, subsequent to the date of their evaluation.

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PART III

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.

Name	Age	Position
Kenneth A. Hendricks	62	Chief Executive Officer and Chairman of the Board
David Luck	54	President, Chief Operating Officer, and Director
Diane Hendricks	56	Executive Vice President, Secretary, and Director
Kendra Story	44	Chief Financial Officer, Treasurer, and Director
Robert Bartels	55	Senior Vice President of Manufacturing Operations
Kevin Hendricks	39	Vice President of Branch Operations
Keith Rozolis	44	Vice President of Strategic Marketing and Planning
Gil Aleman	60	Director
Kent Nelson	59	Director

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 Manufacturing Operations since April 2002, and also served as the Senior Vice President of Operations from September of 1997 to March 2002, 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.

Kevin Hendricks has served as the Company’s Vice President of Branch Operations since April 2002, prior to which, he was the Regional Director of Midwest Operations since 1998. From 1985 to 1997, Mr. Hendricks was employed by the Company in several capacities with increasing responsibilities including distribution center manager.

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 marketing, service, systems and process reengineering, and collaborative internet strategies.

12

Gil Aleman has served as a director of the Company since 1997. Since April 2001, Mr. Aleman has been the President and CEO of Apache Products Company. Prior to joining Apache, Mr. Aleman served as the Director of Operations for American Mortgage Capital Inc., a major lender for all types of mortgages. He was also the 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. Prior to joining TJ Adams Group, he most recently served as managing director of Marsh McLennan and AON Risk Services.

Kenneth and Diane Hendricks are husband and wife. Kendra Story is a daughter of Mr. Hendricks and Kevin Hendricks is a son of Mr. Hendricks.

Audit Committee Financial Expert

The Board of Directors has determined that the Company does not have an audit committee financial expert as that term is defined in the Securities and Exchange Commission rules and regulations. However, the Board of Directors believes that each member of the Board has demonstrated that they are capable of analyzing and evaluating the Company’s financial statements and procedures for financial reporting. As the Board of Directors believes that the current members of the Board are qualified to carry out all of the duties and responsibilities of an audit committee, the Board does not believe that it is necessary at this time to actively search for an outside person to serve on the Board of Directors who would qualify as an audit committee financial expert.

Code of Ethics

The Company has adopted a Code of Ethics applicable to all officers of the Company as well as certain other key accounting staff. A copy of the Code of Ethics can be obtained free of charge by writing to the Company.

13

ITEM 11. EXECUTIVE COMPENSATION

The compensation of executive officers of the Company is determined by the Board of Directors. 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, 2003 for services rendered in all capacities to the Company and its subsidiaries during the year ended December 31, 2003.

	Annual Compensation				All Other Compensation (1)
Name and Principal Position	Annual		Bonus
Kenneth A. Hendricks Chief Executive Officer and Chairman of the Board	$	1,861,538	$	—	$	66,511
David Luck President and Chief Operating Officer		693,267		537,239		12,862
Diane M. Hendricks Executive Vice President and Secretary		385,577		—		37,587
Kendra Story Chief Financial Officer and Treasurer		233,654		268,619		4,062
Robert Bartels Senior Vice President of Manufacturing Operations		212,885		268,619		4,000

(1) Consists of estimated amounts paid by the Company for automobiles, discretionary matching payments under the Company’s 401(k) Profit Sharing Plan and insurance premiums, respectively, as follows: Mr. Hendricks–$0, $4,500 and $62,011; Mr. Luck–$8,362, $4,500 and $0; Ms. Hendricks–$4,350, $4,500 and $28,737; Ms. Story–$62, $4,000 and $0 and Mr. Bartels–$0, $4,000 and $0.

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 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. 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.

14

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ABC transacts business with a number of entities, including Corporate Contractors, Inc. (CCI), Blackhawk Transportation, Inc. and its subsidiary (Blackhawk), Amfinity Capital, LLC (Amfinity), Water Tower Industrial Properties (Water Tower), Hendricks Commercial Properties and its subsidiaries (HCP), Hendricks Carolina Properties, LLC (Carolina), Cornell Felt Acquisition, LLC (Cornell), Patriot, Ltd. (Patriot) and American Patriot Insurance Agency, Inc. (APIA) (collectively, the Related Entities), which are owned by ABC’s 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, Cornell 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 been conducted on an arm’s-length basis.

In connection with certain of the Company’s acquisitions, the Company’s 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, 2003 was approximately $17.8 million and $15.7 million as of December 31, 2002. The Company and Mr. Hendricks currently intend to continue to acquire properties for the Company’s occupancy using such method of financing. At December 31, 2003, the Company’s debt agreements will permit it to lend up to approximately $20.2 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 Revolver. The maximum amount of such borrowings at any time during the three years ended December 31, 2003, occurred in December 2003 and aggregated $17.8 million.

As described above, as of December 31, 2003, the Company leased 128 facilities from Mr. Hendricks or his affiliates compared to 119 facilities as of December 31, 2002, and 110 facilities as of December 31, 2001. For the years ended December 31, 2003, 2002 and 2001, the Company paid $15.3 million, $14.2 million, and $12.5 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, 2003 and 2002, 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 $5.8 million and $6.3 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 October 2001 and aggregated $6.7 million.

