UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 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 0-3922 PATRICK INDUSTRIES, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1057796 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1800 South 14th Street, Elkhart, IN 46516 (Address of principal executive offices) (ZIP Code) (219) 294-7511 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Shares of Common Stock Outstanding as of April 30, 2001: 4,505,666 PATRICK INDUSTRIES, INC. INDEX Page No. PART I: Financial Information Unaudited Condensed Balance Sheets March 31, 2001 & December 31, 2000 3 Unaudited Condensed Statements of Operations Three Months Ended March 31, 2001 & 2000 4 Unaudited Condensed Statements of Cash Flows Three Months Ended March 31, 2001 & 2000 5 Notes to Unaudited Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II: Other Information 13 Signatures 14 2 PART I: FINANCIAL INFORMATION PATRICK INDUSTRIES, INC. CONDENSED BALANCE SHEETS
(Unaudited) MARCH 31 DECEMBER 31 2001 2000 ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,997,153 $ 6,716,128 Trade receivables 19,814,116 14,281,674 Inventories 29,521,257 30,937,954 Income tax refund claims receivable 2,163,122 1,031,086 Prepaid expenses 755,288 770,017 Deferred tax assets 1,946,000 1,946,000 ------------ ------------ Total current assets 60,196,936 55,682,859 ------------ ------------ PROPERTY AND EQUIPMENT, at cost 92,127,175 92,421,319 Less accumulated depreciation 53,014,979 51,831,581 ------------ ------------ 39,112,196 40,589,738 ------------ ------------ INTANGIBLE AND OTHER ASSETS 6,079,628 6,247,573 ------------ ------------ Total assets $105,388,760 $102,520,170 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 3,671,428 $ 3,671,428 Accounts payable 12,636,356 7,040,285 Accrued liabilities 3,151,536 3,555,008 ------------ ------------ Total current liabilities 19,459,320 14,266,721 ------------ ------------ LONG-TERM DEBT, less current maturities 18,785,716 18,785,716 ------------ ------------ DEFERRED COMPENSATION OBLIGATIONS 2,071,892 2,042,198 ------------ ------------ DEFERRED TAX LIABILITIES 1,176,000 1,176,000 ------------ ------------ SHAREHOLDERS' EQUITY Common stock 17,449,877 17,689,417 Retained earnings 46,445,955 48,560,118 ------------ ------------ Total shareholders' equity 63,895,832 66,249,535 ------------ ------------ Total liabilities and shareholders' equity $105,388,760 $102,520,170 ============ ============ See accompanying notes to Unaudited Condensed Financial Statements
3 PATRICK INDUSTRIES, INC. UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31 2001 2000 NET SALES $ 68,294,737 $ 99,824,073 ------------- ------------- COST AND EXPENSES Cost of goods sold 61,209,742 89,070,610 Warehouse and delivery expenses 3,411,000 4,106,037 Selling, general, and administrative expenses 6,348,696 6,861,282 Impairment charges - - - 6,937,163 Interest expense, net 237,729 313,633 ------------- ------------- 71,207,167 107,288,725 ------------- ------------- LOSS BEFORE INCOME TAXES (2,912,430) (7,464,652) INCOME TAXES (CREDIT) (1,164,900) (2,862,300) ------------- ------------- NET LOSS $ (1,747,530) $ (4,602,352) ============= ============= BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.39) $ (0.86) ============= ============= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,517,977 5,346,346 See accompanying notes to Unaudited Condensed Financial Statements.
