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, 1995March 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 November 1, 1995: 5,951,866April 30, 1996: 5,921,466
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
September 30, 1995March 31, 1996 & December 31, 1994 31995
Unaudited Condensed Statements of Income
Three Months Ended September 30,March 31, 1996 & 1995, & 1994, and
Nine Months Ended September 30, 1995 & 1994 4
Unaudited Condensed Statements of Cash Flows
NineThree Months Ended September 30,March 31, 1996 & 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)
SEPTEMBER 30MARCH 31 DECEMBER 31
1996 1995 1994
ASSETS
ASSETS
CURRENT ASSETS
Cash and Temporary Investments $ 601,3693,131,491 $ 666,9861,349,709
Accounts Receivable, Net 27,390,890 18,445,63826,295,906 20,427,355
Inventories 34,340,074 36,087,90033,860,226 35,462,152
Other 298,481 291,194220,076 387,782
Total Current Assets $ 62,630,814 $55,491,718
INVESTMENTS63,507,699 $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 $ 7,164,6465,161,298 $ 7,954,751
PROPERTY AND EQUIPMENT $ 53,235,137 $45,047,383
LESS ACCUMULATED DEPRECIATION 22,434,342 21,225,209
$ 30,800,795 $23,822,1745,239,766
Total Assets $100,596,255 $87,268,643$102,168,885 $95,915,922
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-
termLong-term Debt $ 700,000 $ 1,724,000700,000
Accounts Payable 15,394,431 14,916,30913,331,340 9,589,103
Accrued Expenses and Taxes Payable 4,322,214 3,840,3545,053,879 4,057,446
Total Current Liabilities $ 20,416,645 $20,480,66319,085,219 $14,346,549
LONG-TERM DEBT, LESS CURRENT MATURITIES $ 26,900,000 $21,150,00026,200,000 $26,200,000
DEFERRED COMPENSATION OBLIGATIONS AND OTHER $ 918,6211,036,119 $ 838,971919,821
DEFERRED TAX LIABILITIES $ 1,550,0001,485,000 $ 1,360,0001,461,000
SHAREHOLDERS' EQUITY
Common Stock $ 21,482,870 $21,457,16721,294,217 $21,626,489
Retained Earnings 29,328,119 21,981,84233,068,330 31,362,063
Total Shareholders'Stockholders' Equity $ 50,810,989 $43,439,00954,362,547 $52,988,552
Total Liabilities and Shareholders'Stockholders' Equity $100,596,255 $87,268,643$102,168,885 $95,915,922
NOTE: The balance sheet at December 31, 19941995 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 30MARCH 31
1996 1995
1994 1995 1994
NET SALES $94,125,637 $86,011,213 $273,716,121 $248,148,702$93,767,541 $87,030,721
COST AND EXPENSES
Cost of Goods Sold $80,913,172 $74,840,589 $236,037,230 $216,771,418$82,014,145 $75,060,101
Warehouse and Delivery 3,436,484 3,173,078 9,981,814 9,075,136Expenses 3,364,653 3,250,369
Selling and Administrative 4,801,757 3,673,039 13,850,944 10,892,299Expenses 4,924,656 4,576,174
Financial Expenses, Net 316,132 228,718 1,025,514 646,720
$89,467,545 $81,915,424 $260,895,502 $237,385,573296,881 347,764
$90,600,335 $83,234,408
INCOME BEFORE INCOME TAXES $ 4,658,0923,167,206 $ 4,095,789 $ 12,820,619 $10,763,1293,796,313
INCOME TAXES 1,816,000 1,597,300 5,000,000 4,197,6001,222,500 1,480,600
NET INCOME $ 2,842,0921,944,706 $ 2,498,489 $ 7,820,619 $ 6,565,5292,315,713
EARNINGS PER COMMON SHARE $ .48.33 $ .41 $ 1.32 $ 1.07.39
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,947,431 6,058,770 5,943,991 6,135,3535,967,157 5,940,809
See accompanying notes to Unaudited Condensed Financial Statements.