Prior to 2003, Patriot, an insurance captive owned by Mr. and Mrs. Hendricks, provided certain insurance coverage to the Company, as well as third party companies, which was subsequently reinsured in part by third-party insurance carriers. Beginning in 2003, this coverage was provided directly 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, $19.0 million, $17.1 million and $14.8 million in 2003, 2002 and 2001, 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.

15

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. Fees for audit services totaled $152,000 and $148,000 for the years ended December 31, 2003 and 2002, respectively, which included fees associated with the annual audit and reviews of the Company’s quarterly reports on Form 10-Q.

Audit-Related Fees. There were no fees for audit-related services for the years ended December 31, 2003 and 2002.

Tax Fees. There were no fees for tax services for the years ended December 31, 2003 and 2002.

There were no other fees incurred by the Company during the years ended December 31, 2003 and 2002. The Company’s Board of Directors appoints the independent auditors and pre-approves the services with respect to the annual audit and quarterly reviews of the Company’s Form 10-Q filings.

16

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1.) FINANCIAL STATEMENTS

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

	Page
Report of Ernst & Young LLP, Independent Auditors	18
Consolidated Balance Sheets as of December 31, 2003 and 2002	19
Consolidated Statements of Earnings for the years ended December 31, 2003, 2002 and 2001	20
Consolidated Statements of Stockholder’s Equity for the years ended December 31, 2003, 2002 and 2001	21
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001	22
Notes to Consolidated Financial Statements	23

(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

See Exhibit Index submitted as a separate section of this report.

(b) CURRENT REPORTS ON FORM 8-K

During the quarter ended December 31, 2003, the Company had no current filings on Form 8-K.

(c) EXHIBITS

See Exhibit Index submitted as a separate section of this report.

17

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, 2003 and 2002, and the related consolidated statements of earnings, stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the index at Item 15(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, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, 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.

As discussed in Note 7 to the financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill.

ERNST & YOUNG LLP

Milwaukee, Wisconsin

February 26, 2004

18

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share amounts)

	December 31,
	2003		2002
Assets (Note 3)
Current assets:
Cash	$	6,044	$	6,801
Accounts receivable, less allowance for doubtful accounts of $11,245—2003 and $9,245—2002		218,869		209,813
Inventories		216,086		191,049
Prepaid expenses and other		4,761		3,188
Total current assets		445,760		410,851
Property and equipment, net (Note 4)		87,316		90,875
Receivable from affiliates (Note 6)		17,831		15,692
Goodwill		38,951		38,851
Other intangible assets, net (Note 7)		4,034		4,534
Security deposits		1,124		1,011
Other assets		246		826
	$	595,262	$	562,640
Liabilities and stockholder’s equity
Current liabilities:
Accounts payable	$	135,268	$	119,941
Accrued payroll and benefits		16,554		15,586
Accrued liabilities		22,714		19,864
Current portion of long-term debt (Note 3)		11,639		8,721
Total current liabilities		186,175		164,112
Long-term debt (Note 3)		274,983		296,857
Commitments and contingent liabilities (Notes 5, 6 and 8)
Stockholder’s equity:
Common stock $0.01 par value; 1,000 shares authorized, 147.04 shares issued and outstanding		—		—
Additional paid-in capital		3,779		3,779
Retained earnings		130,325		97,892
Total stockholder’s equity		134,104		101,671
	$	595,262	$	562,640

See accompanying notes.

19

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands)

	Year Ended December 31,
	2003			2002			2001
Net sales	$	1,792,518		$	1,424,705		$	1,381,530
Cost of sales		1,326,139			1,055,093			1,037,192
Gross profit		466,379			369,612			344,338
Operating expenses		382,579			312,770			280,647
Amortization of intangible assets		369			369			1,611
		382,948			313,139			282,258
Operating income		83,431			56,473			62,080
Other income (expense):
Interest income		745			644			365
Interest expense		(15,811	)		(15,027	)		(19,344	)
		(15,066	)		(14,383	)		(18,979	)
Income before provision for income taxes		68,365			42,090			43,101
Provision for income taxes		1,102			981			865
Net income	$	67,263		$	41,109		$	42,236

See accompanying notes.

20

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in thousands)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Total Stock- holder’s Equity
Balance at December 31, 2000	$	—	$	3,779	$	35,399		$	39,178
Net income		—		—		42,236			42,236
Distributions to stockholder		—		—		(6,252	)		(6,252	)
Balance at December 31, 2001		—		3,779		71,383			75,162
Net income		—		—		41,109			41,109
Distributions to stockholder		—		—		(14,600	)		(14,600	)
Balance at December 31, 2002		—		3,779		97,892			101,671
Net income		—		—		67,263			67,263
Distributions to stockholder		—		—		(34,830	)		(34,830	)
Balance at December 31, 2003	$	—	$	3,779	$	130,325		$	134,104

See accompanying notes.

