UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2005
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .................. to ..................
Commission file number 0-3922
PATRICK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| INDIANA | 35-1057796 |
| ||
(State or other jurisdiction of | (I.R.S. Employer |
| |||
incorporation or organization) | Identification No.) | ||||
1800 South 14th107 West Franklin Street, Elkhart, IN 46516
(Address of principal executive offices)
(ZIP Code)
(574) 294-7511
(Registrant's telephone number, including area code)
NOT APPLICABLENONE
(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 |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YesNo X |
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|
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Shares of Common Stock Outstanding as of AprilJuly 29, 2005: 4,748,1984,772,198
1
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I.I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Balance Sheets
| 3 |
Unaudited Condensed Statements of Operations
Three Months Ended | ||
Six Months Ended June 30, 2005 & 2004 | 4 | |
Unaudited Condensed Statements of Cash Flows
| 5 |
Notes to Unaudited Condensed Financial Statements |
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL |
|
CONDITION AND RESULTS OF | 9 | ||
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|
ITEM 4. CONTROLS AND PROCEDURES |
|
PART II: OTHER INFORMATION |
|
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 17 |
ITEM 6. EXHIBITS | 17 |
Signatures |
|
2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED BALANCE SHEETS
MARCH 31 | DECEMBER 31 | |||
| 2005 | 2004 |
| |
ASSETS
| JUNE 30 | DECEMBER 31 | ||||
| 2005 | 2004 |
| |||
ASSETS |
| |||||
CURRENT ASSETS
Cash and cash equivalents | Cash and cash equivalents | $ | 585,250 | $ | 82,787 |
| Cash and cash equivalents | $ | 52,820 | $ | 82,787 | |||||||||||
Trade receivables | Trade receivables | 21,858,929 | 16,720,245 | Trade receivables | 22,438,679 | 16,720,245 | ||||||||||||||||
Inventories | Inventories | 37,012,083 | 34,343,558 | Inventories | 39,482,692 | 34,343,558 | ||||||||||||||||
Prepaid expenses | Prepaid expenses | 934,605 | 951,192 | Prepaid expenses | 1,131,190 | 951,192 | ||||||||||||||||
Deferred tax assets | Deferred tax assets | 1,658,000 | 1,658,000 | Deferred tax assets | 1,658,000 | 1,658,000 | ||||||||||||||||
| Total current assets | 62,048,867 | 53,755,782 | Total current assets | 64,763,381 | 53,755,782 |
PROPERTY AND EQUIPMENT, at cost | 95,567,774 | 94,161,533 | ||
| Less accumulated depreciation | 59,335,360 | 58,518,666 | |
| 36,232,414 | 35,642,867 | ||
PROPERTY AND EQUIPMENT, at cost | 96,024,210 | 94,161,533 | ||||
| Less accumulated depreciation | 59,462,257 | 58,518,666 |
| ||
| 36,561,953 | 35,642,867 |
| |||
OTHER ASSETS |
| 2,976,026 |
Total assets | $ | $ 92,374,675 |
| |||
LIABILITIES AND SHAREHOLDERS' EQUITY |
CURRENT LIABILITIES
Current maturities of long-term debt | Current maturities of long-term debt | $ | 3,810,319 | $ | 3,671,430 | Current maturities of long-term debt | $ | 4,226,986 | $ | 3,671,430 | |||||||||
Short-term borrowings | Short-term borrowings | - - | 7,300,000 | Short-term borrowings | - - - | 7,300,000 | |||||||||||||
Accounts payable | Accounts payable | 12,495,441 | 11,389,966 | Accounts payable | 14,939,377 | 11,389,966 | |||||||||||||
Accrued liabilities | Accrued liabilities | 2,698,434 | 2,624,489 | Accrued liabilities | 3,080,135 | 2,624,489 | |||||||||||||
Income taxes payable | 61,197 | - - |
| ||||||||||||||||
| Total current liabilities | 19,065,391 | 24,985,885 | Total current liabilities | 22,246,498 | 24,985,885 |
LONG-TERM DEBT, less current maturities |
| 4,100,000 |
|
| 2,548,606 |
Total liabilities | $ |
| $ | 31,634,491 |
SHAREHOLDERS' EQUITY
Common stock | Common stock | 19,137,471 | 19,128,021 | Common stock | 19,348,863 | 19,128,021 | ||
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (268,000) | - - - | |||||
Unearned compensation | Unearned compensation | (176,160) | - - - | |||||
Retained earnings | Retained earnings | 41,481,283 | 41,612,163 | Retained earnings | 41,719,278 | 41,612,163 | ||
| Total shareholders' equity | 60,618,754 | 60,740,184 | Total shareholders’ equity | 60,623,981 | 60,740,184 |
Total liabilities and shareholders' equity | $ | $ 92,374,675 |
See accompanying notesNotes to Unaudited Condensed Financial Statements.
3
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED | SIX MONTHS ENDED | |||
|
| JUNE 30 |
| |
2005 | 2004 | 2005 | 2004 |
Net Sales | $ |
| $ | $158,374,930 | $144,332,555 |
Cost of |
|
| 140,008,605 | 127,201,470 |
Gross profit |
|
| 18,366,325 | 17,131,085 |
Operating expenses:
Warehouse and delivery expenses | Warehouse and delivery expenses | 3,540,000 | 3,160,855 | 3,442,110 | 3,513,120 | 6,982,110 | 6,673,975 | |||
Selling, general, and administrative expenses | Selling, general, and administrative expenses | 5,210,540 | 5,156,545 | 5,335,950 | 4,969,555 | 10,546,490 | 10,126,100 |
| ||
| Total operating expenses | 8,750,540 | 8,317,400 |
Total operating expenses | 8,778,060 | 8,482,675 | 17,528,600 | 16,800,075 |
Operating |
|
| 837,725 | 331,010 |
Interest expense, net |
|
| 659,310 | 276,195 |
|
|
| 178,415 | 54,815 |
Federal and state income taxes |
|
|
| 22,200 |
Net | $ |
| $ |
|
| 107,115 | $ | 32,615 |
Basic and diluted earnings
| $ |
| $ |
|
| .02 | $ | .01 |
WEIGHTED AVERAGE COMMON
|
|
| 4,754,190 | 4,668,950 |
See accompanying notesNotes to Unaudited Condensed Financial Statements.
