UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
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 December 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file Number 0-3922
PATRICK INDUSTRIES, INC.
(Exact name of Company as specified in its charter)
Indiana 35-1057796
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
1800 South 14th Street, P.O. Box 638, Elkhart, Indiana 46515
(Address of principal executive offices) (ZIP code)
Company's telephone number, including area code: (219) 294-7511
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
(Title of each class)
Indicate by check mark whether the Company (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 Company 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 Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [ X ]
1
The aggregate market value of the voting stock held by non-affiliates of the
Company on March 23, 2001 (based upon the closing price on NASDAQ and an
estimate that 72.21% of the shares are owned by non-affiliates) was $20,540,482.
The closing market price was $6.313 on that day.
As of March 23, 2001, 4,505,666 shares of the Company's common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Company's Proxy Statement for its Annual
Meeting of Shareholders to be held on May 15, 2001 are
incorporated by reference into Parts III of this Form
10-K.
Explanatory Note:
This Amendment No. 1 is being filed to add the Consolidated Statements of Cash
Flows for the Years Ended December 31, 2000, 1999 and 1998 which were
inadvertently omitted from the first filing of the Form 10-K.
2
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
(a) 1. FINANCIAL STATEMENTS
Independent auditor's report F-1
Balance sheets -
December 31, 2000 and 1999 F-2
Statements of operations-years ended
December 31, 2000, 1999, and 1998 F-3
Statements of shareholders' equity-
years ended December 31,
2000, 1999, 1998 F-4
Statements of cash flow-
years ended December 31,
2000, 1999, and 1998 F-5
Notes to the financial statements F-6-20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the date indicated.
PATRICK INDUSTRIES, INC
By /s/ Keith V. Kankel
-------------------------------------
Keith V. Kankel
Vice President - Finance
Dated: November 26, 2001
PATRICK INDUSTRIES, INC.
and subsidiaries
consolidated Financial Report
DECEMBER 31, 2000
Contents
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS F-1
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheets F-2
Consolidated statements of operations F-3
Consolidated statements of shareholders' equity F-4
Consolidated statements of cash flows F-5
Notes to financial statements F-6-F-20
- --------------------------------------------------------------------------------
Independent Auditor's Report
To the Board of Directors
Patrick Industries, Inc.
Elkhart, Indiana
We have audited the accompanying consolidated balance sheets of Patrick
Industries, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 2000.
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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Patrick Industries,
Inc. and Subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with generally accepted accounting
principles.
Elkhart, Indiana
February 2, 2001
F-1
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
- -----------------------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 6,716,128 $ 6,686,182
Trade receivables 14,281,674 18,498,685
Inventories 30,937,954 42,039,348
Income tax refund claims receivable 1,031,086 -
Prepaid expenses 770,017 663,189
Deferred tax assets 1,946,000 -
----------------------------------
Total current assets 55,682,859 67,887,404
Property and Equipment, net 40,589,738 49,895,640
Intangible and Other Assets 6,247,573 8,420,056
----------------------------------
$102,520,170 $ 126,203,100
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 3,671,428 $ 3,671,428
Accounts payable, trade 7,040,285 11,155,999
Accrued liabilities 3,555,008 5,506,326
----------------------------------
Total current liabilities 14,266,721 20,333,753
----------------------------------
Long-Term Debt, less current maturities 18,785,716 22,457,144
----------------------------------
Deferred Compensation Obligations 2,042,198 1,945,058
----------------------------------
Deferred Tax Liabilities 1,176,000 1,900,000
----------------------------------
Commitments and Contingencies
Shareholders' Equity
Preferred stock, no par value; authorized
1,000,000 shares - -
Common stock, no par value; authorized
12,000,000 shares; issued 2000 4,568,666
shares; 1999 5,595,466 shares 17,689,417 21,389,940
Retained earnings 48,560,118 58,177,205
----------------------------------
66,249,535 79,567,145
----------------------------------
$102,520,170 $ 126,203,100
==================================
See Notes to Financial Statements.