4 PATRICK INDUSTRIES, INC. UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(1,747,530) $(4,602,352) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,906,734 2,464,823 Impairment charges - - - 6,937,163 Deferred income taxes - - - (2,654,000) (Gain) loss on sale of fixed assets (7,863) 2,368 Other 277,013 147,194 Change in assets and liabilities: Decrease (increase) in: Trade receivables (5,532,442) (7,334,715) Income tax refund claims receivable (1,132,036) - - - Inventories 1,416,697 (3,661,087) Prepaid expenses 14,729 (101,866) Increase (decrease) in: Accounts payable and accrued liabilities 5,337,158 7,787,064 Income taxes payable - - - (406,572) ----------- ----------- Net cash provided by (used in) operating activities 532,460 (1,421,980) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (477,608) (1,097,110) Proceeds from sale of fixed assets 7,863 2,000 Other (19,515) (22,500) ----------- ----------- Net cash (used in) investing activities (489,260) (1,117,610) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Repurchase of common stock (561,965) (3,534,001) Cash dividends paid (188,767) (210,549) Other (11,443) (21,320) ----------- ----------- Net cash (used In) financing activities (762,175) (3,765,870) ----------- ----------- (Decrease) in cash and cash equivalents (718,975) (6,305,460) Cash and cash equivalents, beginning 6,716,128 6,686,182 ----------- ----------- Cash and cash equivalents, ending $ 5,997,153 $ 380,722 =========== =========== Cash Payments for: Interest $ 551,094 $ 638,240 Income taxes 27,136 176,611 See accompanying notes to Unaudited Condensed Financial Statements.
5 PATRICK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring accruals and the adjustment for the impairment of certain long-lived assets as discussed in Note 5) necessary to present fairly the financial position as of March 31, 2001, and December 31, 2000, and the results of operations and cash flows for the three months ended March 31, 2001 and 2000. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in Company's December 31, 2000 audited financial statements. The results of operations for the three month periods ended March 31, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year. 3. The inventories on March 31, 2001 and December 31, 2000 consist of the following classes: March 31 December 31 2001 2000 Raw materials $16,768,044 $17,130,635 Work in process 2,160,112 2,040,040 Finished 4,081,624 4,647,673 ------------- ----------- Total manufactured goods 23,009,780 23,818,348 Distribution products 6,511,477 7,119,606 ------------- ----------- TOTAL INVENTORIES $29,521,257 $30,937,954 =========== ===========
Inventories are stated at the lower of cost (first-in, first-out (FIFO) method) or market. 4. Loss per common share for the three months ended March 31, 2001 and 2000 have been computed based on the weighted average common shares outstanding of 4,517,977 and 5,346,346 respectively. Stock options outstanding are immaterial and had no effect on earnings per share. Dividends per common share for the three months ended March 31, 2001 and 2000 were $.04 per share. 5. The Company recognized a non-cash accounting charge in the first quarter of 2000 related to an impairment of certain long-lived assets as required by SFAS 121. The carrying values of these assets were calculated on the basis of discounted estimated future cash flow and resulted in a charge to operations of $6,937,163 or $.80 per share, net of tax. This charge was recognized as an impairment of assets in the March 31, 2000 financial statements. The SFAS 121 charge had no impact on the Company's 2000 cash flow or its ability to generate cash flow in the future. As a result of the SFAS 121 charge, depreciation and amortization expense related to these assets will decrease in future periods. 6. The Company's reportable segments are as follows: Laminating - Utilizes various materials including gypsum, particleboard, plywood, and fiberboard which are bonded by adhesives or a heating process to a number of products including vinyl, paper, foil, and high pressure laminate. These laminated products are utilized to produce furniture, shelving, wall, counter, and cabinet products with a wide variety of finishes and textures. Distribution - Distributes primarily pre-finished wall and ceiling panels, particleboard, hardboard and vinyl siding, roofing products, high pressure laminates, passage doors, building hardware, insulation, and other products. Wood - Uses raw lumber including solid oak, other hardwood materials, and laminated particleboard or plywood to produce cabinet door product lines. Other - Includes aluminum extruding, a painting and distributing division, an adhesive division, a pleated shade division, a 6 plastic thermoforming division (closed effective February 2, 2001), and a machine manufacturing