4
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOWS
| THREE MONTHS ENDED |
| |||
| MARCH 31 |
| |||
2005 | 2004 | ||||
| SIX MONTHS ENDED |
| |||
| JUNE 30 |
| |||
2005 | 2004 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES
Net | $ |
| $ |
|
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization | 1,164,947 | 1,399,259 |
| |||||||||||||||||||
| Depreciation and amortization | 2,323,453 | 2,814,643 |
| ||||||||||||||||||
(Gain) on sale of fixed assets | (Gain) on sale of fixed assets | (108,656) | (11,375) | (Gain) on sale of fixed assets | (123,837) | (25,375) | ||||||||||||||||
Deferred income taxes | Deferred income taxes | - - | (332,566) |
| Deferred income taxes | - - - | (49,695) | |||||||||||||||
Gain on insurance proceeds | Gain on insurance proceeds | - - - | 352,800 |
| ||||||||||||||||||
Other | Other | 76,500 | 70,500 |
| Other | 153,000 | 141,000 |
|
Change in assets and liabilities:
Decrease (increase) in: |
| |||||||||||||||||
| Trade receivables | (5,138,684) | (5,664,780) |
| ||||||||||||||
| Inventories | (2,668,525) | (4,590,978) |
| ||||||||||||||
| Prepaid expenses | 16,587 | (5,516) |
| ||||||||||||||
Increase (decrease) in: |
| |||||||||||||||||
| Accounts payable and accrued liabilities | 1,308,662 | 7,705,556 |
| ||||||||||||||
| Income taxes payable | (68,045) | (12,707) | |||||||||||||||
| Net cash (used in) operating activities | (5,548,094) | (1,964,197) |
| ||||||||||||||
| Decrease (increase) in: |
| |||||||||||||
| Trade receivables | (5,718,434) | (9,258,475) | ||||||||||||
| Inventories | (5,139,134) | (11,262,854) | ||||||||||||
| Prepaid expenses | (179,998) | 65,721 |
| |||||||||||
Increase (decrease) in: |
| ||||||||||||||
| Accounts payable and accrued liabilities | 3,959,166 | 13,573,366 |
| |||||||||||
| Income taxes payable | 45,891 | 26,722 |
| |||||||||||
| Net cash (used in) operating activities | (4,572,778) | (3,589,532) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures | Capital expenditures | (1,761,600) | (4,027,617) | Capital expenditures | (3,162,508) | (5,652,674) | |||||||||||||
Proceeds from sale of property and equipment | Proceeds from sale of property and equipment | 212,570 | 17,150 |
| Proceeds from sale of property and equipment | 237,615 | 31,150 |
| |||||||||||
Other | Other | (27,020) | (106,102) | Other | (42,180) | (77,204) | |||||||||||||
| Net cash (used in) investing activities | (1,576,050) | (4,116,569) |
| Net cash (used in) investing activities | (2,967,073) | (5,698,728) |
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under long term debt | 15,000,000 | - - |
| |||||||||||||||||||||||||||||
Principal payments on debt | (7,300,000) | - - |
| |||||||||||||||||||||||||||||
Borrowings under long-term debt | Borrowings under long-term debt | 15,000,000 | - - - |
| ||||||||||||||||||||||||||||
Short-term borrowings | Short-term borrowings | - - - | 2,000,000 |
| ||||||||||||||||||||||||||||
Payments on short-term borrowings | Payments on short-term borrowings | (7,300,000) | - - - |
| ||||||||||||||||||||||||||||
Payments on deferred compensation obligations | Payments on deferred compensation obligations | (75,432) | (58,812) | Payments on deferred compensation obligations | (152,249) | (117,624) | ||||||||||||||||||||||||||
Proceeds from exercise of common stock options | Proceeds from exercise of common stock options | 9,450 | 401,730 |
| Proceeds from exercise of common stock options | 9,450 | 452,480 |
| ||||||||||||||||||||||||
Other | Other | (7,411) | (2,113) | Other | (47,317) | (30,213) | ||||||||||||||||||||||||||
| Net cash provided by financing activities | 7,626,607 | 340,805 |
| Net cash provided by financing activities | 7,509,884 | 2,304,643 |
|
|
|
|
Cash and cash equivalents, beginning | 82,787 | 7,077,390 |
Cash and cash equivalents, ending | $ |
| $ |
|
Cash Payments for:
Interest | $ | 220,173 | $ | 228,078 | $ | 652,960 | $ | 273,795 | ||||||
Income taxes | Income taxes | 17,764 | 4,773 |
| Income taxes | 55,922 | 45,173 |
|
See accompanying notes to Unaudited Condensed Financial Statements.
5
PATRICK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. | In the opinion of the Company, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring |
2. | Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted |
3. | The inventories on June 30, 2005 and December 31, 2004 consist of the following classes: |
| ||||||||||||
| June 30 | December 31 | ||||||||||||
| 2005 | 2004 |
| |||||||||||
| Raw materials | $24,702,037 | $20,466,965 |
| ||||||||||
| Work in process | 2,528,231 | 1,955,284 |
| ||||||||||
| Finished goods | 5,194,850 | 5,336,306 |
| ||||||||||
| Total manufactured goods | 32,425,118 | 27,758,555 |
| ||||||||||
| Distribution products | 7,057,574 | 6,585,003 |
| ||||||||||
|
| $34,343,558 |
| March 31 | December 31 | ||||||||||||
| 2005 | 2004 |
| |||||||||||
Raw materials | $ 22,608,977 | $ 20,466,965 |
| |||||||||||
Work in process | 2,157,219 | 1,955,284 |
| |||||||||||
Finished goods | 5,439,651 | 5,336,306 |
| |||||||||||
| Total manufactured goods | 30,205,847 | 27,758,555 |
| ||||||||||
Distribution products | 6,806,236 | 6,585,003 |
| |||||||||||
| TOTAL INVENTORIES | $ 37,012,083 | $ 34,343,558 |
| ||||||||||
Inventories are stated at the lower of cost, (first-in, first-outFirst-In First-Out (FIFO) method)method, or market.
