FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1995 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 incorporated or organization) Identification No.) 1800 South 14th Street, Elkhart, IN 46516 (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code (219) 294-7511 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, 1995: 5,943,992 PATRICK INDUSTRIES, INC. INDEX Page No. PART I: Financial Information Unaudited Condensed Balance Sheets March 31, 1995 & December 31, 1994 3 Unaudited Condensed Statements of Income Three Months Ended March 31, 1995 & 1994, 4 Unaudited Condensed Statements of Cash Flows Three Months Ended March 31, 1995 & 1994 5 Notes to Unaudited Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II: Other Information 10 Signatures 11 PART I: FINANCIAL INFORMATION PATRICK INDUSTRIES, INC. CONDENSED BALANCE SHEETS (Unaudited) (Note) MARCH 31 DECEMBER 31 1995 1994 ASSETS CURRENT ASSETS Cash $ 481,911 $ 666,986 Accounts Receivable, Net 22,628,923 18,445,638 Inventories 38,425,221 36,087,900 Other 186,227 291,194 Total Current Assets $61,722,282 $55,491,718 OTHER ASSETS $ 5,259,193 $ 3,370,013 CASH HELD IN ESCROW $ 3,315,307 $ 4,584,738 PROPERTY AND EQUIPMENT $48,375,434 $45,047,383 LESS ACCUMULATED DEPRECIATION 21,974,782 21,225,209 $26,400,652 $23,822,174 Total Assets $96,697,434 $87,268,643 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current Maturities of Long-term Debt $ 1,700,000 $ 1,724,000 Accounts Payable 17,540,031 14,916,309 Accrued Expenses and Taxes Payable 5,070,784 3,840,354 Total Current Liabilities $24,310,815 $20,480,663 LONG-TERM DEBT, LESS CURRENT MATURITIES $24,400,000 $21,150,000 DEFERRED COMPENSATION OBLIGATIONS $ 865,641 $ 838,971 DEFERRED TAX LIABILITIES $ 1,360,000 $ 1,360,000 SHAREHOLDERS' EQUITY Common Stock $21,463,422 $21,457,167 Retained Earnings 24,297,556 21,981,842 Total Stockholders' Equity $45,760,978 $43,439,009 Total Liabilities and Stockholders' Equity $96,697,434 $87,268,643 NOTE: The balance sheet at December 31, 1994 has been taken from the audited financial statements at that date and condensed. See accompanying notes to Unaudited Condensed Financial Statements. PATRICK INDUSTRIES, INC. UNAUDITED CONDENSED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31 1995 1994 NET SALES $87,030,721 $ 76,897,509 COST AND EXPENSES Cost of Goods Sold $75,060,101 $ 67,360,302 Warehouse and Delivery Expenses 3,250,369 2,874,412 Selling and Administrative Expenses 4,576,174 3,532,077 Financial Expenses, Net 347,764 224,013 $83,234,408 $ 73,990,804 INCOME BEFORE INCOME TAXES $ 3,796,313 $ 2,906,705 INCOME TAXES 1,480,600 1,133,600 NET INCOME $ 2,315,713 $ 1,773,105 EARNINGS PER COMMON SHARE $ .39 $ .29 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,940,809 6,174,533 See accompanying notes to Unaudited Condensed Financial Statements. PATRICK INDUSTRIES, INC. UNAUDITED CONDENSED STATEMENTS OF CASH FLOW THREE MONTHS ENDED MARCH 31 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 2,315,713 $ 1,773,105 Adjustment to Reconcile Net Income to Net Cash: Depreciation and Amortization 769,601 683,049 Other (21,000) 11,150 Change in Assets and Liabilities: Decrease (Increase) in: Accounts Receivable (3,919,057) (6,071,241) Inventories (1,931,992) (611,656) Other 118,262 (2,138) Increase (Decrease) in: Accounts Payable and Accrued Expenses 2,393,052 367,450 Income Taxes Payable and Deferred Taxes 1,461,100 1,090,095 Deferred Compensation 26,670 24,720 Net Cash Provided by (Used in) Operating Activities $1,212,349 $(2,735,466) CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures $(2,592,202) $(1,346,651) Acquisition of Assets of U.S. Door (3,346,596) --- Change in Cash Held in Escrow 1,269,431 --- Proceeds from Sale of Assets 21,000 18,850 Other 18,688 20,408 Net Cash (Used in) Investing Activities $(4,629,679) $(1,307,393) CASH FLOWS FROM FINANCING ACTIVITIES Net Borrowings Under Debt Agreements $ 3,500,000 $ 3,725,000 Sale of Common Stock 6,255 2,294 Principal Payments on Debt (274,000) --- Net Cash Provided by Financing Activities $3,232,255 $ 3,727,294 (Decrease) in Cash and Cash Equivalents $ (185,075) $ (315,565) CASH and CASH EQUIVALENTS, BEGINNING $ 666,986 $ 465,460 CASH and CASH EQUIVALENTS, ENDING $ 481,911 $ 149,895 See accompanying notes to Unaudited Condensed Financial Statements. PATRICK INDUSTRIES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. In the opinion of the Registrant, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly financial position as of March 31, 1995, and December 31, 1994, and the results of operations and cash flows for the three months ended March 31, 1995 and 1994. 