SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sections 240.14a-11(c) or Section 240.14a-
12
PATRICK INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PATRICK INDUSTRIES, INC.
1800 SOUTH 14TH STREET
P.O. BOX 638
ELKHART, INDIANA 46515
219-294-7511
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2001
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Patrick
Industries, Inc., an Indiana corporation, will be held at the Company's Patrick
Metals Division offices, 5020 Lincolnway East, Mishawaka, Indiana, on Tuesday,
May 15, 2001 at 10:30 a.m., Mishawaka time, for the following purposes:
1. To elect four directors of the Company to serve until 2004.
2. To approve a proposed amendment to the Company's 1987 Stock Option
Program.
3. To consider and transact such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 16, 2001,
as the record date for the determination of the holders of shares of the
Company's outstanding Common Stock entitled to notice of and to vote at the
Annual Meeting of Shareholders. Each shareholder is entitled to one vote per
share on all matters to be voted on at the meeting.
Whether or not you expect to attend the meeting, you are urged to sign,
date, and return the enclosed proxy in the enclosed envelope.
By Order of the Board of Directors,
KEITH V. KANKEL
SECRETARY
April 10, 2001
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH
REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES. A PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
PATRICK INDUSTRIES, INC.
1800 SOUTH 14TH STREET
P.O. BOX 638
ELKHART, INDIANA 46515
219-294-7511
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2001
-------------------------------
This Proxy Statement is being mailed to shareholders of Patrick Industries,
Inc. (the "Company") on or about April 10, 2001, and is furnished in connection
with the Board of Directors' solicitation of proxies for the Annual Meeting of
Shareholders to be held on May 15, 2001 for the purpose of considering and
acting upon the matters specified in the Notice of Annual Meeting of
Shareholders accompanying this Proxy Statement. If the form of proxy which
accompanies this Proxy Statement is executed and returned, it may be revoked by
the person giving it at any time prior to the voting thereof by written notice
to the Secretary, by delivery of a later dated proxy or by requesting to vote in
person at the meeting. Additional solicitations, in person or by telephone or
telegraph, may be made by certain directors, officers and employees of the
Company without additional compensation. Expenses incurred in the solicitation
of proxies, including postage, printing and handling, and actual expenses
incurred by brokerage houses, custodians, nominees, and fiduciaries in
forwarding documents to beneficial owners, will be paid by the Company.
The Annual Report to shareholders for the year ended December 31, 2000,
accompanies this Proxy Statement. Additional copies of the Annual Report may be
obtained by writing the Secretary of the Company.
VOTING INFORMATION
Each shareholder is entitled to one vote for each share of the Company's
Common Stock held as of the record date. For purposes of the meeting, a quorum
means a majority of the outstanding shares. As of the close of business on March
16, 2001, the record date for shareholders entitled to vote at the annual
meeting, there were outstanding 4,505,666 shares of Common Stock, entitled to
one vote each. In determining whether a quorum exists at the meeting, all shares
represented in person or by proxy will be counted. A shareholder may, with
respect to the election of directors, (i) vote for the election of all named
director nominees, (ii) withhold authority to vote for all named director
nominees or (iii) vote for the election of all named director nominees other
than any nominee with respect to whom the shareholder withholds authority to
vote by so indicating in the appropriate space on the proxy. With respect to the
proposal to amend the 1987 Stock Option Program, a shareholder may (i) vote for
the proposal, (ii) vote against the proposal or (iii) abstain from voting.
Proxies properly executed and received by the Company prior to the meeting and
not revoked will be voted as directed therein on all matters presented at the
meeting. In the absence of a specific direction from the shareholder, proxies
will be voted for the election of all named director nominees and for the
approval of the amendment to the 1987 Stock Option Program.
The Directors are elected by a plurality of the votes cast by shares
present in person or by proxy at the Annual Meeting and entitled to vote.
Withholding authority to vote in the election of Directors will have no effect
on that matter. The affirmative vote of the holders of a majority of the shares
present in person or by proxy at the meeting and entitled to vote is required
for approval of the proposed amendment to the Company's 1987 Stock Option
Program. Abstentions in connection with the proposal to amend the Company's 1987
Stock Option Program will count as votes against the proposal. Broker non-votes
will have no effect on any matter at the Annual Meeting. Any other matter which
may properly come before the meeting will be approved if the votes cast favoring
the action exceed the votes cast opposing the action.