4. | The Company accounts for grants of stock options under its stock option plan based on the recognition and measurement principles of APB Opinion No. 25 and related interpretations. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provision of FASB |
Net income (loss):
Deduct total stock-based employee compensation expense determined under fair value based method for
Basic and diluted
6 Other Comprehensive Income The difference between net income and total comprehensive income for the three and six month periods ended June 30, 2005 is as follows:
Primary Manufactured Products - 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 products are utilized to produce furniture, shelving, wall, counter, and cabinet products with a wide variety of finishes and textures.
Distribution - Distributes
Other Component Manufactured Products - Includes an aluminum extrusion and fabricating division, an adhesive division,
7
|
| PRIMARY | OTHER |
| ||||||||
MANUFACTURED | COMPONENT MFG |
| |||||||||
| PRODUCTS | DISTRIBUTION | PRODUCTS | SEGMENT TOTAL | |||||||
Net outside sales | Net outside sales | $ 40,419,694 | $ 25,822,717 | $ 13,487,914 | $ 79,730,325 |
| Net outside sales | $ 78,883,578 | $ 52,933,757 | $ 26,557,595 | $158,374,930 |
| ||||||||||
Intersegment sales | Intersegment sales | 1,388,795 | 90,133 | 1,940,897 | 3,419,825 |
| Intersegment sales | 2,906,047 | 203,635 | 3,569,529 | 6,679,211 |
| ||||||||||
| Total sales | $ 41,808,489 | $ 25,912,850 | $ 15,428,811 | $ 83,150,150 * | Total sales | $ 81,789,625 | $ 53,137,392 | $ 30,127,124 | $165,054,141 | * |
Operating income | $ | 2,539,385 | $ |
| $ |
| $ |
|
Total assets | $ | $ | $ | $ |
|
Net outside sales | Net outside sales | $ 35,434,304 | $ 20,796,415 | $ | 9,481,636 | $ 65,712,355 | Net outside sales | $ 77,007,811 | $ 46,660,988 | $ 20,663,756 | $144,332,555 |
| |||||||||||
Intersegment sales | Intersegment sales | 1,771,428 | 343,915 | 2,233,894 | 4,349,237 |
| Intersegment sales | 3,622,930 | 671,988 | 4,438,185 | 8,733,103 |
| |||||||||||
| Total sales | $ 37,205,732 | $ 21,140,330 | $ 11,715,530 | $70,061,592 * | Total sales | $ 80,630,741 | $ 47,332,976 | $ 25,101,941 | $153,065,658 | * |
Operating income | $ |
| $ |
| $ |
| $ |
|
Total assets | $ | $ | $ |
| $ |
Reconciliation of segment operatingOperating income to consolidated operatingOperating income:
Three Months Ended | Six Months Ended | ||||||||
June 30, | June 30, | ||||||||
2005 | 2004 | 2005 | 2004 | ||||||
Operating income for segments | $ 2,195,052 | $ 1,665,933 | |||
Corporate incentive agreements | 301,110 | 300,000 | |||
Consolidation reclassifications | 124,991 | 8,649 | |||
Gain on sale of property
| and equipment | 108,657 | 11,375 |
| ||||||||||||||||||||||||||
Corporate expenses | (2,599,472) | (2,748,223) | ||||||||||||||||||||||||||||
Operating income for segments | $ 2,603,911 | $ 3,363,274 | $ 4,798,963 | $ 5,029,207 |
| |||||||||||||||||||||||||
Corporate incentive agreements | Corporate incentive agreements | 792,155 | 301,288 | 1,093,265 | 601,288 |
| ||||||||||||||||||||||||
Consolidation reclassifications | Consolidation reclassifications | 31,468 | 1,119 | 156,459 | 9,768 |
| ||||||||||||||||||||||||
Gain on sale of assets | Gain on sale of assets | 15,180 | 14,000 | 123,837 | 25,375 |
| ||||||||||||||||||||||||
Unallocated corporate expenses | Unallocated corporate expenses | (2,664,973) | (2,387,711) | (5,264,445) | (5,135,934) | |||||||||||||||||||||||||
Other | Other | (78,148) | 38,006 |
| Other | 7,794 | (236,700) | (70,354) | (198,694) |
Consolidated | $ |
| $ 1,055,270 | $ |
|
| 331,010 |
*Does not agree to Financial Statements due to consolidation eliminations. |
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATION
GENERAL
The first quarter of 2005 started out on a positive note with increased unit shipments in both the Manufactured Housing and Recreational Vehicle Industries, which represent approximately 71% of the Company’s revenue base. Second quarter 2005 shipment levels in these two industries as well as increased penetration intodeclined from the first quarter trend, however, they were still ahead of the 2004 levels on a year to date basis. The Industrial and Otherother market sectors. Netsectors, which represent 29% of the Company’s revenue base, remained strong for both the quarter and year to date periods. The Company’s net sales increased by approximately 21.3% and net losses were reduced by approximately $0.4 million, or $.08 per share, from a loss of $.11 per share21% in the first quarter of 2004 to a loss of $.03 per share infrom the same period in 2005. Gross margins continue to be affected by significant competitive pressure and increased commodity prices. The Company’s ongoing efforts to drive a lean operating structure and keep costs aligned with revenues have contributed to decreased operating expenses as a percentage of2004. Second quarter net sales and helpedwere comparable with 2004, resulting in year to offset margin erosion due to competitive pricing situations. Netdate sales to Manufactured Housing, Recreational Vehicle, and Industrial and Other market sectors were 40%, 31%, and 29%, respectively, for the first quarter of 2005 compared to 38%, 33%, and 29%, respectively, for the first quarter of 2004.
The Manufactured Housing industry continued a six month trend of unit shipment increases through February, 2005 followed by a slight decrease in March of approximately 0.4%. First quarter unit shipmentsthat were approximately 7% higher than those9.7% ahead of 2004. Second quarter net income decreased approximately $0.3 million from the same period in 2004 and year to date net income was approximately $0.1 million ahead of the shipment estimates forJune 30, 2004 results. Overall, the 2005 year are projected to be between 10% and 15% higher than those experienced in 2004. As the Manufactured Housing industry continuesCompany is operating at approximate break-even sales levels.
