<PAGE>   1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                (Amendment No. 1)
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended October 31, 1999 or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to ______________

                         COMMISSION FILE NUMBER 0-23442

                                 ---------------

                     CAMERON ASHLEY BUILDING PRODUCTS, INC.
             (Exact name of Registrant as specified in its charter)


            GEORGIA                                      58-1984957
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

11651 PLANO ROAD, DALLAS, TEXAS                            75243
(Address of principal executive offices)                 (Zip Code)

                                  214-860-5100
              (Registrant's telephone number, including area code)

                      ------------------------------------

SECURITIES REGISTERED PURSUANT TO                       COMMON STOCK
SECTION 12(b) OF THE ACT:                             (Title of Class)

                                     RIGHTS TO PURCHASE SERIES A PREFERRED STOCK
                                                      (Title of Class)

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. [ ]

Aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant (7,435,974 shares) on January 14, 2000:
$83,189,959).

The number of shares of Common Stock of the Registrant outstanding as of January
14, 2000 was 8,705,367 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>   2


PART  I

ITEM 1. BUSINESS

GENERAL

Cameron Ashley Building Products, Inc., (together with its principal operating
subsidiaries Wm. Cameron & Co. ("Cameron"), Ashley Aluminum, LLC ("Ashley"), and
Cameron Ashley Canada, Inc. ("CA Canada"), (collectively the "Company") is a
leading North American distributor of a broad line of building products that are
used principally in home improvement, remodeling and repair work and in new
residential and commercial construction. The Company's product lines include
roofing, millwork, pool and patio enclosure materials, insulation, vinyl siding,
industrial metals and a variety of other building materials. The Company
distributes its products through its extensive 167-branch network to independent
building materials dealers, professional builders, large contractors and mass
merchandisers and national co-ops in all 50 U.S. states and throughout Canada.

In 1999, the Company increased its ownership in Field Marketing, Inc., ("FMI")
to 70%. FMI provides various merchandising services to retailers, including:
managing shelf space, conducting in-store audits, and providing promotional
product introductions. The Company offers FMI services as a complementary
value-added service to its customers.

RECENT DEVELOPMENTS

On January 18, 2000, the Company announced that it has entered into a definitive
agreement whereby an investment group consisting of CGW Southeast Partners IV,
L.P. and an affiliate of Citicorp Venture Capital, Ltd., a subsidiary of
Citigroup Inc., along with senior management of the Company (the "Investment
Group") will acquire all the outstanding shares of the Company's common stock at
a price of $15.10 per share in cash. The total consideration of the proposed
merger transaction is approximately $320 million including the assumption of
debt. The Investment Group has indicated that financing commitments, subject to
customary conditions, are in place with both senior and subordinated debt
sources, and the transaction could close in the second calendar quarter of 2000.
The Company entered into the agreement following the unanimous recommendation by
a special committee comprised of independent directors of the Company. Credit
Suisse First Boston advised the special committee in this transaction. CGW
Southeast Partners I, L.P., an affiliate of CGW Southeast Partners IV, L.P.,
currently owns approximately 11% of the Company's outstanding shares. CGW
Southeast Partners IV, L.P., is a private equity fund which supports management
teams in middle-market acquisitions and recapitalizations, and is managed by
Atlanta, Georgia based Cravey, Green & Wahlen, Inc. Richard L. Cravey and Edwin
A. Wahlen, Jr., both directors of the Company, are affiliated with the
CGW-related entities.

The closing of the merger is subject to regulatory and stockholder approval and
customary conditions to closing. The agreement includes a provision whereby the
special committee may withdraw or modify its recommendation of the merger
following receipt of an unsolicited acquisition proposal from a third party in
order to fulfill its fiduciary obligations to the Company's shareholders under
applicable law. The agreement also includes a $5 million breakup fee in favor of
the Investment Group.

On February 10, 2000, Bradco Supply Corporation and Barry Segal jointly filed a
Schedule 13D with the Securities and Exchange Commission to report that they had
together purchased approximately 444,900 shares or approximately 5.13% of the
outstanding shares of Common Stock of the Company. The reporting persons stated
that they believe the Investment Group's proposed acquisition price of $15.10
per share to be inadequate and that they are seeking to purchase approximately
60% of the outstanding shares of the Company at $16.25 per share in the open
market or in privately negotiated transactions. They further indicated their
intent to merge Bradco's operations into the Company and work with the Company's
management to grow the combined companies. Bradco and Segal subsequently filed
an amended Schedule 13D on February 16, 2000 to report an increase in ownership
by 104,500 shares to 549,400 shares or approximately 6.33% of the outstanding
shares of Common Stock of the Company.

On February 11, 2000, the Company announced that it had received an unsolicited
proposal from Guardian Industries Corp. to acquire all the outstanding shares of
the Company's common stock at a price of $17.00 per share. Guardian Industries
indicated that it has the financial capacity to fully fund the proposed
transaction. The proposed transaction is subject to due diligence, negotiation
of a definitive agreement and regulatory approval. The special committee is


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evaluating this proposal along with its financial advisor, Credit Suisse First
Boston, while Guardian is pursuing its due diligence process.

The special committee subsequently notified Segal that they were currently
considering the Guardian proposal and, in light of its superior terms, did not
believe that further consideration of Segal's proposal was warranted at the
present time. On February 18, 2000, Bradco and Segal further amended their
Schedule 13D filing to report that they have no further interest in pursing a
transaction with the Company and that they now intend to hold their shares for
investment purposes.

FORWARD LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K, including statements in
Item 1. Business, Item 3. Legal Proceedings, Item 5. Market for the Registrant's
Common Equity and Related Stockholder Matters, and Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations, are
"forward-looking statements" that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be indicated by phrases such as "believes",
"anticipates", "expects", "intends", "foresees", "projects", "predicts",
"forecasts", "will" or similar words and are subject to known or unknown risks
and uncertainties which may cause actual results in the future to differ
materially from forecasted results. Among the key factors that could cause
results to differ materially are: (i) the inability of the parties to the
definitive merger agreement to complete the proposed buy-out; (ii) actions by
competitors, suppliers, customers, shareholders, regulators and others following
the announcement of the proposed buy-out; (iii) stock market and financing
market conditions; (iv) business and economic conditions in North America and in
the regional markets in which the Company operates; (v) adverse homebuilding
conditions including those related to weather and interest rates; (vi) reliable
and cost-effective supply of products from manufacturers; and (vii) technology
risks in implementing new and/or converting existing information systems and
other risks more fully described in this Annual Report on Form 10-K or in other
Company filings with the Securities and Exchange Commission.

COMPANY OVERVIEW

Since its formation in 1991, the Company has pursued a strategy of establishing
a national building products distribution network through the acquisition of
independent building products distributors. As a result of acquisitions and
internal growth, the Company grew from $134.8 million in revenue in fiscal 1991
to $1,138.4 million in fiscal 1999, representing a compound annual growth rate
of 30.6%. Over the same period, the Company completed 43 acquisitions and added
125 distribution facilities.

According to the Home Improvement Research Institute, building products sales to
contractors in the new housing and home repair and remodeling markets grew from
approximately $70.5 billion in 1991 to approximately $115.2 billion in 1998,
representing a compound annual growth rate of 7.3%. The wholesale building
products distribution industry, which distributes to these markets, is highly
fragmented. According to the National Home Center News, sales by the 100 largest
building materials wholesale distributors were approximately $30.8 billion in
1998, representing only 26.7% of the $115.2 billion in total sales to building
contractors. Many distributors in the building materials industry are small,
privately-held companies which generally lack the purchasing power of a larger
entity and may also lack the broad lines of products and sophisticated inventory
management and control systems typically needed to operate a multi-branch
distribution network. The increasingly competitive environment faced by smaller
distributors has prompted a trend toward industry consolidation which management
believes offers significant opportunities for the Company.

The Company has established a presence in a substantial portion of North America
and as a result, the Company's financial performance is not significantly
dependent upon a single geographic region's economy. The diversity of the
Company's customer base and the wide variety of applications for the Company's
products also decrease the impact of a downturn in demand in any particular
market segment. The risks posed by the cyclical new residential construction
market are somewhat mitigated by the Company's significant participation in the
less cyclical residential remodeling and home improvement market.


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INDUSTRY OVERVIEW

Prior to the 1970's, building materials were sold in both rural and metropolitan
markets largely by local dealers, such as lumberyards and hardware stores. These
dealers, who generally purchased their products from wholesale distributors,
sold building products directly to homeowners, contractors and homebuilders. In
the late 1970's and 1980's, the advent of mass merchandisers such as The Home
Depot and Lowe's altered this distribution channel dramatically in metropolitan
markets as these retailers displaced many local dealers. A core strength of
these mass merchandisers was their ability to market a broad range of
competitively priced home improvement and do-it-yourself products to the
homeowner and small contractor. Accordingly, most wholesale distributors
redirected their efforts and worked to sell directly to large contractors and
homebuilders in metropolitan markets and provide mass merchandisers with fill-in
and specialty products that mass merchandisers would not typically stock in
their retail inventory. This distribution structure remains in place today.

In metropolitan areas, mass merchandisers primarily sell products to retail
customers such as homeowners and small contractors. In rural areas, dealers such
as lumberyards and hardware stores sell products to homeowners, contractors and
homebuilders. Wholesale building products distributors, such as the Company, and
major manufacturers, such as Georgia Pacific and Weyerhaeuser, do not sell
directly to retail customers. Instead, they distribute products to (i)
professional homebuilders and contractors in metropolitan markets, (ii) dealers
in rural markets and (iii) mass merchandisers in metropolitan areas. Despite the
emergence of the mass merchandisers during the past two decades, the wholesale
building products distribution industry has experienced solid growth in the
1990s.

STRATEGY

The Company's primary strategic objective is to be a leading wholesale building
products distributor in North America. Since 1991, the Company has pursued a
strategy of aggressive growth through acquisitions and development of the
management and operational expertise required to be a leader in the industry. As
the Company moves into the next phase of its development, management plans to
(i) continue to expand through selective acquisitions, (ii) accelerate internal
growth and (iii) capitalize on the economies of scale of its North American
network. By pursuing these initiatives, the Company seeks to achieve superior
sales and profit growth relative to its competitors, provide building products
manufacturers with a unified North American distribution network and increase
its market share with national account retailers, developers, large contractors,
builders and manufactured housing companies.

CONTINUE TO EXPAND THROUGH SELECTIVE ACQUISITIONS

Over the past several years, the Company's acquisition strategy has resulted in
the expansion of its operations from branch locations in two states to 39 states
and the District of Columbia and nine provinces in Canada. Going forward, the
Company intends to continue to expand through a disciplined acquisition program
in order to achieve its growth objectives and strengthen its North American
distribution network. In evaluating future acquisition candidates, the Company
will target well-established distributors which will allow the Company to enter
new markets or to expand its product lines in existing markets. The Company
seeks acquisition candidates that have complementary management teams and
product lines. The Company typically retains the existing management team of the
acquired distributor to benefit from local market knowledge and customer
relationships and provides incentive compensation tied to the profitability and
return on investment of the acquired operation. After acquiring a new
distributor, the Company concentrates on expanding product lines at the location
and improving its operational efficiency through purchasing economies, inventory
management and administrative savings.

ACCELERATE INTERNAL GROWTH

The Company is pursuing several strategies designed to accelerate internal
growth. These strategies include:

Broadening Product Lines. The Company seeks to broaden the product lines offered
by its branches in order to improve the overall product mix available to its
customers, assist customers in managing their specialized inventory needs and
enable branches to provide "one-stop shopping" to their customers. The
distribution of a wider variety of products enhances gross profit margins by
adding higher margin specialty products to the Company's branches and reduces
unit shipping costs by allowing delivery of more products per truckload. Current
product lines the Company is seeking to broaden across the branch network
include exterior siding systems, commercial roofing and millwork. Management


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continually seeks opportunities to enhance the Company's product offerings
through the acquisition of distributors offering complementary product lines and
the establishment of relationships with additional suppliers.

Enhancing Relationships with National and Regional Accounts. The Company is
expanding its sales to national and regional home center chains and hardware
co-ops by establishing programs with national vendors which enable these vendors
to rapidly replenish the special inventory needs of their large national
accounts. In addition, the Company has also developed services which provide
special order capabilities for niche products and in-store merchandising
services to its customers. Management believes that its extensive North American
network uniquely positions the Company to provide these services to national and
regional accounts.

Expanding Presence in Large Builder, Developer and Manufactured Housing
Segments. Management believes that its distribution and service network also
provides it with significant growth opportunities in the large national and
regional builder, developer and manufactured housing market segments where the
Company currently has a limited presence. The Company is seeking to expand
existing programs with several major builders to which the Company provides
specialized millwork packages and roofing products. Management believes
additional expansion of the Company's geographic network through acquisitions
will improve its ability to service these market segments.

Offering Value-Added Services. The Company is developing complementary
value-added services to offer its customers. The Company's subsidiary, FMI,
offers third party outsourced field services to fulfill several of the
retailers' traditional merchandising tasks, including managing shelf space and
position, providing inventory management, conducting in- store audits and
promotional introductions and implementing major department resets. Other
retailers such as food and drug stores have found they can take cost out of the
logistical supply chain by using a third party for such in-store merchandising
needs instead of higher-cost, permanent sales and marketing employees. Third
party servicers such as FMI allow suppliers to share the merchandising personnel
through syndication, at a lower cost, for valuable in-store representation. The
Company offers certain FMI resources as a complementary service to its strategic
vendor relationships and to the national and regional home center chains. In
fiscal 1999, services to building materials/hardware retailers represented 21%
of FMI's total revenues.

Enhancing Branch Management Capability. A key aspect of the Company's strategy
is an entrepreneurial operating philosophy which seeks to maximize the Company's
responsiveness to customers' needs and to give branch managers a sense of
responsibility and accountability for the performance of their own operations.
Selling and operational capabilities at the branch level are critical to
achieving the Company's overall sales and profit objectives. To enhance branch
management capabilities, the Company has implemented a number of initiatives
which include (i) providing two weeks of intensive classroom training at one of
the country's leading distribution management programs, (ii) investing in
training courses focusing on professional selling skills and time and territory
management and (iii) providing ongoing training in standardized branch processes
and procedures.

CAPITALIZE ON ECONOMIES OF SCALE

Capturing Purchasing Economies. As a significant customer to many of its
vendors, the Company is able to obtain competitive pricing and purchasing terms,
ensure timely delivery of products and maintain appropriate inventory
availability. While individual branch managers are responsible for selecting and
ordering inventory tailored to the varied needs of customers in their local
markets, the Company generally negotiates with its major vendors on a
company-wide basis to obtain favorable pricing, volume discounts and other
beneficial purchase terms. Branch or regional managers are responsible for
inventory selection and ordering on terms negotiated centrally, so that the
Company remains responsive to local market demand, while still maximizing
purchasing leverage through volume orders. To help strengthen the Company's
overall purchasing economics, management initiated a preferred vendor program
that maintains regional flexibility, but reduces the number of vendors in
several major product categories. Management believes that further opportunities
to realize purchasing economies exist within all product categories and
operating expense areas and intends to pursue such opportunities to enhance
profitability.

Upgrading Business Information Systems. Management believes that information
technology to support organization- wide decision making is critical to
achieving the Company's sales and profit objectives. Each of the Company's
branches is equipped with on-line, real time information systems, which enable
branch management to control and monitor inventory levels, perform invoicing and
order entry and establish delivery routes and schedules. Corporate management is
also able to monitor branch and regional sales, profitability, asset management
and working capital performance by


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utilizing the same system. The Company is in the process of implementing a new
information system in its Cameron division to allow it to improve operations,
customer service, pricing management and inventory and logistics management. See
"Information Technology".

Increasing Operating Efficiencies. The Company centralizes many administrative
functions such as accounting and finance, information technology, employee
benefits, insurance, human resources, legal, and national account sales efforts
both to achieve economies of scale and to help branch management remain focused
on maximizing sales and profitability of their locations. Management intends to
continue its efforts to increase operating productivity throughout the Company.
In an effort to reduce operating expenses, the Company recently launched cost
reduction efforts across many administrative functions and management believes
there will continue to be opportunities to eliminate redundant functions and
facilities from time to time, particularly through operating synergies resulting
from additional acquisitions.

ACQUISITION HISTORY

Since its formation in 1991, the Company has completed 43 acquisitions and has
grown from 40 branches at the end of 1991 to 167 branches as of October 31,
1999. Set forth in the table below is a description of the Company's
acquisitions during each of the calendar years indicated:


<TABLE>
<CAPTION>
                                                           NUMBER OF            LOCATION OF
                      BUSINESS                         ACQUIRED BRANCHES     ACQUIRED BRANCHES
-------------------------------------------------      -----------------     -----------------
<S>                                                    <C>                   <C>
1992
  Thunderbird Steel..............................                      1     NM
  Mike's Aluminum................................                      1     FL
1993
  Owens Corning Fiberglass (Supply Division).....                      5     GA, IL, NC, TX
  Owens Corning Fiberglass (Supply Division).....                      1     MI
  New Orleans Building Products..................                      1     LA
  Wholesale Building Supply (Albuquerque)........                      1     NM
  Whitewater Building Products...................                      2     IN
  San Antonio Building Products..................                      1     TX
1994
  Chesapeake Building Supply.....................                      1     MD
  Bright Aluminum................................                      1     FL
  Wholesale Building Supply (Santa Fe)...........                      1     NM
  Bird Incorporated..............................                     10     AZ, CT, KY, MA, NY, VT
  Southland Building Products....................                      6     LA, TX
  CA Co..........................................                      4     ID, WA
1995
  Blair Siding...................................                      1     GA
  Warehouse Moulding & Door Corp.................                      2     NM
  Zaglin Wholesale...............................                      1     GA
  States Dealer Supply...........................                      1     OR
  Star, Inc......................................                      7     AZ, OR, UT
1996
  Premdor, Inc. (distribution facility)..........                      1     UT
  Jett Supply Co.................................                      3     CO, IL, TX
  Mile High Roofing & Exterior Supply............                      3     CO
  California Roofers Supply......................                      8     CA
  Dependable Roofing & Materials.................                      1     CA
  Metro Roofing Supply...........................                      1     AR
  Midwest Thermal Products, Inc..................                      4     AR, MO, OK
1997
  Ince Holdings, Ltd. (Boyd Division)............                     16     Canada
  Contractors Supply.............................                      2     NE
  Bois Daigle, Ltd...............................                      7     Canada
  DMG Supply.....................................                      3     SC
  Vinyl Wholesale Supply Co .....................                      1     NC
  Mid-America Siding Supply Inc..................                      2     AR, TX
1998
  J&L Services, Inc..............................                      1     IL
  Oakmont Industries, Ltd........................                      1     Canada
  Millwork Specialties, Inc......................                      1     NY
  Ozark Construction Supply......................                      1     MO
  APi Supply Company.............................                      9     IL, IA, MN, MT, ND, SD, WI
  Lafayette Woodworks, Inc.......................                      1     LA
  Gerard Demers/Demers Express...................                      2     Canada
  Washington Roofing Products Co.................                      7     DC, MD, VA
1999
  Performance Materials..........................                      1     KS
  Fox Valley Building Materials..................                      1     IL
  Bak-a-lum Corp. of America.....................                      3     NJ
</TABLE>


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PRODUCTS

The Company distributes a broad range of building products as shown in the
following table and as described below.


<TABLE>
<CAPTION>
                                                   FISCAL 1999    FISCAL 1998     FISCAL 1997
                                                   -----------    -----------     -----------
<S>                                                <C>            <C>             <C>
Roofing Products ..............................            37%            35%            38%
Millwork ......................................            11%            11%            10%
Pool and Patio Enclosure Products .............             6%             8%             9%
Insulation ....................................            10%            12%             9%
Vinyl Siding ..................................             6%             6%             7%
Industrial Metals .............................             3%             3%             4%
Other Building Products* ......................            27%            25%            23%
</TABLE>

* Includes those product lines which individually constitute less than three
  percent (3%) of the Company's net sales in fiscal 1999.