F-2
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2000, 1999, and 1998
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Net sales $361,620,206 $ 457,356,260 $ 453,518,573
Cost of goods sold 319,715,214 400,017,287 393,962,419
------------------------------------------------------------
Gross profit 41,904,992 57,338,973 59,556,154
------------------------------------------------------------
Operating expenses:
Warehouse and delivery 15,140,245 16,714,651 16,076,212
Selling, general, and administrative 25,240,711 27,057,686 26,796,204
Impairment charges 6,937,163 - -
Restructuring charges 717,598 - -
------------------------------------------------------------
48,035,717 43,772,337 42,872,416
------------------------------------------------------------
Operating income (loss) (6,130,725) 13,566,636 16,683,738
Interest expense, net 1,224,145 1,393,346 1,171,967
------------------------------------------------------------
Income (loss) before income
taxes (credits) (7,354,870) 12,173,290 15,511,771
Federal and state income taxes (credits) (2,821,000) 4,769,000 6,204,700
------------------------------------------------------------
Net income (loss) $ (4,533,870) $ 7,404,290 $ 9,307,071
============================================================
Basic earnings (loss) per common share $ (0.89) $ 1.30 $ 1.58
============================================================
Diluted earnings (loss) per common share $ (0.89) $ 1.29 $ 1.57
============================================================
See Notes to Financial Statements.
F-3
2000 1999 1998
------------------------------------------------------
Cost of goods sold:
Total cost of goods sold for reportable
segments $ 347,570 $ 435,618 $ 437,057
Elimination of intersegment cost of goods
sold (22,821) (28,576) (36,123)
Consolidation reclassifications (2,000) (2,890) (2,858)
Corporate incentive agreements (2,589) (3,681) (3,740)
Other (445) (454) (373)
------------------------------------------------------
Consolidated cost of goods sold $ 319,715 $ 400,017 $ 393,963
======================================================
Earnings before interest and taxes (EBIT):
EBIT for reportable segments $ 641 $ 9,868 $ 13,340
Corporate incentive agreements 2,589 3,681 3,740
Consolidation reclassifications (329) (780) (173)
Gain (loss) on sale of property
and equipment 617 643 (32)
Impairment charge (6,937) - -
Restructuring charge (718) - -
Other (1,994) 154 (191)
------------------------------------------------------
Consolidated EBIT $ (6,131) $ 13,566 $ 16,684
======================================================
Consolidated assets:
Identifiable assets for reportable segments $ 63,163 $ 87,420 $ 69,586
Corporate property and equipment 23,764 24,693 24,541
Current assets not allocated to segments 8,518 6,035 25,063
Intangible and other assets not allocated
to segments 6,248 8,420 8,720
Consolidation eliminations (349) (365) (155)
------------------------------------------------------
Consolidated assets $ 101,344 $ 126,203 $ 127,755
======================================================
Depreciation and amortization:
Depreciation for reportable segments $ 5,456 $ 5,825 $ 4,952
Corporate depreciation and amortization 1,942 3,079 2,629
------------------------------------------------------
Consolidated depreciation and
amortization $ 7,398 $ 8,904 $ 7,581
======================================================
F-4
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999, and 1998
- --------------------------------------------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income (loss) $ (4,533,870) $ 7,404,290 $ 9,307,071
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 8,237,025 8,904,059 7,580,928
Impairment charges 6,937,163 - -
Deferred income taxes (2,670,000) 226,000 567,000
(Gain) loss on sale of property and equipment (611,120) (643,446) 32,184
Other 207,139 163,567 365,489
Change in assets and liabilities:
Decrease (increase) in:
Trade receivables 4,217,011 2,268,721 (2,876,930)
Inventories 11,101,394 1,459,284 (8,278,080)
Income tax refund claims receivable (1,031,086) - -
Prepaid expenses (106,828) (71,719) 39,523
Increase (decrease) in:
Accounts payable and accrued liabilities (5,763,761) (2,406,709) 3,144,893
Income taxes payable (404,725) 780,206 (397,579)
---------------------------------------------------------
Net cash provided by operating
activities 15,578,342 18,084,253 9,484,499
---------------------------------------------------------
Cash Flows From Investing Activities
Capital expenditures (3,806,938) (7,505,350) (8,242,644)
Acquisition of businesses, net of cash - - (2,581,490)
Proceeds from sale of property and equipment 748,552 879,556 -
Other 104,264 (399,042) (295,880)
---------------------------------------------------------
Net cash (used in) investing
activities (2,954,122) (7,024,836) (11,120,014)
---------------------------------------------------------
Cash Flows From Financing Activities
Borrowings under long-term debt agreements - - 5,214,483
Principal payments on long-term debt (3,671,428) (3,985,963) (1,253,683)
Proceeds from exercise of common stock options - 26,875 80,625
Repurchase of common stock (7,986,836) (3,054,421) (1,335,728)
Cash dividends paid (851,450) (919,158) (943,944)
Other (84,560) (145,261) (186,716)
---------------------------------------------------------
Net cash provided by (used in)
financing activities (12,594,274) (8,077,928) 1,575,037
---------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 29,946 2,981,489 (60,478)
Cash and cash equivalents, beginning 6,686,182 3,704,693 3,765,171
---------------------------------------------------------
Cash and cash equivalents, ending $ 6,716,128 $ 6,686,182 $ 3,704,693
=========================================================
See Notes to Financial Statements.