The Company increased its market penetration into the ModularManufactured Housing sector, the demandindustry, which represents approximately 42% of 2005 year to date net sales. Sales to this industry for the Company’s manufactured panels is shiftingsix month period ended June 30, 2005 were up more than 17% from the previous year, while shipment levels in this industry were up only slightly more than 3% for the same period. The combination of raw material price increases which were passed on to customers and additional market penetration contributed to the raw substrate and tape and texture products which are more commonCompany’s positive results related to this particular market sector. Shipment levels in the modular units. This shift in demand will result in a decline in manufactured product sold to the Manufactured Housing industry but will continueare expected to bolsterbe between 3% and 5% better than the 2004 figures. The primary product that the Company supplies to this industry continues to migrate from a custom manufactured product to a more general distributed product and as a result is accompanied by lower margins. The Company is continually conducting market research and introducing new products to this industry to supplement its existing manufacturing and distribution capabilities.
Recreational Vehicle market share remained relatively constant from period to period as the Company’s sales to this industry, which represent approximately 29% of 2005 year to date net sales, decreased approximately 1%. Shipment levels in this industry were approximately 1% ahead of the 2004 year to date figures, however, several of the Company’s distribution product offerings.customers reduced production levels as a result of excess finished goods inventory on hand, thus contributing to the Company’s market sales decline. Additionally, the Company’s raw material inventory levels were susceptible to this production lag and at June 30, 2005, inventories were larger than normal. Shipments in this industry are projected to decrease slightly from the 2004 level which were the second highest in the last 25 years.
Industrial and other market penetration continued as the Company’s sales increased more than 10% for the six months ended June 30, 2005. This penetration is the result of the Company’s dedicated marketing and sales efforts to improve visibility of the Company’s products and capabilities, and establish Patrick Industries as a quality oriented and valued supplier to these particular sectors. While market share is difficult to measure on a micro and macro level within these particular sectors due to the large number of manufacturers and the lack of public reporting, the Company continues to increase its customer base and sales levels in these markets, which represent approximately 29% of net sales, at June 30, 2005.
The Recreational Vehicle Industry continued its pace with firstCompany recorded additional income related to corporate incentive agreements in the second quarter unit shipment increasesof 2005 of approximately 6% over$0.4 million due to an increase in the 2004 levels. Whileestimated annual sales volume of products sold in the high gasoline prices may be affecting the sales of motorized units, the towable units continue to perform strongly. Shipment estimates for the 2005 yearindustries where these incentives are expected to finish slightly below the 2004 levels which was the best year in industry history.applicable.
The IndustrialCompany’s manufacturing capabilities and Other market sectors continue toavailable capacity provide significant opportunity for increased sales and market penetrationto all of the Company’s manufactured products. First quarter 2005 sales to this market increased approximately 20% overindustries which the first quarter of 2004 and will continue to be an area of focus for diversification and capacity utilization.
Company serves. The Company‘scurrent capital plan, will be completedwhich is in 2005.its third and final year, includes expenditures up to $11.0 million in 2005 for buildings, machinery, and equipment to support the Company’s strategic initiatives. In conjunction with this strategic initiative,March 2005, the Company obtained $15.0 million ofin fixed term debt financing withto finance this capital plan which has resulted in increased interest only payments in 2005expense of approximately $0.2 million for the quarter and principal payments$0.3 million year to begin in 2006.date. While recent sales trends have experienced some slight declines, the Company continuesremains committed to its focus on keeping operating costs aligned with revenues, therestrategic plan to significantly grow its revenue base. The infrastructure is available capacity in nearly all of its manufacturing facilities and the infrastructure in place to support future growth in all of the industries which it serves.these and other initiatives and thus increase contribution with increased revenues.
9
The following table sets forth the percentage relationship to net sales of certain items in the Company's Statements of Operations:
Quarter Ended | ||||
| March 31, |
| ||
2005 | 2004 |
| ||
| Three Months | Six Months |
| ||||||
| Ended June 30, | Ended June 30, | |||||||
2005 | 2004 | 2005 | 2004 |
| |||||
Net sales | 100.0% 100.0% | |||||||||
Cost of sales | 89.0 | 88.4 |
| |||||||
Gross profit | 11.0 | 11.6 |
| |||||||
Warehouse and delivery | 4.4 | 4.8 |
| |||||||
Selling, general & administrative | 6.5 | 7.9 |
| |||||||
Operating (loss) | 0.1 | (1.1) |
| |||||||
Income taxes (credits) | (0.1) | (0.5) |
| |||||||
Net (loss) | (0.2) | (0.8) |
| |||||||
Net sales | 100.0% | 100.0% | 100.0% | 100.0% | |||||||||||
Cost of sales | 87.8 | 87.9 | 88.4 | 88.1 |
| ||||||||||
Gross profit | 12.2 | 12.1 | 11.6 | 11.9 |
| ||||||||||
Warehouse and delivery | 4.4 | 4.5 | 4.4 | 4.6 |
| ||||||||||
Selling, general, & administrative | 6.8 | 6.3 | 6.7 | 7.0 |
| ||||||||||
Operating income | 1.0 | 1.3 | 0.5 | 0.2 |
| ||||||||||
Income before taxes | 0.5 | 1.2 | 0.2 | - - - |
| ||||||||||
Income taxes | 0.2 | 0.5 | 0.1 | - - - |
| ||||||||||
Net income | 0.3 | 0.7 | 0.1 | - - - |
| ||||||||||
RESULTS OF OPERATIONS
Quarter Ended March 31,June 30, 2005 Compared to Quarter Ended March 31,June 30, 2004
Net Sales. Net sales remained constant at $78.6 million for both quarters ended June 30, 2005 and 2004. The Company increased $14.0 million, or 21.3%, from $65.7 million in the first quarter of 2004 to $79.7 million in the first quarter of 2005. The increased sales are attributable to a 7.6% increase in shipments inits penetration into the Manufactured Housing industry which represents approximately 40%and Industrial and other markets, however, these increases were offset by lower production at certain of the Company’s consolidated sales at March 31, 2005, and a 6.3% increase in shipments in the Recreational Vehicle industry, which represents 31% of the Company’s consolidated revenue at March 31, 2005.
