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 September 30, 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 November 1, 1996: 5,962,766 PATRICK INDUSTRIES, INC. INDEX Page No. PART I: Financial Information Unaudited Condensed Balance Sheets September 30, 1996 & December 31, 1995 3 Unaudited Condensed Statements of Income Three Months Ended September 30, 1996 & 1995, and Nine Months Ended September 30, 1996 & 1995 4 Unaudited Condensed Statements of Cash Flows Nine Months Ended September 30, 1996 & 1995 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) SEPTEMBER 30 DECEMBER 31 1996 1995 ASSETS CURRENT ASSETS Cash $ 2,022,986 $ 1,349,709 Accounts Receivable, Net 28,638,535 20,427,355 Inventories 37,328,685 35,462,152 Other 145,168 387,782 Total Current Assets $ 68,135,374 $ 57,626,998 INTANGIBLE AND OTHER ASSETS $ 5,387,973 $ 5,239,766 PROPERTY AND EQUIPMENT $ 62,828,952 $ 56,189,860 LESS ACCUMULATED DEPRECIATION 25,144,730 23,140,702 $ 37,684,222 $ 33,049,158 Total Assets $ 111,207,569 $ 95,915,922 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current Maturities of Long-term Debt $ 700,000 $ 700,000 Accounts Payable 17,085,094 9,589,103 Accrued Expenses and Taxes Payable 4,850,390 4,057,446 Total Current Liabilities $ 22,635,484 $ 14,346,549 LONG-TERM DEBT, NET OF CURRENT MATURITIES $ 26,200,000 $ 26,200,000 DEFERRED COMPENSATION $ 1,031,428 $ 919,821 DEFERRED INCOME TAX CREDITS $ 1,544,269 $ 1,461,000 SHAREHOLDERS' EQUITY Common Stock $ 21,767,744 $ 21,626,489 Retained Earnings 38,028,644 31,362,063 Total Shareholders' Equity $ 59,796,388 $ 52,988,552 Total Liabilities and Shareholders' Equity $ 111,207,569 $ 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 NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1996 1995 1996 1995 NET SALES $105,686,233 $ 94,125,637 $306,849,116 $273,716,121 COST AND EXPENSES Cost of Goods Sold $ 91,206,330 $ 80,913,172 $266,172,613 $236,037,230 Warehouse and Delivery 3,920,554 3,436,484 10,903,550 9,981,814 Selling and Administrative 4,915,825 4,801,757 15,074,356 13,850,944 Financial Expenses, Net 236,539 316,132 823,347 1,025,514 $100,279,248 $ 89,467,545 $292,973,866 $260,895,502 INCOME BEFORE INCOME TAXES $ 5,406,985 $ 4,658,092 $ 13,875,250 $ 12,820,619 INCOME TAXES 2,122,300 1,816,000 5,441,500 5,000,000 NET INCOME $ 3,284,685 $ 2,842,092 $ 8,433,750 $ 7,820,619 EARNINGS PER COMMON SHARE $ .55 $ .48 $ 1.41 $ 1.32 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,973,212 5,947,431 5,968,790 5,943,991 See accompanying notes to Unaudited Condensed Financial Statements.
PATRICK INDUSTRIES, INC. UNAUDITED CONDENSED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 8,433,750 $ 7,820,619 Adjustment to Reconcile Net Income to Net Cash: Depreciation and Amortization 3,357,973 2,472,907 Other (19,533) (142,038) Change in Assets and Liabilities: Decrease (Increase) in: Accounts Receivable (8,211,180) (8,681,024) Inventories (1,866,533) 2,153,155 Other 242,614 6,008 Increase (Decrease) in: Accounts Payable and Accrued Expenses 7,801,741 907,474 Income Taxes Payable and Deferred Taxes 563,117 242,508 Deferred Compensation 111,607 79,650 Net Cash Provided by Operating Activities $ 10,413,556 $ 4,859,259 CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures $ (7,820,442) $ (8,833,410) Acquisition of Assets of U.S. Door --- (3,346,596) Change in Cash Held in Escrow --- 2,603,959 Other 90,558 373,810 Net Cash (Used in) Investing Activities $ (7,729,885) $ (9,202,237) CASH FLOWS FROM FINANCING ACTIVITIES Net Borrowings Under Debt Agreements $ --- $ 18,000,000 Sale of Common Stock 174,724 25,703 Principal Payments on Debt --- (13,274,000) Reacquisition of Common Stock (1,479,476) --- Cash Dividends (714,912) (474,342) Other 9,269 --- Net Cash Provided by Financing Activities $ (2,010,395) $ 4,277,361 Increase (Decrease) in Cash and Cash Equivalents $ 673,277 $ (65,617) CASH and CASH EQUIVALENTS, BEGINNING $ 1,349,709 $ 666,986 CASH and CASH EQUIVALENTS, ENDING $ 2,022,985 $ 601,369 CASH PAYMENTS FOR: Interest $ 1,282,207 $ 1,127,842 Income Taxes $ 5,012,305 $ 4,879,992 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 September 30, 1996, and December 31, 1995, and the results of operations and cash flows for the three months and the nine months ended September 30, 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 and nine months periods ended September 30, 1996 and 1995 are not necessarily indicative of the results to be expected for the full year. 3. The inventories on September 30, 1996 and December 31, 1995 consist of the following classes: September 30 December 31 1996 1995 Raw Materials $22,965,977 $23,105,916 Work in Process 1,071,624 877,805 Finished 3,276,241 3,197,561 Total Manufactured Goods $27,313,842 $27,181,282 Distribution Products 10,014,843 8,280,870 TOTAL INVENTORIES $37,328,685 $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 and nine months ended September 30, 1996 and 1995 have been computed based on the weighted average number of shares of common stock. The weighted average number of shares outstanding was 5,973,212 for the three months and 5,968,790 for the nine months ended September 30, 1996 and 5,947,431 for the three months and 5,943,991 for the nine months ended September 30, 1995. 