21

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2003			2002			2001
Operating activities
Net income	$	67,263		$	41,109		$	42,236
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		17,740			15,152			15,302
Amortization		369			369			1,611
Amortization of deferred financing costs		398			315			623
Provision for doubtful accounts		14,167			11,190			8,116
Loss on disposal of property and equipment		296			372			308
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(20,956	)		(10,898	)		(30,909	)
Inventories		(21,998	)		(11,832	)		(3,478	)
Prepaid expenses and other		(1,561	)		60			(117	)
Security deposits		(105	)		(56	)		73
Other assets		579			519			159
Accounts payable		15,327			5,670			21,012
Accrued liabilities		3,632			4,072			5,646
Cash provided by operating activities		75,151			56,042			60,582
Investing activities
Additions to property and equipment		(15,170	)		(26,514	)		(15,757	)
Proceeds from disposal of property and equipment		1,704			693			855
Acquisitions of businesses		(6,250	)		(58,261	)		(5,494	)
Cash used in investing activities		(19,716	)		(84,082	)		(20,396	)
Financing activities
Net borrowings (payments) under line of credit		(34,311	)		39,475			(15,300	)
Proceeds from long-term debt		24,450			21,000			1,388
Payments on long-term debt		(9,095	)		(6,020	)		(17,461	)
Net change in receivable from affiliates		(2,139	)		(10,785	)		(1,456	)
Distributions to stockholder		(34,829	)		(14,600	)		(6,252	)
Deferred financing costs		(268	)		(343	)		—
Cash provided by (used in) financing activities		(56,192	)		28,727			(39,081	)
Net increase (decrease) in cash		(757	)		687			1,105
Cash at beginning of year		6,801			6,114			5,009
Cash at end of year	$	6,044		$	6,801		$	6,114
Supplemental disclosures of cash flows information are as follows:
Cash paid for interest	$	15,555		$	14,590		$	19,424
Cash paid for income taxes		732			931			565

See accompanying notes.

22

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003

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 (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 259, 256 and 215 distribution center locations at December 31, 2003, 2002 and 2001, respectively.

Accounts Receivable

The Company evaluates the collectibility of its accounts receivable based on a number of factors. For larger accounts greater than 90 days past due, an allowance for doubtful accounts is recorded based on a customer’s ability and likelihood to pay based on management’s review of the facts. A weighted average of these evaluations is applied to all smaller accounts greater than 90 days past due. For all other customers, the Company recognizes an allowance based on length of time the receivable is past due based on historical experience.

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 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
Aircraft	20 years
Vehicles	2 –   5 years
Warehouse equipment	5 – 15 years
Office furniture and equipment	3 –   7 years
Leasehold improvements	Life of the lease, maximum 10 years

Goodwill

Effective January 1, 2002, goodwill is no longer amortized but is reviewed for impairment on an annual basis. Prior to January 1, 2002, goodwill was 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 3 to 15 years).

23

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Impairment of Long-Lived Assets

Property and equipment and other intangible 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.

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 operating expenses. Late payment charges were approximately $7,545,000, $5,389,000 and $5,225,000 in 2003, 2002 and 2001, respectively.

Shipping and Handling Costs

The Company classifies shipping and handling costs, consisting of driver wages and vehicle expenses, as operating expenses in the accompanying consolidated statements of earnings. Shipping and handling costs were approximately $85,259,000, $66,151,000 and $66,021,000 for 2003, 2002 and 2001, respectively.

Advertising Costs

Advertising costs are expensed in the period incurred. Total advertising expense was approximately $5,613,000, $5,486,000 and $4,869,000 for 2003, 2002 and 2001, 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 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 $1,102,000, $981,000 and $865,000 have been made for such income taxes in 2003, 2002 and 2001, respectively.

Net income differs from the amount currently taxable to the Company’s 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.

24

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

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.

New Accounting Standards

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which expands upon and strengthens existing accounting guidance concerning when a company should include in its financial statements the assets, liabilities and activities of another entity. A variable interest entity (VIE) does not share economic risk and reward through typical equity ownership arrangements. Instead, contractual or other relationships re-distribute economic risks and rewards among equity holders and other parties. Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. FIN 46 also requires disclosures about VIEs that a company is not required to consolidate but in which it has a significant variable interest. The adoption of applicable provisions of FIN 46 in 2003 did not have a material impact on the Company’s results of operations or financial position. The Company does not expect the adoption of the remaining provisions related to FIN 46 to have a material impact on the Company’s results of operations or financial position.

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.

2003 Acquisitions

During 2003, the Company completed five relatively small acquisitions with an aggregate cost of approximately $6,250,000 consisting mainly of inventories, accounts receivable and equipment. The excess of costs over the fair value of the net assets acquired is approximately $100,000.

2002 Acquisitions

On December 16, 2002, the Company acquired certain assets consisting mainly of inventories, accounts receivable, real estate and equipment, and assumed certain liabilities from twenty-nine distribution centers of Wm. Cameron & Co. for a total net purchase price of approximately $54,500,000. These Wm. Cameron & Co. locations were engaged primarily in the wholesale distribution of residential roofing, siding and window products to customers located in Maryland, Virginia, the District of Columbia, Colorado, Arizona, Utah, New Mexico, Oregon and California. The excess of cost over the fair value of the net assets acquired was approximately $2,300,000.

During 2002, the Company made five other relatively small acquisitions with an aggregate cost of approximately $6,500,000. The cost of each of these acquisitions approximated the fair value of the net assets acquired.

Unaudited pro forma financial information for the acquisitions in 2003 and 2002 is not presented because these acquisitions are not significant to the Company’s results of operations.