The Board of Directors knows of no other matter which may come up for
action at the meeting. However, if any other matter properly comes before the
meeting, the persons named in the proxy form enclosed will vote in accordance
with their judgment upon such matter.
Shareholder proposals for inclusion in proxy materials for the next Annual
Meeting should be addressed to the Company's Secretary, P.O. Box 638, Elkhart,
Indiana 46515, and must be received no later than December 11, 2001. In
addition, the Company's By-laws require notice of any other business to be
brought before a meeting by a shareholder (but not included in the proxy
statement) to be delivered to the Company's Secretary, together with certain
prescribed information, not less than 20 nor more than 50 days prior to such
meeting. Likewise, the Articles of Incorporation and By-laws require that
shareholder nominations to the Board of Directors be delivered to the Secretary,
together with certain prescribed information, not less than 20 no more than 50
days prior to a meeting at which directors are to be elected.
STOCK OWNERSHIP INFORMATION
The following table sets forth, as of the record date, information
concerning the only parties known to the Company having beneficial ownership of
more than 5 percent of its outstanding Common Stock and information with respect
to the stock ownership of all directors and executive officers of the Company as
a group.
NUMBER OF
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
------------------------------------ ----- --------
Mervin D. Lung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 995,786 22.10%
Chairman of the Company
P.O. Box 638
Elkhart, Indiana 46515
Dimensional Fund Advisors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 399,842 8.87%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
FMR Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 415,100 9.21%
82 Devonshire Street
Boston, Massachusetts 02109
Heartland Advisors, Inc. . . . . . . . . . . . .. . . . .. . . . . . . . . . . . 515,000 11.43%
789 North Water Street
Milwaukee, Wisconsin 53202
Directors and Executive Officers as a group (11 persons) . . . . . . . . . . . . 1,251,986 27.79%(1)
- ---------
(1) The stock ownership of the executive officers named in the Summary
Compensation Table is set forth under the heading "Election of Directors",
except for R. Lynn Brandon (10,000 shares) and Alan M. Rzepka (250 shares).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that certain
of the Company's officers, its directors and 10% shareholders file with the
Securities and Exchange Commission and Nasdaq an initial statement of beneficial
ownership and certain statements of changes in beneficial ownership of Common
Stock of the Company. Based solely on its review of such forms received by the
Company and written representation from the directors and officers that no other
reports were required, the Company is unaware of any instances of noncompliance,
or late compliance, with such filings during the fiscal year ended December 31,
2000.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with the members of
each class serving staggered three-year terms. Accordingly, at the 2001 Annual
Meeting four directors will be elected to hold office until the 2004 Annual
Meeting or until their successors are duly elected and qualified.
In December, 2000 Merlin Knispel retired as a director of the Company. The
Board wishes to express its gratitude for Mr. Knispel's many years of faithful
service to the Company and its shareholders. In accordance with the By-Laws, the
vacancy created by Mr. Knispel's retirement was filled by the Board of Directors
who elected Mr. Walter Wells to complete the remainder of Mr. Knispel's term as
a director.
It is intended that the proxies will be voted for the nominees listed
below, unless otherwise indicated on the proxy form. It is expected that these
nominees will serve, but, if for any unforeseen cause any such nominee should
decline or be unable to serve, the proxies will be voted to fill any vacancy so
arising in accordance with the discretionary authority of the persons named in
the proxies.
The following information concerning principal occupations and the number
of shares of Common Stock of the Company owned beneficially as of March 16,
2001, has been furnished by the nominees and directors continuing in office:
COMMON PERCENT
FIRST STOCK OF
YEAR OF THE COMMON
PRINCIPAL OCCUPATION ELECTED COMPANY STOCK
NAME AND AGE AND OTHER DIRECTORSHIPS DIRECTOR OWNED(1) OWNED
------------ ----------------------- -------- -------- -----
Nominees to Serve Until the 2004 Annual Meeting:
- ------------------------------------------------
Keith V. Kankel, 58 . . . . . .Vice President of Finance since 1987 1977 16,686 less
and Secretary-Treasurer since 1974. than
1%
Mervin D. Lung, 78 . . . . . Chairman in 1989, President since 1961 995,786 22.1%
incorporation in 1961 until 1989,
husband of Dorothy M. Lung and
father of David D. Lung.