F-5
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1. Nature of Business, Use of Estimates, Risks and Uncertainties, and
Significant Accounting Policies
Nature of business:
The Company's operations consist primarily of the manufacture and distribution
of building products and materials for use primarily by the Manufactured Housing
and Recreational Vehicle industries for customers throughout the United States.
Credit is generally granted on an unsecured basis for terms of 30 days.
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 disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Risks and uncertainties:
The Company purchases significant amounts of inventory, which are commodities,
from a limited number of suppliers. The purchase price of such items can be
volatile as it is subject to prevailing market conditions, both domestically and
internationally. The Company's purchases of these items are based on supplier
allocations.
Significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of Patrick
Industries, Inc. and its wholly- owned subsidiaries, Harlan Machinery Company,
Inc., and Patrick Door, Inc., and its majority-owned subsidiary, Patrick
Mouldings, L.L.C. ("the Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and cash equivalents:
The Company has cash on deposit in financial institutions in amounts which, at
times, may be in excess of insurance coverage provided by the Federal Deposit
Insurance Corporation.
For purposes of the statement of cash flows, the Company considers all overnight
repurchase agreements and commercial paper with a maturity of 30 days or less
acquired in connection with its sweep account arrangements with its bank to be
cash equivalents.
F-6
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
At December 31, 2000 and 1999, the Company owned marketable debt securities in
the total amounts of approximately $4,500,000 and $6,600,000 respectively. These
available for sale debt securities mature in January 2001 and 2000 and bear
interest at a weekly adjusted variable rate which was 6.2% at December 31, 2000
and 5% at December 31, 1999. The securities are stated at fair value which
approximated their cost at December 31, 2000 and 1999. These securities matured
and were sold on January 22, 2001 and January 24, 2000 and have been classified
as a cash equivalent in the accompanying balance sheet.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out (FIFO) method)
or market.
Property and equipment:
Property and equipment is recorded at cost. Depreciation has been computed
primarily by the straight- line method applied to individual items based on
estimated useful lives which generally range from 10 to 40 years for buildings
and improvements and from 3 to 15 years for machinery and equipment,
transportation equipment, and leasehold improvements.
Goodwill:
Goodwill, the excess of cost over the fair value of net assets acquired, is
amortized by the straight-line method over 15-year periods. At each balance
sheet date, management assesses whether there has been a permanent impairment in
the value of goodwill. Factors considered by management include current
operating results, anticipated future cash flows, trends, and prospects, as well
as the effects of obsolescence, demand, competition, and other economic factors.
In the event that an impairment is evident, the Company records an expense for
that impairment.
Revenue recognition:
The Company ships product based on specific orders from customers and revenue is
recognized upon delivery.
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Earnings per common share:
Following is information about the computation of the earnings per share data
for the years ended December 31, 2000, 1999, and 1998:
2000 1999 1998
-------------------------------------------------------
Numerator for basic and diluted
earnings per share, net income (loss) $(4,533,870) $ 7,404,290 $ 9,307,071
=======================================================
Denominator:
Weighted average shares, denominator
for basic earnings per share 5,118,103 5,714,177 5,902,615
Effect of dilutive potential common
shares, employee stock options (a) - 10,867 24,395
-------------------------------------------------------
Denominator for diluted
earnings per share 5,118,103 5,725,044 5,927,010
=======================================================
Basic earnings (loss) per share $ (0.89) $ 1.30 $ 1.58
=======================================================
Diluted earnings (loss) per share $ (0.89) $ 1.29 $ 1.57
=======================================================
(a) Due to the loss incurred during the year ended December 31, 2000,
15,715 dilutive potential common shares are not included because the
effect would be antidilutive.
Note 2. Balance Sheet Data
Trade receivables:
Trade receivables in the accompanying balance sheets at December 31, 2000 and
1999 are stated net of an allowance for doubtful accounts of $750,000 and
$275,000 respectively.