Additionally, salesrecreational vehicle customers due to the Industrial and Other market sectors, which represents 29% of the Company’s consolidated revenue in the first quarter of 2005, increased 20% from period to period.excess finished goods inventory levels.
Gross Profit. Gross profit increased $1.2also remained consistent at $9.5 million, or 15.9%,12.1% of net sales for the second quarter of 2004 and 12.2% for the second quarter of 2005. Exclusive of a $0.4 million increase in corporate incentive agreements in the second quarter of 2005, gross profits decreased $0.4 million from $7.6$9.5 million in the firstsecond quarter of 2004 to $8.8$9.1 million in the first quarter of 2005. As a percentage of net sales, gross profit decreased 0.6%, from 11.6%same period in the first quarter of 2004 to 11.0% in the first quarter of 2005. The increaseddecrease in gross profit in dollars is due to the increased sales volume. The decreased gross profit, as a percentage of net sales,profits is attributable to significant competitive pricing pressures forcing lowera 12% increase in direct shipments from quarter to quarter which result in reduced gross margins.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.3decreased $0.1 million, or 12.0%2.0%, from $3.2 million in the first quarter of 2004 to $3.5 million in the first quarter ofended June 30, 2004 to $3.4 million in the same period in 2005. As a percentage of net sales, warehouse and delivery expenses decreased 0.4%, from 4.8%4.5% in the first quarter of 2004 to 4.4% in the first quarter of 2005. While increasedIncreased gasoline prices have had a negative impact onwere offset by decreases in certain fixed delivery costs as a percentage of net sales, the increased revenues, coupled with consistent fixed costs from period to period, have resulted in decreasedkeep overall costs as a percentage of net sales.aligned with revenues.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were consistentincreased $0.4 million, or 7.4%, from $4.9 million in the firstsecond quarter of 2004 to $5.3 million in the first quarter of 2005 at $5.2 million.same period in 2005. As a percentage of net sales, selling, general, and administrative expenses decreased 1.4%increased 0.5%, from 7.9%6.3% in the firstsecond quarter of 2004 to 6.5%6.8% in the first quarter ofsame period in 2005. The decrease2004 second quarter includes a $0.4 million gain on life insurance proceeds. Exclusive of the gain on life insurance proceeds, selling, general, and administrative expenses remained comparable at $5.3 million and 6.8% for both quarters ended June 30, 2004 and 2005. Increases in percentage of net sales is due to decreasedexpense have been offset by reductions in certain fixed administrative costs from quarter to quarter.including depreciation, building rent, and insurance.
Operating Income. Operating income increased $0.8decreased $0.2 million, or 25.6%, from a loss of $0.7$1.0 million in the firstsecond quarter of 2004 to income of $0.1$0.8 million in the firstsecond quarter of 2005. As a percentage of net sales, operating income decreased 0.3%, from 1.3% in 2004 to 1.0% in 2005. The increaseddecrease in operating income is attributable to the factors described above.
Interest Expense, Net. Interest expense, net increased by $0.2$0.3 million, from $0.1 million in the firstsecond quarter of 2004 to $0.3$0.4 million in the firstsecond quarter of 2005. The increase is dueattributable to the additional borrowings on the Company’s line of credit in the first quarter of 2005 as well as the Company borrowing $15.0 million of fixed term debt in March, 2005. These borrowings were2005 and increased interest expense on the variable rate industrial revenue bonds from period to period. The term debt borrowing was done in conjunction with the Company’s capital expenditure plan for 2004 and 2005.
Net Loss.Income. Net lossincome decreased $0.4$0.3 million, or 74.9%, from a loss of $0.5 million or $.11 per share in the firstsecond quarter of 2004 to a loss$0.2 million in the second quarter of $0.12005 due to the factors described above.
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Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
Net Sales. Net sales increased $14.0 million, or $.03 per share9.7%, from $144.3 million in the six months ended June 30, 2004 to $158.3 million in the same period in 2005. The increase is due to increased raw material prices which were passed on to customers, increased shipments in the Manufactured Housing industry, and increased shipments in the Recreational Vehicle industry, primarily in the first quarter of 2005. The reducedCompany’s sales are 42% Manufactured Housing, 29% Recreational Vehicle, and 29% Industrial and other markets. In 2004, the Company’s sales were 39% Manufactured Housing, 32% Recreational Vehicle, and 29% Industrial and other markets.
Gross Profit. Gross profit increased $1.3 million, or 7.2%, from $17.1 million in 2004 to $18.4 million in 2005. As a percentage of net losses aresales, gross profit decreased 0.3%, from 11.9% in 2004 to 11.6% in 2005. The decrease in gross profits in dollars and as a percentage of net sales is attributable to a 23% increase in direct shipments to customers from year to year which traditionally carry lower margins. Gross profit in 2005 includes approximately $0.4 million of additional corporate incentive agreements from year to year.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased $0.3 million, or 4.6%, from $6.7 million in the six months ended June 30, 2004 to $7.0 million in the same period in 2005. As a percentage of net sales, warehouse and delivery expenses decreased 0.2%, from 4.6% in 2004 to 4.4% in 2005. The increase in dollars is due to increased sales and gasoline prices, and the decrease in percentage of net sales is due to comparable fixed costs from period to period on increased sales.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $0.4 million, or 4.2%, from $10.1 million in the six months ended June 30, 2004 to $10.5 million in the same period in 2005. As a percentage of net sales, selling, general, and administrative expenses decreased 0.3%, from 7.0% in 2004 to 6.7% in 2005. The six month period ended June 30, 2004 includes a gain on life insurance proceeds of approximately $0.4 million. Exclusive of this gain, selling, general, and administrative expenses increased $0.1 million and decreased as a percentage of net sales by 0.6%, from 7.3% in 2004 to 6.7% in 2005. Increased costs related to investment in personnel in conjunction with the Company’s strategic plan were offset by decreases in other fixed costs including depreciation, rent, and insurance from period to period.