division. The table below presents unaudited information about the revenue and operating income of those segments: THREE MONTHS ENDED MARCH 31, 2001 --------------------------------- SEGMENT LAMINATING DISTRIBUTION WOOD OTHER TOTAL ---------- ------------ ---- ----- ----- Net outside sales $ 31,059,688 $ 22,062,225 $ 7,504,874 $ 7,667,950 $ 68,294,737 Intersegment sales 1,052,729 94,690 208,251 2,943,611 4,299,281 Total sales $ 32,112,417 $ 22,156,915 $ 7,713,125 $ 10,611,561 $ 72,594,018* ---------------------------------------------------------------------------------------- EBIT (loss)** $ (390,540) $ (32,786) $ (125,276) $ (851,750) $ (1,400,352) ---------------------------------------------------------------------------------------- Total assets $ 33,701,515 $ 14,054,885 $ 6,561,935 $ 11,629,527 $ 65,947,862 THREE MONTHS ENDED MARCH 31, 2000 --------------------------------- Net outside sales $ 43,563,694 $ 35,874,665 $ 9,663,555 $ 10,722,159 $ 99,824,073 Intersegment sales 1,827,626 8,810 271,253 4,938,076 7,045,765 ---------------------------------------------------------------------------------------- Total sales $ 45,391,320 $ 35,883,475 $ 9,934,808 $ 15,660,235 $106,869,838* ---------------------------------------------------------------------------------------- EBIT (loss)** $ 494,138 $ 397,038 $ (662,869) $ (52,396) $ (175,911) Total assets $ 43,482,827 $ 22,183,794 $ 8,077,183 $ 16,516,899 $ 90,260,703
Reconciliation of segment operating income to consolidated operating income 2001 2000 ---- ---- EBIT** for segments $(1,400,352) $ 175,911 Consolidation reclassifications (50,171) (185,163) Gain (loss) on sale of property and equipment 7,863 (2,368) Impairment charge - - - (6,937,163) Unallocated corporate expenses (1,351,420) (425,012) Other 119,379 222,776 ------------- ------------ Consolidated EBIT** $(2,674,701) $(7,151,019) ============ =========== *Does not agree to Financial Statements due to consolidation eliminations. **Earnings (loss) before interest and taxes 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Due to the overall downturn in the Manufactured Housing and Recreational Vehicle industries, the Company's sales in fiscal 2000 declined 21% from the previous year to $362 million. The downturn in the Manufactured Housing industry began in the fourth quarter of 1999 due to retail sales lots being overstocked and unit production being reduced approximately 7% that year. In fiscal 2000 the Manufactured Housing industry was down nearly 29% in units shipped and produced due to the limited availability of dealer and retail financing, as well as excessive retail inventory levels, which included repossessed units. The decline in the Recreational Vehicle industry began in the second quarter of 2000 due to the Recreational Vehicle dealers making inventory corrections. The end result of this was an approximate 7% decline in units shipped and produced in that particular industry for the twelve months ended December 31, 2000. The first quarter of 2001 showed similar results as shipments and production in the Manufactured Housing industry were down approximately 42% and shipments in the Recreational Vehicle industry were down nearly 24% from the same quarter of 2000. The Company's sales to the Manufactured Housing and Recreational Vehicle industries were down approximately 35% and 31%, respectively. These conditions are expected to continue through the end of fiscal 2001. The Company's sales are 48% to Manufactured Housing, 26% to Recreational Vehicle, and 26% to other industries. The following table sets forth the percentage relationship to net sales of certain items in the Company's Statements of Operations: Quarterly Ended March 31, 2001 2000 Net sales 100.0% 100.0% Cost of sales 89.6 89.2 Gross profit 10.4 10.8 Warehouse and delivery 5.0 4.1 Selling, general & administrative 9.3 6.9 Impairment charges - - - 6.9 Operating loss (3.9) (7.1) Income taxes (credits) (1.7) (2.9) Net loss (2.6) (4.6) RESULTS OF OPERATIONS Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000 Net Sales. Net sales decreased by $31.5 million, or 31.6%, from $99.8 million in the quarter ended March 31, 2000 to $68.3 million in the quarter ended March 31, 2001. This decrease was a direct result of an estimated 42% decrease in units shipped and produced in the Manufactured Housing industry and an estimated 24% decrease in units shipped in the Recreational Vehicle industry in the first quarter 2001. Gross Profit. Gross profit decreased by $3.7 million, or 34.1%, from $10.8 million in the first quarter of 2000 compared to $7.1 million in the same quarter of 2001. As a percentage of net sales, gross profit decreased 0.4% from 10.8% in the first quarter of 2000 to 10.4% in the first quarter of 2001. The overall decrease was due to a 31.6% decrease in consolidated net sales. The decrease in gross profits as a percentage of net sales indicates that market conditions are still highly competitive resulting in the inability of the Company to increase selling prices without losing business. 