Inventories:
2000 1999
----------------------------------
Raw materials $ 17,130,635 $ 23,286,250
Work in process 2,040,040 1,555,319
Finished goods 4,647,673 4,668,813
Materials purchased for resale 7,119,606 12,528,966
----------------------------------
$ 30,937,954 $ 42,039,348
==================================
F-8
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Property and equipment:
2000 1999
----------------------------------
Land and improvements $ 3,509,609 $ 3,601,733
Buildings and improvements 24,487,881 23,975,663
Machinery and equipment 58,680,294 56,670,702
Transportation equipment 2,304,343 2,666,259
Leasehold improvements 3,439,192 3,536,046
----------------------------------
92,421,319 90,450,403
Less accumulated depreciation 51,831,581 40,554,763
----------------------------------
----------------------------------
$ 40,589,738 $ 49,895,640
==================================
Goodwill, at amortized cost $ 2,921,060 $ 4,706,976
Cash value of life insurance 2,526,659 2,630,923
Other 799,854 1,082,157
---------------------------------
$ 6,247,573 $ 8,420,056
=================================
Accrued liabilities:
Payroll and related expenses $ 1,132,012 $ 2,445,031
Property taxes 879,900 973,600
Other 1,543,096 2,087,695
-----------------------------------
$ 3,555,008 $ 5,506,326
===================================
Note 3. Pledged Assets and Long-Term Debt
Long-term debt at December 31, 2000 and 1999 is as follows:
2000 1999
-----------------------------------
Senior Notes, insurance company $ 12,857,144 $ 15,428,572
Indiana Development Finance Authority Bonds 1,800,000 2,100,000
State of Oregon Economic Development Revenue Bonds 3,600,000 4,000,000
State of North Carolina Economic Development Revenue
Bonds 4,200,000 4,600,000
-----------------------------------
22,457,144 26,128,572
Less current maturities 3,671,428 3,671,428
-----------------------------------
$ 18,785,716 $ 22,457,144
===================================
F-9
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
The senior notes bear interest at a fixed rate of 6.82% and are unsecured. The
notes are due in annual principal installments of $2,571,428 and the final
installment is due September 15, 2005. This agreement requires that the Company
maintain a minimum level of tangible net worth.
The Indiana Development Finance Authority Bonds are payable in annual
installments of $300,000 plus interest at a variable tax exempt bond rate, set
periodically to enable the bonds to be sold at par (5.2% at December 31, 2000).
The final installment is due November 1, 2006. The bonds are collateralized by
real estate and equipment purchased with the bond funds and are backed by a bank
standby letter of credit.
The State of Oregon Economic Development Revenue Bonds are payable in annual
installments of $400,000 plus interest at a variable tax exempt bond rate (5.2%
at December 31, 2000). The final installment is due December 1, 2009. The bonds
are collateralized by real estate and equipment purchased with the bond funds
and are backed by a bank standby letter of credit.
The State of North Carolina Economic Development Revenue Bonds are payable in
annual installments of $400,000 plus quarterly interest payments at a variable
tax exempt bond rate (5.2% at December 31, 2000). Annual payments of $500,000
are due in each of the last two years with a final payment due August 1, 2010.
The bonds are collateralized by real estate and equipment purchased with the
bond funds and are backed by a bank standby letter of credit.
The Company has an unsecured revolving credit agreement which allows borrowings
up to $10,000,000 or a borrowing base defined in the agreement and which expires
on January 28, 2003. Interest on this note is at either prime or the Eurodollar
rate plus .75%. The Company pays .25% of the unused portion of the revolving
line. In addition, this agreement requires the Company to, among other things,
maintain minimum levels of tangible net worth, working capital, and debt to net
worth.
Aggregate maturities of long-term debt for the years ending December 31, 2001
through 2004 are $3,671,428; 2005 $3,671,432; and thereafter $4,100,000.
In addition, the Company is contingently liable for standby letters of credit of
approximately $11,800,000 to meet credit policies of certain suppliers.
Based on the borrowing rates currently available to the Company for loans with
similar terms and average maturities, the fair value of the long-term debt
instruments approximates their carrying value.
Interest expense for the years ended December 31, 2000, 1999, and 1998 was
approximately $1,662,000, $1,826,000, and $1,640,000 respectively.
Note 4. Equity Transactions
Stock options exercised:
Common stock sold to key employees through the exercise of stock options
resulted in a tax deduction for the Company equivalent to the taxable income
recognized by the employee. For financial reporting purposes, the tax benefit
resulting from this deduction, if material, along with the proceeds from the
exercise of the options, is accounted for as an increase to common stock.