John H. McDermott, 69 . . . Of counsel to the Chicago, Illinois 1969 35,000 less
law firm of McDermott, Will & Emery, than
which firm has been retained by the 1%
Company since 1968 for certain legal
matters.
Harold E. Wyland, 64 . . . . Retired Vice President of Sales, 1989 11,800 less
from 1990 through 1998. than
1%
Directors to Serve Until the 2003 Annual Meeting:
-------------------------------------------------
Thomas G. Baer, 69 . . . . . Retired Vice President of Operations, 1970 9,008 less
from 1975 through 1998. than
1%
Walter Wells, 62 . . . . . . .Retired President and CEO of Schult 2001 0
Homes Corporation and Director of
Pleasant Street, LLC
David D. Lung, 53 . . . . . . .President (Chief Executive Officer) 1977 75,556 1.68%
since 1989. Son of Mervin D. and
Dorothy M. Lung.
COMMON PERCENT
FIRST STOCK OF
YEAR OF THE COMMON
PRINCIPAL OCCUPATION ELECTED COMPANY STOCK
NAME AND AGE AND OTHER DIRECTORSHIPS DIRECTOR OWNED(1) OWNED
------------ ----------------------- -------- -------- -----
Directors to Serve Until the 2002 Annual Meeting:
- -------------------------------------------------
Dorothy M. Lung, 74 . . . . Vice President and Director of Gano 1986 45,600 1.01%
Plywood, Inc. (construction
materials), wife of Mervin D. Lung
and mother of David D. Lung.
Robert C. Timmins, 79 . . . Vice President and Director of 1987 45,300 1.00%
a Musical Instrument Company and
CPA and Partner of McGladrey &
Pullen (certified public
accountants) until 1985.
Terrence D. Brennan, 62 . . Retired President and CEO of NBD Bank, - - 7,000 less
Elkhart, IN, from 1973 to 1997. than
1%
- - - - - - - -
(1) Each individual has sole voting and dispositive power over the shares
indicated.
PROPOSED AMENDMENT TO 1987 STOCK OPTION PROGRAM
The Company's 1987 Stock Option Program (the "Program") was adopted by the
Board of Directors in 1987 and approved by the shareholders in the same year.
The purpose of the Program is to attract and retain highly qualified persons as
officers and key employees of the Company.
In 1994, the Program was amended to (i) extend the term of the Program to
the year 2004, (ii) increase the number of shares available for grants under the
Program to 600,000, (iii) change the class of eligible participants to include
non-employee directors, and (iv) add a per person limitation of 50,000 shares to
the number of shares which may be awarded to any participant in any year during
the term of the Program to comply with the requirements of Section 162(m) of the
Internal Revenue Code.
The Board of Directors has now amended the Program, subject to shareholder
approval, to increase the number of shares available for grants under the
program by 200,000 shares.
The proposed amendment will permit the Company to keep pace with changing
trends in management compensation and make the Company competitive with those
companies that offer stock incentives to attract and keep management employees.
ELIGIBILITY FOR PARTICIPATION
Officers and other key employees of the Company are eligible to participate
in the Program. In addition, each non-employee director bi-annually receives a
restricted stock award for 6,000 shares of Common Stock upon election to the
Board which will vest after two years of continued service on the Board.
FEDERAL TAX TREATMENT
The grant of a stock option is not a taxable event. Upon exercise of a
stock option, the participant will have taxable income equal to the difference
between the fair market value on the date of exercise and the exercise price.
The non-employee directors who receive restricted stock awards will not
realize taxable income at the time of grant, and the Company will not be
entitled to a tax deduction at the time of grant, unless any such person makes
an election to be taxed at the time of grant. When the restrictions lapse, the
non-employee director will recognize taxable income in an amount equal to the
then fair market value of the shares. The Company will be entitled to a
corresponding tax deduction.