8 Warehouse and Delivery Expenses. Warehouse and delivery expenses decreased $0.7 million from $4.1 million in the first quarter of 2000 to $3.4 million in the first quarter of 2001. As a percentage of net sales, warehouse and delivery expenses increased 0.9% from 4.1% in the first quarter of 2000 to 5.0% in the first quarter of 2001. This increase is attributable to lower sales levels and higher shipping costs specifically related to the increase in gasoline prices over the past year and transportation companies running at capacity. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased $0.5 million, or 7.4%, from $6.8 million in the quarter ended March 31, 2000 to $6.3 million in the quarter ended March 31, 2001. As a percentage of net sales, selling, general, and administrative expenses increased 2.4% from 6.9% in the first quarter of 2000 to 9.3% in the first quarter of 2001. The overall decrease is due to the Company making cost and staffing reductions. The increase in costs as a percentage of net sales is due to reduced volumes as a result of the decline in shipments in the Manufactured Housing and Recreational Vehicle industries. Impairment Charges. As discussed in Note 5 to the financial statements, the Company recognized an impairment charge of $6.9 million in the first quarter of 2000. Operating Loss. The operating loss decreased from $7.2 million in the first quarter of 2000 to $2.7 million in the first quarter of 2001. The operating loss for the first quarter of 2000 is due primarily to the impairment charges of $6.9 million and similar operating costs from quarter to quarter. The operating loss for the first quarter of 2001 is due to the decline in sales volume related to the industries which the Company serves. Interest Expense, Net. Interest expense, net of interest income, decreased 24.2% from $314,000 in the first quarter of 2000 to $238,000 in the same period in 2001. This decrease is attributable to more funds invested in the first quarter 2001 as a result of reduced working capital needs, as well as lower long-term debt levels due to normal debt service requirements. Net Loss. The Company experienced a net loss after interest and taxes in the first quarters of 2000 and 2001 of $4.6 million and $1.7 million, respectively. These losses are attributable to the factors described above. Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999 Net Sales. Net sales decreased by $7.5 million, or 7.0%, from $107.3 million in the quarter ended March 31, 1999 to $99.8 million in the quarter ended March 31, 2000. This decrease was a direct result of an estimated 21% decrease in units shipped and 22% decrease in units produced in the Manufactured Housing industry in the first quarter 2000. Gross Profit. Gross profit decreased by $3.2 million, or 23.1%, from $14.0 million in the first quarter of 1999 compared to $10.8 million in the same quarter in 2000. As a percentage of net sales, gross profit decreased 2.2%, from 13.0% in the first quarter of 1999 to 10.8% in the first quarter 2000. This decrease was due to a 7.0% decrease in consolidated net sales as well as highly competitive market conditions affecting margins. Several of our operations have reduced prices in order to maintain sales which has resulted in lower gross profits. Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.3 million, from $3.8 million in the first quarter 1999 to $4.1 million in the first quarter 2000. As a percentage of net sales, warehouse and delivery expenses increased from 3.6% in the first quarter of 1999 to 4.1% in the first quarter 2000. This increase is attributable to lower sales levels and higher shipping costs specifically related to the increase in gasoline prices in the first quarter 2000. Selling, General, and Administrative Expenses. For the period ended March 31, 1999, a $0.6 million gain on sale of assets has been included in the selling, general, and administrative expenses. Exclusive of the gain on the sale of assets, selling, general, and administrative expenses increased 1.4% in the quarter ended March 31, 2000 compared to the same period in 1999. These expenses remained fairly constant at $6.8 million for both quarters. As a percentage of net sales however, March 31, 2000 expenses were 6.9% compared to 6.3% for the three-month period ended March 31, 1999. Impairment Charges. As discussed in Note 5 of the financial statements, the Company recognized an impairment charge of $6.9 million in the first quarter of 2000. 