F-10
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Shareholder Rights Plan:
On February 29, 1996, the Company's Board of Directors adopted a shareholder
rights agreement, granting certain new rights to holders of the Company's common
stock. Under the agreement, one right was granted for each share of common stock
held as of March 20, 1996, and one right will be granted for each share
subsequently issued. Each right entitles the holder, in an unfriendly takeover
situation, and after paying the exercise price (currently $30), to purchase
Patrick common stock having a market value equal to two times the exercise
price. Also, if the Company is merged into another corporation, or if 50 percent
or more of the Company's assets are sold, then rightholders are entitled, upon
payment of the exercise price, to buy common shares of the acquiring
corporation's common stock having a then current market value equal to two times
the exercise price. In either situation, these rights are not available to the
acquiring party. However, these exercise features will not be activated if the
acquiring party makes an offer to acquire the Company's outstanding shares at a
price which is judged by the Board of Directors to be fair to all Patrick
shareholders. The rights may be redeemed by the Company under certain
circumstances at the rate of $.01 per right. The rights will expire on March 20,
2006. The Company has authorized 100,000 shares of preferred stock, Series A, no
par value, in connection with this plan, none of which have been issued.
Repurchase of common stock:
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.
Note 5. Commitments and Related Party Leases
The Company leases office, manufacturing, and warehouse facilities and certain
equipment under various noncancelable agreements, which expire at various dates
through 2005. These agreements contain various renewal options and provide for
minimum annual rentals plus the payment of real estate taxes, insurance, and
normal maintenance on the properties. Certain of the leases are with the
chairman/major shareholder and expire at various dates through September 30,
2005.
The total minimum rental commitment at December 31, 2000 under the leases
mentioned above is approximately $7,122,000 which is due approximately
$2,747,000 in 2001, $1,949,000 in 2002, $1,178,000 in 2003, $714,000 in 2004,
$277,000 in 2005, and $257,000 thereafter.
The total rent expense included in the statements of operations for the years
ended December 31, 2000, 1999, and 1998 is approximately $3,900,000, $4,100,000,
and $3,900,000 respectively, of which approximately $1,300,000 each year was
paid to the chairman/major shareholder.
Note 6. Major Customers
Net sales for the year ended December 31, 2000 included sales to one customer
accounting for 10% or more of the total net sales of the Company for the year.
The percentage of sales to this customer was 14.4%.
F-11
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Net sales for the year ended December 31, 1999 included sales to two customers,
each of which accounted for 10% or more of the total net sales of the Company
for the year. The percentage of sales for these customers was 11.9% and 10.4%.
Net sales for the year ended December 31, 1998 included sales to two customers,
each of which accounted for 10% or more of the total net sales of the Company
for the year. The percentage of sales for these customers was 12.1%, and 11.3%.
The balances due from these customers at December 31, 2000 and 1999 were not
significant to the total trade receivables balance.
Note 7. Income Tax Matters
Federal and state income taxes (credits) for the years ended December 31, 2000,
1999, and 1998, all of which are domestic, consist of the following:
2000 1999 1998
-------------------------------------------------------------
Current:
Federal $ (120,000) $ 3,600,000 $ 4,704,700
State (31,000) 943,000 933,000
Deferred (2,670,000) 226,000 567,000
-------------------------------------------------------------
$ (2,821,000) $ 4,769,000 $ 6,204,700
=============================================================
The provisions for income taxes (credits) for the years ended December 31, 2000,
1999, and 1998 are different from the amounts that would otherwise be computed
by applying a graduated federal statutory rate of 35% to income before income
taxes. A reconciliation of the differences is as follows:
2000 1999 1998
--------------------------------------------------------
Rate applied to pretax income $ (2,570,000) $ 4,260,000 $ 5,430,000
State taxes, net of federal
tax effect (368,000) 550,000 706,000
Write off of nondeductible goodwill 121,000 - -
Other (4,000) (41,000) 68,700
--------------------------------------------------------
$ (2,821,000) $ 4,769,000 $ 6,204,700
========================================================
Deferred income tax assets and liabilities are computed annually for differences
between the financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the current period plus or minus
the change during the period in deferred tax assets and liabilities.
F-12
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
The composition of the deferred tax assets and liabilities at December 31, 2000
and 1999 is as follows:
2000 1999
-----------------------------------
Gross deferred tax liability,
accelerated depreciation $ (1,983,000) $ (3,926,000)
-----------------------------------
Gross deferred tax assets:
Trade receivables allowance 296,000 109,000
Inventory capitalization 308,000 320,000
Accrued expenses 696,000 641,000
Deferred compensation 807,000 768,000
Unvested stock awards 197,000 155,000
Inventory reserves 217,000 -
AMT credit carryforward 100,000 -
Other 132,000 33,000
-----------------------------------
2,753,000 2,026,000
-----------------------------------
Net deferred tax assets (liabilities) $ 770,000 $ (1,900,000)
===================================
Note 8. Self-Insured Plans
The Company has a self-insured health plan for its employees under which there
is both a participant stop loss and an aggregate stop loss based on total
participants. The total annual aggregate liability was approximately $3,900,000
at December 31, 2000. The excess loss portion of the employees' coverage has
been insured with a commercial carrier.