Roofing Products. Shingles, felt, roof tile, commercial roll roofing, coatings,
asphalt, flashings, vents and other roofing products are distributed to
residential and commercial roofing contractors and dealers, including
lumberyards and, to a lesser extent, mass merchandisers. Principal brands of
roofing products include CertainTeed, Elk, GAF, Genstar, Monier/Lifetile, Owens
Corning and Tamko. Management believes the Company is one of the largest roofing
products wholesalers in the United States.

Millwork. Millwork includes doors, door units and component parts, molding,
windows, stair parts, blinds, shutters and screens, which are distributed to
dealers, mass merchandisers, contractors and builders in the residential
construction industry. The Company's major millwork lines include ABTCo.
(prefinished moldings, shutters and architectural work), Premdor and Steves &
Sons (flush doors), ThermaTru (residential entry doors) and a variety of other
regional suppliers. The Company also pre-hangs door units for large residential
builders such as D. R. Horton and Perry Homes, mass merchandisers and
independent dealers.

Pool and Patio Enclosure Products. Pool and patio enclosure products include
aluminum extrusions, roof panels, gutters, coil, screen, awnings, handrails and
various other exterior aluminum building products. These products are sold by
the Company to residential contractors and installers, who use them in the
construction of pool enclosures, screen rooms, mobile home improvement projects,
carports and roof-over applications. A majority of the pool and patio enclosure
product line is purchased from a variety of suppliers for redistribution by the
Company. The remainder consists of roll-formed roof panels, gutters and
fold-down window awnings fabricated by the Company. The Company's fabrication
capability allows it to produce a variety of sizes and styles on an as-needed
basis to control inventory costs or fill custom orders.


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Insulation. The Company distributes a broad line of insulation materials to
contractors and dealers. Principal brands distributed by the Company include
CertainTeed and Owens Corning products that are used in both residential and
commercial applications.

Vinyl Siding. Vinyl siding consists of siding, soffit and accessories. The
Company purchases vinyl siding from several industry leaders, including
CertainTeed, Rollex and Owens Corning, and distributes the product to builders,
contractors and mass merchandisers.

Industrial Metals. Industrial aluminum and stainless steel products fall
primarily into two categories, extrusions and sheet. These products are
purchased by sheet metal businesses, fabricators and manufacturers for use in a
variety of products. The Company purchases extruded products for distribution,
while third party processors and the Company cut sheet products from coils to
standard specifications. In addition, the Company has the ability to cut sheet
products to individual specifications.

Other Building Products. The Company distributes a variety of building materials
such as stucco, aluminum siding, sheathing, fireplaces, ceiling tiles, grids,
skylights, gutters, sheet rock, nails and fasteners, rebar, mesh, corrugated
metal, wood products, fencing and pneumatics. The product mix offered by each
branch is tailored to the demands of its local market.

BRANCH OPERATIONS

The Company distributes products through its network of 167 branches which are
strategically located to provide prompt delivery and responsive customer
service. The Company emphasizes individual branch profit-and-loss and working
capital responsibility and seeks to maximize the benefits of its local market
presence. A branch is typically comprised of warehouse and receiving space,
secure outdoor holding space, office space and product display areas. Local
sales efforts are coordinated and supported at the branches. The bulk of the
remaining branch activities relate to receiving, storing and delivering building
products.

Each branch is responsible for selecting and ordering inventory to meet the
needs of its customers and for creating its own localized sales, marketing and
promotional programs, supplemented by coordinated national and regional programs
at the corporate level. All branches are equipped with on-line information
systems that allow managers to control and monitor inventory levels, perform
invoicing and order entry, and establish delivery routes and schedules.
Corporate management also uses the Company's information systems to monitor
sales, profitability and working capital management by branch. The Company
employs electronic data interchange ("EDI") to enhance its ability to serve the
needs of major national accounts and national manufacturers.

Some of the Company's branches are organized into a formal "hub and spoke"
system, with large branches supporting smaller branches or mini-branches. Even
where a formal "hub and spoke" system has not been implemented, full-line
metropolitan branches typically provide fill-in service to smaller and rural
branches. Metropolitan branches are typically larger in square footage and
generally stock a full line of products, while the product mix at rural branches
is typically more limited and market specific.

The Company establishes and maintains overall credit policy and terms at the
corporate level. Branch managers are generally responsible, within the Company's
policy, for overseeing the extension of credit and the collection of accounts
receivable. The Company's central credit function assists branches with major
accounts, collects delinquent accounts and determines overall credit lines and
credit approval. In certain instances, the Company obtains lien rights and
security interests where appropriate to provide security for larger accounts.

PURCHASING

The Company generally negotiates with its major vendors on a company-wide basis
to obtain favorable pricing, volume discounts and other beneficial purchase
terms. The Company negotiates large block purchases of roofing, insulation,
millwork, pool and patio and commodity products centrally to capture purchasing
economies. Branch or regional managers are responsible for inventory selection
and ordering on terms negotiated centrally, so that the Company remains
responsive to local market demand, while still maximizing purchasing leverage
through volume orders. Branch managers are also responsible for inventory
management at their respective locations.


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<PAGE>   9


Payment, discount and volume purchase programs are negotiated directly by the
Company with its major suppliers, with a majority of the Company's purchases
made from suppliers offering these programs. The Company is a party to
distribution agreements with certain vendors, including CertainTeed and Owens
Corning, on an exclusive or non- exclusive basis, depending on the product and
the territory involved. The agreements also provide certain price protections
for products purchased by the Company from these suppliers.

SALES AND MARKETING

The Company's marketing programs center on fostering strong customer
relationships and providing superior service. The Company focuses its marketing
efforts primarily on the residential remodeling and new housing segments and, to
a lesser extent, on the commercial and industrial segments. The Company has a
national accounts sales and marketing staff that is responsible for negotiating
programs and standards for relationships with mass merchandisers, purchasing
cooperatives, national home builders and developers and manufacturers. The
Company's marketing team also has dedicated executives focused on product lines
targeted for growth, such as vinyl siding.

The Company's sales organization consists of outside field sales personnel who
report directly to their local branch manager and are supported by inside
customer service representatives at the branch. Bonus and commission payments
constitute a substantial portion of the compensation for salespersons, and in
fiscal 1999 branch managers could earn up to 50% of their base salary in bonus
if branch performance goals were achieved or exceeded.

CUSTOMERS

The Company distributes products to a large number and variety of building
material dealers, large home builders, contractors, mass merchandisers and
national co-ops, and others.

Contractors represent the Company's single largest customer group. Management
believes that prospects of increased sales to this group are strong, based on
projected growth in home repair and remodeling work. In addition, with the
emergence and continued growth of retail mass merchandisers such as The Home
Depot and Lowe's, the Company has begun to target those merchandisers to satisfy
their fill-in and specialty product needs.

The percentages of the Company's revenue attributable to the Company's various
types of customers are as follows:


<TABLE>
<CAPTION>
                                              FISCAL 1999    FISCAL 1998     FISCAL 1997
                                              -----------    -----------     -----------
<S>                                           <C>            <C>             <C>
Contractors ................................      49%            51%            56%
Dealers ....................................      33%            33%            26%
Mass Merchandisers and National Co-ops......      11%             9%            11%
Builders ...................................       5%             5%             4%
Other ......................................       2%             2%             3%
</TABLE>

INFORMATION TECHNOLOGY

In late 1997, the Company initiated a major business process re-engineering
project aimed at improving and standardizing processes and using a "best
practices" approach to reduce operating costs in the Cameron division. This
re-engineering effort centers around a new information system using J.D. Edwards
software and IBM AS/400 hardware. The system has been successfully implemented
in Canada and in parts of the U.S. and management expects the system to be fully
implemented in early fiscal 2000. The new information system and re-engineered
processes are expected to enhance the Company's competitive position by reducing
operating and administrative costs and improving customer service, pricing
management and inventory and logistics management.

COMPETITION

The Company's competition varies by product line, customer classification and
geographic market. The Company competes with many local and regional building
products distributors, and, in certain markets and product categories, with
other national building products distributors, such as ABC Supply, Allied
Building Products, and Huttig Building Products. The Company also competes with
major corporations with national distribution capability, such as Georgia-


                                       9
<PAGE>   10


Pacific, Weyerhaeuser and other product manufacturers that engage in direct
sales; however, the Company also acts as a distributor for certain products of
these manufacturers. The Company sells products to and, to a lesser extent,
competes with large home center chains such as The Home Depot and Lowe's for
business from smaller contractors. Competition from such large home center
chains may, in the future, include more competition for the business of larger
contractors.

Management believes that the Company's target customers generally select
building products distributors on the basis of product availability,
relationships, service and delivery, geographic coverage, responsiveness and
credit availability. The Company utilizes its purchasing power with major
suppliers to obtain products at prices generally more favorable than its smaller
competitors. The Company's relative size also permits it to attract experienced
sales and service personnel and gives the Company the resources to provide
company-wide sales, product and service training programs. By working closely
with its customers and utilizing the Company's information technology, the
Company's branches are able to maintain appropriate inventory levels and are
well positioned to deliver completed orders on time.

ENVIRONMENTAL

The Company is subject to federal, state and local environmental laws and
regulations. 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.

Management believes the Company is in material compliance with applicable laws
and regulations governing the discharge of hazardous waste into the environment;
moreover, management 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.

EMPLOYEES

As of October 31, 1999, the Company had 2,669 employees, including 195 corporate
and administrative personnel and 2,474 branch employees. At the branch level, a
total of 1,936 people were employed as warehouse and manufacturing personnel,
truck drivers, office staff and labor supervisors; and 538 were employed as
branch managers and sales personnel. Unions represent a total of approximately
134 hourly workers at the Company's Chicago, Detroit, San Antonio, New York
City, Hauppauge (Long Island), Linden, New Jersey and Houston facilities. The
Company has not experienced any work stoppages. The remainder of the Company's
employees are not represented by a union or a collective bargaining unit.
Management considers the Company's employee relations to be satisfactory.

TRADENAMES

Historically, the Company operated under various tradenames in the markets it
served, retaining the name of an acquired business to preserve local
identification. To capitalize on its increasing national presence, the Company
has converted most branch operations to the primary tradename "Cameron Ashley
Building Products." New acquisitions typically convert to the primary tradename
within 6 to 12 months after the purchase date. Some local branches continue to
use historical trade names as secondary tradenames to maintain goodwill.

SEASONALITY

The Company's first quarter and, to a lesser extent, its second quarter are
typically adversely affected by winter construction cycles and weather patterns
as the level of activity in both the home improvement and new construction
markets decreases. Management closely monitors operating expenses and inventory
levels during seasonally affected periods and to the extent possible, controls
variable operating costs to minimize seasonal effects on profitability.


                                       10
<PAGE>   11


ITEM 3. LEGAL PROCEEDINGS

Between January 24, 2000 and January 31, 2000, a total of five separate
shareholder lawsuits were filed against the Company and its individual
directors, each alleging, among other things, breach of fiduciary duties and
unfair dealing in connection with the announced merger transaction by the
Company and the Investment Group. Each action seeks to enjoin the merger and,
alternatively, damages. Three of these cases were filed in the Superior Court of
Fulton County, Georgia and two actions were filed in the County Court at Law of
Dallas County, Texas. Each plaintiff is seeking class action status in
connection with their claims and is requesting to be certified as the class
representative. The Company has not yet filed answers to any of the pending
suits and, in view of the acquisition proposal by Guardian Industries Corp. at
$17.00 per share, has asked for an extension of time to answer. The Company
believes that each cause of action is without merit and intends to vigorously
defend against such actions.

On November 3, 1997, Bradco Supply Corporation ("Bradco") of Avenel, New Jersey
filed suit against the Company in the Superior Court of New Jersey, alleging
various contractual claims arising out of the terms of a letter of intent dated
October 2, 1997 executed by Bradco and the Company pertaining to the acquisition
of Bradco by the Company. Bradco has alleged, among other things, a breach and
unilateral termination of the letter of intent by the Company and seeks to
recover as damages a $3 million "walk-away" fee under the terms of the letter of
intent. In December 1997, the Company removed the Bradco lawsuit to the United
States District Court, New Jersey District. Thereafter, the Company filed a
counterclaim for fraud, among other claims, seeking to recover its out of pocket
transaction expenses. Management believes the Bradco action is without merit and
has maintained a vigorous defense and counterclaim to date. However, an adverse
resolution could result in an after-tax charge to income of up to $2 million. In
September 1998, the Company filed an alternate motion to dismiss or for judgment
on the pleadings, which was denied by the Court in early 1999. Thereafter, each
of the Company and Bradco have filed motions for summary judgment on the merits
of the lawsuit and the counterclaim, respectively. The Court has yet to rule on
the motions for summary judgment. Discovery in the case is substantially
complete. The Court has ruled on certain pretrial motions, but has not yet set a
date for trial, pending its ruling on summary judgment. There is no indication
from the Court when this will occur.

In January 1998, a subsidiary of the Company and three of its employees were
subpoenaed to provide information to a grand jury of the United States District
Court, Northern District of Texas, in connection with an investigation of
possible violations of federal antitrust laws in the aluminum building products
industry, including possible violations of Section 1 of the Sherman Act. No
allegations of wrongdoing have been made against the subsidiary, the employees
or the Company. In February 1998, information was provided in response to the
subpoenas and the grand jury appearance was postponed indefinitely. In November
1998, the Company's three employees were again notified to appear before a
federal grand jury in Ft. Worth, Texas. Such appearance was again postponed
indefinitely. Thereafter, the U.S. Attorney's office agreed to an informal
interview with an officer of the Company in lieu of formal grand jury testimony.
The interview was conducted in June 1999. After the interview, the U.S. Attorney
requested additional information from the subsidiary. There has been no further
activity since the Company provided these materials to the government in August
1999.

From time to time, the Company is also involved in litigation and proceedings in
the ordinary course of its business. Management believes that such ordinary
course of business litigation will not have a material adverse effect on the
Company's financial condition or results of operations.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

RECENT DEVELOPMENTS

Please see Item 1. Business- Recent Developments for information about (i) the
proposed acquisition of the Company's outstanding common stock by an investment
group consisting of CGW Southeast Partners IV, L.P., an affiliate of Citicorp
Venture Capital, LLC. and senior management of the Company, (ii) the acquisition
proposal by Guardian Industries at $17.00 per share and (iii) the Schedule 13D
filing, as amended, by Bradco Supply Corporation and Barry Segal with regard to
their ownership of shares of the Company and intentions with respect to such
ownership. The


                                       11
<PAGE>   12


information contained in this Item 7 including, any "forward-looking statements"
is qualified by reference to the information set forth in Item 1. Business -
Recent Developments; and Forward Looking Statements.

GENERAL

The building products industry is affected by various factors including general
economic conditions, the level of building activity, weather conditions, the
rate of new home construction, interest rates and the availability of credit. A
significant portion of the Company's products are sold for use in the home
improvement, remodeling and repair market, which is relatively less affected by
these factors than the new residential construction market.

The Company has experienced substantial improvement in its results of operations
since its formation in 1991. The Company's revenue has more than doubled from
$504 million in fiscal 1995 to $1,138 million in fiscal 1999. This revenue
growth has been accomplished largely due to 43 acquisitions completed since
October 1992, and increased sales in existing branches. Further, the Company's
income from operations has increased from $19.2 million in 1995 to $39.3 million
in 1999, a compound annual growth rate of 19.6%.

Gross profit as a percentage of revenue increased from 18.9% in fiscal 1995 to
19.9% in fiscal 1999 which resulted primarily from the product and sales mix of
acquired businesses. The businesses acquired by the Company since October 1992
typically either have had product lines consisting of narrow assortments of
commodity products or have had a relatively high proportion of products
distributed through direct shipments from manufacturers. Both of these
characteristics result in lower selling margins and a lower gross profit as a
percentage of revenue. In implementing its operating strategy for acquired
businesses, management focuses on improving gross profit as a percentage of
revenue, which requires the integration of additional higher margin product
lines. This process takes time to implement because of market conditions,
suppliers' territorial restrictions and conversion of customers' buying
requirements and habits. The Company historically has been able to improve the
gross profit margins of acquired businesses and anticipates further improvements
as additional product mix, pricing and sales mix changes are implemented. The
growth of the Company through its acquisition strategy since 1991 has reduced
the contribution of its Ashley subsidiary as a percentage of the total
operation. Ashley is a specialty products distributor and operates with
significantly higher gross profit margins.

The net effect of these various factors has been a significant increase in the
Company's income from operations from $19.2 million in fiscal 1995 to $39.3
million in fiscal 1999. However, the increased gross profit margin discussed
previously was offset by an increase in operating expenses, which resulted in a
decrease in income from operations as a percentage of revenue from 3.9% in
fiscal 1995 to 3.5% in 1999. The operating margin decrease is primarily the
result of operating expenses associated with the software/systems development
and business process re-engineering project in the Cameron division which was
$2.6 million in fiscal 1999. While unable to accurately calculate the impact,
management believes the Company's operating expense levels were also adversely
affected by the disruption to operations by the business process re-engineering
project. Implementation of the new system requires significant changes in the
day-to-day handling of normal transactions and results in inefficiencies and
increased costs in the months following initial implementation. Management
expects that operating costs as a percent of sales will improve as branch
personnel become more experienced in operating the new system.

Management had previously budgeted $23 million for the new information system
and related re-engineering effort in its Cameron division and expects the
project to be completed near that cost estimate during 2000. The project will
require approximately $5.3 million in cost that will be expensed, with the
balance being capitalized. Total project pre-tax expenses were $1.5 million and
$2.6 million in fiscal years 1998 and 1999, respectively. Management expects
$1.1 million of project expenses in fiscal 2000. Management expects the new
information system, after its implementation, to begin to produce productivity
savings beginning in the third quarter of fiscal 2000 and provide the necessary
technology infrastructure to allow the Company to continue its growth strategy.


                                       12
<PAGE>   13


The following table sets forth information regarding certain components of
revenue for the periods presented in "Selected Financial Data."

<TABLE>
<CAPTION>
                                                    FISCAL PERIODS ENDED OCTOBER 31
                                            1999      1998      1997        1996      1995
                                           ------    ------    ------      ------    ------
<S>                                        <C>       <C>       <C>         <C>       <C>
Revenue ................................    100.0%    100.0%    100.0%      100.0%    100.0%
Cost of sales ..........................     80.1      80.2      80.3        80.3      81.1
                                           ------    ------    ------      ------    ------
Gross profit ...........................     19.9      19.8      19.7        19.7      18.9
Operating expenses .....................     16.2      16.0      16.5        15.8      15.0
Re-engineering & system conversion .....      0.2       0.2
                                           ------    ------    ------      ------    ------
Income from operations .................      3.5       3.6       3.2(1)      3.9       3.9
Interest expense .......................      1.0       0.9       0.8         0.7       0.7
                                           ------    ------    ------      ------    ------
Income before income taxes .............      2.5       2.7       2.4         3.2       3.2
Provision for income taxes .............      0.9       1.0       0.9         1.2       1.2
                                           ------    ------    ------      ------    ------
Income before extraordinary charge .....      1.6%      1.7%      1.5%        2.0%      2.0%
                                           ======    ======    ======      ======    ======
</TABLE>

(1) Includes the effect of charges of 0.7% of revenue, as discussed below.

RESULTS OF OPERATIONS

Fiscal 1999 Compared to Fiscal 1998

The comparability of operating results between fiscal year 1999 and fiscal year
1998 is affected by several events which occurred during those periods
(collectively referred to as the "Net Acquisition Activity"). These events
include: 1) the discontinuation of the Company's financing subsidiary, Cameron
Ashley Financial Services ("CAFS") in 1998, 2) the acquisition of seven
businesses during fiscal 1998 at a total cost of $48.8 million, 3) the
acquisition of four businesses during fiscal 1999 at a total price of
approximately $20.0 million, and 4) the increase in ownership of Field
Marketing, Inc., from 33% to 70.17% during 1999.