OTHER INFORMATION
The Compensation Committee has authorized the cancellation of stock options
to 44 persons holding options for 327,500 shares of stock. Six months and one
day from the cancellation of those options new options will be granted to those
persons for seventy-five percent (75%) of the shares covered under the old
options with an exercise price equal to the fair market value on the date of
grant. The named executive officers will be allowed to participate in this
cancellation process as follows:
NUMBER OF SHARES
NUMBER OF SHARES TO BE RECEIVED
NAME UNDER CANCELLED OPTION UNDER NEW OPTION
------------------------------------------------------------------
Mervin D. Lung 50,000 37,500
David D. Lung 50,000 37,500
Keith V. Kankel 20,000 15,000
Alan M. Rzepka 10,000 7,500
The closing price of the Common Stock as reported on the NASDAQ/MNS for
March 16, 2001 was $6.688 per share.
The affirmative vote of holders of a majority of the shares represented and
entitled to vote at the meeting is required for approval of the amendment of the
1987 Stock Option Program. Abstentions will count as a vote against the
proposal, and broker non-votes will have no effect on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
1987 STOCK OPTION PROGRAM.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) 2000 OPTIONS(#)(1) COMPENSATION ($)(2)
- --------------------------- ---- ---------- --------- ------------------ ------------------
Mervin D. Lung 2000 249,326 - - - - - - 700
Chairman 1999 243,436 146,393 850
1998 235,903 192,806 850
David D. Lung 2000 244,182 - - - 12,000 700
President and CEO 1999 238,443 167,664 850
1998 198,965 192,806 850
Keith V. Kankel 2000 151,890 - - - 7,500 700
Vice President of Finance 1999 148,413 146,393 850
1998 143,461 192,806 850
R. Lynn Brandon (3) 2000 147,987 - - - 7,500 0
Vice President of Operations 1999 77,885 63,214 0
Alan M. Rzepka (4) 2000 141,615 - - - 12,000 700
Vice President Sales/Marketing
- - - - - - - - - -
(1) The options are for a term of six years and become exercisable at the rate
of 25% per year at the end of the first year, at $6.125 per share.
(2) Company contributions to 401(k) Savings Plan.
(3) Mr. Brandon became an employee of the Company in May, 1999 and was elected
Vice President in August, 1999.
(4) Mr. Rzepka became an employee of the Company in January, 1986 and was
elected Vice President in May, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
% OF TOTAL
OPTIONS POTENTIAL
GRANTED REALIZABLE
OPTION TO EXERCISE EXPIRATION VALUE
GRANTED EMPLOYEES PRICE DATE 5% 10%
------- --------- ---------- ------------ ------------------
David D. Lung . . . . . . . . . 12,000 10.4 $6.125 06/06/2007 25,025 56,700
Keith V. Kankel . . . . . . . . 7,500 6.5 $6.125 06/06/2007 15,638 19,800
R. Lynn Brandon . . . . . . . . 7,500 6.5 $6.125 06/06/2007 15,638 19,800
Alan M. Rzepka . . . . . . . . 12,000 10.4 $6.125 06/06/2007 25,025 56,700
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FY- OPTIONS AT FY-
END (#) END ($)*
EXERCISABLE / EXERCISABLE /
NAME NONEXERCISABLE NONEXERCISABLE
- ---- --------------
David D. Lung . . . . . . . . . . . . . . . . 12,500/49,500 $0/0
Keith V. Kankel . . . . . . . . . . . . . . . 5,000/22,500 $0/0
R. Lynn Brandon . . . . . . . . . . . . . . . 0/ 7,500 $0/0
Alan M. Rzepka . . . . . . . . . . .. . . . . 2,500/19,500 $0/0
- - - - - - -
* Market value of the underlying stock at exercise date or year-end as the case
may be, minus the exercise price of the options.
Under the Company's 1987 Stock Option Program, the Company may grant to key
employees (including employees who may also be officers and directors, as long
as they do not serve on the committee overseeing the administration of the
Program) stock options that may either be incentive stock options or
non-qualified stock options, related stock appreciation rights and stock awards.
In 2000, David D. Lung and Alan M. Rzepka were granted 12,000 share options and
Keith V. Kankel and R. Lynn Brandon were granted 7,500 share options. The
options vest 25% per year and are for $6.125 per share.
