FORM 10-Q
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, 1996 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, 1996: 5,921,466
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
March 31, 1996 & December 31, 1995
Unaudited Condensed Statements of Income
Three Months Ended March 31, 1996 & 1995,
Unaudited Condensed Statements of Cash Flows
Three Months Ended March 31, 1996 & 1995
Notes to Unaudited Condensed Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: Other Information
Signatures
PART I: FINANCIAL INFORMATION
PATRICK INDUSTRIES, INC. CONDENSED BALANCE SHEETS
(Unaudited) (Note)
MARCH 31 DECEMBER 31
1996 1995
ASSETS
CURRENT ASSETS
Cash and Temporary Investments $ 3,131,491 $ 1,349,709
Accounts Receivable, Net 26,295,906 20,427,355
Inventories 33,860,226 35,462,152
Other 220,076 387,782
Total Current Assets $ 63,507,699 $57,626,998
PROPERTY AND EQUIPMENT, at cost $ 57,057,563 $56,189,860
Less Accumulated Depreciation 23,557,675 23,140,702
$ 33,499,888 $33,049,158
INTANGIBLE AND OTHER ASSETS $ 5,161,298 $ 5,239,766
Total Assets $102,168,885 $95,915,922
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-term Debt $ 700,000 $ 700,000
Accounts Payable 13,331,340 9,589,103
Accrued Expenses and Taxes Payable 5,053,879 4,057,446
Total Current Liabilities $ 19,085,219 $14,346,549
LONG-TERM DEBT, LESS CURRENT MATURITIES $ 26,200,000 $26,200,000
DEFERRED COMPENSATION OBLIGATIONS AND OTHER $ 1,036,119 $ 919,821
DEFERRED TAX LIABILITIES $ 1,485,000 $ 1,461,000
SHAREHOLDERS' EQUITY
Common Stock $ 21,294,217 $21,626,489
Retained Earnings 33,068,330 31,362,063
Total Stockholders' Equity $ 54,362,547 $52,988,552
Total Liabilities and Stockholders' Equity $102,168,885 $95,915,922
NOTE: The balance sheet at December 31, 1995 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
1996 1995
NET SALES $93,767,541 $87,030,721
COST AND EXPENSES
Cost of Goods Sold $82,014,145 $75,060,101
Warehouse and Delivery Expenses 3,364,653 3,250,369
Selling and Administrative Expenses 4,924,656 4,576,174
Financial Expenses, Net 296,881 347,764
$90,600,335 $83,234,408
INCOME BEFORE INCOME TAXES $ 3,167,206 $ 3,796,313
INCOME TAXES 1,222,500 1,480,600
NET INCOME $ 1,944,706 $ 2,315,713
EARNINGS PER COMMON SHARE $ .33 $ .39
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,967,157 5,940,809
See accompanying notes to Unaudited Condensed Financial Statements.
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOW
THREE MONTHS ENDED
MARCH 31
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,944,706 $ 2,315,713
Adjustment to Reconcile Net Income to Net Cash:
Depreciation and Amortization 1,061,881 769,601
Other (378) (21,000)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (5,868,551) (3,919,057)
Inventories 1,601,926 (1,931,992)
Other 167,706 118,262
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 3,756,025 2,393,052
Income Taxes Payable and Deferred Taxes 1,008,568 1,461,100
Deferred Compensation 35,749 26,670
Net Cash Provided by Operating
Activities $ 3,707,632 $ 1,212,349
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $ (1,458,961) $(2,592,202)
Acquisition of Assets of U.S. Door - - - (3,346,596)
Change in Cash Held in Escrow - - - 1,269,431
Proceeds from Sale of Assets 750 21,000
Other 22,523 18,688
Net Cash (Used in) Investing Activities $(1,435,688) $(4,629,679)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Dividend $ (238,439) $ - - -
Net Borrowings Under Debt Agreements - - - 3,500,000
Sale of Common Stock 23,978 6,255
Principal Payments on Debt - - - (274,000)
Reacquisition of Common Stock (356,250) - - -
Other 80,549 - - -
Net Cash Provided by (Used In) Financing
Activities $ (490,162) $ 3,232,255
Increase (Decrease) in Cash and Cash
Equivalents $ 1,781,782 $ (185,075)
CASH and CASH EQUIVALENTS, BEGINNING $ 1,349,709 $ 666,986
CASH and CASH EQUIVALENTS, ENDING $ 3,131,491 $ 481,911
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, 1996, and December 31, 1995, and the results of operations and
cash flows for the three months ended
March 31, 1996 and 1995.
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, 1995
audited financial statements. The results of operations for the three
months periods ended March 31, 1996 and 1995 are not necessarily indicative
of the results to be expected for the full year.