Revenues increased 26.6% from $899.2 million in 1998, to $1,138.4 million in
1999, an increase of $239.2 million. Of the increase in revenues, $56.1 million
resulted from an 6.4% increase in same store revenues. The remaining increase in
revenues is from the Net Acquisition Activity, specifically the acquisitions
done during 1998, which were only partially reflected in the 1998 numbers, while
revenues for the full period are shown in the 1999 results.

Gross profit increased from $177.9 million in 1998 to $226.8 million in 1999, an
increase of 27.5%. Gross profit as a percentage of net sales increased to 19.9%
in 1999 as compared to 19.8% in 1998, due primarily to changes in overall
product mix.

Operating expense increased from $143.8 million in 1998, to $184.9 million in
1999. Operating expenses include both expenses directly attributable to branch
operations and corporate expenses. The increase is primarily a result of the
increased operations as a result from the Net Acquisition Activity mentioned
above. As a percentage of net sales, operating expenses increased from 16.0% in
1998, to 16.2% in 1999. A portion of the increase is a result of increased
employee costs and increased vehicle and transportation costs. Other operating
expenses incurred for re-engineering and system conversion costs totaled $2.6
million in 1999, compared to $1.5 million a year ago. As a percent of revenue
these expenses remained flat at 0.2% for both 1998 and 1999. The full impact of
the business process re-engineering project on operating expenses cannot be
accurately calculated. However, Management believes operating expenses were
adversely affected and expects operating costs as a percentage of sales to
improve following full implementation of the new system.

Total operating expenses, including those associated with re-engineering and the
system conversion, increased from $145.4 million in 1998, to $187.5 million in
1999. Included in the operating expenses in 1998 is a charge of $2.5 million for
pre-tax costs associated with the termination of issuing customer loans by CAFS.
There were no charges in 1999 related to CAFS.

Income from operations increased 20.7% from $32.5 million to $39.3 million in
1999, due to the reasons previously discussed. The direct re-engineering and
system conversion costs effectively reduced income from operations by 6.2%


                                       13
<PAGE>   14


in 1999 and 4.5% in 1998. Including all activity, the income from operations as
a percentage of revenues dropped slightly from 3.6% in 1998 to 3.5% in 1999.

Interest expense increased from $8.0 million in 1998 to $11.7 million in 1999.
The increase is in conjunction with the increase in long-term debt, which was
the result of the Net Acquisitions Activity mentioned previously. Total
long-term debt, including current maturities, was $137.4 million on October 31,
1998, and $170.1 million on October 31, 1999.

As a result of the above factors, income before income taxes increased 13.2%
from $24.5 million in 1998 to $27.8 million in 1999. Net income increased 11.6%
from $15.3 million in 1998 to $17.1 million in 1999, an increase of $1.8
million. Net income as a percentage of revenue decreased from 1.7% in 1998 to
1.6% in 1999. Diluted EPS increased from $1.61 per share in 1998 to $1.94 per
share in 1999.

The aggregate tax rate net of minority interest increased from 37.6% in fiscal
1998 to 38.7% in fiscal 1999. During 1998, the Company recorded a deferred tax
benefit attributable to prior year acquisitions.

Fiscal 1998 Compared to Fiscal 1997

When comparing 1998 with 1997, the following significant items should be
considered:

o    In fiscal 1998, the Company incurred $1.5 million of operating expenses
     associated with the software/systems development and business process
     re-engineering project in the Cameron division. These expenses were 0.2% of
     revenue for the year and effectively reduced income from operations by 4.5%
     in fiscal 1998.

o    Also in fiscal 1998, the Company terminated its CAFS U.S. operations. CAFS
     reported $2.5 million of pre-tax losses.

o    In the fourth quarter of fiscal 1997, the Company recorded pre-tax charges
     to operations of $5.6 million. These charges consisted primarily of $3.6
     million for the merger of four branches in Oregon and Texas and the closure
     of a small mill operation in Arizona and a $2.0 million writeoff of
     unamortized costs related to the Company's management information system
     and certain costs associated with the evaluation of the new system. These
     charges increased cost of sales by $0.5 million and operating expenses by
     $5.1 million.

Revenue increased 18.1% from $761.6 million in 1997 to $899.2 million in 1998.
This increase was due primarily to the 1998 year containing a full 12 months of
sales from the 38 branches acquired or opened in fiscal 1997, as well as the
incremental sales from the 17 branches acquired or opened in fiscal 1998.
Same-branch sales growth of 2.4%, compared to zero same-branch sales growth in
1997, also contributed to the revenue increase. The 1998 same-branch sales
growth was driven by a 3.6% increase at the Cameron division.

Gross profit as a percentage of revenue increased slightly to 19.8% in 1998
compared to 19.7% in 1997, with an overall increase of $28.1 million or 18.7% in
1998, compared to 1997. The revenue growth is due to acquisitions and internal
growth, while the slight increase in gross profit percentage was due primarily
to product mix.

Total operating expenses increased 15.7% from $125.7 million in 1997 to $145.4
million in 1998. These expenses decreased as a percentage of revenue from 16.5%
to 16.2%. Operating expenses include both expenses directly attributable to
branch operations and corporate expenses and increased primarily as a result of
acquisitions, new branch openings, CAFS, and the systems and business process
re-engineering costs. Higher revenue and gross profit allowed for absorption of
the overall expense increases without a negative impact to earnings. Operating
expenses excluding the significant items summarized above, remained level at
15.7% of revenue in fiscal 1998 compared to 1997. These expenses were 0.4% of
revenue for the year and effectively reduced income from operations 10.5% in
fiscal 1998.

Income from operations increased 34.7% from $24.2 million in 1997 to $32.5
million in 1998 and increased as a percentage of revenue from 3.2% to 3.6% for
the reasons indicated above.

Interest expense increased $2.3 million in 1998 compared to 1997 as a result of
higher borrowings required for 1998 acquisitions, working capital requirements,
and a corporate share repurchase program.


                                       14
<PAGE>   15


As a result of the above factors, income before taxes increased 33.2% from $18.4
million in 1997 to $24.5 million in 1998. Net income increased 35.1% from $11.3
million in 1997 to $15.3 million in 1998, and net income as a percentage of
revenue increased 0.2% from 1.5% in 1997 to 1.7% in 1998. Diluted earnings per
share increased from $1.20 per share in the 1997 period to $1.61 per share in
the 1998 period, a 34.2% increase.

The aggregate tax rate decreased from 38.5% in fiscal 1997 to 37.6% in fiscal
1998. During 1998, the Company recorded a deferred tax benefit attributable to
prior year acquisitions.

EFFECTS OF INFLATION

Management does not believe that inflation has had a material impact on results
of operations for the periods presented. Substantial increases in costs,
however, could have an impact on the Company and the industry. Management
believes that, to the extent inflation affects its costs in the future, the
Company can generally offset inflation by increasing prices if competitive
conditions permit.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary needs for capital resources have been to
finance acquisitions, working capital and capital expenditures. Borrowings for
working capital typically increase during periods of sales expansion when higher
levels of inventory and receivables are needed and decrease as inventories and
receivables are converted to cash and are subsequently used to pay down debt.
During the fourth quarter of fiscal 1997, the Company initiated a business
process re-engineering project that includes the implementation of a new
computer system and is estimated to cost approximately $23 million. Management
expects this system to be fully implemented during second calendar quarter 2000
and has incurred $21 million through October 31, 1999, on this project. The
Company had $155.2 million of long-term debt, less current maturities,
outstanding as of October 31, 1999.

Under the terms of the Senior Notes and the Revolver, the Company is subject to
various restrictive covenants regarding, among other things, payment of any
dividends, capital expenditures limitations, incurrence of indebtedness from
others in excess of certain amounts and consummation of any merger or
acquisitions of an entity that is not engaged in the building materials
distribution business without the consent of the lenders. Financial covenants
include, but are not limited to, maintaining current ratios, minimum net worth
ratios, fixed charges ratios and debt to cash flow ratios. The Company was in
compliance with the restrictive covenants contained in its various credit
agreements at October 31, 1999. It is anticipated that the Senior Notes and the
Revolver will be refinanced pursuant to commitments obtained by the investment
group which as agreed to acquire the Company's outstanding common stock in the
pending sale transaction. Otherwise, the consent of the various lenders under
the Company's current credit agreements would be required to complete the
pending transaction.

Net cash generated from operating activities was $14.4 million and $19.3 million
for the year ended October 31, 1999 and 1998, respectively. In 1998, $4.3
million increase in operating cash flow was due to the termination of CAFS and
the sale of its loan properties. Capital expenditures were $19.4 million and
$10.1 million for the year ended October 31, 1999 and 1998, respectively. Four
acquisitions were made in fiscal 1999 for $20.0 million, and seven acquisitions
were made in fiscal 1998 for $48.8 million.

Except as affected by the pending sale transaction, the Company believes that
its current cash position, funds from operations and the availability of funds
under its credit agreements will be sufficient to meet anticipated liquidity
requirements for the next twelve months.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued certain new pronouncements
during 1999 that have various disclosure or reporting requirements. See Note 2
to the Consolidated Financial Statements of the Company for a discussion of the
new standards.

SEASONALITY AND QUARTERLY FINANCIAL INFORMATION

The business of the Company is, to a significant degree, seasonal. Because a
substantial portion of the building products distributed by the Company are
intended for exterior use, sales by the Company tend to be lower during periods


                                       15
<PAGE>   16


of inclement weather; this is particularly true with respect to the Company's
Canadian and Northern United States operations. Accordingly, weather conditions
occurring during the first and second quarters (November-April) of the Company's
fiscal year usually result in the generation of lower sales revenues during
those time periods than in other periods of the Company's fiscal year. The
Company anticipates that these seasonal fluctuations will continue in the
future.

The following table sets forth selected quarterly financial information. This
information is derived from unaudited financial statements of the Company and
includes, in the opinion of management, only normal and recurring adjustments
that management considers necessary for a fair statement of the results for such
periods. The operating results for any quarter are not necessarily indicative of
results for any future period. Quarterly results have been adjusted to reflect
change in method of accounting for the Company's investment in Field Marketing,
Inc., which increased to a 70% ownership during 1999, (see Note 3 to the
consolidated financial statements of the Company). This adjustment had no effect
on net income or diluted earnings per share.

<TABLE>
<CAPTION>
                                                       FISCAL 1999
                                            1ST            2ND           3RD          4TH
                                          QUARTER        QUARTER       QUARTER      QUARTER
                                         ---------     -----------    ---------    ---------
                                       (IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE AMOUNTS)

<S>                                      <C>           <C>            <C>          <C>
Revenue ..............................   $ 223,417     $   270,103    $ 320,992    $ 323,865
Gross profit .........................      44,740          54,097       63,296       64,656
Operating expenses ...................      42,167          45,607       48,836       50,918
Income from operations ...............       2,573           8,490       14,460       13,738
Net income ...........................         (43)          3,477        6,662        6,970
Net income per share - diluted .......        0.00            0.40         0.76         0.78

Gross profit as a percentage
  of revenue .........................        20.0%           20.0%        19.7%        19.9%
Operating expenses as a percentage
  of revenue .........................        18.9%           16.9%        15.2%        15.7%
Income from operations as a percentage
  of revenue .........................         1.1%            3.1%         4.5%         4.2%
</TABLE>

<TABLE>
<CAPTION>
                                                       FISCAL 1998
                                            1ST            2ND           3RD          4TH
                                          QUARTER        QUARTER       QUARTER      QUARTER
                                         ---------     -----------    ---------    ---------
                                       (IN THOUSANDS, EXCEPT PERCENTAGE AND PER SHARE AMOUNTS)

<S>                                      <C>           <C>            <C>          <C>
Revenue ..............................   $ 167,090     $   196,896    $ 249,322    $ 285,909
Gross profit .........................      33,918          39,547       48,790       55,662
Operating expenses ...................      31,324          33,140       37,609       43,307
Income from operations ...............       2,594           6,407       11,181       12,355
Net income ...........................         640           2,748        5,365        6,541
Net income per share - diluted .......        0.07            0.29         0.56         0.72

Gross profit as a percentage
  of revenue .........................        20.3%           20.1%        19.6%        19.5%
Operating expenses as a percentage
  of revenue .........................        18.7%           16.9%        15.1%        15.1%
Income from operations as a percentage
  of revenue .........................         1.6%            3.3%         4.5%         4.3%
</TABLE>

YEAR 2000 COMPLIANCE

The Company utilizes a significant number of computer software programs and
information systems in its internal operations, including applications used in
financial business systems and various administration functions ("IT systems").
The Company also makes use of a variety of machinery and equipment in its
business which are operated


                                       16
<PAGE>   17


by or reliant upon non-information technology systems ("non-IT systems"), for
example equipment or mechanical systems which contain embedded technology such
as microcontrollers. To the extent that the source code of the software
applications of these IT systems or the embedded technologies of these non-IT
systems are unable to appropriately interpret and process the calendar year 2000
("Year 2000"), some level of modification or possible replacement of such
applications could be necessary for proper continuous performance. This
potential problem is commonly referred to as the Year 2000 compliance issue.

During 1998 and 1999 the management of the Company completed evaluation of the
status of the Company's internal IT and non-IT systems for compliance with the
Year 2000 issue. The Company has experienced no material adverse effects from
Year 2000 issues to date. All computer systems, telephone, facsimile systems,
and security systems are functioning normally. Management does not anticipate
any significant Year 2000 issues to occur.

Major IT Systems. The Company initiated a major re-engineering project in late
1997, centered around a new information system for the Cameron division. The new
system is operational and is being implemented on a gradual rollout basis in all
of the Company's branch locations. The implementation is scheduled to be
completed by second calendar quarter 2000.

Costs to Address Year 2000 Issues. It is important to note that, although Year
2000 compliance was a necessary byproduct of the Cameron division system
re-engineering project, it is only one portion of the benefit to be derived by
the Company from the new system conversion. While cost of the project
constitutes the vast majority of the Company's IT budget for the relevant
periods, such cost is not confined solely to the Year 2000 issue and is not
displacing other critical IT projects. It is not possible to segregate the total
expense to the Company strictly for Year 2000 compliance from the total system
conversion project budget.

As of October 31, 1999, the costs of the new information system and related
re-engineering project in the Cameron division were approximately $21.0 million.
The Company currently expects that the final project cost to be approximately
$23 million. The Company's results of operations reflect the amount of
re-engineering and system conversion costs that have been expensed and not
capitalized. The Company's source of funds for the system re-engineering project
is cash generated by operations and borrowings under existing bank facilities.

The costs of Year 2000 compliance verification and testing in the Company, and
the costs for making other IT systems and non-IT systems Year 2000 compliant,
have not been material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS OF REGISTRANT:

CAMERON ASHLEY BUILDING PRODUCTS, INC.

<TABLE>
<S>                                                                                  <C>
Independent Auditors' Report....................................................
Consolidated Balance Sheets, October 31, 1999 and 1998..........................
Consolidated Statements of Income and Comprehensive Income
for the Years Ended October 31, 1999, 1998 and 1997.............................
Consolidated Statements of Stockholders' Equity for the Years Ended October 31,
1999, 1998 and 1997.............................................................
Consolidated Statements of Cash Flows for the Years Ended October 31, 1999, 1998
and 1997........................................................................
Notes to Consolidated Financial Statements......................................
Independent Auditors' Report on Financial Statement Schedule....................
Supplemental Consolidating Information:
    Schedule II - Valuation and Qualifying Accounts.............................
    Index to Exhibits...........................................................
</TABLE>

                                       17
<PAGE>   18


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Cameron Ashley Building Products,
Inc.:

We have audited the accompanying consolidated balance sheets of Cameron Ashley
Building Products, Inc. and subsidiaries (the "Company") as of October 31, 1999
and 1998 and the related consolidated statements of income and comprehensive
income, stockholders' equity and of cash flows for each of the three years in
the period ended October 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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, based on our audits, such consolidated financial statements
present fairly, in all material respects, the financial position of Cameron
Ashley Building Products, Inc. and subsidiaries at October 31, 1999 and 1998 and
the results of their operations and their cash flows for each of the three years
in the period ended October 31, 1999 in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE LLP
Dallas, Texas
December 22, 1999, (January 24, 2000, as to Note 16)


                                       18
<PAGE>   19


                     CAMERON ASHLEY BUILDING PRODUCTS, INC.
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                              OCTOBER 31,
                                                                          -------------------
                                                                            1999       1998
                                                                          --------   --------
                                                                             (IN THOUSANDS,
                                                                          EXCEPT SHARE AMOUNTS)
<S>                                                                       <C>        <C>
                                  ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ...........................................   $      3   $  3,706
  Accounts receivable, less allowances of $4,623 in 1999 and $3,214 in
      1998 ............................................................    183,453    148,392
  Inventories .........................................................    112,896     99,810
  Prepaid expenses and other assets ...................................      2,314      1,999
  Deferred income taxes ...............................................      5,064      3,703
                                                                          --------   --------
Total current assets ..................................................    303,730    257,610

PROPERTY, PLANT AND EQUIPMENT, NET ....................................     63,040     50,454

INTANGIBLE ASSETS, NET ................................................     67,244     48,865

OTHER ASSETS ..........................................................      1,582      4,804
                                                                          --------   --------
TOTAL .................................................................   $435,596   $361,733
                                                                          ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable ....................................................   $ 97,828   $ 80,950
  Accrued expenses ....................................................     27,694     24,052
  Line of credit ......................................................      4,896
  Current maturities of debt ..........................................     10,014      2,346
                                                                          --------   --------
Total current liabilities .............................................    140,432    107,348

LONG-TERM DEBT, LESS CURRENT MATURITIES ...............................    155,224    135,051
MINORITY INTEREST .....................................................        476
DEFERRED INCOME TAXES .................................................      6,442      4,369
                                                                          --------   --------
  Total liabilities ...................................................    302,574    246,768
                                                                          --------   --------

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:

  Preferred stock; authorized 100,000 shares; no shares issued and
  outstanding Common stock, no par value; authorized 20,000,000 shares;
  9,882,000 and 9,834,000 shares issued in 1999 and 1998,
  respectively ........................................................     64,700     64,329
  Treasury stock 1,190,000 shares, at cost, ...........................    (13,633)   (13,633)
  Accumulated comprehensive income ....................................       (867)    (1,487)
  Retained earnings ...................................................     82,822     65,756
                                                                          --------   --------
      Total stockholders' equity ......................................    133,022    114,965
                                                                          --------   --------
      TOTAL ...........................................................   $435,596   $361,733
                                                                          ========   ========
</TABLE>


                 See notes to consolidated financial statements


                                       19
<PAGE>   20


                     CAMERON ASHLEY BUILDING PRODUCTS, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


<TABLE>
<CAPTION>
                                                                                   YEAR ENDED OCTOBER 31,
                                                                         -----------------------------------------
                                                                             1999          1998            1997
                                                                         -----------    -----------    -----------
                                                                          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                                      <C>            <C>            <C>
REVENUE .........................................................        $ 1,138,377    $   899,217    $   761,590
COST OF SALES ...................................................            911,588        721,300        611,753
                                                                         -----------    -----------    -----------
  GROSS PROFIT ..................................................            226,789        177,917        149,837
OPERATING EXPENSES ..............................................            184,950        143,835        125,684
RE-ENGINEERING & SYSTEM CONVERSION ..............................              2,578          1,545              0
                                                                         -----------    -----------    -----------
INCOME FROM OPERATIONS ..........................................             39,261         32,537         24,153
INTEREST EXPENSE ................................................             11,664          8,019          5,750
MINORITY INTEREST ...............................................               (159)             0              0
                                                                         -----------    -----------    -----------
INCOME BEFORE INCOME TAXES ......................................             27,756         24,518         18,403
PROVISION FOR INCOME TAXES ......................................             10,690          9,224          7,084
                                                                         -----------    -----------    -----------
NET INCOME ......................................................             17,066         15,294         11,319
                                                                         -----------    -----------    -----------
OTHER COMPREHENSIVE INCOME:
      FOREIGN CURRENCY TRANSLATION ADJUSTMENTS,
         net of income tax expense (benefits) of $388, ($784)
           and ($116) ...........................................                620         (1,301)          (186)
                                                                         -----------    -----------    -----------
COMPREHENSIVE INCOME ............................................        $    17,686    $    13,993    $    11,133
                                                                         ===========    ===========    ===========

NET INCOME PER SHARE:
      BASIC .....................................................        $      1.97    $      1.65    $      1.23
                                                                         ===========    ===========    ===========
      DILUTED ...................................................        $      1.94    $      1.61    $      1.20
                                                                         ===========    ===========    ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
      BASIC .....................................................              8,661          9,250          9,195
                                                                         ===========    ===========    ===========
      DILUTED ...................................................              8,816          9,501          9,447
                                                                         ===========    ===========    ===========
</TABLE>


                 See notes to consolidated financial statements.