The executive officers of the Company have deferred compensation agreements
which provide that the Company will pay each of these employees or their
beneficiaries 60% of their base salary for 120 months upon retirement (if the
employee continues in the employ of the Company until the age of 65) or upon the
employee's death or total disability, up to a maximum of $102,000 per year for
Mervin D. Lung, $82,000 per year for David D. Lung, $72,000 per year for Keith
V. Kankel, and 40% of base salary up to a maximum $72,000 per year for R. Lynn
Brandon and Alan M. Rzepka. The cost of these agreements is being funded with
insurance contracts purchased by the Company
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has an Audit Committee comprised of Terrence D.
Brennan, John H. McDermott and Robert C. Timmins, who are not employees of the
Company. The Audit Committee's responsibilities include recommending to the
Board of Directors the independent accountants to be employed for the purpose of
conducting the annual examination of the Company's financial statement,
discussing with the independent accountants the scope of their examination,
reviewing the Company's financial statements and the independent accountants'
report thereon with Company personnel and the independent accountants, and
inviting the recommendations of the independent accountants regarding internal
controls and other matters. All of the members of the Audit Committee are
independent as defined in the Nasdaq listing standards. The Audit Committee met
four times in 2000.
The Board of Directors also has a Stock Option Committee, comprised of John
H. McDermott, Terrence D. Brennan, and Robert C. Timmins. The Stock Option
Committee met three times in 2000.
The Board of Directors also has a Compensation Committee which met four
times in 2000 and their actions are described on the following pages of this
Proxy Statement.
The Board of Directors had six regular and one telephonic meetings in 2000
and all directors attended at least six meetings. Non-employee directors are
paid $600 for each meeting they attend. Employee directors receive no
compensation as such. On a bi-annual basis in May, each non-employee director is
automatically granted a restricted stock award for 6,000 shares of the Company's
Common Stock which will vest upon such director's continued service as a member
of the Board of Directors for two years or earlier upon certain events.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report of the Compensation Committee and the following Performance
Graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
OVERVIEW
The Committee policy is to design compensation programs for salaries,
incentive bonus programs, other benefits, and long-term incentive programs for
all key executives, including the officers named in the Summary Compensation
Table. The goals and objectives of the Committee are to attract and retain top
quality management employees and ensure that an appropriate relationship exists
between executive pay and the creation of shareholder value. The criteria used
to determine the compensation of the Chief Executive Officer will also be used
in determining compensation for the other officers. The Committee will also
receive the recommendation of the Chief Executive Officer regarding the
compensation of the other officers.
Federal tax law imposes a $1 million limit on the tax deduction for certain
executive compensation payments. Because the compensation paid to any executive
office is significantly below the $1 million threshold, the Compensation
Committee has not yet had to address the issues relative thereto.
SALARIES
The executive salaries are reviewed annually. The Committee sets executive
salaries based on competitive market levels, experience, individual and company
performance, levels of responsibility, and pay practices of other companies
relating to executives of similar responsibility. The Committee considered the
compensation levels of executives at comparable companies and fixed the
compensation for the CEO and other executive officers at levels approximating
the midrange of such companies. The Committee includes in its consideration
comparable companies listed in the CRSP Index for lumber and wood products and
other in building products industries. See "Performance Graph."
ANNUAL INCENTIVE
The Company provides an annual bonus plan for executive officers that gives
them the opportunity to earn additional compensation based on the performance of
the Company. The Chief Executive Officer and the other officers share in this
program to achieve certain bonus amounts based on various levels of
profitability of the Company. In 2000, there was no bonus due to the Company not
having income before taxes.
STOCK OPTIONS
On an ongoing basis the Company has used stock options as a long-term
incentive program for executives and key employees. In 2000, the Stock Option
Committee granted options of 115,000 shares at $6.125 per share to key
employees. Included in this grant was 12,000 shares each to David D. Lung and
Alan M. Rzepka, and 7,500 shares each to Keith V. Kankel and R. Lynn Brandon.
David D. Lung
Mervin D. Lung
John H. McDermott
Robert C. Timmins
Terrence D. Brennan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mervin D. Lung is Chairman of the Company and David D. Lung is President
and Chief Executive Officer of the Company. Mervin D. Lung and David D. Lung did
not participate in the final decisions with respect to their compensation. John
H. McDermott is of counsel to the Chicago, Illinois law firm of McDermott, Will
& Emery which provides various legal services to the Company.