Operating Income. Operating income increased $0.5 million, from $0.3 million in the six months ended June 30, 2004 to $0.8 million in the same period in 2005. The increase in operating income is attributable to the factors described above.
Interest Expense, Net. Interest expense, net increased by $0.3 million, from $0.3 million in the six months ended June 30, 2004 to $0.6 million in the same period in 2005. The increase in interest expense is due to increased variable rates on the industrial revenue bonds, increased borrowings on the Company’s line of credit in the first quarter of 2005, and the Company obtaining an additional $15.0 million in fixed term debt in March, 2005.
Net Income. Net income increased from $33,000 in the six month period ended June 30, 2004 to $0.1 million in the six month period ended June 30, 2005 due to the factors described above.
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BUSINESS SEGMENTS
Quarter Ended March 31,June 30, 2005 Compared to Quarter Ended March 31,June 30, 2004
PRIMARY MANUFACTURED PRODUCTS SEGMENT DISCUSSION |
Net sales increased $4.6decreased $3.4 million, or 12.4%7.9%, from $37.2$43.4 million in the firstsecond quarter of 2004 to $41.8$40.0 million in the firstsecond quarter of 2005. The increaseddecreased net sales are primarily attributable to increased shipmentscertain recreational vehicle customers reducing production as a result of excess finished goods inventories in the Recreational Vehicle industry of approximately 6.3% and increased penetration into the Industrial and Other market sectors.second quarter.
Gross profit increased $0.8decreased $0.7 million, or 24.4%16.0%, from $3.0$4.7 million in the firstsecond quarter of 2004 to $3.8$4.0 million in the firstsecond quarter of 2005. As a percentage of net sales, gross profit increaseddecreased 0.9%, from 8.3%10.9% in 2004 to 10.0% in 2005. The decrease in gross profit dollars and percentage of net sales is due to decreased sales and excess capacity at certain operating units resulting in increased overhead as a percentage of net sales.
Operating income decreased $0.7 million, from $2.1 million in the firstsecond quarter of 2004 to 9.2%$1.4 million in the firstsame period in 2005. The decline is due to decreased gross profits as operating expenses have remained aligned with revenues on a percentage of net sales basis.
DISTRIBUTION SEGMENT DISCUSSION
Net sales increased $1.0 million, or 3.9%, from $26.2 million in the second quarter of 2004 to $27.2 million in the second quarter of 2005. The increased sales are attributable to increased raw material price increases which were passed on to customers and increased market penetration into the Manufactured Housing sector, which is the primary market this segment serves.
Gross profit decreased $0.3 million, or 8.3%, from $3.3 million in the second quarter of 2004 to $3.0 million in the same period in 2005. As a percentage of net sales, gross profit decreased 1.5%, from 12.6% in 2004 to 11.1% in 2005. The decrease in gross profit in dollars and percentage of net sales is due to an approximate 12% increase in direct shipments to customers which traditionally result in lower margins.
Operating income decreased $0.3 million, from $1.1 million in the second quarter of 2004 to $0.8 million in the second quarter of 2005 due to the factors described above.
OTHER COMPONENT MANUFACTURED PRODUCTS DISCUSSION
Net sales increased $1.3 million, or 9.8%, from $13.4 million in the second quarter of 2004 to $14.7 million in the same period in 2005. The increase is primarily attributable to increased sales in the Company’s aluminum extrusion division as a result of increased raw aluminum prices and increased market penetration.
Gross profit increased $0.2 million, or 17%, from $1.1 million in the second quarter of 2004 to $1.3 million in the second quarter of 2005. As a percent of net sales, gross profit increased 0.6%, from 8.6% in 2004 to 9.2% in 2005. The increased in gross profit is attributabledue to increased sales and capacity utilization in almost all of the operating units in this segment in the first quarter of 2005.sales.
Operating income increased $0.4$0.2 million, from $0.7$0.2 million in the firstsecond quarter of 2004 to $1.1$0.4 million in the firstsecond quarter of 2005 due to the factors described above.
Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
PRIMARY MANUFACTURED PRODUCTS SEGMENT DISCUSSION
Net sales increased $1.2 million, or 1.4%, from $80.6 million in the six months ended June 30, 2004 to $81.8 million in the same period in 2005. The increase is due to increased revenues.
|
Neta strong first quarter both in shipments and unit sales increased $4.8 million, or 22.6%, from $21.1 million in the first quarter of 2004 to $25.9 million in the first quarter of 2005. The increase is due to increased shipments in the Manufactured HousingRecreational Vehicle industry, of approximately 7.6%, which is the primary market sector that this segment serves.serves, as well as increased penetration into the Industrial and other markets.
Gross profit remained consistent in dollarsconstant at approximately $2.8$7.8 million for both the first quarter ofsix month periods ending June 30, 2004 and 2005. As a percentage of net sales, gross profit decreased approximately 2.3%0.2%, from 13.4%9.7% in the first quarter of 2004 to 11.1%9.5% in the first quarter of 2005. The decrease in gross profit as a percentagepercent of net sales is due to excess capacity at certain operating units in the second quarter as a result of decreased production levels at certain of the Company’s Recreational Vehicle customers.
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Operating income decreased $0.3 million, or 10.4%, from $2.8 million in the six months ended June 30, 2004 to $2.5 million in the same period in 2005 due to increased operating expenses in the general and administrative areas. The excess capacity in the second quarter contributed to higher fixed costs as a percentage of net sales.
DISTRIBUTION SEGMENT DISCUSSION
Net sales increased $5.8 million, or 12.3%, from $47.3 million in the six month period ended June 30, 2004 to $53.1 million in the same period in 2005. This increase is due to increased market penetration and raw material price increases which were passed on to the customer in the Manufactured Housing industry, which is the primary market sector this segment serves. Shipments in this industry were up more than 3% from the 2004 levels.