25

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. Business Acquisitions (continued)

2001 Acquisitions

In October 2001, the Company formed two new wholly owned subsidiaries, Vande Hey Raleigh Roof Tile Manufacturing, Inc. and Vande Hey Roof Tile Installation, Inc. These companies acquired certain assets and assumed certain liabilities of a roof tile manufacturer and a related installation company for approximately $3,800,000, which included a $1,000,000 note to the sellers.

In December 2001, the Company purchased certain assets and assumed certain liabilities of Jim Houk Seamless Guttering and Supply, Inc., which was in the business of manufacturing and distributing gutter supplies and accessories in the Missouri, Oklahoma and Kansas markets, for approximately $2,600,000.

The cost of each of these acquisitions approximated the fair value of the net assets acquired.

3. Long-Term Debt

Long-term debt consists of the following:

	December 31,
	2003		2002
	(in thousands)
Revolving line of credit	$	162,378	$	196,688
Senior Subordinated Notes		63,650		63,650
Equipment loans		46,024		36,725
Mortgage		11,051		4,734
Aircraft loan		3,519		3,781
		286,622		305,578
Less current maturities		11,639		8,721
	$	274,983	$	296,857

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 $325,000,000, reduced by outstanding letters of credit. As amended March 21, 2002, the initial term of the Revolver expires on June 30, 2005, 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, 2003, the Company had $118,828,000 of availability under the Revolver. The average availability during 2003 was approximately $91,630,000 based on a percentage of eligible accounts receivable and inventories. Under the amended terms of the Revolver, borrowings bear interest, at the Company’s option, at LIBOR plus 1.75% or at a base rate, as defined, plus 0.50%. The weighted average interest rate on all borrowings outstanding under the Revolver was 2.7% and 3.3% at December 31, 2003 and 2002, respectively.

The Revolver and the Company’s 10 ⁵/8% Senior Subordinated Notes which are due in 2007, contain various covenants, including, among other things, provisions that place restrictions on ABC’s ability to merge or sell its business, repurchase stock, or pay dividends. Additional provisions of the Revolver require the Company to maintain specific fixed charge coverage and leverage ratios, and also require that the Company’s stockholder continue to own at least 51% of the Company’s common stock.

In 2003, the Company mortgaged six of its distribution center properties in exchange for a $6,750,000 note. The note requires scheduled average monthly principal payments of approximately $28,000 plus interest through January 2008, with a final payment due in February 2008. The note bears interest at LIBOR plus 1.75%.

26

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Long-Term Debt (continued)

In September 2003, the Company entered into two notes collateralized by specific equipment (delivery trucks, trailers and forklifts). The notes, with an initial total principal balance of $12,000,000, require monthly principal payments of approximately $150,000 through October 2008 and $71,000 through April 2007, respectively, plus interest. These notes bear interest at LIBOR plus 1.3%.

Additionally during 2003, the Company refinanced $12,300,000 of its promissory notes which were collateralized by specific equipment (delivery trucks, trailers and forklifts). The new notes with an initial principal balance totaling $18,000,000 require monthly principal payments of approximately $338,000 plus interest through December 2007 and monthly principal payments of approximately $150,000 plus interest for the next twelve months. These notes bear interest at the General Electric Capital Corporations 30-day commercial paper rate plus an applicable margin ranging from 1.85% to 2.15%.

In 2002, the Company refinanced its mortgage on its corporate office with a $4,800,000 note. The note requires monthly principal payments of approximately $13,000 plus interest through July 2007, with a final payment due in August 2007. The note bears interest at the lower of LIBOR plus 2.0% or the lender’s prime rate, as defined in the note.

In addition, in 2002, the Company purchased and financed an aircraft with a loan of approximately $3,949,000. The loan requires scheduled average monthly principal payments of approximately $23,000, plus interest through March 2007, with a final payment in April 2007. The loan bears interest at LIBOR plus 2.2%.

Substantially all of the Company’s assets are collateral for the Company’s indebtedness. Future maturities of long-term debt as of December 31, 2003, are as follows (in thousands):

Year ending December 31,
2004	$	11,639
2005		174,057
2006		15,576
2007		78,427
2008		6,923
	$	286,622

4. Property and Equipment

Property and equipment consists of the following:

	December 31,
	2003		2002
	(in thousands)
Land	$	4,591	$	4,966
Buildings and improvements		15,278		15,760
Aircraft		4,433		4,433
Warehouse equipment		18,237		15,971
Vehicles		104,596		99,300
Office furniture and equipment		14,299		13,824
Leasehold improvements		21,859		19,962
		183,293		174,216
Less accumulated depreciation		95,977		83,341
	$	87,316	$	90,875

27

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Lease Commitments

The Company conducts the majority of its operations in leased facilities under operating leases expiring at various dates through 2013. Generally, the leases provide that the Company pays 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, 2003, the real estate for 128 of the distribution centers was owned by a related party. The total rent expense for these related-party leases was approximately $15,297,000, $14,200,000 and $12,532,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

Rent expense under all leases totaled $29,800,000, $25,015,000 and $21,884,000 for the years ended December 31, 2003, 2002 and 2001, respectively. Future minimum rental payments required as of December 31, 2003, under all leases with initial or remaining terms of more than one year are as follows (in thousands):

Year ending December 31,
2004	$	28,791
2005		25,389
2006		22,634
2007		20,116
2008		10,775
Thereafter		17,594
	$	125,299

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:

	2003		2002		2001
	(in thousands)
Accounts receivable	$	89	$	96	$	76
Security deposits		326		323		314
Sales		171		215		211
Purchases		5,493		4,164		1,802
Rent expense		15,297		14,200		12,532
Interest income		719		613		329

The noncurrent receivable from affiliates on the accompanying consolidated balance sheets primarily represents advances to an affiliate to purchase real estate to be used by the Company. Interest on the receivable from affiliates is charged at a rate comparable to the interest rate the Company pays on its Revolver.