3. The inventories on March 31, 1996 and December 31, 1995 consist of the
following classes:
March 31 December 31
1996 1995
Raw Materials $21,527,255 $23,105,916
Work in Process 1,001,192 877,805
Finished 2,877,248 3,197,561
Total Manufactured Goods $25,405,695 $27,181,282
Distribution Products 8,454,531 8,280,870
TOTAL INVENTORIES $33,860,226 $35,462,152
The inventories are stated at the lower of cost, First-In, First-Out (FIFO)
method, or market.
4. The earnings per common share for the three months ended March 31, 1996 and
1995 have been computed based on the weighted average number of shares of
common stock outstanding of 5,967,157 and 5,940,809 respectively.
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 annually from $184 million in 1992 to over $362
million in 1995.
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 87.5 86.3 87.6
Gross Profit 12.5 13.7 12.4
Warehouse and Delivery 3.6 3.7 3.7
Selling, General & Administrative 5.2 5.3 4.6
Operating Income 3.7 4.7 4.1
Net Income 2.1 2.7 2.3
RESULTS OF OPERATIONS
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
Net Sales. Net sales increased by $6.7 million, or 7.7%, from $87.0
million for the quarter ended March 31, 1995, to $93.8 million in the quarter
ended March 31, 1996. This sales increase was attributable to a 7% increase in
units shipped by the Manufactured Housing industry, which represents
approximately 68% of the Registrant's sales. The Registrant's sales to the
Recreational Vehicle industry were down as a percent of total company sales as a
result of a slight decline in units produced in that industry, which represents
approximately 16% of Registrant's sales.
Gross Profit. Gross profit decreased by approximately $217,000, or 1.8%,
from $11.9 million in the first quarter of 1995, to $11.7 million in the same
1996 quarter. As a percentage of net sales, gross profit decreased from 13.7%
in first quarter 1995 to 12.5% in 1996. This decrease in gross profit was the
result of lower volume and higher raw material costs of sales in the
Registrant's aluminum extrusion division, and lower sales volume and plant
relocation costs at the new Oregon facility. The Registrant also
experienced highly competitive market pricing of certain products in the
first quarter of 1996.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
approximately $114,000 or 3.5%, from $3.3 million in 1995, to $3.4 million in
the first quarter of 1996. As a percentage of net sales, warehouse and delivery
expenses decreased from 3.7% in 1995 to 3.6% in the 1996 first quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $348,000, or 7.6%, from $4.5
million in 1995, to $4.9 million in 1996. As a percentage of net sales,
selling, general and administrative expenses decreased from 5.3% in 1995 to 5.2%
in 1996.
Operating Income. Operating income decreased by approximately $680,000
because of the reduced gross profit and increases in warehouse and delivery, and
selling, general and administrative expenses. As a percentage of sales,
operating income decreased from 4.7% in 1995 to 3.7% in the 1996 first quarter.
Interest Expense. Interest expense decreased by approximately $51,000 from
$348,000 in 1995 to $297,000 in the first quarter of 1996. The Registrant's
borrowing levels in the 1996 period were slightly higher but at lower rates.
Net Income. Net income decreased by approximately $371,000 from $2.3
million in 1995 to $1.9 million in 1996 for the first quarter ended March 31.
This decrease is attributable to the factors described above.
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.
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, 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 beginning in 1996 and
seven annual principal repayments beginning September 15, 1999. These funds
were used to reduce existing bank debt and for working capital needs.
The Registrant has a bank financing agreement (the Credit Agreement) with
NBD Bank, N.A. The Credit Agreement provided for a $10 million term loan with a
maturity in February, 1999 and a credit revolver loan of up to $13 million with
maturity in February, 1997. In September, 1995 with funds from the insurance
company private placement, the Registrant prepaid the term loan in full and paid
the revolver outstanding balance. On October 31, 1995 the bank financing
agreement was amended reducing the credit revolver loan availability to
$5,000,000. Pursuant to the Credit Agreement, the Registrant is required to
maintain certain financial ratios, all of which are currently complied with.
The Registrant believes that cash generated from operations 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 historically have been 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 quarters of 1995 and 1994 and the fourth
quarters of 1994 and 1993 were unusual in their high sales and gross profit
levels during those winter months when compared to historical trends.
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
(a) Exhibits
3.1 Articles of Amendment of the Articles of Incorporation of
Patrick Industries, Inc.
3.2 Certificate of Designations, Preferences and Rights of
Preferred Stock of Patrick Industries, Inc.
27 Financial Data Schedule
(b) There were no Reports filed on Form 8-K.
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 10, 1996 /S/Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date May 10, 1996 /S/David D. Lung
David D. Lung
(President)
Date May 10, 1996 /S/Keith V. Kankel
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)