The Company is partially self insured for its workers' compensation liability.
The Company is responsible for a per occurrence limit amount not to exceed
approximately $500,000 individually and $2,800,000 in aggregate annually. The
excess loss portion of the employees' coverage has been insured with a
commercial carrier.
The Company has accrued an estimated liability for these benefits based upon
claims incurred.
Note 9. Compensation Plans
Deferred compensation obligations:
The Company has deferred compensation agreements with certain key employees. The
agreements provide for monthly benefits for ten years subsequent to retirement,
disability, or death. The Company has accrued an estimated liability based upon
the present value of an annuity needed to provide the future benefit payments.
Bonus plan:
The Company pays bonuses to certain management personnel. Historically, bonuses
are determined annually and are based upon corporate and divisional income
levels. The charge to operations amounted to approximately $560,000, $2,170,000,
and $2,200,000 for the years ended December 31, 2000, 1999, and 1998
respectively.
F-13
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Profit-sharing plan:
The Company has a qualified profit-sharing plan, more commonly known as a 401(k)
plan, for substantially all of its employees with over one year of service and
who are at least 21 years of age. The plan provides for a matching contribution
by the Company as defined in the agreement and, in addition, provides for a
discretionary contribution annually as determined by the Board of Directors. The
amounts of contributions for the years ended December 31, 2000, 1999, and 1998
were immaterial.
Stock option plan:
At December 31, 2000, the Company has a stock option plan with shares of common
stock reserved for options to key employees. As permitted under generally
accepted accounting principles, grants under this plan are accounted for
following APB Opinion No. 25 and related interpretations. Accordingly, no
compensation cost has been recognized for grants under the plan. Had
compensation cost for the plans been determined based on the grant date fair
values of awards (the method described in FASB Statement No. 123), reported net
income and earnings per common share would have been reduced to the pro forma
amounts shown below:
2000 1999 1998
----------------------------------------------------------
Net income (loss):
As reported $ (4,533,870) $ 7,404,290 $ 9,307,071
Pro forma (4,895,300) 7,060,174 9,307,071
Primary earnings (loss) per share:
As reported $ (0.89) $ 1.30 $ 1.58
Pro forma (0.96) 1.24 1.58
Fully diluted earnings (loss) per share:
As reported $ (0.89) $ 1.29 $ 1.57
Pro forma (0.96) 1.23 1.57
The fair value of each grant is estimated at the grant date using the
Black-Scholes option-pricing model with the following assumptions for 2000:
dividend rate of 2.25% for all years; risk-free interest rate of 5.25%; expected
lives of 5 years; and price volatility of 43%.
F-14
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Following is a summary of transactions of granted shares under option for the
years ended December 31, 2000, 1999 and 1998:
2000 1999 1998
-----------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-----------------------------------------------------------------------------
Outstanding, beginning
of year 417,500 $14.13 88,500 $10.75 96,000 $10.75
Issued during the year 115,000 6.13 352,500 14.75 - -
Canceled during the year (80,000) 11.50 (21,000) 10.75 - -
Exercised during the year - - (2,500) 10.75 (7,500) 10.75
-----------------------------------------------------------------------------
Outstanding, end of year 452,500 $12.55 417,500 $14.13 88,500 $10.75
===============================================================================
Eligible, end of year for
exercise 84,375 $14.75 65,000 $10.75 88,500 $10.75
===============================================================================
Weighted average fair value
of options granted during
the year N/A $2.07 N/A $ 7.26 N/A N/A
===============================================================================
A further summary about fixed options outstanding at December 31, 2000 is as
follows:
Options Outstanding Options Exercisable
------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Outstanding Life Price Exercisable Price
------------------------------------------------------------------------
Exercise price of $14.75 337,500 8.5 $ 14.75 84,375 $ 14.75
========================================================================
Exercise price of $6.125 115,000 9.5 $ 6.125 - $ -
========================================================================
Theses options were included in computing diluted earnings per common share as
shown on the consolidated statements of income.
Stock award plan:
The Company has adopted a stock award plan for the seven existing non-employee
directors. Grants awarded during May 2000 and May 1999 of 24,000 and 18,000
shares respectively are subject to forfeiture in the event the recipient
terminates as a director within two years from the date of grant. The related
compensation expense is being recognized over the two-year vesting period.