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 Registrant's December 31, 1994 audited financial statements. The results of operations for the three months periods ended March 31, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. 3. The inventories on March 31, 1995 and December 31, 1994 consist of the following classes: March 31 December 31 1995 1994 Raw Materials $25,235,795 $23,630,848 Work in Process 647,015 738,439 Finished 3,044,051 3,618,587 Total Manufactured Goods $28,926,861 $27,987,874 Distribution Products 9,498,360 8,100,026 TOTAL INVENTORIES $38,425,221 $36,087,900 4. The earnings per common share for the three months ended March 31, 1995 and 1994 have been computed based on the weighted average number of shares of common stock outstanding of 5,940,809 and 6,174,533 respectively. The number of shares reflect the results of the March 8, 1994 two for one Stock Split. 5. On January 30, 1995, the Registrant purchased substantially all of the assets of U.S. Door, a manufacturer of wooden cabinet doors in Phoenix, Arizona, for $3,346,500. The transaction was accounted for as a purchase. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The economy and the industries served by the Registrant improved starting in 1992 as net sales increased by 28% over 1991, and in 1993 net sales increased 40% over 1992. In 1994, the Registrant continued its growth and recorded its highest annual sales of $331 million. The following table sets forth the percentage relationship to net sales of certain items in the Registrant's Statements of Operations: Quarterly Ended March 31, 1995 1994 1993 Net Sales 100.0% 100.0% 100.0% Cost of Sales 86.3 87.6 87.4 Gross Profit 13.7 12.4 12.6 Warehouse and Delivery 3.7 3.7 3.9 Selling, General & Administrative 5.3 4.6 5.3 Operating Income 4.7 4.1 3.4 Net Income 2.7 2.3 1.8 RESULTS OF OPERATIONS Quarter Ended March 31, 1995 Compared to Quarter Ended March 31, 1994 Net Sales. Net sales increased by $10.1 million, or 13.2%, from $76.9 million for the quarter ended March 31, 1994, to $87.0 million in the quarter ended March 31, 1995. This sales increase was attributable to increases in units produced by the manufactured housing, recreational vehicle and other building products industries served by the Registrant, and increased demand for Registrant's products. This increase, although less as a percentage than the previous two years first quarters, is further evidence of the continuing improvement in these industries. Gross Profit. Gross profit increased by $2.4 million, or 25.5%, from $9.5 million in the first quarter 1994, to $11.9 million in the first quarter 1995. As a percentage of net sales, gross profit increased from 12.4% in first quarter 1994 to 13.7% in 1995. This increase in gross profit resulted from fewer cost increases of certain of the Registrant's products during the period compared to 1994, and certain inventory items having cost below market cost. Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.4 million or 13.1%, from $2.9 million in 1994, to $3.3 million in the first quarter 1995. As a percentage of net sales, warehouse and delivery expenses remained the same at 3.7% for 1994 and 1995. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1.0 million, or 29.6%, from $3.5 million in 1994, to $4.5 million in 1995. As a percentage of net sales, selling, general and administrative expenses increased from 4.6% in 1994 to 5.3% in 1995. This percentage increase is due to unusually large group insurance claims, additional personnel costs and other increased expenses because of the higher sales levels. Operating Income. Operating income increased by $1.0 million, or 32%, from $3.1 million in 1994, to $4.1 million in 1995. This increase is primarily attributable to the $2.4 million increase in gross profit. As a percentage of sales, operating income increased from 4.1% in 1994 to 4.7% in 1995. Interest Expense. Interest expense increased by $124,000 from $224,000 in 1994, to $348,000 in 1995. This increase was due to higher interest rates and higher average borrowing levels. Net Income. Net income increased by $0.5 million from $1.8 million in 1994, to $2.3 million in 1995. This increase in net income is primarily attributable to the factors described above. Quarter Ended March 31, 1994 Compared to Quarter Ended March 31, 1993 Net Sales. Net sales increased by $21.9 million, or 39.9%, from $55.0 million for the quarter ended March 31, 1993, to $76.9 million in the quarter ended March 31, 1994. This sales increase was attributable to increases in units produced by the manufactured housing, recreational vehicle and other building products industries served by the Registrant, and increased demand for Registrant's products. This increase is further evidence of the continuing improvement in these industries. Gross Profit. Gross profit increased by $2.6 million, or 38.0%, from $6.9 million in the first quarter 1993, to $9.5 million in the first quarter 1994. As a percentage of net sales, gross profit decreased from 12.6% in first quarter 1993 to 12.4% in 1994. This decrease in gross profit resulted from cost increases and competitive pricing of certain of the Registrant's products during the period. Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.8 million, or 34.5%, from $2.1 million in 1993, to $2.9 million in the first quarter 1994. As a percentage of net sales, warehouse and delivery expenses decreased from 3.9% in 1993 to 3.7% in 1994. This percentage decrease is primarily due to increased sales volumes. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $0.6 million, or 21.2%, from $2.9 million in 1993, to $3.5 million in 1994. As a percentage of net sales, selling, general and administrative expenses decreased from 5.3% in 1993 to 4.6% in 1994. This percentage decrease is primarily due to increased sales volumes. Operating Income. Operating income increased by $1.2 million, or 68%, from $1.9 million in 1993, to $3.1 million in 1994. This increase is primarily attributable to the $2.6 million increase in gross profit. As a percentage of sales, operating income increased from 3.4% in 1993 to 4.1% in 1994. Interest Expense. Interest expense decreased by $18,000 from $242,000 in 1993, to $224,000 in 1994. This decrease was due to lower interest rates and lower average borrowing levels. Net Income. Net income increased by $0.8 million from $1.0 million in 1993, to $1.8 million in 1994. This increase in net income is primarily attributable to the factors described above. LIQUIDITY AND CAPITAL RESOURCES The Registrant's primary capital requirements are to meet working capital needs, support its capital expenditure plans and meet debt service requirements. The Registrant acquired property and equipment of $2.6 million and acquired substantially all of the assets of U.S. Door for $3.3 million during the quarter ended March 31, 1995. These were funded by a combination of cash provided by operations and net borrowings under credit agreements. The Registrant has a bank financing agreement (the Credit Agreement) with NBD Bank, N.A. The Credit Agreement provides for a $10 million term loan with a maturity in February 1999 and a credit revolver loan of up to $10 million which matures in February 1997. At March 31, 1995, $9.0 million and $7.5 million were outstanding on the term loan and the credit revolver loan, respectively. Pursuant to the Credit Agreement, the Registrant is required to maintain certain financial ratios, all of which are currently complied with. The Registrant has also financed in late 1994 the acquisition of land, building, and equipment in Oregon with a $6,000,000 industrial revenue bond. At March 31, 1995, $2.7 million of the bond proceeds have been used for construction of the project and $3.3 million was held in escrow for future payments on the project. The Registrant believes that cash generated from operations, bond proceeds held in escrow and borrowings under its credit agreements will be sufficient to fund its working capital requirements and capital expenditures as currently contemplated. SEASONALITY Manufacturing operations in the manufactured housing and recreational vehicle industries tend to be seasonal and are generally at the highest levels when the climate is temperate. Accordingly, the Registrant's sales and profits are generally highest in the second and third quarters. However, due to dramatic increases in production of manufactured housing and recreational vehicles, the first quarter of 1994 and 1995 and the fourth quarters of 1993 and 1994 were unusual in their high sales and gross profit levels during those winter months when compared to prior years. INFLATION The Registrant does not believe that inflation had a material effect on results of operations for the periods presented. 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 Ex-27 - Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PATRICK INDUSTRIES, INC. (Registrant) _________________________________ Date May 12, 1995 /S/Mervin D. Lung Mervin D. Lung (Chairman of the Board) ________________________________ Date May 4, 1995 /S/David D. Lung David D. Lung (President) ________________________________ Date May 5, 1995 /S//Keith V. Kankel Keith V. Kankel (Vice President Finance) (Principal Accounting Officer)