9 Operating Income (Loss). The Company experienced a quarterly operating loss of $7.2 million compared to operating income in the first quarter of 1999 of $4.0 million. The operating loss in the first quarter of 2000 was due to the factors described above. Interest Expense, Net. Interest expense, net of interest income, decreased 14.4% from $366,000 in the first quarter of 1999 to $314,000 in the same period in 2000. This decrease is attributable to more funds invested in the first quarter 2000 as well as lower long-term debt levels due to normal debt service requirements. Net Income (Loss). The Company experienced a net loss after interest and taxes in the first quarter of 2000 of $4.6 million compared to net income of $2.2 million in the period ended March 31, 1999. This decrease is due primarily to the factors described above. BUSINESS SEGMENTS Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000 Laminating Segment Discussion Net sales decreased in the first quarter of 2001 by $13.3 million, or 29.3%, from $45.4 million in the period ended March 31, 2000 to $32.1 million in the period ended March 31, 2001. This decline in sales volume was due to approximately 42% less shipments nationwide in the Manufactured Housing industry as well as declines of up to 44% in some of the Company's principal market areas. EBIT declined 179.0% in the laminating segment from income of $0.5 million in the period ended March 31, 2000 compared to a loss of $0.4 million in the period ended March 31, 2001. As a percentage of net sales, EBIT decreased 2.3% from positive 1.1% in the first quarter 2000 to negative 1.2% in the first quarter 2001. This decline is due to the decrease in sales volume. Distribution Segment Discussion Net sales decreased $38.3%, or $13.7 million, from $35.9 million in the first quarter 2000 to $22.2 million in the first quarter 2001. This decrease is due primarily to the decline in units shipped and produced in the Manufactured Housing industry. EBIT decreased 108.3%, or $430,000, due to the decrease in sales and competitive pricing situations. Wood Segment Discussion Net sales decreased 22.4%, or $2.2 million, from $9.9 million in the period ended March 31, 2000 to $7.7 million in the period ended March 31, 2001. This decline is consistent with the overall decline in the Recreational Vehicle industry, which is the primary industry to which this segment serves. EBIT for this segment has increased $537,000 from an operating loss of $663,000 in period ended March 31, 2000 to an operating loss of $125,000 in the same period in 2001. Management's continued commitment to improving operating results in this segment and returning it to profitability caused the improvement of two of the segment's major operating units. The decrease in the operating loss is partially due to reduced depreciation of approximately $250,000 as a result of the Company recognizing a non-cash accounting charge in the first quarter of 2000 related to the impairment of certain long-lived assets, as discussed in Note 5. Other Segment Discussion Net sales in the other segment decreased by 32.2%, or $5.1 million, from $15.7 million in the three months ended March 31, 2000 to $10.6 million in the three month period ending March 31, 2001. This decrease is primarily attributable to a 24% decline in shipments in the Recreational Vehicle industry as well as a 29% reduction in sales in the Company's aluminum extrusion division which sells to areas mainly outside the Manufactured Housing and Recreational Vehicle industries. EBIT decreased from an operating loss of $52,000 in the period ended March 31, 2000 to an operating loss of $852,000 in the same period in 2001. This is the result of a 32.2% decrease in sales volume as well as competitive pricing situations which 10 negatively affected margins in this segment. Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Laminating Segment Discussion Net sales decreased in the first quarter of 2000 by $1.3 million, or 2.8%, from $46.7 million in the period ended March 31, 1999 to $45.4 million in the period ended March 31, 2000. This decline in sales volume was due to approximately 21% less shipments nationwide in the Manufactured Housing industry and declines over 30% in some of the Company's market areas. EBIT declined 78.6% in the laminating segment from $2.3 million in the period ended March 31, 1999 compared to $0.5 million in the period ended March 31, 2000. As a percentage of net sales, EBIT decreased 3.9% from 5.0% in the first quarter 1999 to 1.1% in the first quarter 2000. The ability to increase selling prices in the first quarter of 1999 became more difficult in the second half of that year and in the first quarter of 2000 the Company had to make concessions in pricing to maintain business as a result of the decline in the overall industry. Distribution Segment Discussion Net sales decreased 12.9%, or $5.3 million, from $41.2 million in the first quarter 1999 to $35.9 million in the first quarter 