At December 31, 2003 and 2002, the Company had guaranteed debt of the stockholder in the amounts of approximately $1,191,000 and $1,264,000, 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 $4,562,000 at December 31, 2003 and $5,064,000 at December 31, 2002 with respect to debt of the stockholder and affiliates.

28

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Related-Party Transactions (continued)

Prior to 2003, an insurance captive owned by the stockholder and his spouse, provided certain insurance coverage to the Company, which was subsequently reinsured in part by third-party insurance carriers. Beginning in 2003 this coverage was provided directly by third party insurance carriers. The Company paid an insurance broker, also owned by the stockholder and his spouse, net of reimbursements, approximately $19,024,000, $17,077,000 and $14,782,000 in 2003, 2002 and 2001, respectively, for claim liabilities, as determined by an independent actuarial service. The Company has approximately $5,630,000 and $5,000,000 of letters of credit outstanding at December 31, 2003 and 2002, respectively, with respect to its potential exposure under certain coverages provided by the affiliated insurance captive.

7. Goodwill and Other Intangible Assets

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” as of January 1, 2002. In connection with the adoption of SFAS No. 142, the Company completed the transitional goodwill impairment test, which required the Company to compare the fair value of its reporting units to the carrying value of the net assets of the respective reporting units as of January 1, 2002. Based on this analysis, the Company concluded that no impairment existed at the time of adoption, or at the time of the annual impairment tests were performed at December 31, 2003 and 2002, and, accordingly, no impairment charge has been recorded.

The gross carrying value and accumulated amortization by major class of other intangible assets are as follows (in thousands):

	December 31, 2003				December 31, 2002
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-compete agreements	$	4,650	$	2,095	$	4,650	$	1,752
Deferred financing costs		4,434		3,297		4,165		2,898
Other		400		58		400		31
	$	9,484	$	5,450	$	9,215	$	4,681

The Company does not have any intangible assets deemed to have indefinite lives. Amortization expense expected to be recognized for each of the next five years ending December 31, is as follows (in thousands):

2004	$	767
2005		722
2006		593
2007		436
2008		317

As required by SFAS No. 142, the results of operations for periods prior to its adoption have not been restated. Had these provisions been adopted effective January 1, 2001, the proforma net income would have been $43,532,000 for the year ended December 31, 2001.

8. Contingent Liabilities

The Company is involved in various legal matters arising in the normal course of business. In the opinion of management 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.

29

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Employee Benefit Plan

The Company sponsors a 401(k) plan covering substantially all employees. Contributions, which are at the discretion of the Company, approximated $1,246,000 in 2003, $1,123,000 in 2002 and $527,000 in 2001.

10. Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, accounts payable and borrowings under the Revolver, equipment loans and mortgage and aircraft notes payable approximated fair value at December 31, 2003 and 2002. The value of the Senior Subordinated Notes, based on quoted market prices, is as follows:

	December 31,
	2003		2002
	(in thousands)
Par value	$	63,650	$	63,650
Fair value		65,880		65,560

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.

11. Summarized Financial Information about Guarantor Subsidiaries

The following tables present consolidating financial information for 2003, 2002 and 2001 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.

30

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Balance Sheet

December 31, 2003

(in thousands)

	ABC		Subsidiary Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash	$	5,805	$	239		$	—		$	6,044
Accounts receivable, less allowance for doubtful accounts		216,762		13,052			(10,945	)		218,869
Inventories		215,552		3,568			(3,034	)		216,086
Intercompany advances		5,477		(5,477	)		—			—
Prepaid expenses and other		2,257		2,504			—			4,761
Total current assets		445,853		13,886			(13,979	)		445,760
Property and equipment, net		80,727		6,589			—			87,316
Investment in subsidiaries		3,366		—			(3,366	)		—
Receivable from affiliates		17,831		—			—			17,831
Goodwill		38,951		—			—			38,951
Other intangible assets, net		3,623		411			—			4,034
Security deposits		1,624		(500	)		—			1,124
Other assets		—		246			—			246
	$	591,975	$	20,632		$	(17,345	)	$	595,262
Liabilities and stockholder’s equity
Current liabilities:
Accounts payable	$	138,080	$	8,133		$	(10,945	)	$	135,268
Accrued payroll and benefits		15,860		694			—			16,554
Accrued liabilities		20,828		1,886			—			22,714
Current portion of long-term debt		11,367		272			—			11,639
Total current liabilities		186,135		10,985			(10,945	)		186,175
Long-term debt		271,736		3,247						274,983
Commitments and contingent liabilities
Stockholder’s equity:
Common stock		—		—			—			—
Additional paid-in capital		3,779		1			(1	)		3,779
Retained earnings		130,325		6,399			(6,399	)		130,325
Total stockholder’s equity		134,104		6,400			(6,400	)		134,104
	$	591,975	$	20,632		$	(17,345	)	$	595,262