                                       20
<PAGE>   21


                     CAMERON ASHLEY BUILDING PRODUCTS, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                                           COMMON STOCK
                                                      --------------------                            ACCUMULATED
                                                                              RETAINED   TREASURY    COMPREHENSIVE
                                                       SHARES       VALUE     EARNINGS    STOCK      INCOME (LOSS)      TOTAL
                                                      --------    --------    --------   --------    -------------    --------
                                                                                 (IN THOUSANDS)


<S>                                                   <C>         <C>         <C>        <C>         <C>              <C>
   BALANCE AS OF NOVEMBER 1, 1996 ...............        9,477    $ 60,641    $ 39,143   $ (4,175)   $           0    $ 95,609

   Proceeds from exercise of stock options
         including tax benefits of $1,059 .......          255       2,198                                               2,198
   Proceeds from employee stock
         purchase plan ..........................           13         108                                                 108
   Purchase of treasury stock (8,547 shares) ....                                            (121)                        (121)
   Net income ...................................                               11,319                                  11,319
   Comprehensive income .........................                                                             (186)       (186)
                                                      --------    --------    --------   --------    -------------    --------

   BALANCE AS OF NOVEMBER 1, 1997 ...............        9,745      62,947      50,462     (4,296)            (186)    108,927

   Proceeds from exercise of stock options
         including tax benefits of $208 .........           71         913                                                 913
   Proceeds from employee stock
         purchase plan ..........................           18         239                                                 239
   Purchase of treasure stock (749,000) .........                                          (9,337)                      (9,337)
   Issuance of stock warrants
         to acquire business ....................                      230                                                 230
   Net income ...................................                               15,294                                  15,294
   Comprehensive income .........................                                                           (1,301)     (1,301)
                                                      --------    --------    --------   --------    -------------    --------

   BALANCE AS OF NOVEMBER 1, 1998 ...............        9,834      64,329      65,756    (13,633)          (1,487)    114,965

   Proceeds from exercise of stock options
         including tax benefits of $28 ..........           10          54                                      54
   Proceeds from employee stock
         purchase plan ..........................           38         317                                                 317
   Net income ...................................                               17,066                                  17,066
   Comprehensive income .........................                                                              620         620
                                                      --------    --------    --------   --------    -------------    --------

   BALANCE AS OF OCTOBER 31, 1999 ...............        9,882    $ 64,700    $ 82,822   $(13,633)   $        (867)   $133,022
                                                      ========    ========    ========   ========    =============    ========
</TABLE>


                 See notes to consolidated financial statements.


                                       21
<PAGE>   22


                     CAMERON ASHLEY BUILDING PRODUCTS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     YEAR ENDED OCTOBER 31,
                                                                --------------------------------
                                                                  1999        1998        1997
                                                                --------    --------    --------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>
OPERATING ACTIVITIES:
  Net income ................................................   $ 17,066    $ 15,294    $ 11,319
  Adjustments to reconcile net income to cash provided by
      operating activities:
      Depreciation and amortization .........................     12,511      10,071       9,287
      Loss on sale of property and equipment ................         18          12           2
      Deferred income taxes .................................        669       1,998      (1,522)
      Changes in assets and liabilities, net of acquisitions:
             Accounts receivable ............................    (20,170)    (11,031)     (3,689)
             Notes receivable held for sale .................          0      16,462     (16,462)
             Inventories ....................................     (4,831)        995        (642)
             Prepaid expenses and other assets ..............         84         775         957
             Accounts payable and accrued expenses ..........     11,455      (2,426)      5,403
             Warehouse line of credit .......................          0     (12,189)     12,189
             Other current liabilities ......................     (2,445)       (706)       (157)
                                                                --------    --------    --------
             Net cash provided by operating activities ......     14,357      19,255      16,685
                                                                --------    --------    --------

INVESTING ACTIVITIES:
  Cash paid for acquisitions ................................    (18,511)    (47,381)    (33,034)
  Purchases of property, plant and equipment ................    (19,426)    (10,110)    (11,236)
  Investment in affiliate ...................................     (3,874)       (442)     (2,640)
  Other .....................................................         24          29         (16)
                                                                --------    --------    --------
         Net cash used in investing activities ..............    (41,787)    (57,904)    (46,926)
                                                                --------    --------    --------

FINANCING ACTIVITIES:
  Net borrowings ............................................     23,581      50,920      24,797
  Repayments of seller financing of acquired businesses .....     (1,640)     (1,279)       (566)
  Proceeds from employee stock purchase plan ................        317         239         108
  Exercise of stock options .................................         54         913       2,198
  Purchase of treasury stock ................................          0      (9,337)       (121)
  Other .....................................................      1,415           0        (354)
                                                                --------    --------    --------
         Net cash provided by financing activities ..........     23,727      41,456      26,062
                                                                --------    --------    --------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS ...............................................     (3,703)      2,807      (4,179)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR .........................................      3,706         899       5,078
                                                                --------    --------    --------

CASH AND CASH EQUIVALENTS, END OF YEAR ......................   $      3    $  3,706    $    899
                                                                ========    ========    ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
      Cash paid for interest ................................   $ 11,885    $  7,736    $  5,913
                                                                ========    ========    ========
      Cash paid for income taxes ............................   $ 13,517    $  6,230    $  7,046
                                                                ========    ========    ========
      Debt of acquired business .............................   $  1,490    $  1,435    $  8,877
                                                                ========    ========    ========
      Stock warrants issued to acquire businesses ...........   $      0    $    230    $      0
                                                                ========    ========    ========
</TABLE>


                 See notes to consolidated financial statements.


                                       22
<PAGE>   23


CAMERON ASHLEY BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE)

1. ORGANIZATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Cameron Ashley Building Products, Inc., and its majority owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.

The Company distributes building products to independent dealers (lumberyards
and hardware stores), professional builders, contractors and mass merchandisers
throughout the United States and in Mexico and Canada. Products distributed by
the Company are used primarily in new residential construction and home
improvement, remodeling and repair work, as well as in commercial and industrial
applications.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS. All highly liquid debt instruments with a maturity of three
months or less when purchased are classified as cash equivalents.

INVENTORIES. Inventories are stated at the lower of last-in, first-out ("LIFO")
cost or market. Included in inventory cost are costs directly associated with
the fabrication of the Company's products. Substantially all of the Company's
inventory is finished goods.

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is recorded at
cost. Costs associated with major additions are capitalized and depreciated.
Upon disposal, the cost of properties and related accumulated depreciation are
removed from the accounts, with gains and losses reflected in earnings. Assets
are generally depreciated on the straight-line method over the estimated
service lives of the related assets, which range from 1 to 25 years. Leasehold
improvements are depreciated over the shorter of their estimated useful lives or
the term of the related lease. Management routinely evaluates its recorded
investments for impairment in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
to the Disposed Of," based on projected undiscounted cash flows and other
methods when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Management believes the investments
to be recoverable.

RE-ENGINEERING AND SYSTEM CONVERSION COSTS. All costs incurred in connection
with re-engineering, training, and business process improvement activities are
expensed as incurred including all related internal and third party costs.
System conversion costs and the costs of new hardware and software are accounted
for in accordance with the Financial Accounting Standards Board's Emerging Issue
Task Force Issue No. 97-13 and the American Institute of Certified Public
Accountants' Statement of Position 98-1.

INTANGIBLE ASSETS. Intangible assets consist primarily of noncompete agreements,
which are recorded at cost and are amortized over periods of three to five
years, the contractual term of the agreements, and goodwill, which is primarily
amortized over 25 years. Goodwill relates primarily to market entry and the
earnings potential of acquired branches. If branches were closed, sold, or had
sustained poor performance, goodwill related to such market would be evaluated
for impairment based upon undiscounted cash flows from the specific geographic
area. During fiscal 1999, there was no change in estimated useful life or
recoverability of any intangible assets.

FOREIGN CURRENCY TRANSLATION ADJUSTMENT. Included in other comprehensive income
is the unrealized adjustments resulting from translating the financial
statements of the Company's foreign subsidiary. The functional currency of the
Company's foreign subsidiary is the local currency of the country. Accordingly,
assets and liabilities of the foreign subsidiary are translated to U.S. dollars
at year-end exchange rates. Income and expense items are translated at the
average rates prevailing during the year.

REVENUE RECOGNITION. Sales are recorded at the time merchandise is delivered and
are reported net of estimated payment discounts and returns and allowances.


                                       23
<PAGE>   24


INCOME TAXES. Income taxes are provided for using the asset and liability method
under which deferred income taxes are recognized for the tax consequences of
temporary differences between the financial statement carrying amounts and the
tax basis of existing assets and liabilities by applying enacted statutory tax
rates. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. The Company periodically
evaluates the collectibility of deferred tax assets and provides a valuation
allowance for the portion of such assets not considered realizable.

CONCENTRATION OF CREDIT RISK. The Company is engaged in the distribution of
building products throughout the United States. The Company grants credit to
customers, substantially all of whom are dependent upon the construction
economic sector. The Company continuously evaluates its customers' financial
condition but does not generally require collateral. The concentration of credit
risk with respect to trade accounts receivable is limited due to the Company's
large customer base located throughout the United States. The Company maintains
an allowance for doubtful accounts based upon the expected collectibility of its
accounts receivable.

USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimated.

INCOME PER SHARE. The computation of basic and diluted income per share is
computed by dividing net income by the weighted average shares outstanding
during the period (see Note 10). Common stock equivalents are included in the
computation if they are dilutive.

DERIVATIVE FINANCIAL INSTRUMENTS. Derivative financial instruments are utilized
by the Company to reduce foreign currency exchange rate risks. Derivative
financial instruments include foreign currency swaps. The Company does not hold
or issue derivative financial instruments for speculative or trading purposes.
Gains and losses resulting from the termination of derivative financial
instruments are recognized over the shorter of the remaining original contract
lives of the derivative financial instruments or the lives of the related hedged
positions or, if the hedged positions are terminated, are recognized in the
current period as gain or loss.

NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, the FASB issued SFAS No. 130
"Reporting Comprehensive Income" which establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
The adoption of SFAS No. 130 did not have a significant impact on the Company's
financial position or results of operations.

The FASB also issued in June 1997, SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" which establishes standards for the way
public companies disclose information about operating segments, products and
services, geographic areas and major customers. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. Prior
periods have been restated to reflect the adoption of SFAS No. 131, which has no
impact on the Company's financial position or results of operations. (See Note
14)

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes standards for accounting
and reporting for derivative instruments. It requires entities to record all
derivative instruments on the balance sheet at fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The portion of all hedges
not effective in achieving offsetting changes in fair value is recognized in
earnings. In June 1999, the FASB issued SFAS No. 137 which defers the
implemenation date of SFAS No. 133 to be effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. Management has not completed an
evaluation of the impact of the provisions of this statement on the Company's
financial statements.

RECLASSIFICATIONS. Certain prior year amounts have been reclassified to conform
to current-year presentation.


                                       24
<PAGE>   25


3. ACQUISITIONS

Over the past three years, the Company has acquired certain net assets and
operations of various building materials distributors. All of these transactions
were accounted for as purchases; therefore, results of operations of the Company
include the operations of the businesses subsequent to their acquisitions.

During fiscal 1997, eight businesses were acquired at a total cost of $41.9
million. During fiscal 1998, seven businesses were acquired at a total cost of
$48.8 million, including the purchase of certain assets and liabilities of APi
Supply Company ("APi") as of June 15, 1998, for $35.3 million cash and $.8
million in debt assumed. Additionally, the company issued warrants to purchase
200,000 shares of the Company's common stock at $20.00 per share as
consideration for a noncompete agreement with APi's previous owner. These
warrants are fully vested on the first anniversary and expire on the fifth
anniversary of the acquisition date. During fiscal 1999, four businesses were
acquired at a total cost of $20.0 million. Pro forma revenue as if the 1999
acquisitions had occurred at the beginning of the year would have been $1,155.6
million and $1,004.7 million for 1999 and 1998, respectively. Pro forma results
of operations and income per share for these acquisitions are not presented due
to the immaterial effect on historical results.

On October 31, 1997, the Company acquired a one-third interest in Field
Marketing, Inc., ("FMI") for $2.6 million. During 1999, the Company increased
its interest in FMI to approximately 70% through additional stock purchases
totaling $3.5 million. The seller may put the remaining stock and the Company
may call such stock under certain conditions at prices based upon future
performance. FMI provides certain marketing services to the Company. FMI was
paid $225,000 in 1999 and $9,000 in 1998 for marketing services. Concurrent with
attaining majority ownership, the Company changed from the equity method of
accounting to consolidation. Pro forma revenue as if the change in interest had
occurred at the beginning of the year would increase by $7.8 million.

4. INVENTORIES

The Company values its inventories using the LIFO method. Had the Company used
the first-in, first-out ("FIFO") method, inventories would have been
approximately $2,315,000 and $1,936,000 higher at October 31, 1999 and 1998,
respectively. Under FIFO, income from operations for the year ended October 31,
1999 would have been higher by approximately $369,000, for the year ended
October 31, 1998 would have been lower by approximately $691,000, and for the
year ended October 31, 1997 would have been higher by approximately $400,000.

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at October 31:

<TABLE>
<CAPTION>
                                      USEFUL LIVES (YEARS)     1999        1998
                                      --------------------   --------    --------

<S>                                   <C>                    <C>         <C>
Land ..............................          --              $  3,730    $  3,723
Buildings and improvements ........          25                22,721      22,597
Machinery and equipment ...........        3 to 10             14,181      13,205
Furniture and fixtures ............         3 to 7             31,613      19,852
Transportation equipment ..........         5 to 7             22,578      19,029
Other .............................            1                  517         347
                                                             --------    --------
                                                               95,520      78,753
Accumulated depreciation ...............................      (32,480)    (28,299)
                                                             --------    --------
Property, plant and equipment, net .....................     $ 63,040    $ 50,454
                                                             ========    ========
</TABLE>

Included in property and equipment at October 31, 1999 and 1998, is $9,959,000
and $7,798,000, respectively, of equipment under capital leases.


                                       25
<PAGE>   26


6. INTANGIBLE ASSETS

Intangible assets consist of the following at October 31:

<TABLE>
<CAPTION>
                                   1999        1998
                                 --------    --------

<S>                              <C>         <C>
Noncompete agreements ........   $  3,423    $  3,424
Goodwill .....................     73,808      52,728
Other ........................      1,606       1,397
                                 --------    --------
                                   78,837      57,549
Accumulated amortization .....    (11,593)     (8,684)
                                 --------    --------
     Intangible assets, net ..   $ 67,244    $ 48,865
                                 ========    ========
</TABLE>

7. DEBT

Debt consists of the following at October 31:

<TABLE>
<CAPTION>
                                                                                               1999          1998
                                                                                             ---------    ---------
<S>                                                                                          <C>          <C>
Senior Debt:
    Unsecured Senior Notes with maturities and interest rates as follows:
          $10,000 due April 15, 2001 bearing interest at 6.79%
          $15,000 due April 15, 2002 bearing interest at 6.79%
              with scheduled payments of $5 million on April 15, 2000
              and April 15, 2001
          $10,000 due April 15, 2003 bearing interest at 7.21%
          $15,000 due April 15, 2006 bearing interest at 7.61%
           $3,000 due April 7, 2004 bearing  interest at 6.71%
          $63,000 due April 7, 2010 bearing interest at 6.90%
              with payments of $12.6 million beginning April 7, 2006
          $10,000 (Canadian $) due October 7, 2004 bearing interest at 6.45%
          $7,000 due October 7, 2004 bearing interest at 6.71%
    Interest is due semi-annually, with an average interest rate of 6.93% ................   $ 129,797    $ 129,050

    Bank of America (as lead agent):
       Revolving credit note due January 15, 2002; unsecured;
          interest is due quarterly at the LIBOR rate or Banker's
          acceptance rate plus 0.50% to 2.0%, or at a base rate
          (defined in the agreement as prime).  At October 31,
          1999 and 1998, the interest rate was 7.32% and 8.00% respectively ..............      26,192        2,500
    Revolving credit note due April 30, 2000, secured, interest paid monthly at prime plus
    0.5% at October 31, 1999, and the interest rate was 8.75% ............................   $   4,896            0
    Seller financing of acquired business:
    Various terms, interest rates ranging from 6% to 9% ..................................       2,315          369


    Other, including capital leases (see Note 9) .........................................       6,934        5,478
                                                                                             ---------    ---------
                                                                                               170,134      137,397

    Less current maturities ..............................................................     (14,910)      (2,346)
                                                                                             ---------    ---------
    Long-term debt .......................................................................   $ 155,224    $ 135,051
                                                                                             =========    =========
</TABLE>

In February 1998, the Company's Canadian subsidiary entered into a cross
currency swap on $7.0 million of its U.S. dollar denominated unsecured senior
notes to reduce its exposure to foreign currency exchange rate fluctuations. The
Company initially paid $7.0 million in exchange for Canadian $10.1 million which
amounts will be repaid at the termination date of September 16, 2004. The
Company will pay at a fixed rate of 6.45% and receive a fixed rate of 6.71%. The
swap agreement did not have a material effect on the Company's operations during
1999.

The seller notes payable are subordinated to the obligations under the Bank of
America agreement.

In March 1999, the Company amended the credit facility with Bank of America and
other banks (collectively referred to as "Bank of America"). The financing
agreement with Bank of America covers a revolving line of credit up to $80
million U.S. dollars and $25 million Canadian dollars. The financing agreement
restricts distributions to stockholders to 50% of


                                       26
<PAGE>   27


net income, issuance of stock by the Company's subsidiaries, the assumption of
debt and liens by the Company's subsidiaries, and requires compliance with
certain financial ratios and covenants. The obligations of the Company to Bank
of America are unsecured. The Bank of America revolving credit note also
requires the Company to pay a quarterly commitment fee on the unused balance
ranging from 0.2% to 0.5% on the difference between the revolving commitment and
revolving advances outstanding. At October 31, 1999 and 1998, the Company had
letters of credit of $1.3 million and $2.3 million issued under this credit
facility.