F-15
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 10. Business Combination
In April 1998, the Company acquired for cash all of the assets and liabilities
of Woodtek, L.L.C., a manufacturer of wood products. The total acquisition cost
was $2,581,490. The acquisition has been accounted for as a purchase and the
results of operations of Woodtek, L.L.C. since the date of acquisition are
included in the consolidated financial statements.
Note 11. Asset Impairments and Restructurings
During 2000, the Company recorded asset impairments of $6,937,163 (approximately
$4,283,000 after tax or $.84 per share) and restructuring charges of $717,598
(approximately $430,600 after tax or $.08 per share).
Asset impairment charges were required to write down the net book values of
long-lived assets primarily in the Company's Wood and Other Segments
(approximately $5,371,000 and $1,566,000 respectively). Estimated future cash
flows of these operations had indicated that an impairment had occurred.
Restructuring charges were incurred from the strategic decisions to close a
manufacturing plant in the Wood Segment, moving manufacturing to other existing
plant locations, the merging of certain facilities in the Southeast to gain
operating efficiencies, and the closing of an unprofitable manufacturing
facility in the Other Segment. The charges include severance payments, writedown
of obsolete inventories, and future rental commitments related to the closed
facilities. The remaining restructuring reserves amount to approximately
$400,000 and are expected to be utilized by the second quarter 2001. The
majority of the cost savings related to these plans will be realized in 2001 and
beyond.
Note 12. Contingencies
The Company is subject to claims and suits in the ordinary course of business.
In management's opinion, currently pending legal proceedings and claims against
the Company will not, individually or in the aggregate, have a material adverse
effect on the Company's financial condition or results of operations.
Note 13. Cash Flows Information
Supplemental information relative to the statements of cash flows for the years
ended December 31, 2000, 1999, and 1998 is as follows:
2000 1999 1998
-------------------------------------------------------
Supplemental disclosures of cash
flows information:
Cash payments for:
Interest $ 1,275,745 $ 1,597,626 $ 1,621,879
=======================================================
Income taxes $ 1,248,811 $ 4,850,244 $ 6,359,279
=======================================================
Business acquisitions:
Cash purchase price $ - $ - $ 2,581,490
=======================================================
Working capital acquired $ - $ - $ 1,081,490
Fair value of long-lived assets acquired - - 1,500,000
-------------------------------------------------------
$ - $ - $ 2,581,490
=======================================================
F-16
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
The changes in assets and liabilities in arriving at net cash provided by
operating activities are net of amounts related to acquisitions.
Note 14. Unaudited Interim Financial Information
Presented below is certain selected unaudited quarterly financial information
for the years ended December 31, 2000 and 1999 (dollars in thousands, except per
share data):
Quarter Ended
----------------------------------------------------------
March 31, June 30, September 30, December 31,
----------------------------------------------------------
2000
----------------------------------------------------------
Net Sales $ 99,824 $ 100,902 $ 89,945 $ 70,949
Gross Profit 10,753 12,566 11,122 7,463
Net income (loss) (4,602) 880 605 (1,417)
Earnings loss per common share (0.86) 0.16 0.11 (0.30)
Weighted average common
shares outstanding 5,346,346 5,268,666 5,141,275 4,720,242
Quarter Ended
----------------------------------------------------------
March 31, June 30, September 30, December 31,
----------------------------------------------------------
1999
----------------------------------------------------------
Net Sales $107,352 $ 123,029 $ 116,981 $ 109,994
Gross Profit 13,984 16,270 13,490 13,595
Net income ( 2,211 2,659 1,337 1,197
Earnings per common share 0.38 0.47 0.23 0.21
Weighted average common
shares outstanding 5,786,480 5,685,715 5,695,539 5,690,237
Note 15. Segment Information
The Company has determined that its reportable segments are those that are based
on the Company's method of internal reporting, which segregates its business by
product category and production/ distribution process. 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, passage
doors, building hardware, insulation, and other products.
F-17
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Wood -- Uses raw lumber including solid oak as well as other hardwood
materials or laminated particleboard or plywood to produce cabinet door
product lines.
Other -- Includes aluminum extruding, painting and distributing divisions,
an adhesive division, a pleated shade division, a plastic thermoforming
division, and a machine manufacturing division.
The accounting policies of the segments are the same as those described in
"Significant Accounting Policies," except as described below. Segment data
includes intersegment revenues, as well as a charge allocating a majority of the
corporate costs to each of its operating segments. Assets are identified with
the segments with the exception of cash, and land and buildings, which are
identified with the corporate division. The corporate division charges rents to
the segment for use of the land and buildings based upon market rates. The
Company accounts for intersegment sales as if the sales were to third parties,
that is, at current market prices. The Company also records income from purchase
incentive agreements as corporate division revenue. The Company evaluates the
performance of its segments and allocates resources to them based on a variety
of indicators including revenues, cost of goods sold, earnings before interest
and taxes (EBIT), and total identifiable assets.