31

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Balance Sheet

December 31, 2002

(in thousands)

	ABC		Subsidiary 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

32

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Statement of Earnings

Year Ended December 31, 2003

(in thousands)

	ABC			Subsidiary Guarantors			Eliminations			Consolidated
Net sales	$	1,774,493		$	103,405		$	(85,380	)	$	1,792,518
Cost of sales		1,322,033			88,811			(84,705	)		1,326,139
Gross profit		452,460			14,594			(675	)		466,379
Operating expenses		370,267			12,578			(266	)		382,579
Amortization of intangible assets		305			64			—			369
		370,572			12,642			(266	)		382,948
Operating income		81,888			1,952			(409	)		83,431
Other income (expense):
Interest income		745			—			—			745
Interest expense		(15,683	)		(128	)		—			(15,811	)
		(14,938	)		(128	)		—			(15,066	)
Income before provision for income taxes and equity in earnings of subsidiaries		66,950			1,824			(409	)		68,365
Provision for income taxes		1,098			4			—			1,102
		65,852			1,820			(409	)		67,263
Equity in earnings of subsidiaries		1,411			—			(1,411	)		—
Net income	$	67,263		$	1,820		$	(1,820	)	$	67,263

33

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Statement of Earnings

Year Ended December 31, 2002

(in thousands)

	ABC			Subsidiary Guarantors			Eliminations			Consolidated
Net sales	$	1,408,589		$	81,763		$	(65,647	)	$	1,424,705
Cost of sales		1,051,013			69,416			(65,336	)		1,055,093
Gross profit		357,576			12,347			(311	)		369,612
Operating expenses		303,219			9,678			(127	)		312,770
Amortization of intangible assets		305			64			—			369
		303,524			9,742			(127	)		313,139
Operating income		54,052			2,605			(184	)		56,473
Other income (expense):
Interest income		644			—			—			644
Interest expense		(14,866	)		(161	)		—			(15,027	)
		(14,222	)		(161	)		—			(14,383	)
Income before provision for income taxes and equity in earnings of subsidiaries		39,830			2,444			(184	)		42,090
Provision for income taxes		972			9			—			981
		38,858			2,435			(184	)		41,109
Equity in earnings of subsidiaries		2,251			—			(2,251	)		—
Net income	$	41,109		$	2,435		$	(2,435	)	$	41,109

34

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Statement of Earnings

Year Ended December 31, 2001

(in thousands)

	ABC			Subsidiary Guarantors		Eliminations			Consolidated
Net sales	$	1,377,645		$	61,603	$	(57,718	)	$	1,381,530
Cost of sales		1,043,850			50,961		(57,619	)		1,037,192
Gross profit		333,795			10,642		(99	)		344,338
Operating expenses		273,805			6,842		—			280,647
Amortization of intangible assets		1,601			10		—			1,611
		275,406			6,852		—			282,258
Operating income		58,389			3,790		(99	)		62,080
Other income (expense):
Interest income		365			—		—			365
Interest expense		(19,344	)		—		—			(19,344	)
		(18,979	)		—		—			(18,979	)
Income before provision for income taxes and equity in earnings of subsidiaries		39,410			3,790		(99	)		43,101
Provision for income taxes		856			9		—			865
		38,554			3,781		(99	)		42,236
Equity in earnings of subsidiaries		3,682			—		(3,682	)		—
Net income	$	42,236		$	3,781	$	(3,781	)	$	42,236

35

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Statement of Cash Flows

Year Ended December 31, 2003

(in thousands)

	ABC			Subsidiary Guarantors			Eliminations			Consolidated
Operating activities
Net income	$	67,263		$	1,820		$	(1,820	)	$	67,263
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		16,976			764			—			17,740
Amortization		305			64			—			369
Amortization of deferred financing costs		398			—			—			398
Provision for doubtful accounts		14,167			—			—			14,167
Loss on disposal of property and equipment		334			(38	)		—			296
Changes in operating assets and liabilities:
Accounts receivable		(20,813	)		(1,809	)		1,666			(20,956	)
Inventories		(21,541	)		(866	)		409			(21,998	)
Prepaid expenses and other		(590	)		(971	)		—			(1,561	)
Security deposits		(105	)		—			—			(105	)
Other assets		(1,862	)		2,441			—			579
Accounts payable		14,011			2,982			(1,666	)		15,327
Accrued liabilities		3,521			111			—			3,632
Cash provided by operating activities		72,064			4,498			(1,411	)		75,151
Investing activities
Additions to property and equipment		(14,118	)		(1,052	)		—			(15,170	)
Proceeds from disposal of property and equipment		1,583			121			—			1,704
Acquisitions of businesses		(6,250	)		—			—			(6,250	)
Investment in subsidiaries		(1,411	)		—			1,411			—
Cash used in investing activities		(20,196	)		(931	)		1,411			(19,716	)
Financing activities
Net borrowings under line of credit		(34,311	)		—			—			(34,311	)
Proceeds from long-term debt		24,450			—			—			24,450
Payments on long-term debt		(8,834	)		(261	)		—			(9,095	)
Net change in receivable from affiliates		(2,139	)		—			—			(2,139	)
Distributions to stockholder		(31,858	)		(2,971	)		—			(34,829	)
Deferred financing costs		(268	)		—			—			(268	)
Cash used in financing activities		(52,960	)		(3,232	)		—			(56,192	)
Net increase (decrease) in cash		(1,092	)		335			—			(757	)
Cash at beginning of year		6,897			(96	)		—			6,801
Cash at end of year	$	5,805		$	239		$	—		$	6,044
Supplemental disclosures of cash flows information are as follows:
Cash paid for interest	$	15,427		$	128		$	—		$	15,555
Cash paid for income taxes		728			4			—			732