Aggregate maturities of long-term debt during the fiscal years subsequent to
October 31, 1999 are as follows:

<TABLE>
<CAPTION>
<S>                    <C>
2000 ...............   $ 14,910
2001 ...............     18,738
2002 ...............     31,689
2003 ...............     10,000
2004 ...............     16,797
   Thereafter ......     78,000
                       --------
       Total .......   $170,134
</TABLE>

8. INCOME TAXES

The provision for income taxes computed by applying the federal statutory tax
rate to income before income taxes and minority interest differs from the actual
provision for income taxes as set forth below for the years ended October 31:

<TABLE>
<CAPTION>
                                          1999                 1998                  1997
                                         -------              -------              -------
                                         AMOUNT    PERCENT    AMOUNT    PERCENT    AMOUNT    PERCENT
                                         -------   -------    -------   -------    -------   -------

<S>                                      <C>       <C>        <C>       <C>        <C>       <C>
Income taxes at statutory
              rates...................   $ 9,660      35.0%   $ 8,580      35.0%   $ 6,441      35.0%
State taxes based on income net of
              federal income tax
              benefit.................       801       2.9%       225       0.9%       424       2.3%
Other ................................       229       0.8%       419       1.7%       219       1.2%
                                         -------   -------    -------   -------    -------   -------


          Total income tax expense ...   $10,690      38.7%   $ 9,224      37.6%   $ 7,084      38.5%
                                         =======   =======    =======   =======    =======   =======
</TABLE>


The provision for income taxes consists of the following:

<TABLE>
<S>                                   <C>         <C>        <C>
Current year income taxes:
     United States ................   $  9,523    $  6,717   $  8,459
     Foreign ......................        455         576        147
Deferred income taxes:
     United States ................        894       1,635     (2,144)
     Foreign ......................       (182)        296        622
                                      --------    --------   --------

Total income tax expense ..........   $ 10,690    $  9,224   $  7,084
                                      ========    ========   ========
</TABLE>

The components of the deferred tax assets (liabilities) consist of the following
at October 31:

<TABLE>
<CAPTION>
                                       1999        1998
                                      -------    -------
<S>                                   <C>        <C>
Allowance for doubtful accounts ...   $ 2,050    $ 1,436
Inventory .........................        46       (154)
Accrued liabilities ...............     2,639      2,330
Sales returns and allowances ......        85         51
Other .............................       244         40
                                      -------    -------
  Current .........................     5,064      3,703
                                      -------    -------

Property, plant and equipment .....    (5,146)    (3,843)
Deferred charges ..................      (539)      (363)
Other .............................      (757)      (163)
                                      -------    -------
Noncurrent ........................    (6,442)    (4,369)
                                      -------    -------
   Total ..........................   $(1,378)   $  (666)
                                      =======    =======
</TABLE>

Management believes that no valuation allowance against net deferred tax
benefits is necessary. Deferred U.S. federal income taxes are not provided on
certain undistributed earnings of foreign subsidiaries as management plans to
continue reinvesting these earnings outside the United States. Determination of
such tax amounts is not practical because potential offset by U.S. foreign tax
credits would be available under various assumptions involving the tax
calculation.


                                       27
<PAGE>   28


9. COMMITMENTS AND CONTINGENCIES

Future minimum lease payments under noncancellable lease agreements during the
years subsequent to October 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                          CAPITAL    OPERATING
                                          LEASES       LEASES
                                          -------    ---------
<S>                                       <C>        <C>
2000                                      $ 3,902    $  10,069
2001                                        2,987        8,099
2002                                          491        6,574
2003                                           --        4,419
2004                                           --        2,685
Thereafter                                     --        2,994
                                          -------    ---------
Total minimum lease payments                7,380    $  34,840
                                                     =========
Amount representing interest                 (462)
                                          ---------
Present value of minimum lease payments
(including current portion of $3,551)     $ 6,918
                                          =========
</TABLE>


During the years ended October 31, 1999, 1998, and 1997, the Company incurred
rent expense of approximately $12,684,000, $8,642,000, and $8,468,000
respectively.

On November 3, 1997, Bradco Supply Corporation ("Bradco") of Avenel, New Jersey
filed suit against the Company in the Superior Court of New Jersey, alleging
various contractual claims arising out of the terms of a letter of intent dated
October 2, 1997 executed by Bradco and the Company pertaining to the acquisition
of Bradco by the Company. Bradco has alleged, among other things, a breach and
unilateral termination of the letter of intent by the Company and seeks to
recover as damages a $3 million "walk-away" fee under the terms of the letter of
intent. In December 1997, the Company removed the Bradco lawsuit to the United
States District Court, New Jersey District. Thereafter, the Company filed a
counterclaim for fraud, among other claims, seeking to recover its out of pocket
transaction expenses. Management believes the Bradco action is without merit and
has maintained a vigorous defense and counterclaim to date. However, an adverse
resolution could result in an after-tax charge to income of up to $2 million. In
September 1998, the Company filed an alternate motion to dismiss or for judgment
on the pleadings, which was denied by the Court in early 1999. Thereafter, each
of the Company and Bradco have filed motions for summary judgment on the merits
of the lawsuit and the counterclaim, respectively. The Court has yet to rule on
the motions for summary judgment. Discovery in the case is substantially
complete. The Court has ruled on certain pretrial motions, but has not yet set a
date for trial, pending its ruling on summary judgment. There is no indication
from the Court when this will occur.

In January 1998, a subsidiary of the Company and three of its employees were
subpoenaed to provide information to a grand jury of the United States District
Court, Northern District of Texas, in connection with an investigation of
possible violations of federal antitrust laws in the aluminum building products
industry, including possible violations of Section 1 of the Sherman Act. No
allegations of wrongdoing have been made against the subsidiary, the employees
or the Company. In February 1998, information was provided in response to the
subpoenas and the grand jury appearance was postponed indefinitely. In November
1998, the Company's three employees were again notified to appear before a
federal grand jury in Ft. Worth, Texas. Such appearance was again postponed
indefinitely. Thereafter, the U.S. Attorney's office agreed to an informal
interview with an officer of the Company in lieu of formal grand jury testimony.
The interview was conducted in June 1999. After the interview, the U.S. Attorney
requested additional information from the subsidiary. There has been no further
activity since the Company provided these materials to the government in August
1999.

Refer to Note 16 with regard to events occurring after October 31, 1999.


                                       28
<PAGE>   29


From time to time, the Company is also involved in litigation and proceedings in
the ordinary course of its business. Management believes that such ordinary
course of business litigation will not have a material adverse effect on the
Company's financial condition or results of operations.

10. CAPITAL STOCK AND NET INCOME PER SHARE

During fiscal 1995, the Company's board of directors authorized the repurchase
of up to 750,000 shares of the Company's common stock. During fiscal 1998, the
Company's board of directors authorized the repurchase of an additional 750,000
shares of the Company's common stock. Through October 31, 1998, the Company had
repurchased 1,189,911 shares of the Company's common stock at an average price
per share of $11.46. No shares were repurchased during fiscal 1999.

A reconciliation of the numerators and denominators of the basic and diluted EPS
computations is as follows:




<TABLE>
<CAPTION>
                                                            1999        1998        1997
                                                          --------    --------    --------
<S>                                                       <C>         <C>         <C>
NUMERATOR
      Net income (basic and diluted earnings) .........   $ 17,066    $ 15,294    $ 11,319
                                                          --------    --------    --------

BASIC EPS DENOMINATOR
      Weighted average shares outstanding .............      8,661       9,250       9,195
                                                          ========    ========    ========

DILUTED EPS DENOMINATOR
     Weighted average shares outstanding (basic) ......      8,661       9,250       9,195
      stock options outstanding .......................      1,643       1,418       1,129
      Less: Anti-dilutive options .....................     (1,274)       (427)       (787)
            Dilutive effect (treasury stock method)....       (214)       (740)        (90)
                                                          --------    --------    --------
      Total dilution effect ...........................        155         251         252

      Weighted average shares outstanding (diluted) ...      8,816       9,501       9,447
                                                          ========    ========    ========
</TABLE>


11. EMPLOYEE AND DIRECTOR STOCK OPTION AND PURCHASE PLANS

The Company's Stock Incentive Plan and 1996 Stock Incentive Plan (collectively
referred to as the "Incentive Plans") provide for the issuance of options,
phantom shares, stock awards, stock appreciation rights, performance unit awards
or dividend equivalent rights. Options, which constitute the only issuances
under the Incentive Plans, have generally been granted at fair market value of
the Company's common stock on the date of grant.

Summary of Stock Options Outstanding at October 31, 1999:


                           STOCK OPTIONS OUTSTANDING

<TABLE>
<CAPTION>
                                             WT.AVG.
                 NUMBER OF                 REMAINING  WT. AVG.
               EXERCISABLE       NUMBER     CONTRACT  EXERCISE
                   OPTIONS   OF OPTIONS   LIFE (YRS)     PRICE
               -----------   ----------   ---------   --------
<S>            <C>           <C>          <C>         <C>
$ 0.95- 1.42       168,898      168,898         2.0   $   0.98
$ 2.25- 5.38        92,873      135,783         5.5       3.67
$ 8.38-13.63       334,720      900,188         8.1      12.32
$14.25-18.63       215,745      429,308         7.6      15.36
               -----------   ----------               --------

                   812,236    1,634,177               $  11.23
               ===========   ==========               ========
</TABLE>


                                       29
<PAGE>   30


The following table summarizes the Company's Incentive Plans stock option
activity:

<TABLE>
<CAPTION>
                                         WEIGHTED
                                         AVERAGE                   OPTION
                                         EXERCISE                   PRICE
                                          PRICE       SHARES        RANGE
                                        ----------  ---------   -------------
<S>                                     <C>         <C>         <C>
Outstanding at November 1, 1996...          7.59    1,076,788    $0.95-$17.50

  Granted ........................         14.91      313,334   $13.38-$17.88
  Exercised ......................          3.83     (254,196)   $0.95-$16.25
  Canceled .......................         14.40      (21,914)   $9.50-$16.00
                                                    ---------
Outstanding at October 31, 1997...         10.38    1,114,012    $0.95-$17.88

  Granted ........................         16.14      410,879    $8.38-$20.38
  Exercised ......................          7.66      (67,061)   $0.95-$16.25
  Canceled .......................         14.57      (51,277)  $10.00-$17.88
                                                    ---------
Outstanding at October 31, 1998...         12.04    1,406,533    $0.95-$20.38

  Granted ........................         11.69      606,864    $2.25-$13.12
  Exercised ......................          2.77       (9,536)    $0.98-$9.50
  Canceled .......................         15.58     (369,704)  $10.00-$20.38
                                                    ---------
Outstanding at October 31, 1999...      $  11.23    1,634,177    $0.95-$18.63
                                                    =========

Exercisable at October 31, 1999...      $   9.69      812,236    $0.95-$18.63
                                                    =========
</TABLE>

During 1997, 9,000 options were granted under the incentive plan to
nonmanagement directors at less than fair market value of the Company's common
stock and $63,000 in compensation expenses was recorded. None were granted to
nonmanagement directors in 1999 or 1998. These options generally vest over
six-month to three-year periods and expire within ten years of grant date. Such
options are included in the tables above.

On December 1, 1998, the Company canceled 120,000 stock options with a weighted
average exercise price of $19.00 and reissued 120,000 stock options with a
weighted average exercised price of $13.00 for three executive officers of the
Company. Approximately 40,000 of such repriced options were canceled and not
reissued in May 1999 upon the resignation of one of these executive officers.

A NonManagement Directors Plan (the "Directors Plan") provides for the issuance
of up to 25,000 options to purchase shares at an exercise price equal to fair
market value of the Company's common stock on date of grant. The following table
summarizes the Company's Directors Plan stock option activity:


<TABLE>
<CAPTION>
                                     WEIGHTED
                                      AVERAGE                  OPTION
                                     EXERCISE                  PRICE
                                       PRICE      SHARES       RANGE
                                     --------     ------    ------------


<S>                                  <C>          <C>       <C>
Outstanding at November 1, 1996...      12.55     15,000    $7.75-$18.25

Outstanding at October 31, 1997         12.55     15,000    $7.75-$18.25
     Exercised ...................      (9.66)    (4,000)   $7.75-$12.00
                                                  ------

Outstanding at October 31, 1998      $  12.57     11,000    $7.75-$18.25
     Canceled ....................   $  12.57     (2,000)   $7.75-$18.25
                                                  ------

Outstanding at October 31, 1999...   $  12.57      9,000    $7.75-$18.25
                                                  ======

Exercisable at October 31, 1999...   $  12.57      9,000    $7.75-$18.25
                                                  ======
</TABLE>


                                       30
<PAGE>   31


At October 31, 1999, 529,626 and 12,000 additional options were available for
future grant under the Incentive and Directors' Plans, respectively, and
2,180,244 shares of common stock were reserved for issuance upon the exercise of
outstanding options or future option grants under all plans.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related Interpretations in accounting for its
stock option plans. Accordingly, compensation expense is recognized for the
Company's stock option plans, except as noted above, since the exercise price of
the Company's stock option grants was the fair market value of the underlying
stock on the date of grant only for those grants of stock options share the
exercise price is lower than the fair market value on the grant date.

The Company has adopted the pro forma disclosure features of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). As required by SFAS No. 123, pro forma information
regarding net income and earnings per share has been determined as if the
Company had accounted for its employee stock options granted subsequent to
November 1, 1995, using the fair value method prescribed by SFAS No. 123. Pro
forma disclosures for 1999, 1998 and 1997 are presented below. Because the SFAS
No. 123 method of accounting has not been applied to options granted prior to
November 1, 1995, the pro forma effect will not be fully reflected until 2000.


<TABLE>
<CAPTION>
                             YEAR ENDED OCTOBER 31,
                      ------------------------------------
                         1999         1998         1997
                      ----------   ----------   ----------
<S>                   <C>          <C>          <C>
Net income:
      As reported     $   17,066   $   15,294   $   11,319
      Pro forma       $   16,077   $   14,095   $   10,585

Earnings per share:
      As reported:
         Basic        $     1.97   $     1.65   $     1.23
         Diluted      $     1.94   $     1.61   $     1.20
      Pro forma:
         Basic        $     1.86   $     1.52   $     1.15
         Diluted      $     1.82   $     1.49   $     1.12
</TABLE>

The estimated fair value of options granted during 1999, 1998 and 1997 was
$5.64, $8.15 and $7.38 per share, respectively. For the purpose of determining
fair value of each option, the Company used the Black-Scholes model with the
following assumptions:

<TABLE>
<CAPTION>
                                 1999        1998        1997
                                 ----        ----        ----

<S>                              <C>         <C>         <C>
Risk-free interest rate          5.9%        6.2%        6.4%
Expected life                    5.4 years   5.3 years   5.2 years
Expected volatility             44.2%       44.3%       43.4%
Expected dividends               0.0%        0.0%        0.0%
</TABLE>

During fiscal 1995, the Company adopted an Employee Stock Purchase Plan under
which employees are granted a right to purchase shares of the Company's common
stock. The purchase price is 85% of the fair market value of the stock at the
end of the quarter. Shares were purchased at prices ranging from $9.00 to $13.06
during fiscal 1999 and $11.19 to $18.63 during fiscal 1998. At October 31, 1999
and 1998, there were 112,587 and 150,930 shares of common stock reserved for
purchase under the plan.

On August 19, 1997, the Board of Directors of the Company adopted a shareholders
rights plan and declared a dividend distribution of one Right for each
outstanding share of the Company's common stock to stockholders of record at the
close of business on September 10, 1997. Each Right entitles the registered
holder to purchase from the Company 1/10,000 of a share of Series A Preferred
Stock (the "Preferred Stock") at a purchase price of $72 per 1/10,000 of a
share, subject to adjustment. Initially, the Rights will be attached to all
Common Stock certificates representing shares then outstanding,


                                       31
<PAGE>   32


and no separate Rights Certificates will be distributed. The Rights will
separate from the Common Stock upon the earlier of (i) ten business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired or obtained the right to
acquire beneficial ownership of 15% or more of the outstanding shares of Common
Stock (the "Stock Acquisition Date") or (ii) ten business days (or such later
date as the Board of Directors determines) following the commencement of a
tender or exchange offer that would result in a person or group beneficially
owning 15% or more of such outstanding shares of Common Stock. The date the
Rights separate is referred to as the "Distribution Date".

In the event that any person or group becomes an Acquiring Person, each holder
of a Right (other than the Acquiring Person and certain related parties) will
thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the Purchase Price of the Right. At any time after
any person or group becomes an Acquiring Person and prior to the acquisition by
such person or group of 50% or more of the outstanding shares of Common Stock,
the Board of Directors of the Company may, without payment of the Purchase Price
by the holder, exchange the rights (other than Rights owned by such person or
group, which will become void), in whole or in part, for shares of Common Stock
at an exchange ratio of one-half the number of shares of Common Stock (or in
certain circumstances, Preferred Stock) for which a Right is exercisable
immediately prior to the time of the Company's decision to exchange the Rights
(subject to adjustment). At any time until ten business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $0.001 per Right (payable in cash, shares of Common Stock or other
considerations deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $0.001 redemption price. The rights expire on September 10, 2007.

12. EMPLOYEE BENEFITS

The Company has 401(k) plans that cover substantially all employees. The
Company's funding target is to match the employee's contributions up to 4% of
the employee's base salary, not to exceed certain allowable limits. Employees
vest in Company contributions evenly over four years. The Company's
contributions for the years ended October 31, 1999, 1998 and 1997 were
$1,257,000, $1,183,000 and $916,000.

13. FINANCIAL INSTRUMENTS

The Company is, from time to time, a party to financial instruments with
off-balance sheet risk in the normal course of business to hedge against changes
in interest and foreign currency exchange rates. The Company may reduce its
exposure to fluctuations in interest and foreign currency exchange rates by
creating offsetting positions through the use of derivative financial
instruments. The Company currently does not use derivative financial instruments
for trading or speculative purposes, nor is the Company party to highly
leveraged derivatives. These financial instruments include interest rate and
foreign currency swap agreements. The instruments involve, to varying degrees,
elements of interest and foreign currency exchange rate risk in excess of the
amount recognized in the consolidated statements of financial condition. The
Company controls the risk of its hedging agreements, interest rate and foreign
currency swaps through approvals, limits and monitoring procedures.

The following disclosure of the estimated fair value of financial instruments is
made in accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The effect of using different market assumptions and/or estimation
methodologies may be material to the estimated fair value amounts.

The carrying amount and fair value of certain financial instruments consist of
the following at October 31:

<TABLE>
<CAPTION>
                                                       1999                  1998
                                                     --------              --------
                                                     CARRYING    FAIR      CARRYING    FAIR
                                                      AMOUNT     VALUE      AMOUNT     VALUE
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Assets:
  Cash and cash equivalents ......................   $      3   $      3   $  3,706   $  3,706
  Accounts receivable, net .......................    183,453    183,453    148,392    148,392
    Liabilities:
      Accounts payable ...........................     97,828     97,828     80,950     80,950
      Line of credit .............................      4,896      4,896         --         --
      Current maturities of debt .................     10,014     10,014      2,346      2,346
      Long-term debt .............................    155,224    153,028    135,051    145,109

    Off  balance sheet foreign currency swap: ....         --         82         --        593
</TABLE>


                                       32
<PAGE>   33


Cash and cash equivalents, accounts receivable, accounts payable and current
maturities of debt . The carrying amounts of these items approximate their fair
value due to their short-term nature or are the amounts payable on demand.

Line of credit; long-term debt and foreign currency swap. Interest rates that
are currently available to the Company for issuance of debt with similar terms
and remaining maturities are used to estimate fair value of debt. The fair value
of the foreign currency swap was estimated using market quotes.

The fair value estimates presented herein are based on pertinent information
available to management as of October 31, 1999 and 1998. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since the date presented, and therefore, current
estimates of fair value may differ significantly from the amounts presented
herein.

14. SEGMENT INFORMATION

In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." The
Company adopted this statement at November 1, 1998. Adoption of the standard has
no impact on net income.

The Company operates its business using four reportable segments. These segments
represent distinct operating subsidiaries of the Company. The segments include
Wm. Cameron & Co., CA Canada, Inc., Ashley Aluminum, L.L.C., and all other. The
segments are managed separately because of their geographical locations and
their differing products and services. Each of these businesses requires
distinct operating and marketing strategies. Management reviews the performance
of the Company based on these operating segments.

The Wm. Cameron & Co. segment is engaged in distribution, marketing, selling and
manufacturing of building products within the continental United States. The CA
Canada, Inc. segment is engaged in distribution, marketing, selling and
manufacturing of building products within Canada. The Ashley Aluminum, L.L.C.,
segment manufactures, markets, and distributes various building material
products, including pool and patio enclosure materials. The corporate and other
segment includes Field Marketing, Inc. and corporate support staff services.