Gross profit decreased $0.2 million, or 3.6%, from $6.1 million in the six months ended June 30, 2004 to $5.9 million in the same period in 2005. As a percent of net sales, gross profit decreased 1.8%, from 12.9% in 2004 to 11.1% in 2005. The decreased gross profits in both dollars and percent of net sales are attributable to ana 23% increase in direct shipments to customers of approximately 38% over the previous year and an increase in direct sales as a percentage of total distribution sales of approximately 5% over the previous year. Direct saleswhich traditionally result in lower margins thanwhen compared to warehouse sales to customers.
shipments.
Operating income decreased $0.1$0.4 million, from $0.8$1.9 million in the first quarter ofsix months ended June 3, 2004 to $0.7$1.5 million in the first quarter of 2005. The decrease is attributablesame period in 2005 primarily due to the factors described above.
OTHER COMPONENT MANUFACTURED PRODUCTS DISCUSSION |
Net sales increased $3.7$5.0 million, or 31.7%20.0%, from $11.7$25.1 million in the first quarter ofsix months ended June 30, 2004 to $15.4$30.1 million in the first quarter ofsame period in 2005. The increase is due to increased commoditymarket penetration and increased aluminum prices as well as increased shipments in the Recreational Vehicle industryCompany’s aluminum extrusion division from quarterperiod to quarter.period.
Gross profit increased $0.4$0.5 million, or 32.3%24.4%, from $1.0$2.2 million in the first quarter ofsix month period ended June 30, 2004 to $1.4$2.7 million in the first quarter ofsame period in 2005. As a percentagepercent of net sales, gross profit remained consistent at 8.9% for both the first quarter ofincreased 0.3%, from 8.7% in 2004 andto 9.0% in 2005. The increaseIncreased gross profit in dollarsthis segment is attributable to consistent fixed expenses, coupled with increased revenues and the consistencysales, resulting in percentage of net sales is due to increased commodity prices in certain operationsbetter contribution rates in this segment not being able to be passed on to certain customers served by this business segment.
Operating income increased $0.2$0.4 million, from $0.2$0.3 million in the first quarter of 2004 to $0.4$0.7 million in the first quarter of 2005. The increased operating income is attributable2005 primarily due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company’sCompany's primary capital requirements are to meet working capital needs, support its capital expenditure plans, and meet debt service requirements.
The Company, in September, 1995, issued to an insurance company in a private placement $18,000,000 of senior unsecured notes. The ten year notes bear interest at 6.82%, with semi-annual interest payments that began in 1996 and seven annual principal repayments of $2,571,429 thatwhich began in September, 1999. The final payment is due in September 2005. These funds were used to reduce existing bank debt and for working capital needs.
The Company has a secured a bank revolving credit agreementRevolving Credit Agreement that provides loan availability of $10,000,000 with maturity in the year 2006. In March 2005, the Company secured a term debt financing package for $15,000,000. This package provides for a five year maturity in January, 2010, and a ten year amortization schedule with interest only payments due in 2005 and principal payments to begin in the first quarter of 2006. In order to reduce its vulnerability to variable interest rates, this packagefinancing includes an interest rate swap agreement with interest fixed at a rate of 4.78%. In conjunction with this agreement and the Company’s projected cash flow needs, the Company reduced its available line of credit from $15,000,000 to $10,000,000 through August 31, 2005. At that date, availability will increase to $15,000,000 and subsequently increasing to $15,000,000 on August 31, 2005 and then decreasingdecrease back to $10,000,000 on February 1, 2006.
Pursuant to the private placement and the Credit Agreement, the Company is required to maintain certain financial ratios, all of which are currently complied with. In addition, the term debt which was obtained in March, 2005 includes certain financial covenants which are incorporated into the overall credit facility.
In conjunction with itsthe strategic and capital plan, the Company increased its capital expenditures for property and equipment in 2004 to approximately $10.6 million. Capital expenditures over the pastlast three years have been approximately $5.3 million, $4.2 million, and $1.8 million for 2003, 2002, and 2001, respectively. The Company expects to spend up to $11$11.0 million in 2005 on capital expenditures, including buildings and equipment. The Company expects 2006 capital expenditures to decline to a level that is more consistent with prior years. The Company believes that cash generated from operationsoperating and borrowings under its credit agreements will be sufficient to fund its working capital requirements, remaining capital expenditures, and the common stock purchaserepurchase program as currently contemplated. The changes in inventory and accounts receivable balances, which affect the Company’s cash flows, are part of the normal business cycles that cause them to change periodically.
A summary of ourthe Company’s contractual cash obligations remaining at March 31,June 30, 2005 and for the twelve month periods ending 2006 through 2009 is as follows:
| Payments due by period | |||||
Contractual Obligations | Total | 2005 | 2006 | 2007 | 2008 | 2009 |
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|
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|
|
|
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Long-term debt, including interest at variable rates** | $5,068,958 | $1,223,750 | $1,196,250 | $870,000 | $850,000 | $928,958 |
Long-term debt, including interest at fixed rates** | $12,073,455 | $3,243,360 | $2,223,701 | $2,282,388 | $2,203,164 | $2,120,842 |
Operating Leases | $3,328,811 | $1,259,636 | $1,093,239 | $635,314 | $267,291 | $73,331 |
Total contractual cash obligations | $20,471,224 | $5,726,746 | $4,513,190 | $3,787,702 | $3,320,455 | $3,123,131 |
| Payments due by period | |||||
Contractual Obligations | Total | 2005 | 2006 | 2007 | 2008 | 2009 |
|
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|
|
|
|
|
| ||||||
Long-term debt, including interest at variable rates** | $5,003,958 | $1,158,750 | $1,196,250 | $870,000 | $850,000 | $928,958 |
| ||||||
Long-term debt, including interest at fixed rates** | $11,892,213 | $3,062,118 | $2,223,701 | $2,282,388 | $2,203,164 | $2,120,842 |
| ||||||
Operating Leases | $3,479,231 | $1,075,427 | $1,268,739 | $760,092 | $282,840 | $92,133 |
| ||||||
Total contractual cash obligations | $20,375,402 | $5,296,295 | $4,688,690 | $3,912,480 | $3,336,004 | $3,141,933 |
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**Interest payments have been calculated using the fixed rate of 6.82% for the Senior notes and the estimated 2005average 2004 annual interest rate of 2.50% for the Industrial Revenue Bonds.