36

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Statement of Cash Flows

Year Ended December 31, 2002

(in thousands)

	ABC			Subsidiary Guarantors			Eliminations			Consolidated
Operating activities
Net income	$	41,109		$	2,435		$	(2,435	)	$	41,109
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		14,561			591			—			15,152
Amortization		305			64			—			369
Amortization of deferred financing costs		315			—			—			315
Provision for doubtful accounts		11,190			—			—			11,190
Loss on disposal of property and equipment		367			5			—			372
Changes in operating assets and liabilities:
Accounts receivable		(9,441	)		(2,906	)		1,449			(10,898	)
Inventories		(11,496	)		(520	)		184			(11,832	)
Prepaid expenses and other		617			(557	)		—			60
Security deposits		(556	)		500			—			(56	)
Other assets		(4,185	)		4,704			—			519
Accounts payable		8,536			(1,417	)		(1,449	)		5,670
Accrued liabilities		3,079			993			—			4,072
Cash provided by operating activities		54,401			3,892			(2,251	)		56,042
Investing activities
Additions to property and equipment		(25,097	)		(1,417	)		—			(26,514	)
Proceeds from disposal of property and equipment		660			33			—			693
Acquisitions of businesses		(58,261	)		—			—			(58,261	)
Investment in subsidiaries		(2,251	)		—			2,251			—
Cash used in investing activities		(84,949	)		(1,384	)		2,251			(84,082	)
Financing activities
Net borrowings under line of credit		39,475			—			—			39,475
Proceeds from long-term debt		21,000			—			—			21,000
Payments on long-term debt		(4,851	)		(1,169	)		—			(6,020	)
Net change in receivable from affiliates		(10,785	)		—			—			(10,785	)
Distributions to stockholder		(13,091	)		(1,509	)		—			(14,600	)
Deferred financing costs		(343	)		—			—			(343	)
Cash provided by (used in) financing activities		31,405			(2,678	)		—			28,727
Net increase (decrease) in cash		857			(170	)		—			687
Cash at beginning of year		6,040			74			—			6,114
Cash at end of year	$	6,897		$	(96	)	$	—		$	6,801
Supplemental disclosures of cash flows information are as follows:
Cash paid for interest	$	14,429		$	161		$	—		$	14,590
Cash paid for income taxes		922			9			—			931

37

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Summarized Financial Information about Guarantor Subsidiaries (continued)

Consolidating Statement of Cash Flows

Year Ended December 31, 2001

(in thousands)

	ABC			Subsidiary Guarantors			Eliminations			Consolidated
Operating activities
Net income	$	42,236		$	3,781		$	(3,781	)	$	42,236
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		15,045			257			—			15,302
Amortization		1,601			10			—			1,611
Amortization of deferred financing costs		623			—			—			623
Provision for doubtful accounts		8,116			—			—			8,116
Loss on disposal of property and equipment		302			6			—			308
Changes in operating assets and liabilities:
Accounts receivable		(31,661	)		(269	)		1,021			(30,909	)
Inventories		(3,807	)		230			99			(3,478	)
Prepaid expenses and other		(129	)		12			—			(117	)
Security deposits		73			—			—			73
Other assets		(2,476	)		2,635			—			159
Accounts payable		21,795			238			(1,021	)		21,012
Accrued liabilities		5,462			184			—			5,646
Cash provided by operating activities		57,180			7,084			(3,682	)		60,582
Investing activities
Additions to property and equipment		(15,449	)		(308	)		—			(15,757	)
Proceeds from disposal of property and equipment		835			20			—			855
Acquisitions of businesses		(2,692	)		(2,802	)		—			(5,494	)
Investment in subsidiaries		(3,682	)		—			3,682			—
Cash used in investing activities		(20,988	)		(3,090	)		3,682			(20,396	)
Financing activities
Net payments under line of credit		(15,300	)		—			—			(15,300	)
Proceeds from long-term debt		1,388			—			—			1,388
Payments on long-term debt		(17,461	)		—			—			(17,461	)
Net change in receivable from affiliates		(1,456	)		—			—			(1,456	)
Distributions to stockholder		(1,974	)		(4,278	)		—			(6,252	)
Cash used in financing activities		(34,803	)		(4,278	)		—			(39,031	)
Net increase (decrease) in cash		1,389			(284	)		—			1,105
Cash at beginning of year		4,651			358			—			5,009
Cash at end of year	$	6,040		$	74		$	—		$	6,114
Supplemental disclosures of cash flows information are as follows:
Cash paid for interest	$	19,424		$	—		$	—		$	19,424
Cash paid for income taxes		556			9			—			565