CERTAIN TRANSACTIONS
The Company leases a distribution warehouse and various facilities for its
manufacturing operations from Mervin D. Lung, the Company's Chairman, under an
agreement which expires September 30, 2005, with an option to renew for three
years. The agreement provides for monthly rental of $27,801, and the payment of
property taxes and insurance premiums on the property. The Company also leases
two buildings from Mr. Lung used for distribution and manufacturing, under an
agreement expiring on September 30, 2004, with an option to renew for five
years. The agreement provides for monthly rental of $25,029, and the payment of
property taxes and insurance premiums on the property. The Company also leases
two manufacturing facilities from Mr. Lung under agreements that expire on March
31, 2004 with options to renew for three years. The agreements provide for
monthly rentals of $11,149, and the payment of property taxes and insurance
premiums on the property. The Company also leases three manufacturing facilities
from Mr. Lung under agreements that expire on July 31, 2001, August 31, 2003,
and October 31, 2003 with options to renew for three years. The agreements
provide for monthly rentals of $25,390, and the payment for property taxes and
insurance premiums on the property. The Company also leases an aircraft from Mr.
Lung under an agreement that expires on June 13, 2002. The agreement provides
for monthly rentals of $24,350, and the payment of insurance premiums and
maintenance on the aircraft.
Mr. Lung owns a building supply firm which does not serve the Manufactured
Housing and Recreational Vehicle industries. The Company purchases certain
specialty items from and sells products to such firm. During the year ended
December 31, 2000, purchases from such firm totaled $54,022 and sales to such
firm totaled $76,163.
The Company believes that the terms of each of the above transactions are
at least as favorable as those which could have been obtained from unrelated
parties.
AUDIT COMMITTEE REPORT
The responsibilities of the Audit Committee, which are set forth in the
Audit Committee Charter adopted by the Board of Directors (a copy of which is
attached to this Proxy Statement as Appendix A), include providing oversight to
the Company's financial reporting process through periodic meetings with the
Company's independent auditors, principal accounting officer, and management to
review accounting, auditing, internal controls, and financial reporting matters.
The management of the Company is responsible for the preparation and integrity
of the financial reporting information and related systems of internal controls.
The Audit Committee, in carrying out its role, relies on the Company's senior
management, including senior financial management, and its independent auditors.
We have reviewed and discussed with senior management the Company's audited
financial statements included in the 2000 Annual Report to Shareholders.
Management has confirmed to us that such financial statements (i) have been
prepared with integrity and objectivity and are responsibility of management
and, (ii) have been prepared in conformity with generally accepted accounting
principles.
We have discussed with McGladrey & Pullen, LLP, our independent auditors,
the matters required to be discussed by SAS 61 (Communications with Audit
Committee). SAS 61 requires our independent auditors to provide us with
additional information regarding the scope and results of their audit of the
Company's financial statements, including with respect to (i) their
responsibility under generally accepted auditing standards, (ii) significant
accounting policies, (iii) management judgements and
estimates, (iv) any significant audit adjustments, (v) any disagreements with
management, and (vi) any difficulties encountered in performing the audit.
We have received from McGladrey & Pullen, LLP a letter providing the
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) with respect to any
relationships between McGladrey & Pullen, LLP and the Company that in their
professional judgment may reasonably be thought to bear on independence.
McGladrey & Pullen, LLP has discussed its independence with us, and has
confirmed in such letter that, in its professional judgment, it is independent
of the Company within the meaning of the federal securities laws.
Based on the review and discussions described above with respect to the
Company's audited financial statements included in the Company's 2000 Annual
Report to Shareholders, we have recommended to the Board of Directors that such
financial statements be included in the Company's Annual Report on Form 10-K for
filing with the Securities and Exchange Commission.
As specified in the Audit Committee Charter, it is not the duty of the
Audit Committee to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate and in accordance with generally
accepted accounting principles. That is the responsibility of management and the
Company's independent auditors. In giving our recommendation to the Board of
Directors, we have relied on (i) management's representation that such financial
statements have been prepared with integrity and objectivity and in conformity
with generally accepted accounting principals, and (ii) the report of the
Company's independent auditors with respect to such financial statements.