We also have
The Company also has a commercial commitment as described below: |
Other Commercial | Total Amount | Outstanding | Date of |
Commitment | Committed | at 06/30/05 | Expiration |
Line of Credit | $10,000,000 | $0 | May 31, 2006 |
Other Commercial | Total Amount | Outstanding | Date of |
Commitment | Committed | at 03/31/05 | Expiration |
Line of Credit | $10,000,000 | $0 | May 31, 2006 |
Borrowings outstanding on the line of credit at July 31, 2005 were $2.7 million. |
We believe that our cash balance, availability under our line of credit, if needed, and anticipated cash flows from operations will be adequate to fund our cash requirements for fiscal 2005.
CRITICAL ACCOUNTING POLICIES
OurThe Company’s significant accounting policies are summarized in the footnotes to our financial statements. Some of the most critical policies are also discussed below.
Our major operating assets are accounts receivable, inventory, and property and equipment. Exclusive of the write-off of certain assets related to the Oakwood Homes Corporation bankruptcy filing in November, 2002, and the write-off of certain receivables in the fourth quarter of 2004 related to one customer, we have not experienced significant bad debts losses and our reserve for doubtful accounts of $200,000 should be adequate for any exposure to loss in our March 31,June 30, 2005 accounts receivable. We have also established reserves for slow moving and obsolete inventories and believe them to be adequate. We depreciate our property and equipment over their estimated useful lives and we have not identified any items that are impaired for the quarter ended March 31,June 30, 2005. The Company ships product based on specific orders from customers and revenue is recognized upon delivery.
Purchasing costs are included in selling, general, and administrative expenses and receiving costs are included in cost of goods sold. Cost of goods sold includes material costs, direct and indirect labor, and overhead expenses. Cost of goods sold further includes inbound freight charges, inspection costs, internal transfer costs, and other costs of the distribution network. Warehouse and delivery costs include costs such as salaries and wages, building rent and insurance, and other overhead costs related to our distribution operations and delivery costs related to the shipment of finished and distributed products to our customers. Due to the Company including certain costs in cost of goods sold that may be different from that of other companies, our gross margins may not be comparable to those other companies.
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SEASONALITY
Manufacturing operations in the Manufactured Housing and Recreational Vehicle Industriesindustries historically have been seasonal and are generally at the highest levels when the climate is moderate. Accordingly, the Company'sCompany’s sales and profits are generally highest in the second and third quarters.
PURCHASE OF PROPERTY
In February, 2005, the Company purchased a 35,000 square foot corporate office building in Elkhart, Indiana and expects to spend approximately $1.6 million, including renovations, which will be complete in the second quarter of 2005.
INFLATION
The Company does not believe that inflation had a material effect on results of operations for the periods presented. |
SAFE HARBOR STATEMENT
The Company makes forward-looking statements from time to time and desires to take advantage of the “safe harbor” which is afforded such statements under the Private Securities Litigation Reform Act of 1995 when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements.
The statements contained in the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as other statements contained in the Quarterly Reportquarterly report and statements contained in future filings with the Securities and Exchange Commission and publicly disseminated press releases, and statements which may be made from time to time in the future by management of the Company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statement. In addition to the risks and uncertainties of ordinary business operations, the forward-looking statements of the Company referred to above are also subject to the following risks and uncertainties:
• | The Company operates in a highly competitive business environment, and its sales could be negatively affected by its inability to maintain or increase prices, changes in geographic or product mix, or the decision of its customers to purchase competitive products instead of the Company’s products. Sales could also be affected by pricing, purchasing, financing, operational, advertising, or promotional decisions made by purchasers of the Company’s products. |
• | On an annual basis, the Company negotiates renewals for property, casualty, workers |
• | The primary markets to which the Company sells include the Manufactured Housing and Recreational Vehicle industries, which are cyclical and dependent on various factors including interest rates, access to financing, inventory and production levels, and other economic and demographic factors. The Company’s sales levels could be negatively impacted by changes in any one of the above items. |
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to interest rate changes on portions of its debt. Long term debt includes $2,571,430 of indebtedness bearing interest at a fixed rate of 6.82%. The related maturities and interest are reported in the contractual obligations table in the Liquidity and Capital Resources section of this report.
In March 2005, the Company entered into an interest rate swap agreement. This swap agreement effectively converts a portion of the Company’s variable-rate borrowings to a fixed-rate basis, thus reducing the impact of changes in interest rates on future interest expense.
ITEM 4. |
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Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”)_reports reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING |
There have been no changes in our internal control over financial reporting that occurred during the |
March 31,June 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None |
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None |
Item 3. DEFAULTS UPON SENIOR SECURITIES
None |
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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(b) Not applicable. |
(c) Set forth below is the tabulation of the votes on each nominee for election as a director: |
| WITHHOLD |
| ||||||||
| NAME | FOR | AUTHORITY | |||||||
Robert C. Timmins | 4,071,391 | 368,897 |
| |||||||
Terrence D. Brennan | 4,426,016 | 14 272 |
| |||||||
Larry D. Renbarger | 3,692,086 | 811,202 |
| |||||||
(d) | Not applicable. |
Item 5. OTHER INFORMATION
None |
Item 6. EXHIBITS
(a) |
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31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer | |
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer |
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32.1 Certification pursuant to 18 U.S.C. Section 350
Certification pursuant to 18 U.S.C. Section 1350
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the CompanyRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PATRICK INDUSTRIES, INC. | |
(Company) |
|
(Company)
Date |
| /S/Robert C. Timmins |
Robert C. Timmins
(Lead Director)
|
|
|
Paul E. Hassler
(President)
( | |||||
Date |
| /S/Paul E. Hassler | ||||
Paul E. Hassler | ||||||
(President) | ||||||
(Chief Executive Officer & Director) | ||||||
Date | August 12, 2005 | /S/Andy L. Nemeth |
Andy L. Nemeth
(Executive Vice President-Finance)
Andy L. Nemeth
(Executive Vice President, Finance)
(Chief Financial Officer)
18
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