The segments are measured on operating profits before interest expense, income
taxes and minority interest. Certain expenses are allocated to the operating
segments. For some of these allocated expenses, the related assets and
liabilities remain in the corporate and other segment. The segments follow the
same accounting principles described in the Summary of Significant Accounting
Policies. Sales between the segments are recorded primarily at market prices.


                                       33
<PAGE>   34


No single customer accounts for 10% or more of consolidated trade sales. An
analysis of operations by segment for the years ended October 31, 1999 and
October 31, 1998, is as follows:


<TABLE>
<CAPTION>
                                                                         CORPORATE      INTERCOMPANY
                                  WM CAMERON   CA CANADA      ASHLEY     AND OTHER      ELIMINATIONS   CONSOLIDATED
                                  ----------   ----------   ----------   ----------     ------------   ------------
<S>                               <C>          <C>          <C>          <C>                 <C>       <C>
OCTOBER 31, 1999
Sales to customers                $  815,915   $  132,975   $  165,156   $   25,465          (1,134)   $  1,138,377

Segment Operating Profit (Loss)       27,431        3,067       14,954       (6,032)                         39,420
Interest Expense                                                             11,664                          11,664
                                                                                                       ------------
Income before income taxes                                                                             $     27,756
                                                                                                       ============


Segment assets at October 31,     $  310,660   $   52,436   $   45,889   $   26,611                    $    435,596
1999

OCTOBER 31, 1998
Sales to customers                $  620,534   $  121,126   $  157,557                                 $    899,217

Segment Operating Profit (Loss)       21,213        3,419       13,390       (5,485)                         32,537
Interest Expense                                                              8,019                           8,019
                                                                                                       ------------


Income before income taxes                                                                             $     24,518
                                                                                                       ============

Segment assets at October 31,     $  259,021   $   44,043   $   46,902   $   11,767                    $    361,733
1998

OCTOBER 31, 1997
Sales to customers                $  488,122   $  115,140   $  157,422   $      906                    $    761,590


Segment Operating Profit (Loss)       11,047        3,265       13,336       (3,495)                         24,153

Interest Expense                                                              5,750                           5,750
                                                                                                       ------------


Income before income taxes                                                                             $     18,403
                                                                                                       ============


Segment assets at October 31,     $  190,663   $   34,716   $   46,452   $   21,420                    $    293,251
1997
</TABLE>


15. CONSULTING AGREEMENTS

The Company had an agreement which expired in December 1998 with an affiliate of
a major shareholder for financial and management consulting services to be
provided to the Company. This agreement, executed in November 1996, amended and
superseded prior consulting agreements with the Company's operating
subsidiaries. Fees under these agreements with the Company and its operating
subsidiaries paid during the fiscal years ended October 31, 1999, 1998 and 1997,
totaled $72,000, $180,000 and $280,000, respectively.

16. SUBSEQUENT EVENTS

On January 18, 2000, the Company announced that it has entered into a definitive
agreement whereby an investment group consisting of CGW Southeast Partners IV,
L.P. and an affiliate of Citicorp Venture Capital, Ltd., a subsidiary of
Citigroup Inc., along with senior management of the Company will acquire all the
outstanding shares of Cameron Ashley's common stock at a price of $15.10 per
share in cash. The total consideration of the proposed transaction is
approximately $320 million including the assumption of debt. Financing
commitments, subject to customary conditions, are in place with both senior and
subordinated debt sources, and the transaction is expected to close in the
second calendar quarter of 2000. The Company entered into the agreement
following the unanimous recommendation by the Special Committee, comprised of
independent directors of the Company. Credit Suisse First Boston advised the
Special Committee in this transaction. CGW Southeast Partners I, L.P., an
affiliate of CGW Southeast Partners IV, L.P., currently owns approximately 11%
of the Company's outstanding shares. CGW Southeast Partners IV, L.P., is a
private equity fund which supports management teams in middle-market
acquisitions and recapitalizations, and is managed by Atlanta, Georgia, based
Cravey, Green & Wahlen, Inc. Two directors of the Company are affiliated with
the CGW-related entities.


                                       34
<PAGE>   35


The closing of the merger is subject to regulatory and stockholder approval and
customary conditions to closing. The agreement includes a $5 million breakup
fee. The Company will file for review by the Securities and Exchange Commission
a proxy statement to be mailed to stockholders in connection with a stockholder
meeting that will be called to consider the merger.

On January 24, 2000, a stockholder of the Company filed suit in the Superior
Court of Fulton County, Georgia, against the Company and its individual
directors alleging, among other things, breach of fiduciary duties and unfair
dealing in connection with the proposed merger transaction and seeking to enjoin
the merger and, alternatively, damages. The stockholder is also seeking class
action status and to be certified as the class representative. The Company
believes that this cause of action is without merit and will contest the
plaintiff's claims by all available means.

17. EVENTS SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S REPORT
(UNAUDITED)

On February 10, 2000, Bradco Supply Corporation and Barry Segal jointly filed a
Schedule 13D with the Securities and Exchange Commission to report that they had
together purchased approximately 444,900 shares or 5.13% of the outstanding
shares of Common Stock of the Company. The reporting persons stated that they
believed the Investment Group's proposed acquisition price of $15.10 per share
to be inadequate and that they were seeking to purchase approximately 60% of the
outstanding shares of the Company at $16.25 per share in the open market or in
privately negotiated transactions. They further indicated their intent to merge
Bradco's operations into the Company and work with the Company's management to
grow the combined companies. Bradco and Segal subsequently filed an amended
Schedule 13D on February 16, 2000 to report an increase in ownership by 104,500
shares to 549,400 shares or 6.33% of the outstanding shares of Common Stock of
the Company.

On February 11, 2000, the Company announced that it had received an unsolicited
proposal from Guardian Industries Corp. to acquire all the outstanding shares of
the Company's common stock at a price of $17.00 per share. Guardian Industries
indicated that it has the financial capacity to fully fund the proposed
transaction. The proposed transaction is subject to due diligence, negotiation
of a definitive agreement and regulatory approval. The special committee is
evaluating this proposal along with its financial advisor, Credit Suisse First
Boston, while Guardian is pursuing its due diligence process.

The special committee subsequently notified Segal that they were currently
considering the Guardian proposal and, in light of its superior terms, did not
believe that further consideration of Segal's proposal was warranted at the
present time. On February 18, 2000, Bradco and Segal further amended their
Schedule 13D filing to report that they have no further interest in pursing a
transaction with the Company and that they now intend to hold their shares for
investment purposes.

Between January 24, 2000 and January 31, 2000, a total of five separate
shareholder lawsuits were filed against the Company and its individual
directors, each alleging, among other things, breach of fiduciary duties and
unfair dealing in connection with the announced merger transaction by the
Company and the Investment Group. Each action is seeks to enjoin the merger and,
alternatively, damages. Three of these cases were filed in the Superior Court of
Fulton County, Georgia and two actions were filed in the County Court at Law of
Dallas County, Texas. Each of the plaintiff's is seeking class action status in
connection with their claims and is requesting to be certified as the class
representative. The Company has not yet filed answers to any of the pending
suits and, in view of the acquisition proposal by Guardian Industries Corp. at
$17.00 per share, has asked for an extension of time to answer. The Company
believes that each cause of action is without merit and intends to vigorously
defend against such actions.


                                       35
<PAGE>   36


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

     Class III Directors (Terms expire 2000)

Richard L. Cravey, 55, has been a director of Cameron Ashley since 1994. Mr.
Cravey has served as a Managing Director of Cravey, Green & Wahlen, Incorporated
since 1985, as a Managing Director of CGW Southeast Management Company since
1991, and as a Managing Director of CGW Southeast I, Inc., the general partner
of CGW Southeast I, L.P. since 1991. CGW Southeast I, L.P. is an affiliate of
Cameron Ashley. Mr. Cravey is also a director of AMRESCO, INC.

J. Veronica Biggins, 53, has been a director of Cameron Ashley since October
1996. She is a partner with the executive search firm Heidrick & Struggles,
specializing in senior management recruitment where she has been employed since
February 1995. Previously, Ms. Biggins served as Assistant to the President of
the United States and Director of Presidential Personnel from January 1994 to
February 1995. Prior thereto, she was with NationsBank for 20 years serving in
various positions including Executive Vice President for Corporate Community
Relations. Ms. Biggins also serves on the board of directors for Avnet, Inc. and
National Data Corporation.

     Class II Directors (Terms expire 2001)

Harry K. Hornish, 54, has been a director of Cameron Ashley since October 1996.
He is President and Chief Operating Officer of the Distribution Group of United
States Filter Corporation, a manufacturer and distributor of water and sewer
related products and systems. From November 1991 to October 1996, Mr. Hornish
was President and Chief Executive Officer of The Utility Supply Group, Inc.
prior to its sale to United States Filter in October 1996. He served as Vice
President and General Manager of the Cameron Wholesale Division of CertainTeed
Corporation prior to its purchase by CGW Southeast I, L.P. in November 1991.

Walter J. Muratori, 56, has been a director of Cameron Ashley since 1994. Mr.
Muratori has served as Vice Chairman and Chief Operating Officer of Cameron
Ashley since March 1998, as President of Cameron Ashley since February 1994 and
as President of Wm. Cameron & Co. since June 1997. He also served as Chairman of
the Board of Ashley Aluminum L.L.C., formerly Ashley Aluminum, Inc., a
subsidiary of Cameron Ashley from June 1997 until its conversion to limited
liability company in November 1998. He previously served as President of Ashley
from October 1991 to June 1997. From 1989 to 1991, Mr. Muratori served as
President of Talquin Building Products, Inc., a division of Florida Progress
Corporation and the parent of Ashley. From 1970 to 1986, Mr. Muratori held
various sales and management positions at Ashley.

Alan K. Swift, 49, has been a director of Cameron Ashley since October 1997. Mr.
Swift is Chairman of the Board of Field Marketing, Inc., a provider of
merchandising and other in-field marketing services to national manufacturers
and consumer goods companies. From May 1998 to June 1999 he served as Chairman
of A-Three Services Agency, Ltd., a national fulfillment company specializing in
promotional materials handling and database/direct marketing. From 1994 to May
1998, he served as Chief Executive Officer of Field Marketing. Field Marketing
is a subsidiary of Cameron Ashley. See "Certain Relationships and Related
Transactions". He also was Chairman and Chief Executive Officer of Promotional
Marketing, Inc., a marketing services company headquartered in Chicago,
Illinois, from 1982 to 1994.

     Class I Directors (Terms expire 2002)

Ronald R. Ross, 47, has been a director of Cameron Ashley since 1994. Mr. Ross
has served as Chief Executive Officer of Cameron Ashley since September 1996, as
Chairman of the Board of Cameron Ashley since February 1994 and as Chairman of
the Board and Chief Executive Officer of Wm. Cameron & Co., a subsidiary of
Cameron Ashley, since November 1996. From December 1991 to June 1997, he served
as President of Cameron. Mr. Ross was Vice President, Operations of the Cameron
Wholesale division of CertainTeed Corporation, a building products manufacturer,
from September 1987 to September 1991 and served as Vice President and General
Manager of the division until its sale in December 1991.


                                       36
<PAGE>   37


Lawrence P. Klamon, 63, has been a director of Cameron Ashley since September
1999. Mr. Klamon is a private investor. He served as President and Chief
Executive Officer of Fuqua Enterprises, Inc. an Atlanta based, New York Stock
Exchange listed medical products company from 1995 until the sale of that
company in 1997. Prior thereto, Mr. Klamon was senior counsel to Alston & Bird,
an Atlanta law firm, from 1991 to 1995. From 1967 to 1991, Mr. Klamon served in
a variety of capacities, most recently as Chairman of the Board of Fuqua
Industries, a Fortune 500 diversified holding company.

Edwin A. Wahlen, Jr., 52, has been a director of Cameron Ashley since August
1996. He has served as a Managing Director of Cravey, Green & Wahlen
Incorporated since 1985, as Managing Director of its investment management
affiliate, CGW Southeast Management Company since 1991, and as a Managing
Director of CGW Southeast I, Inc., the general partner of CGW Southeast I, L.P.
since 1991. CGW Southeast I, L.P. is an affiliate of the Company. [

FORMER DIRECTORS

Allen J. Keesler, Jr., a director of Cameron Ashley since August 1996, resigned
from our board of directors on May 21, 1999. After Mr. Keesler's resignation,
our board of directors reduced the number of director positions from nine to
eight.

Donald S. Huml, a director of Cameron Ashley since 1994, resigned from our board
of directors on August 27, 1999. Mr. Klamon was appointed to fill the vacancy
occurring in our board of directors by Mr. Huml's resignation.

EXECUTIVE OFFICERS

In addition to Ronald R. Ross and Walter J. Muratori, who are named above,
Cameron Ashley has the following executive officers:

Garold E. Swan, 46, has served as Executive Vice President and Chief Financial
Officer of the Company and Cameron since April 1999. During 1998, Mr. Swan was
Senior Vice President and Chief Financial Officer of PC Service Source, Inc., a
Dallas, Texas, based personal computer service logistics provider. From 1988 to
1997, Mr. Swan was with Fibreboard Corporation, serving as Vice President and
Controller from 1988 to 1996 and as Vice President of Finance from 1996 through
the company's acquisition by Owens Corning in 1997. Mr. Swan was employed by
Arthur Andersen, LLP from 1977 to 1988.

Kirk W. Black, 38, has served as Executive Vice President and Chief Information
Officer of the Company and Cameron since June 1999. Mr. Black was a Senior
Consultant with IBM Corporation from 1997 to 1999 focusing on ERP and E-
Commerce implementation initiatives. He served as Director of Supply Chain
Systems for Paging Network, Inc., a paging and wireless service company, from
1995 to 1997. Mr. Black was employed by Andersen Consulting, LLP from 1983 to
1995.

C. Steven Gaffney, 51, has served as Executive Vice President of the Company and
as President and Chief Executive Officer of Ashley since June 1997. Mr. Gaffney
was Vice President of the Company from 1994 to June 1997. Mr. Gaffney was
Executive Vice President of Ashley from 1991 to June 1997. He previously served
as President of Ashley from 1989 to 1991 and as its Vice President from 1986 to
1989.

John S. Davis, 43, has served as Vice President - General Counsel and Secretary
of the Company since August 1994. Prior to joining the Company, he was employed
as Associate Counsel - Mergers and Acquisitions of Electronic Data Systems
Corporation (EDS) from 1990 to August 1994. Mr. Davis was engaged in private
legal practice prior to 1990.

Thomas R. Miller, 50, has served as Vice President - Human Resources of the
Company since December 1994. From 1980 until December 1994, Mr. Miller served as
Managing Director of Employee Relations for American Airlines, Inc.


                                       37
<PAGE>   38


ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION INFORMATION. The following table summarizes compensation
with respect to the fiscal years 1997, 1998 and 1999 earned by or paid to or
accrued for our chief executive officer and our other four most highly
compensated executive officers during fiscal 1999. J. Andrew Kerner, our former
Executive Vice President and Chief Financial Officer of who resigned in March
1999 is included as a named executive officer for fiscal 1999. We did not grant
any restricted stock awards or stock appreciation rights or make any long-term
incentive payouts during fiscal 1997, 1998 or 1999. The named executive officers
in the following tables were officers of Cameron Ashley and our Cameron or
Ashley divisions during fiscal 1997, 1998 and 1999 and were compensated by such
companies for service in such capacities in the amounts set forth below:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                         ANNUAL                  LONG TERM         ALL OTHER
                                      COMPENSATION              COMPENSATION     COMPENSATION
                                      ------------              ------------     ------------

                                                                 SECURITIES
                                                                 UNDERLYING
                                     FISCAL  SALARY     BONUS      OPTIONS
      NAME AND CURRENT POSITION       YEAR    ($)        ($)         (#)              ($)
      -------------------------      ------  -------   -------   ----------         -------
<S>                                  <C>     <C>       <C>       <C>                <C>
Ronald R. Ross ..................     1999   391,731   258,240       60,179          4,800(1)
  Chairman of the Board &             1998   295,192   181,600            0          4,800(1)
  Chief Executive Officer             1997   275,000   209,575            0          4,763(1)

Walter J. Muratori ..............     1999   332,987   223,840       41,185         16,232(2)
  Vice Chairman, President &          1998   251,141   164,640            0         18,297(2)
  Chief Operating Officer             1997   233,872   220,050            0         13,627(2)

C. Steven Gaffney ...............     1999   175,526   165,312            0         16,350(2)
  Executive Vice President,           1998   163,318   105,600       50,000         15,223(2)
  President - Ashley Division         1997   137,818   123,240        6,994         12,398(2)

Garold E. Swan ..................     1999   121,154    44,100      100,000              0
  Executive Vice President -          1998         0         0            0              0
  Chief Financial Officer (3)         1997         0         0            0              0

J. Andrew Kerner ................     1999    99,203         0       40,000              0
  Former Executive Vice President     1998   124,038    48,411      100,000              0
  and Chief Financial Officer (4)     1997         0         0            0              0

John S. Davis ...................     1999   171,298    55,360       30,000          4,800(1)
  Vice President, General Counsel     1998   160,000    48,400            0          4,800(1)
  & Secretary                         1997   120,000    50,000       33,443          3,948(1)
</TABLE>


(1)  Represents Cameron division's matching contribution under its 401(k) Plan.
(2)  Represents Ashley division's matching contribution under its 401(k) Plan
     and contributions to the Ashley profit sharing plan.
(3)  Mr. Swan joined Cameron Ashley in April, 1999.
(4)  Mr. Kerner joined Cameron Ashley in April, 1998 and resigned in March,
     1999.


                                       38
<PAGE>   39


EMPLOYEE STOCK OPTIONS

         Our incentive plans provide for the grant of awards in the form of
non-qualified stock options, incentive stock options, stock appreciation rights
and shares of restricted stock as well as several types of equity-based
incentive compensation awards including performance units, performance shares,
phantom stock, unrestricted bonus stock and dividend equivalent rights. All
officers and several key employees of Cameron Ashley and its subsidiaries,
approximately 150 persons, are eligible to participate in our incentive plans.
Set forth below is information relating to grants of options to purchase shares
of Cameron Ashley's common stock made to the named executive officers in fiscal
1999 under the incentive plans. We did not grant any incentive stock options,
stock appreciation rights or restricted stock during fiscal 1999.

                          OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>

                                                                              POTENTIAL REALIZABLE VALUE AT ASSUMED
                                                                                  ANNUAL RATES OF STOCK PRICE
                              INDIVIDUAL GRANTS                                   APPRECIATION FOR OPTION TERM
                              -----------------                                   ----------------------------

                                           % OF TOTAL
                         OPTIONS        OPTIONS GRANTED        EXERCISE OR
                       GRANTED (1)      TO EMPLOYEES IN        BASE PRICE      EXPIRATION
         NAME               #             FISCAL YEAR           ($/SH)(2)         DATE       5%($)           10%($)
         ----          -----------      ----------------       -----------     ----------   -------         -------


<S>                    <C>              <C>                    <C>             <C>          <C>             <C>
Ronald R. Ross           41,235               6.9              11.81           5/25/09      306,262         776,129
                         18,944               3.2               2.95           5/25/09      308,546         524,410

Walter J. Muratori       28,220               4.7              11.81           5/25/09      209,597         531,160
                         12,965               2.2               2.95           5/25/09      211,164         358,898

C. Steven Gaffney             0                --                 --                --           --              --

Garold E. Swan          100,000              16.8              13.00           4/12/09      817,563       2,071,865

J. Andrew Kerner         40,000               6.7              13.00          Canceled           --              --

John S. Davis            30,000               5.0              13.00          10/29/07      212,713         522,912
</TABLE>


(1) These options become exercisable in equal installments over a three- to
five-year period. In the event of a change of control, the options listed above
become immediately exercisable.