John H. McDermott
Terrence D. Brennan
Robert C. Timmins
PERFORMANCE GRAPH*
Set forth below is a line graph comparing the yearly cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the indices indicated for the period of five fiscal years commencing
December 29, 1995 and ended December 29, 2000. This graph assumes that $100 was
invested on December 29, 1995 and that all dividends were reinvested. The stock
price performance shown on the graph below is not necessarily indicative of
future price performance.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR PATRICK INDUSTRIES, INC.
Produced on 01/25/2001 including data to 12/29/00
[Graph omitted]
- ------------------------------------------------------------------------------------------------------------------------
LEGEND
Symbol CRSP Total Returns Index for: 12/1995 12/1996 12/1997 12/1998 12/1999 12/2000
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
PATRICK INDUSTRIES, INC. 100.0 107.4 105.5 111.5 67.9 43.3
Nasdaq Stock Market (US Companies) 100.0 123.0 150.5 212.5 394.9 237.6
NASDAQ Stocks (SIC 2400-2499 US Companies) 100.0 135.4 152.0 153.2 146.0 100.2
Lumber and wood products, except furniture
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 12/31/1995.
- -------------------------------------------------------------------------------------------------------------------------
*Prepared by Center for Research in Securities Prices, University of
Chicago/Graduate School of Business.
ACCOUNTING INFORMATION
The Board of Directors has reappointed McGladrey & Pullen, LLP as
independent auditors to audit the financial statements of the Company for 2001.
Representatives of McGladrey & Pullen, LLP are expected to be present at the
annual meeting and will be given the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
AUDIT FEES
The aggregate fees billed by the Company's independent auditors for
professional services rendered in connection with (i) the audit of the Company's
annual financial statements set forth in the Company's Annual Report on Form
10-K for the year ended December 31, 2000, and (ii) the review of the Company's
quarterly financial statements set forth in the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2000, June 30, 2000, and September
30, 2000, were approximately $120,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by the Company's independent auditors for the
Company's most recent fiscal year for professional services in this category.
ALL OTHER FEES
The aggregate fees for all other services rendered by its independent
auditors or affiliates for the Company's most recent fiscal year were
approximately $65,300. These fees include work performed by the independent
auditors with respect to web site consultation, employee benefit plan audits,
and income tax services.
The Audit Committee has advised the Company that it has determined that the
non-audit services rendered by the Company's independent auditors during the
Company's most recent fiscal year are compatible with maintaining the
independence of such auditors.
By Order of the Board of Directors
KEITH V. KANKEL
Secretary
April 10, 2001
Appendix A
PATRICK INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
- -------
The Audit Committee is appointed by the Board of Directors for the
primary purposes of:
o Assisting the Board of Directors in fulfilling its oversight
responsibilities as they relate to the Company's accounting
policies and internal controls, financial reporting practices,
and legal and regulatory compliance, and
o Maintaining, through regularly scheduled meetings, a line of
communication between the Board of Directors and the Company's
financial management, principal accounting officer, and
independent accountants.
COMPOSITION AND QUALIFICATIONS
- ------------------------------
The Audit Committee shall be appointed by the Board of Directors and
shall be comprised of three or more Directors (as determined from time to time
by the Board), each of whom shall meet the independence requirements of the
Nasdaq Stock Market, Inc. Each member of the Audit Committee shall have the
ability to understand fundamental financial statements. In addition, at least
one member of the Audit Committee shall have past employment experience in
finance or accounting, professional certification in accounting, or any other
comparable experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer, or other senior officer with financial oversight
responsibilities.
RESPONSIBILITIES
- ----------------
The Audit Committee will:
(1) Review the annual audited financial statements with management and the
independent accounts. In connection with such review, the Audit Committee will:
o Discuss with the independent accountants the matters required to
be discussed by Statement on Auditing Standards No. 61 relating
to the conduct of the audit.
o Review changes in accounting or auditing policies, including
resolution of any significant reporting or operational issues
affecting the financial statements.
o Inquire as to the existence and substance of any significant
accounting accruals, reserves or estimates made by management
that had or may have a material impact on the financial
statements.
o Review with the independent accountants any problems encountered
in the course of their audit, including any change in the scope
of the planned audit work and any restrictions placed on the
scope of such work, any management letter provided by the
independent accountants, and management's response to such
letter.
o Review with the independent accountants and the principal
accounting officer the adequacy of the Company's internal
controls, and any significant findings and recommendations.