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. In the first nine months of 1996, the Registrant continued its growth with record sales for the period. The following table sets forth the percentage relationship to net sales of certain items in the Registrant's Statements of Income: Three Months Nine Months Ended September 30 Ended September 30 1996 1995 1996 1995 Net Sales 100.0% 100.0% 100.0% 100.0% Cost of Sales 86.3 86.0 86.7 86.2 Gross Profit 13.7 14.0 13.3 13.8 Warehouse and Delivery 3.7 3.7 3.6 3.7 Selling, General & Administrative 4.7 5.1 4.9 5.1 Operating Income 5.3 5.2 4.8 5.0 Net Income 3.1 3.0 2.8 2.9 RESULTS OF OPERATIONS Quarter Ended September 30, 1996 Compared to Quarter Ended September 30, 1995 Net Sales. Net sales increased by $11.6 million, or 12.3%, from $94.1 million for the quarter ended September 30, 1995 to $105.7 million in the quarter ended September 30, 1996. This sales increase was attributable to an almost 9% increase in units shipped by the Manufactured Housing industry, which represents approximately 69% of Registrant's sales. The Registrant's sales to the Recreational Vehicle industry were higher in this years third quarter because the industry, which represents approximately 16% of Registrant's sales, was experiencing a slight increase in units shipped of the units that utilize Registrant's products. Gross Profit. Gross profit increased by approximately $1.3 million, or 9.6%, from $13.2 million in the third quarter of 1995, to $14.5 million in the same quarter of 1996. As a percentage of sales, gross profit was lower by 0.3%. Warehouse and Delivery Expenses. Warehouse and delivery expenses increased by $0.48 million, or 14%. This is the same percentage to net sales as the third quarter of 1995. The increase in dollars is due to increased sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by only $114,000, or 2.4%, in the 1996 third quarter. As a percentage of net sales, these expenses decreased from 5.1% to 4.7% in the third quarter of 1996 compared to 1995. Operating Income. Operating income increased by $669,000 because of the increased sales and the operating expenses remaining steady or lower as percentages of sales. As a percentage of sales, operating income was increased from 5.2% to 5.3% in the 1996 third quarter. Interest Expense. Interest expense decreased by almost $80,000. The Registrant's borrowing levels were slightly lower during most of the 1996 third quarter compared to 1995, and temporary investments were higher. Net Income. Net income increased by $443,000 from $2.8 million in 1995 to $3.3 million in 1996 for the third quarter ended September 30. This increase from 3.0% of sales to 3.1% is attributable to the factors described above. Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30, 1995 Net Sales. Net sales increased by $33.1 million, or 12.1%, from $273.7 million for the nine months ended September 30, 1995, to $306.8 million in the nine months ended September 30, 1996. This sales increase was attributable to an almost 10% increase in the first nine months in units shipped by the Manufactured Housing industry, which represents approximately 69% of Registrant's sales. The Registrant's sales to the Recreational Vehicle industry were higher in this years first nine months because the industry, which represents approximately 16% of Registrant's sales, was experiencing a slight increase in units shipped of the units that utilize Registrants products. Gross Profit. Gross profit increased by approximately $3.0 million, or 8.0%, from $37.7 million in the first nine months of 1995, to $40.7 million in the same period of 1996. As a percentage of sales, gross profit was lower by 0.5%. Warehouse and Delivery Expenses. Warehouse and delivery expenses increased by approximately $921,000, or 9.2%. This is 0.1 % less as a percentage of net sales than the nine months period of 1995. The increase in dollars is due to increased sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $1.2 million, or 8.8%, in the 1996 first nine months. As a percentage of net sales, these expenses decreased from 5.1% to 4.9% in the first nine months of 1996 compared to 1995. Operating Income. Operating income increased by approximately $852,000 because of the increased sales and the operating expenses remaining steady or lower as percentages of sales. As a percentage of sales, operating income decreased from 5.0% to 4.8% in the 1996 first nine months. Interest Expense. Interest expense decreased by approximately $202,000. The Registrant's borrowing levels were slightly lower during the first nine months of 1996 compared to 1995, and temporary investments were higher. Net Income. Net income increased by approximately $613,000 from $7.8 million in 1995 to $8.4 million in 1996 for the nine months ended September 30. This increase is 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 ordinary 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. 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) Exhibit 27 Financial Data Schedule (b) There were no Reports filed on Form 8-K during this period. 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 November 12, 1996 /S/Mervin D. Lung Mervin D. Lung (Chairman of the Board) Date November 12, 1996 /S/David D. Lung David D. Lung (President) Date November 12, 1996 /S/Keith V. Kankel Keith V. Kankel (Vice President Finance) (Principal Accounting Officer)