(2) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to restrictions.


                                       39
<PAGE>   40



         The following table presents information regarding the value realized
through stock option exercises during fiscal 1999 and the value of unexercised
options held by the named executive officers at October 31, 1999. There were no
incentive stock options, stock appreciation rights or restricted stock
outstanding during fiscal 1999.

       AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FY-END OPTION VALUES


<TABLE>
<CAPTION>
                                                        NUMBER OF
                                                  SECURITIES UNDERLYING     VALUE OF UNEXERCISED
                                                   UNEXERCISED OPTIONS      IN-THE-MONEY OPTIONS
                                                       AT FY-END                AT FY-END(1)
                                                          (#)                       ($)
                                                  ---------------------     --------------------

                             SHARES
                           ACQUIRED
                          ON EXERCISE   VALUE         EXERCISABLE/              EXERCISABLE/
      NAME                     #       REALIZED      UNEXERCISABLE             UNEXERCISABLE
      ----                -----------  --------      -------------             -------------

<S>                       <C>          <C>           <C>                       <C>
Ronald R. Ross ......          0          0          120,000/140,180             0/107,507

Walter J. Muratori...          0          0          155,003/81,186           726,306/73,576

C. Steven Gaffney....          0          0           37,794/30,000              82,566/0

Garold E. Swan ......          0          0             0/100,000                   0/0

J. Andrew Kerner.....          0          0                0/0                      0/0

John S. Davis .......          0          0           33,443/10,000                 0/0
</TABLE>

(1) Dollar values were calculated by determining the difference between the
closing sale price of our common stock on October 29, 1999 of $8.625 per share
and the exercise price of such options.

DIRECTOR COMPENSATION

         Members of our board of directors who are not officers or employees of
Cameron Ashley or its subsidiaries, are eligible to receive annual aggregate
compensation $25,000 (plus an additional $1,000 per meeting for each meeting
attended in excess of four meetings per year) in a combination of monthly
retainers, meeting fees and optional equity-based awards. All of these fees are
paid in a lump sum at the end of the fiscal year. Each outside director receives
a monthly retainer of $1,000 and a fee of $1,000 for each board or committee
meeting attended plus reimbursement for expenses incurred in serving as
directors. Outside directors are also eligible to receive, at the end of each
fiscal year, an award of 1,000 stock options under our stock incentive plan at a
discount to market value on the date of grant with a total value of $9,000.
These options vest in full on the one year anniversary of the date of grant.
Each outside director may elect to receive the total of monthly and meeting fees
in the form of additional discounted stock options under our stock incentive
plan in lieu of cash.

         Upon the expiration of the consulting agreement in December 1998, Mr.
Cravey and Mr. Wahlen became eligible to receive compensation for service as
outside directors of Cameron Ashley for fiscal 1999.

         At its meeting in December 1999, our compensation committee approved
management's proposal to pay all outside director compensation for fiscal 1999
in cash in lieu of equity-based awards. We paid the following cash amounts to
outside directors in 1999: Mr. Hornish, $25,000; Ms. Biggins, $26,000; Mr.
Cravey, $25,000; Mr. Wahlen, $25,000; and Mr. Klamon, $11,000.

         We paid four of our outside directors additional compensation for
serving on a special committee of the board. This committee was formed in
December 1998 to evaluate a proposal by an investment group, which included
members of our management, to acquire Cameron Ashley. The proposed transaction
was not completed. This special committee


                                       40
<PAGE>   41


completed its work in March 1999. We paid the following amounts to the members
of this special committee: $15,000 to Mr. Huml, as Chairman, and $10,000 each to
Mr. Hornish, Mr. Keesler and Ms. Biggins.

EMPLOYMENT AGREEMENTS

         Mr. Ross is party to an employment agreement with Cameron Ashley dated
May 25, 1999. This agreement replaced, superseded and extended the term of a
prior agreement dated September 1, 1996 between Mr. Ross and Wm. Cameron & Co.
Mr. Ross' agreement provides for his employment by us for a period of four years
commencing on May 25, 1999 or until earlier termination upon (i) death or
disability; (ii) cause, as defined in the agreement; (iii) 90 days' prior
written notice to us by Mr. Ross; (iv) immediate written notice by us to Mr.
Ross; or (v) mutual agreement between Mr. Ross and us. Mr. Ross' agreement
provides for a minimum base salary of $460,000, subject to periodic review and
discretionary increase by our board of directors; eligibility for an annual cash
performance bonus in an amount up to 100% of base salary for the applicable year
based on attainment of performance objectives established by our board of
directors in good faith; and a grant of stock options effective as of the date
thereof in accordance with our long term incentive compensation program. Mr.
Ross is also entitled to reimbursement of reasonable business expenses and
participation in all employee benefit plans for which he is eligible. Upon
termination of Mr. Ross' employment for any reason except our termination
without cause, Mr. Ross will be paid only his earned but unpaid base salary as
of the date of termination. If we terminate Mr. Ross without cause, Mr. Ross
will be entitled to receive severance pay equal to (a) his then current
annualized base salary for a period of 12 months plus (b) the average of the
annual bonus actually paid to or accrued for him for the two most recent fiscal
years ended prior to the date of termination, paid over 12 months. The agreement
also contains noncompetition and nonsolicitation covenants covering the term of
the agreement plus one year following termination.

Mr. Muratori is party to an employment agreement with Cameron Ashley dated May
25, 1999. This agreement replaced, superseded and extended the term of a prior
agreement dated December 20, 1991, between Mr. Muratori and Ashley. Mr.
Muratori's agreement provides for his employment by us for a period of three
years commencing on May 25, 1999 or until earlier termination upon (i) death or
disability; (ii) cause, as defined in the agreement; (iii) 90 days' prior
written notice to us by Mr. Muratori; (iv) immediate written notice to Mr.
Muratori by us; or (v) mutual agreement between Mr. Muratori and us. Mr.
Muratori's agreement provides for a minimum base salary of $340,000, subject to
periodic review and discretionary increase by our board of directors;
eligibility for an annual cash performance bonus in an amount up to 100% of base
salary for the applicable year based on attainment of performance objectives
established by our board of directors in good faith; and a grant of stock
options effective as of the date thereof in accordance with our long term
incentive compensation program. Mr. Muratori is also entitled to reimbursement
for reasonable business expenses and participation in all employee benefit plans
for which he is eligible. Upon termination of Mr. Muratori's employment for any
reason except our termination without cause, Mr. Muratori will be paid only his
earned but unpaid based salary as of the date of termination. If we terminate
Mr. Muratori without cause, Mr. Muratori will be entitled to receive severance
pay equal to (a) his then current annualized base salary for a period of 12
months plus (b) the average of the annual bonus actually paid to or accrued for
him for the two most recent fiscal years ended prior to the date of termination,
paid over 12 months. The agreement also contains noncompetition and
nonsolicitation covenants covering the term of the agreement plus one year from
the date of termination.

Mr. Gaffney is party to an employment agreement with Ashley dated December 1,
1997. Mr. Gaffney's agreement provides for his employment by Ashley for a period
of three years commencing on December 1, 1997 or until earlier termination upon
(i) death or disability; (ii) cause, as defined in the agreement; (iii) 90 days'
prior written notice to Ashley by Mr. Gaffney; (iv) immediate written notice to
Mr. Gaffney by Ashley; or (v) mutual agreement between Mr. Gaffney and Ashley.
Mr. Gaffney's agreement provides for a minimum base salary of $160,000, subject
to periodic review and discretionary increase by Ashley; eligibility for an
annual cash performance bonus in an amount of up to 100% of base salary for the
applicable year based on attainment of performance objectives established by the
board of directors of Ashley and Cameron Ashley in good faith; and a grant of
stock options for 50,000 shares of Cameron Ashley common stock and an additional
grant of options at the end of the term thereof in the discretion of the board
of directors of Cameron Ashley. Mr. Gaffney is also entitled to reimbursement
for reasonable business expenses and participation in all employee benefit plans
for which he is eligible. Upon termination of Mr. Gaffney's employment for any
reason except Ashley's termination without cause, Mr. Gaffney will be paid only
his earned but unpaid base salary as of the date of termination. If Ashley
terminates Mr. Gaffney without cause, Mr. Gaffney will be entitled to receive
severance pay equal to (a) his then current annualized base salary for a period
of 12 months, paid over 12 months. The agreement also contains noncompetition
and nonsolicitation covenants covering the term of the agreement plus one year
from the date of termination.


                                       41
<PAGE>   42


Mr. Swan is a party to an employment agreement with Wm. Cameron & Co. dated
April 12, 1999. Mr. Swan's agreement provides for his employment by Wm. Cameron
& Co. for a period of three years commencing on April 12, 1999 or until earlier
termination upon (i) death or disability; (ii) cause, as defined in the
agreement; (iii) 90 days' prior written notice to Wm. Cameron & Co. by Mr. Swan;
(iv) immediate written notice to Mr. Swan by Wm. Cameron & Co.; or (v) mutual
agreement between Mr. Swan and Wm. Cameron & Co. Mr. Swan's agreement provides
for a minimum base salary of $225,000, subject to periodic review and
discretionary increase by Cameron Ashley; eligibility for an annual cash
performance bonus in an amount of up to 60% of base salary for the applicable
year based on attainment of performance objectives established by our board of
directors in good faith; and a grant of stock options for 100,000 shares of
Cameron Ashley common stock. Mr. Swan is also entitled to reimbursement for
reasonable business expenses and participation in all employee benefit plans for
which he is eligible. Upon termination of Mr. Swan's employment for any reason
except Wm. Cameron & Co's termination without cause, Mr. Swan will be paid only
his earned but unpaid base salary as of the date of termination. If Wm. Cameron
& Co. terminates Mr. Swan without cause, Mr. Swan will be entitled to receive
severance pay equal to his then current annualized base salary for a period of
12 months, paid over 12 months. The agreement also contains noncompetition and
nonsolicitation covenants covering the term of the agreement plus one year from
the date of termination.

Mr. Davis is party to an employment agreement with Wm. Cameron & Co. dated
October 13, 1997. Mr. Davis' agreement provides for his employment by Wm.
Cameron & Co. for a period of three years commencing on October 13, 1997 or
until earlier termination upon (i) death or disability; (ii) cause, as defined
in the agreement; (iii) 90 days' prior written notice to Wm. Cameron & Co. by
Mr. Davis; (iv) immediate written notice to Mr. Davis by Wm. Cameron & Co.; or
(v) mutual agreement between Mr. Davis and Wm. Cameron & Co. Mr. Davis'
agreement provides for a minimum base salary of $160,000, subject to periodic
review and discretionary increase by Wm. Cameron & Co.; eligibility for an
annual cash performance bonus in an amount of up to 60% of base salary for the
applicable year based on attainment of performance objectives established by the
board of directors of Wm. Cameron & Co. and Cameron Ashley in good faith; and a
grant of stock options for 30,000 shares of Cameron Ashley common stock. Mr.
Davis is also entitled to reimbursement for reasonable business expenses and
participation in all employee benefit plans for which he is eligible. Upon
termination of Mr. Davis' employment for any reason except Wm. Cameron & Co.'s
termination without cause, Mr. Davis will be paid only his earned but unpaid
base salary as of the date of termination. If Wm. Cameron & Co. terminates Mr.
Davis without cause, Mr. Davis will be entitled to receive severance pay equal
to his then current annualized base salary for a period of 12 months, paid over
12 months. The agreement also contains noncompetition and nonsolicitation
covenants covering the term of the agreement plus one year from the date of
termination.

CHANGE OF CONTROL AGREEMENTS

Mr. Ross and Mr. Muratori are parties to change of control agreements with
Cameron Ashley dated June 1, 1999 (replacing and superseding prior agreements
dated June 1, 1996). Mr. Swan, Mr. Gaffney and Mr. Davis are parties to change
of control agreements with Cameron Ashley dated October 25, 1999. These
agreements become effective upon a "change of control", as defined in the change
of control agreements, and remain in effect for a period of five years
thereafter. Upon a change of control, the employment agreements of Mr. Ross, Mr.
Muratori, Mr. Gaffney, Mr. Swan and Mr. Davis would be automatically superseded
by the change of control agreements and the terms of their employment with
Cameron Ashley would be governed thereby.

Under the change of control agreements, each executive is provided a base salary
equal to a 12-month annualized amount of the highest monthly base salary paid to
such executives during the preceding 12-month period. They are also entitled to
receive a guaranteed bonus in cash equal to their highest bonus under existing
bonus plans for the last three full fiscal years prior to the effective date.
Each executive would be entitled to participate in all incentive plans, fringe
benefits, vacation and expense reimbursement policies as in effect with respect
to Cameron Ashley prior to the change of control.

The change of control agreements provide remedies to the executive in the event
his employment is terminated during the employment period initiated by the
change of control. If the executive is terminated for "cause", as defined in the
change of control agreements, he is entitled only to salary and benefits accrued
through the date of termination. If terminated without cause or if the executive
resigns for "good reason", as defined in the change of control agreements, he is
entitled to severance benefits. Such benefits would consist of (i) unpaid base
salary through the termination date; (ii) bonus earned through the termination
date; (iii) any unpaid deferred compensation and accrued vacation pay; (iv)
three times annual base salary and annual bonus (two years in the case of Mr.
Gaffney, Mr. Swan and Mr. Davis); (v) three years extra credit toward retirement
plan benefits (two years in the case of Mr. Gaffney, Mr. Swan and Mr. Davis);
(vi) three years continued coverage under welfare plans (two years in the case
of Mr. Gaffney , Mr. Swan and Mr. Davis); and (vii) any other unpaid benefits to
which the executive is entitled. The change of control agreements also provide
for the


                                       42
<PAGE>   43


payment of accrued salary, bonus and benefits in the event of the death or
disability of the executives. The severance payments owed to the executive are
further subject to adjustment to mitigate the impact on Cameron Ashley and on
the executive of Sections 280G, dealing with the limitation on deductibility of
so-called excess "parachute" payments, and 4999, dealing with excise taxes
payable by the recipient of "parachute" payments, of the Internal Revenue Code
of 1986 applicable to such payments.

INDEMNIFICATION AGREEMENTS

Each of our directors and the named executive officers is a party to an
indemnification agreement with us under which we have granted to each named
executive officer rights of indemnification and, under some circumstances,
mandatory indemnification, permissible under the provisions of our articles of
incorporation and bylaws and the Georgia Business Corporation Code. The
indemnification is applicable to expenses, liabilities and other costs actually
and reasonably incurred or suffered by these persons in connection with any
threatened, pending or completed action, suit or proceeding to which they are
made a party because they were an officer or director of Cameron Ashley,
provided that they have met the requisite standard of conduct established by the
indemnification agreement and applicable law.


                             TEN-YEAR/SAR REPRICINGS

On December 1, 1998, our compensation committee approved the repricing of
options for two of the named executive officers and one of our other executive
officers. The compensation committee determined that the repricings were
necessary for retention of these executive officers in key administrative
positions. The following table sets forth information regarding the repricing of
options during fiscal 1999. There have been no other options repriced for any of
our executive officers in any of the last 10 completed fiscal years.


<TABLE>
<CAPTION>
                                        NUMBER OF                                                         LENGTH OF
                                        SECURITIES        MARKET PRICE     EXERCISE                       ORIGINAL
                                        UNDERLYING        OF STOCK AT      PRICE AT                       OPTION TERM
                                        OPTIONS/          TIME OF          TIME OF           NEW          REMAINING AT
                                        SARS              REPRICING OR     REPRICING OR      EXERCISE     DATE OF
                                        REPRICED OR       AMENDMENT        AMENDMENT         PRICE        REPRICING OR
NAME                        DATE        AMENDED (#)           ($)              ($)             ($)        AMENDMENT
----                        ----        -----------       -------------    ------------      --------     --------------

<S>                         <C>         <C>               <C>              <C>               <C>          <C>
John S. Davis               12/1/98     30,000            8.0625              17.875         13.00        8 years,
  Vice President and                                                                                      11 months
  General Counsel

Thomas R. Miller            12/1/98     30,000            8.0625              17.875         13.00        8 years,
  Vice President of                                                                                       11 months
  Human Resources


J. Andrew Kerner            12/1/98     40,000            8.0625               20.00         13.00        9 years,
  Former Executive                                                                                        4 months
  Vice President and
  Chief Financial Officer
</TABLE>


                                       43
<PAGE>   44


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our compensation committee, which is comprised of Richard L. Cravey and J.
Veronica Biggins, is responsible for establishing salaries, bonuses and other
compensation for our executive officers and for administering our stock
incentive plans.

Mr. Cravey is a managing director of CGW Southeast Management Company. CGW
Southeast Management Company, an affiliate of CGW Southeast I, L.P., was
previously a party to a consulting agreement with Cameron Ashley which expired
on December 20, 1998. Under the agreement, Cameron Ashley paid a monthly
retainer fee to CGW Southeast Management Company for financial and management
consulting services. CGW Southeast Management Company also was eligible to
receive additional compensation, if approved by our board of directors at the
end of the fiscal year, based upon the overall performance of Cameron Ashley and
its subsidiaries. The aggregate monthly fees paid by Cameron Ashley in fiscal
1999 were $72,000. No additional compensation was paid at fiscal year-end. The
consulting agreement was not renewed or replaced by any similar arrangement. Mr.
Cravey was appointed to the compensation committee effective January 1, 1999
after expiration of the consulting agreement in December 1998.

Mr. Cravey holds a one-third interest in the CGW Southeast Management Company, a
one-third interest in the corporate general partner of CGW Southeast I, L.P.
that made a 1% investment in CGW Southeast I, L.P., and a one-third interest in
Le Select, a Georgia general partnership and limited partner of CGW Southeast I,
L.P. that owns a 5.33% limited partnership interest in CGW Southeast I, L.P. Mr.
Cravey is also a managing director of CGW Southeast I, Inc. and of CGW Southeast
Management Company.

Ms. Biggins is a partner of Heidrick & Struggles, and her firm provided retained
executive recruitment services to Cameron Ashley in fiscal 1999. The amount paid
by Cameron Ashley for such services did not exceed 5% of consolidated gross
revenues of either Cameron Ashley or Heidrick & Struggles in fiscal 1999.



REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Decisions and recommendations regarding the compensation of our executives are
made by a two-member compensation committee composed entirely of directors who
do not serve as officers or employees of Cameron Ashley. Following is a report
of the compensation committee concerning our executive compensation policies for
fiscal 1999. The following report is not subject to incorporation by reference
in any filings heretofore or hereafter made by us under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.

We are responsible for establishing the policies and programs that determine the
compensation of Cameron Ashley's Chief Executive Officer and other senior
management. We establish increases in base compensation, over base compensation
as established by contract, and bonus compensation, subject to maximum bonus
percentages also established by contract, on an annual basis for Cameron
Ashley's Chairman of the Board and Chief Executive Officer and its President and
have approval authority over the recommendations of senior management for
increases in annual base and bonus compensation for all other executive
officers. In addition, we have exclusive authority to approve stock option
grants to all executive officers. We consider both internal and external data in
determining officers' compensation, including input from outside compensation
consultants and relevant industry executive compensation data.


COMPENSATION PHILOSOPHY

The compensation philosophy of Cameron Ashley, endorsed by the compensation
committee, is that a substantial portion of the annual compensation of each
executive officer must be contingent upon Cameron Ashley's performance, as well
as the individual contributions of each officer. As a result, much of the
executive officer's compensation is "at risk," with annual bonus compensation,
at full target levels, accounting for up to one-half of total cash compensation
for senior management. The purpose of this philosophy is to align the
executive's compensation closely with Cameron Ashley's annual and long-range
objectives, thereby serving the interests of Cameron Ashley's shareholders. We
also seek to ensure that Cameron Ashley's compensation opportunities are
competitive with companies of similar size and in similar industries to enable
Cameron Ashley to attract and retain highly qualified executives.