The table below presents information about the net income (loss) and segment
assets used by the chief operating decision makers of the Company as of and for
the years ended December 31, 2000, 1999, and 1998.
Laminating Distribution Wood Other Total
------------------------------------------------------------------
2000
------------------------------------------------------------------
Sales $ 156,525 $ 133,174 $ 34,050 $ 37,855 $ 361,604
Sales, intersegment 5,821 56 1,066 15,894 22,837
------------------------------------------------------------------
Total sales 162,346 133,230 35,116 53,749 384,441
Cost of goods sold 146,538 120,534 32,735 47,763 347,570
EBIT 1,763 1,110 (1,596) (636) 641
Identifiable assets 32,368 13,177 6,132 11,486 63,163
Depreciation 2,668 457 947 1,384 5,456
F-18
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
Laminating Distribution Wood Other Total
------------------------------------------------------------------
1999
------------------------------------------------------------------
Sales $ 185,300 $ 185,053 $ 42,458 $ 43,747 $ 456,558
Sales, intersegment 6,733 51 1,209 21,381 29,374
------------------------------------------------------------------
Total sales 192,033 185,104 43,667 65,128 485,932
Cost of goods sold 171,288 167,507 41,639 55,184 435,618
EBIT 5,229 4,588 (2,572) 2,623 9,868
Identifiable assets 39,750 20,270 11,956 15,444 87,420
Depreciation 2,398 437 1,630 1,360 5,825
Laminating Distribution Wood Other Total
------------------------------------------------------------------
1998
------------------------------------------------------------------
Sales $ 190,204 $ 171,700 $ 45,019 $ 45,717 $ 452,640
Sales, intersegment 8,244 - 5,834 22,924 37,002
Total sales 198,448 171,700 50,853 68,641 489,642
Cost of goods sold 174,673 156,303 49,061 57,020 437,057
EBIT 8,289 3,480 (3,019) 4,590 13,340
Identifiable assets 32,181 14,480 10,965 11,960 69,586
Depreciation 1,982 367 1,349 1,254 4,952
A reconciliation of total segment sales, cost of goods sold, and EBIT to
consolidated sales, cost of goods sold, and segment information to the
consolidated financial statements as of and for the years ended December 31,
2000, 1999, and 1998 is as follows (dollars in thousands):
Sales:
Total sales for reportable segments $ 384,441 $ 485,932 $ 489,642
Elimination of intersegment revenue (22,821) (28,576) (36,123)
------------------------------------------------------
------------------------------------------------------
Consolidated sales $ 361,620 $ 457,356 $ 453,519
======================================================
F-19
PATRICK INDUSTRIES, INC.
AND SUBSIDIARIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------
Cost of goods sold:
Total cost of goods sold for reportable
segments $ 347,570 $ 435,618 $ 437,057
Elimination of intersegment cost of goods
sold (22,821) (28,576) (36,123)
Consolidation reclassifications (2,000) (2,890) (2,858)
Corporate incentive agreements (2,589) (3,681) (3,740)
Other (445) (454) (373)
------------------------------------------------------
Consolidated cost of goods sold $ 319,715 $ 400,017 $ 393,963
======================================================
Earnings before interest and taxes (EBIT):
EBIT for reportable segments $ 641 $ 9,868 $ 13,340
Corporate incentive agreements 2,589 3,681 3,740
Consolidation reclassifications (329) (780) (173)
Gain (loss) on sale of property
and equipment 617 643 (32)
Impairment charge (6,937) - -
Restructuring charge (718) - -
Other (1,994) 154 (191)
------------------------------------------------------
Consolidated EBIT $ (6,131) $ 13,566 $ 16,684
======================================================
Consolidated assets:
Identifiable assets for reportable segments $ 63,163 $ 87,420 $ 69,586
Corporate property and equipment 23,764 24,693 24,541
Current assets not allocated to segments 8,518 6,035 25,063
Intangible and other assets not allocated
to segments 6,248 8,420 8,720
Consolidation eliminations (349) (365) (155)
------------------------------------------------------
Consolidated assets $ 101,344 $ 126,203 $ 127,755
======================================================
Depreciation and amortization:
Depreciation for reportable segments $ 5,456 $ 5,825 $ 4,952
Corporate depreciation and amortization 1,942 3,079 2,629
------------------------------------------------------
Consolidated depreciation and
amortization $ 7,398 $ 8,904 $ 7,581
======================================================
F-20