2000. This decrease is due to the decline in units shipped in the Manufactured Housing industry for which this segment serves. EBIT decreased 67.8%, or $673,000, due to the decrease in sales and competitive pricing situations. Wood Segment Discussion Net sales decreased 8.9%, or $1.0 million, from $10.9 million in the period ended March 31, 1999 to $9.9 million in the period ended March 31, 2000. This decline is due to the overall decline in the industry as well as some operating divisions choosing not to accept lower margin business. EBIT in 2000 of $663,000 is less than the loss experienced in the first quarter of 1999 of $781,000 by $118,000, or 15.2%. Other Segment Discussion Net sales in the Other segment increased by 1.9%, or $284,000, from $15.4 million in the three months ended March 31, 1999 to $15.7 million in the three month period ending March 31, 2000. This increase is primarily attributable to increased sales in the Company's aluminum extrusion division which sells to areas mainly outside the Manufactured Housing industry. The Other segment experienced an EBIT loss for the first quarter 2000 of $52,000, compared to operating income in the first quarter 1999 of $598,000. This decrease in operating income was due to one division, which was profitable in 1999, becoming unprofitable in 2000 and another division continuing to lose market share due to operational inefficiencies. 11 LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirements are to meet working capital needs, support its capital expenditure plans, and meet debt service requirements. The Company, in September, 1995, issued to an insurance company in a private placement $18,000,000 of senior unsecured notes. The ten year notes bear interest at 6.82%, with semi-annual interest payments that began in 1996 and seven annual principal repayments of $2,571,060 that began in September, 1999. These funds were used to reduce existing bank debt and for working capital needs. The Company has an unsecured bank Revolving Credit Agreement that provides loan availability of $10,000,000 with maturity in the year 2003. Pursuant to the private placement and the Credit Agreement, the Company is required to maintain certain financial ratios, all of which are currently complied with, except one which has been waived. The Company intends to negotiate an amendment to the Credit Agreement so future compliance can be maintained. Although there are no assurances that the agreement will be amended, the Company, at this time, does not foresee any problems. The Company's Board of Directors from time to time has authorized the repurchase of shares of the Company's common stock, in the open market or through negotiated transactions, at such times and at such prices as management may decide. The Company believes that cash generated from operations and borrowings under its credit agreements will be sufficient to fund its working capital requirements, normal recurring capital expenditures, and the common stock repurchase program as currently contemplated. The fluctuations in inventory and accounts receivable balances, which affect the Company's cash flows, are part of normal business cycles. SEASONALITY Manufacturing operations in the Manufactured Housing and Recreational Vehicle industries historically have been seasonal and are generally at the highest levels when the climate is moderate. Accordingly, the Company's sales and profits are generally highest in the second and third quarters. INFLATION The Company does not believe that inflation had a material effect on results of operations for the periods presented. SAFE HARBOR STATEMENT Statements that do not address historical performance are "forward-looking statements" within the meaning of the Private Securities Litigation reform Act of 1995 and are based on a number of assumptions, including but not limited to; (1) continued domestic economic growth and demand for the Company's products; and (2) the Company's belief with respect to its capital expenditures, seasonality and inflation. Any developments significantly deviating from these assumptions could cause actual results to differ materially from those forecast or implied in the aforementioned forward-looking statements. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (b) There were no reports filed on Form 8-K 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PATRICK INDUSTRIES, INC. (Company) Date May 11, 2001 /S/Mervin D. Lung -------------------------- ---------------------------------- Mervin D. Lung (Chairman of the Board) Date May 11, 2001 /S/David D. Lung -------------------------- ---------------------------------- David D. Lung (President) Date May 11, 2001 /S/Keith V. Kankel -------------------------- ---------------------------------- Keith V. Kankel (Vice President Finance) (Principal Accounting Officer) 14