                                       44
<PAGE>   45


COMPENSATION PROGRAM

Cameron Ashley's executive compensation program has three major components, all
of which are intended to implement Cameron Ashley's compensation philosophy:

                  1. Base salary for executive officers has generally been
         established by employment contract and is reviewed annually in relation
         to the competitive pay practices of comparable companies, the skills
         and performance level of the individual executive, and our needs and
         resources.

                  2. Cash incentive compensation is paid annually in the form of
         bonuses based on the attainment of specified business and personal
         goals. Target maximum bonuses are established as a percentage of base
         salary and range from 100% of base salary for the Chairman and Chief
         Executive Officer, President and Chief Operating Officer and some
         Executive Vice Presidents to 60% of base salary for other executive
         officers. A major component of each executive's annual bonus
         compensation formula is tied to Cameron Ashley's overall financial
         performance in the fiscal year.

                  3. Equity-based incentive compensation is provided to
         employees and management through the incentive plans. The incentive
         plans are administered by our compensation committee. Our compensation
         committee awards option grants to officers and key employees from time
         to time in reflection of the incentive and retention goals of the
         incentive plans. These awards take the form of discretionary grants and
         annual formula-based grants.

         As an inducement to aid in executive recruitment, new executive
officers who join Cameron Ashley typically receive an initial option grant
commensurate with their position and responsibilities. Of the named executive
officers, Mr. Swan received such a grant in fiscal 1999. Some executive officers
may also from time to time receive additional, discretionary option grants in
recognition of outstanding performance or to respond to competitive market
conditions and our retention objectives. Larger option grants are often made in
connection with the execution or renewal of employment contracts with executive
officers. None of the named executive officers received any discretionary grants
during fiscal 1999. From time to time, we may make smaller, discretionary grants
of stock options to non-executive key employees for retention purposes or to
reward outstanding performance.

         Options under our incentive plans, other than in connection with
directors' compensation, vest over a term of three to five years during the
participant's employment with us. The purpose of the incentive plans is to
instill the economic incentives of ownership, create management incentives to
improve shareholder value and, through the use of vesting periods, encourage
executives to remain with us and focus on long-term results. We have not granted
stock appreciation rights, restricted stock awards or long-term incentive
bonuses; however, the incentive plans permit grants of these types of
incentives.

         On the recommendation of independent compensation consultants and our
compensation committee, in May 1999 our board of directors approved a long term
incentive compensation program calling for annual stock option grants under the
incentive plans to several of our executive officers and other key management.
This compensation strategy was designed to directly link performance in meeting
annual objectives and the individual's position with an annual grant of stock
options based upon a pre-determined formula. Under this long term incentive
compensation program, a portion of individual option grants would be made at a
discount to the fair market value at date of grant and a portion would be made
at fair market value. The total option grant value, determined by Black Scholes
valuation, would equate to the predetermined formula award value. Mr. Ross and
Mr. Muratori, who received grants of 60,179 and 41,185 options, respectively, in
May 1999, were the only executive officers or employees to receive option grants
under the long term incentive program in fiscal 1999. In December 1999, our
compensation committee suspended all other annual stock option grants for fiscal
1999.

         Our employee stock purchase plan allows all eligible employees,
including executive officers, to purchase shares of our common stock at a price
not less than 85% of fair market value, subject to limitations. The purpose of
the stock purchase plan is to enhance the proprietary interest among all of our
employees, including executives.

OTHER EXECUTIVE COMPENSATION

Through our subsidiaries, we provide benefits to executives that are also
available to all employees of our subsidiaries, including 401(k) savings plans
which include matching contributions, medical, basic life and disability
insurance benefits. Executive officers also receive supplemental disability
insurance and car allowances. There are no other pension or retirement programs.
We generally do not provide executive perquisites such as club memberships.


                                       45
<PAGE>   46


SECTION 162(m) POLICY

The Securities and Exchange Commission requires that our compensation committee
discuss how they intend to deal with the cap on the deductibility of
compensation over $1,000,000 for executive officers under Section 162(m) of the
Internal Revenue Code.

Generally, our compensation committee has determined to analyze the impact of
Section 162(m) on Cameron Ashley in the light of all of the relevant factors and
will maintain flexibility and integrity in our compensation systems while
attempting to maximize deductibility of compensation. While our compensation
committee recognizes the importance of maximizing Cameron Ashley's ability to
deduct compensation for tax purposes, it also realizes a need for compensation
systems designed to attract and retain qualified executives, particularly the
Chief Executive Officer.

Section 162(m) will have little or no impact on Cameron Ashley in 2000, as we
project that the maximum levels of cash compensation for Cameron Ashley's most
highly paid executive officers will not exceed $1,000,000. We believe that
Cameron Ashley's incentive plans include provisions required in order to permit
the stock options granted by Cameron Ashley to qualify as "performance-based
compensation" for purposes of Section 162(m).

We will periodically monitor Cameron Ashley's compensation programs, the levels
of compensation to various executives and the impact of Section 162(m) on
Cameron Ashley with a view toward maintaining a flexible and competitive
compensation system for executives that includes deductible elements to the
extent feasible.

CHIEF EXECUTIVE OFFICER'S COMPENSATION

Mr. Ross's fiscal 1999 compensation was derived from commitments under Mr. Ross'
employment agreement dated May 25, 1999 and former employment agreement dated
September 1, 1996. See "Executive Compensation - Employment Agreements." Under
the current agreement, Mr. Ross' base salary was set at $460,000, subject to
review periodically by our compensation committee. In practice, our compensation
committee reviews Mr. Ross' salary annually each December. In December 1999, the
compensation committee reviewed Mr. Ross' performance and comparative salary
data and granted a 5% base salary increase from $460,000 to $483,000, effective
December 1, 1999.

Our compensation committee approved the incentive bonus payment for Mr. Ross for
fiscal 1999 in December 1999. Mr. Ross' target annual bonus of 100% of base
salary is set by his current employment agreement. The agreement provides that
the amount of bonus is determined based upon the achievement of quantitative and
qualitative performance goals established in good faith by our compensation
committee. In determining Mr. Ross' fiscal 1999 bonus payment, our compensation
committee measured Cameron Ashley's performance in relation to pre-set targets
for the following factors: (i) our pre-tax profit; (ii) our earnings per share;
and (iii) the stock price of our common stock at fiscal year end (based on an
average market price during November). Our committee also considered several
discretionary factors for fiscal 1999, including (x) strengthening of our
balance sheet, (y) successful progress on implementation of our Cameron
division's system re-engineering project and (z) moderate improvements in
Cameron Ashley's operating efficiency and in reducing the number of branch
locations with negative earnings before interest and taxes. Mr. Ross' bonus
formula is weighted 60% to the pre-set financial targets described above and 40%
to discretionary factors. In fiscal 1999, Mr. Ross achieved approximately 56%
out of a possible 100% of the criteria performance established for his fiscal
1999 bonus, including discretionary factors.


                                            COMPENSATION COMMITTEE

                                            Richard L. Cravey
                                            J. Veronica Biggins

February 21, 2000


                                       46
<PAGE>   47
SHAREHOLDER RETURN COMPARISON

We completed an initial public offering of our common stock on March 29, 1994.
Our common stock began trading on the NASDAQ National Market System on that
date. On June 17, 1998 our common stock was listed for trading on the New York
Stock Exchange. The following line graph presentation compares cumulative
returns of our common stock with the New York Stock Exchange (U.S. Companies)
and an industry peer group selected by us assuming the investment of $100 in our
common stock, the New York Stock Exchange (U.S. Companies) and the peer index
and reinvestment of all dividends for the period beginning October 31, 1994
through October 29, 1999. The peer index includes a selected group of companies
who are engaged in the distribution of various lines of building products in the
residential, manufactured housing or commercial construction industry and, in
many cases, employ an acquisition and consolidation strategy similar to ours.

                     COMPARISON OF CUMULATIVE TOTAL RETURNS
                     CAMERON ASHLEY BUILDING PRODUCTS, INC.



                                     LEGEND

<TABLE>
<CAPTION>
Symbol    CRSP Total Returns Index for:                10/1994   10/1995   10/1996   10/1997   10/1998   10/1999
------    -----------------------------                -------   -------   -------   -------   -------   -------
<S>       <C>                                          <C>       <C>       <C>       <C>       <C>       <C>
____o     Cameron Ashley Building Products, Inc.         100.0      42.5      74.7      95.2      61.6      47.3

 ..-.*     NYSE Stock Market (US Companies)               100.0     124.0     152.6     200.1     231.8     271.6

----+     Self-Determined Peer Group                     100.0      88.3     102.9     115.9      89.6      73.3
</TABLE>

Companies in the Self-Determined Peer Group

     BARNETT INC                                 BUILDING MATERIALS HOLDING CORP
     DAYTON SUPERIOR CORP                        HUGHES SUPPLY INC
     KEVCO INC                                   MORGAN PRODUCTS LTD
     NOLAND COMPANY                              PATRICK INDUSTRIES INC
     WICKES INC                                  WOLOHAN LUMBER CO

NOTES:

     A. The lines represent monthly index levels derived from compounded daily
        returns that include all dividends.

     B. The indexes are reweighted daily, using the market capitalization on
        the previous trading day.

     C. If the monthly interval, based on the fiscal year-end, is not a trading
        day, the preceding trading day is used.

     D. The index level for all series was set to $100.0 on 10/31/1994.


                               CUMULATIVE RETURNS


<TABLE>
<CAPTION>
                       10/31/94   10/29/99
                       --------   --------
<S>                    <C>        <C>
CAMERON ASHLEY           100        47.3
NYSE STOCK MARKET        100       271.6
PEER INDEX               100        73.3
</TABLE>

Our peer index includes the following companies: Barnett, Inc., Building
Materials Holding Corp., Dayton Superior Corporation, Hughes Supply, Inc.,
Kevco, Inc. (successor to Shelter Components Corporation), Morgan Products,
Ltd., Noland Company, Patrick Industries, Inc., Wickes Inc. and Wolohan Lumber
Company






                                       47
<PAGE>   48


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to beneficial ownership
of Cameron Ashley's common stock as of February 21, 2000, by (i) each person (or
group of affiliated persons) who is known by Cameron Ashley to own beneficially
more than 5% of Cameron Ashley's common stock, (ii) each of Cameron Ashley's
directors and executive officers, and (iii) all directors and named executive
officers as a group. Unless otherwise indicated, each shareholder has sole
voting and investment power with respect to the indicated shares.


<TABLE>
<CAPTION>
                                                                   NUMBER OF SHARES
                                                                   OF COMMON STOCK             PERCENT
     NAME                                                         BENEFICIALLY OWNED           OF CLASS (1)
     ----                                                         ------------------           ------------

<S>                                                               <C>                          <C>
CGW Southeast Partners I, L.P.(2)                                      938,121                 10.8
FMR Corp. (3)                                                          846,400                  9.7
The Prudential Insurance Company of America (4)                        774,400                  8.9
T. Rowe Price Associates, Inc. (5)                                     666,900                  7.6
Dimensional Fund Advisors (6)                                          651,300                  7.5
Barry Segal (7)                                                        547,400                  6.3
Heartland Advisors Inc. (8)                                            500,000                  5.7
Wilen Management Company, Inc.(9)                                      491,800                  5.6
Ronald R. Ross                                                         189,335 (10)             2.2
Walter J. Muratori                                                     292,505 (11)             3.3
Garold E. Swan                                                          26,390 (12)              *
C. Steven Gaffney                                                      129,462 (13)             1.5
John S. Davis                                                           33,983 (14)              *
Richard L. Cravey (3)                                                  938,121 (15)            10.8
Edwin A. Wahlen, Jr. (3)                                               938,121 (15)            10.8
J. Veronica Biggins                                                      9,667 (16)              *
Harry K. Hornish                                                         5,667 (17)              *
Lawrence P. Klamon                                                           0                   *
Alan K. Swift                                                            4,500                   *
All directors and executive officers as a group (14 persons)         1,663,733 (18)            18.2
</TABLE>

---------------

*        Represents less than 1% of the outstanding shares of Cameron Ashley
         common stock.

(1)      Pursuant to the rules of the Securities and Exchange Commission, shares
         of Cameron Ashley's common stock that a person has the right to acquire
         within 60 days pursuant to the exercise of stock options are deemed to
         be outstanding for the purposes of computing the percentage ownership
         of such person but are not deemed outstanding for the purpose of
         computing the percentage ownership of any other person.
(2)      Based upon a Schedule 13G filed with the Securities and Exchange
         Commission on October 15, 1998. The address of CGW Southeast Partners
         I, L.P. and the business address of Messrs. Cravey and Wahlen is Twelve
         Piedmont Center, Suite 210, Atlanta, Georgia 30305.
(3)      Based upon a Schedule 13G filed with the Securities And Exchange
         Commission on February 11, 2000. The address of FMR Corp. is 82
         Devonshire Street, Boston, Massachusetts 02109.
(4)      Based upon a Schedule 13G filed with the Securities and Exchange
         Commission on January 31, 2000. The address of The Prudential Insurance
         Company of America is 751 Broad Street, Newark, New Jersey 07102-3777.
         Includes 216,200 shares for which Prudential has sole voting power and
         sole dispositive power or both and 558,200 shares for which Prudential
         is deemed to have shared voting power or shared dispositive power or
         both.
(5)      Based upon a Schedule 13G filed with the Securities and Exchange
         Commission on February 2, 2000. The address of T. Rowe Price Associates
         Inc. ("Price Associates") is 100 East Pratt Street, Baltimore, Maryland
         21202. These securities are owned by various individual and
         institutional investors for which Price Associates serves as investment
         advisor with power to direct investments and/or sole power to vote the
         securities. For purposes of the reporting requirements of the
         Securities Exchange Act of 1934, Price Associates is deemed to be a
         beneficial owner of such securities; however, Price Associates
         expressly disclaims that it is, in fact, the beneficial owner of such
         securities.
(6)      Based upon a Schedule 13G filed with the Securities and Exchange
         Commission on February 3, 2000. The address of Dimensional Fund
         Advisors is 1299 Ocean Avenue, Santa Monica, California 90401.


                                       48
<PAGE>   49


(7)      Based upon a 13D filed with the Securities And Exchange Commission on
         February 16, 2000. The address of Barry Segal is c/o Bradco Supply
         Corporation, 13 Production Way, Avenel, New Jersey 07001.
(8)      Based upon a Schedule 13G filed with the Securities And Exchange
         Commission on January 18, 2000. The address of Heartland Advisors Inc.
         is 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.
(9)      Based upon a Schedule 13G filed with the Securities And Exchange
         Commission on February 9, 2000. The address of Wilen Management
         Company, Inc. is 2360 West Joppa Road, Greenspring Station Suite 226,
         Lutherville, Maryland 21093
(10)     Includes 120,000 shares subject to options exercisable within 60 days
         and 370 shares owned by his children.
(11)     Includes 155,003 shares subject to options exercisable within 60 days.
(12)     Includes 20,000 shares subject to options exercisable within 60 days.
(13)     Includes 37,794 shares subject to options exercisable within 60 days.
(14)     Includes 33,443 shares subject to options exercisable within 60 days.
(15)     As managing directors of the corporate general partner of CGW Southeast
         Partners I, L.P. and of CGW Southeast Management Company, Messrs.
         Cravey and Wahlen share voting and investment power with respect to the
         shares owned of record by CGW Southeast Partners I, L.P. and are,
         therefore, deemed to be the beneficial owners of such shares.
(16)     Includes 7,667 shares subject to options exercisable within 60 days.
(17)     Includes 5,667 shares subject to options exercisable within 60 days.
(18)     Includes a total of 412,913 shares subject to options exercisable
         within 60 days.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Richard L. Cravey and Edwin A. Wahlen, Jr. are each managing directors of CGW
Southeast Management Company. CGW Southeast Management Company, an affiliate of
CGW Southeast I, L.P., was previously a party to a consulting agreement with
Cameron Ashley which expired on December 20, 1998. Under the agreement, Cameron
Ashley paid a monthly retainer fee to CGW Southeast Management Company for
financial and management consulting services. CGW Southeast Management Company
also was eligible to receive additional compensation, if approved by our board
of directors at the end of the fiscal year, based upon the overall performance
of Cameron Ashley and its subsidiaries. The aggregate monthly fees paid by
Cameron Ashley in fiscal 1999 were $72,000. No additional compensation was paid
at fiscal year-end. The consulting agreement was not renewed or replaced by any
similar arrangement.

Mr. Cravey and Mr. Wahlen each hold a one-third interest in the CGW Southeast
Management Company, a one-third interest in the corporate general partner of CGW
Southeast I, L.P. that made a 1% investment in CGW Southeast I, L.P., and a
one-third interest in Le Select, a Georgia general partnership and limited
partner of CGW Southeast I, L.P. that owns a 5.33% limited partnership interest
in CGW Southeast I, L.P. Messrs. Cravey and Wahlen are also managing directors
of CGW Southeast I, Inc. and of CGW Southeast Management Company.

Alan K. Swift is Chairman of the Board and a minority shareholder of Field
Marketing, a subsidiary of Cameron Ashley. Mr. Swift, Field Marketing and
Cameron Ashley are parties to a stock purchase and option agreement dated
October 31, 1997 pursuant to which Cameron Ashley purchased a one-third equity
interest in the common stock of Field Marketing for $2,640,000. In addition,
Cameron Ashley granted Mr. Swift and the other shareholders of Field Marketing
"put" options for their remaining shares of Field Marketing common stock. Under
the "put" options, the shareholders of Field Marketing may elect at any time
until October 31, 2001 to require Cameron Ashley to purchase their Field
Marketing shares at a price based upon the financial performance of Field
Marketing. Mr. Swift exercised put options for an aggregate exercise price of
$813,000 in February 1999, based on the performance of Field Marketing in fiscal
1998. He has elected not to exercise his annual put option in February 2000
relating to the performance of Field Marketing in fiscal 1999. Cameron Ashley
currently owns approximately 70% of Field Marketing.

J. Veronica Biggins is a partner of Heidrick & Struggles, which firm provided
retained executive recruitment services to Cameron Ashley in fiscal 1999. The
amount paid by Cameron Ashley for such services did not exceed 5% of
consolidated gross revenues of either Cameron Ashley or Heidrick & Struggles in
fiscal 1999.


                                       49
<PAGE>   50


                                   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/A
(Amendment No. 1) to be signed on its behalf by the undersigned, thereunto duly
authorized, on February 23, 2000.

                            CAMERON ASHLEY BUILDING PRODUCTS, INC.


                            By: /s/ Garold E. Swan
                               -------------------------------------------------
                            Garold E. Swan,
                            Executive Vice President and Chief Financial Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K/A (Amendment No. 1) has been signed by the following
person on behalf of the Registrant and in the capacities indicated on February
23, 2000.

<TABLE>
<CAPTION>
               SIGNATURE                                           TITLE
               ---------                                           -----

<S>                                                    <C>
 /s/ Ronald R. Ross                                    Chairman of the Board and CEO
-----------------------------------------------        (Principal Executive Officer)
Ronald R. Ross


 /s/  Walter J. Muratori                               President and Director
-----------------------------------------------
Walter J. Muratori


 /s/ Garold E. Swan                                    Executive Vice President and CFO
-----------------------------------------------        (Principal Financial and Accounting Officer)
Garold E. Swan


 /s/ Garold E. Swan, attorney-in-fact                  Director
------------------------------------------------
J. Veronica Biggins


 /s/ Garold E. Swan, attorney-in-fact                  Director
------------------------------------------------
Richard L. Cravey


 /s/ Garold E. Swan, attorney-in-fact                  Director
------------------------------------------------
Harry K. Hornish


 /s/ Garold E. Swan, attorney-in-fact                  Director
-----------------------------------------------
Lawrence P. Klamon


 /s/ Garold E. Swan, attorney-in-fact                  Director
----------------------------------------------
Alan K. Swift


 /s/ Garold E. Swan, attorney-in-fact                  Director
---------------------------------------------
Edwin A. Wahlen, Jr.
</TABLE>


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