38

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Quarterly Results of Operations (Unaudited)

	Year ended December 31, 2003
	1st Quarter			2nd Quarter		3rd Quarter		4th Quarter
Net sales	$	326,771		$	469,962	$	537,515	$	458,270
Gross profit		82,137			117,498		137,981		128,763
Net income (loss)		(3,979	)		17,176		30,210		23,856
	Year ended December 31, 2002
	1st Quarter			2nd Quarter		3rd Quarter		4th Quarter
Net sales	$	266,362		$	390,313	$	416,397	$	351,633
Gross profit		66,041			98,210		107,080		98,281
Net income (loss)		(4,249	)		12,545		20,843		11,970

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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 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 25, 2004.

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
	By:	/s/ Kenneth A. Hendricks
	Kenneth A. Hendricks
	Chief Executive Officer, Chairman of the Board
	By:	/s/ David Luck
	David Luck
	President, Chief Operating Officer, Director
	By:	/s/ Diane M. Hendricks
	Diane M. Hendricks
	Executive Vice President, Secretary, Director
	By:	/s/ Kendra A. Story
	Kendra A. Story
	Chief Financial Officer, Treasurer, Director

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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)].
3.7	Certificate of Incorporation of VH Manufacturing Acquisition Co., Inc., By-laws of VH Manufacturing Acquisition Co., Inc. and Certificate of Amendment of Certificate of Incorporation of Vande Hey Raleigh Roof Tile Manufacturing, Inc. [Incorporated by reference to exhibit 3.7 to the Company’s Form 10-K for the period ending December 31, 2001 (File No. 33-26991)]
3.8	Certificate of Incorporation of VH Contractor Acquisition Co., Inc., By-laws of VH Contractor Acquisition Co., Inc. Certificate of Amendment of Certificate of Incorporation of Vande Hey Roof Tile Installation, Inc. [Incorporated by reference to exhibit 3.8 to the Company’s Form 10-K for the period ending December 31, 2001 (File No. 33-26991)]
3.9	Articles of Incorporation of M-H Manufacturing Co., Inc., By-laws of M-H Manufacturing Co., Inc. [Incorporated by reference to exhibit 3.9 to the Company’s Form 10-K for the period ending December 31, 2002 (File No. 33-26991)]
3.10	Articles of Organization of Seven KH Aviation, LLC, Operating Agreement of Seven KH Aviation, LLC. [Incorporated by reference to exhibit 3.10 to the Company’s Form 10-K for the period ending December 31, 2002 (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 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)].

41

10.5	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)]
10.6	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)]
10.7	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)]
10.8	Third Amended and Restated Loan and Security Agreement among American Builders & Contractors Supply Co., Inc. as Borrower, Bank of America, National Association as Agent and a Lender, and American National Bank and Trust Company of Chicago, as Co-Agent and a Lender and the Other Lenders Party Hereto dated as of March 21, 2002. [Incorporated by reference to exhibit 10.20 to the Company’s Form 10-K for the period ending December 31, 2001 (File No. 33-26991)]
10.9	First Amendment to Third Amended and Restated Loan and Security Agreement, dated September 30, 2002, among American Builders & Contractors Supply Co., Inc. as Borrower, Bank of America, National Association as Agent and a Lender, and American National Bank and Trust Company of Chicago, as Co-Agent and a Lender and the Other Lenders Party Hereto. [Incorporated by reference to exhibit 10.1 to the Company’s Form 10-Q for the period ending September 30, 2002 (File No. 33-26991)]
10.10	Second Amendment to Third Amended and Restated Loan and Security Agreement among American Builders & Contractors Supply Co., Inc. as Borrower, Bank of America, National Association as Agent and a Lender, and the Other Lenders Party Hereto dated as of June 4, 2003 [Incorporated by reference to exhibit 10.1 to the Company’s Form 10-Q for the period ending June 30, 2003 (File No. 33-26991)]
10.11	Third Amendment to Third Amended and Restated Loan and Security Agreement dated March 3, 2004, among American Builders & Contractors Supply Co., Inc. as Borrower, Bank of America, National Association as Agent and a Lender, and Other Lenders Party Hereto.
21.1	Subsidiaries of the Company, Mule-Hide, Amcraft, Vande Hey Roof Tile Installation, Inc., Vande Hey Raleigh Roof Tile Manufacturing, Inc., Mule-Hide Manufacturing Co., Inc. and Seven KH Aviation, LLC. [Incorporated by reference to exhibit 21.1 to the Company’s Form 10-K for the period ending December 31, 2002.]
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

42

AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2003, 2002 and 2001

(in thousands)

Description	Balance at Beginning of Year		Additions Charged to Expense		Deductions (1)		Balance at End of Year
Accounts Receivable—Allowance for doubtful accounts:
2003	$	9,245	$	14,167	$	12,167	$	11,245
2002		7,595		11,190		9,540		9,245
2001		6,075		8,116		6,596		7,595

(1) Consist of charge-offs, net of recoveries

43