(2) Review with management and the independent accountants the Company's
quarterly financial statements in advance of quarterly earnings releases.
(3) Oversee the external audit coverage. The Company's independent accountants
are ultimately accountable to the Board of Directors and the Audit Committee,
which have the ultimate authority and responsibility to select, evaluate, and,
where appropriate, replace the independent accountants. In connection with its
oversight of the external audit coverage, the Audit Committee will:
o Recommend to the Board the appointment of the independent
accountants.
o Approve the engagement letter and the fees to be paid to the
independent accountants.
o Obtain confirmation and assurance as to the independent
accountants independence, including ensuring that they submit on
a periodic basis (not less than annually) to the Audit Committee
a formal written statement delineating all relationships between
the independent accountants and the Company. The Audit Committee
is responsible for actively engaging in a dialogue with the
independent accountants with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the independent accountants and for recommending
that the Board of Directors take appropriate action in response
to the independent accountants' report to satisfy itself of their
independence.
o Meet with the independent accountants prior to the annual audit
to discuss planning and staffing of the audit.
o Review and evaluate the performance of the independent
accountants, as the basis for a recommendation to the Board of
Directors with respect to reappointment or replacement.
(4) Oversee internal audit coverage. In connection with its oversight
responsibilities, the Audit Committee will:
o Review the appointment or replacement of the principal accounting
officer.
o Review, in consultation with management, the independent
accountants and the principal accounting officer, the plan and
scope of internal audit activities.
o Review internal audit activities, budget, and staffing.
o Review significant reports to management prepared by the internal
auditing department and management's responses to such reports.
(5) Review with the independent accountants and the principal accounting officer
the adequacy of the Company's internal controls, and any significant findings
and recommendations with respect to such controls.
(6) Meet periodically with management to review and assess the Company's major
financial risk exposures and the manner in which such risks are being monitored
and controlled.
(7) Meet at least annually in separate executive session with each of the chief
financial officer, executive officers, and the independent accountants.
(8) Review periodically with the Company's General Counsel (i) legal and
regulatory matters which may have a material affect on the financial statements,
and (ii) corporate compliance policies or codes of conduct.
(9) Report regularly to the Board of Directors with respect to Audit Committee
activities.
(10) Prepare the report of the Audit Committee required by the rules of the
Securities and Exchange Commission to be included in the proxy statement for
each annual meeting.
(11) Review and reassess annually the adequacy of this Audit Committee Charter
and recommend any proposed changes to the Board of Directors.
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent accountants. Nor is
it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between
management and the independent accountants or to assure compliance with laws and
regulations and the Company's corporate policies.
- --------------------------------------------------------------------------------
PROXY PROXY
PATRICK INDUSTRIES, INC.
1800 SOUTH 14TH STREET, P.O. BOX 638, ELKHART, INDIANA 46515
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mervin D. Lung, David D. Lung, and Keith V.
Kankel, and each of them, as the undersigned's proxies, each with full power of
substitution, to represent and to vote, as designated below, all of the
undersigned's Common Stock in Patrick Industries, Inc. at the annual meeting of
shareholders of Patrick Industries, Inc. to be held on Tuesday, May 15, 2001,
and at any adjournment thereof, with the same authority as if the undersigned
were personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO SPECIFIC DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR APPROVAL OF THE
AMENDMENT TO THE 1987 STOCK OPTION PROGRAM. THE DIRECTORS FAVOR A VOTE "FOR"
BOTH PROPOSALS.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE RETURN ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
PATRICK INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /x/
1. ELECTION OF DIRECTORS: For Withhold For All
Nominees: All All Except*
01 Mervin D. Lung
02 John H. McDermott / / / / / /
03 Harold E. Wyland
04 Keith V. Kankel
________________________________________
*For ALL except those nominee(s) written
above.
2. Proposal to amend the Company's For Against Abstain
1987 Stock Option Program. / / / / / /
In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before the
meeting.
Dated:__________________ ,2001
Signature (s)______________________
___________________________________
Please sign exactly as name appears
hereon. For joint accounts, all
tenants should sign. Executors,
Administrators, Trustees, etc.,
should so indicate when signing.
-------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE RETURN ENVELOPE.