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOW
NINETHREE MONTHS ENDED
SEPTEMBER 30MARCH 31
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 7,820,6191,944,706 $ 6,565,5292,315,713
Adjustment to Reconcile Net Income to Net Cash:
Depreciation and Amortization 2,472,907 2,175,3061,061,881 769,601
Other (142,038) (126,742)(378) (21,000)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (8,681,024) (6,412,931)(5,868,551) (3,919,057)
Inventories 2,153,155 (8,242,065)1,601,926 (1,931,992)
Other 6,008 (139,443)167,706 118,262
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 907,474 6,479,8633,756,025 2,393,052
Income Taxes Payable and Deferred Taxes 242,508 246,2141,008,568 1,461,100
Deferred Compensation 79,650 74,16035,749 26,670
Net Cash Provided by Operating
Activities $ 4,859,2593,707,632 $ 619,8911,212,349
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $(8,833,410) $(3,502,805)$ (1,458,961) $(2,592,202)
Acquisition of Assets of U.S. Door - - - (3,346,596) ---
Change in Cash Held in Escrow 2,603,959 ---- - - 1,269,431
Proceeds from Sale of Assets 750 21,000
Other 373,810 46,61122,523 18,688
Net Cash (Used in) Investing Activities $(9,202,237) $(3,456,194)$(1,435,688) $(4,629,679)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Dividend $ (238,439) $ - - -
Net Borrowings Under Debt Agreements $18,000,000 $ 5,250,000- - - 3,500,000
Sale of Common Stock 25,703 286,52123,978 6,255
Principal Payments on Debt (13,274,000) (1,030,245)- - - (274,000)
Reacquisition of Common Stock --- (1,917,874)
Cash Dividends (474,342) ---(356,250) - - -
Other 80,549 - - -
Net Cash Provided by (Used In) Financing
Activities $ 4,277,361(490,162) $ 2,588,4023,232,255
Increase (Decrease) in Cash and Cash
Equivalents $ (65,617)1,781,782 $ (247,901)(185,075)
CASH and CASH EQUIVALENTS, BEGINNING $ 666,9861,349,709 $ 465,460666,986
CASH and CASH EQUIVALENTS, ENDING $ 601,3693,131,491 $ 217,559481,911
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
September 30, 1995,March 31, 1996, and December 31, 1994,1995, and the results of operations and
cash flows for the three months ended
March 31, 1996 and the nine months ended September 30,
1995 and 1994.1995.
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, 19941995
audited financial statements. The results of operations for the three
months and nine months periods ended September 30,March 31, 1996 and 1995 and 1994 are not necessarily indicative
of the results to be expected for the full year.
3. The inventories on September 30, 1995March 31, 1996 and December 31, 19941995 consist of the
following classes:
September 30 December 31
1995 1994
Raw Materials $22,630,329 $23,630,848
Work in Process 840,036 738,439
Finished 2,677,042 3,618,587
Total Manufactured Goods $26,147,407 $27,987,874
Distribution Products 8,192,667 8,100,026
TOTAL INVENTORIES $34,340,074 $36,087,900
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
nine months ended
September 30, 1995 and 1994 have been computed based on the weighted average number of shares of
common stock. The weighted average numberstock outstanding of shares outstanding was 5,947,431 for the three months5,967,157 and 5,943,991 for the
nine months ended September 30, 1995 and 6,058,770 for the three months and
6,135,353 for the nine months ended September 30, 1994. 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.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 by 28%annually from $184 million in 1992 to over 1991, and$362
million in 1993 net sales increased
40% over 1992. In 1994, the Registrant continued its growth and recorded its
highest annual sales of $331 million.1995.
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
1995 1994 1995 1994
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 86.0 87.0 86.2 87.4
Gross Profit 14.0 13.0 13.8 12.6
Warehouse and Delivery 3.7 3.7 3.7 3.6
Selling, General & Administrative 5.1 4.3 5.1 4.4
Operating Income 5.2 5.0 5.0 4.6
Net Income 3.0 2.9 2.9Operations:
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 September 30, 1995March 31, 1996 Compared to Quarter Ended September 30,
1994March 31, 1995
Net Sales. Net sales increased by $8.1$6.7 million, or 9.4%7.7%, from $87.0
million for the quarter ended March 31, 1995, to $93.8 million in this year's
thirdthe quarter
over the same 1994 period.ended March 31, 1996. This sales increase was primarily
attributable to production unit increasesa 7% increase in
units shipped by the Manufactured Housing industry, from whomwhich represents
approximately 68% of the Registrant records 65%Registrant's sales. The Registrant's sales to the
Recreational Vehicle industry were down as a percent of itstotal 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 increaseddecreased by $2.0approximately $217,000, or 1.8%,
from $11.9 million or 18.3% and asin the first quarter of 1995, to $11.7 million in the same
1996 quarter. As a percentage of net sales, increasedgross profit decreased from 13.0%13.7%
in 1994first quarter 1995 to 14.0%12.5% in this year's
third quarter.1996. This increasedecrease in gross profit resulted from more stabilizedwas the
result of lower volume and higher raw material costs of sales in the
Registrant's aluminum extrusion division, and improvementlower sales volume and plant
relocation costs at the new Oregon facility. The Registrant also
experienced highly competitive market pricing of certain products in Workers Compensation insurance costs.the
first quarter of 1996.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
by $0.26approximately $114,000 or 3.5%, from $3.3 million or 8.3%. This isin 1995, to $3.4 million in
the same 3.7% asfirst quarter of 1996. As a percentage toof net sales, aswarehouse and delivery
expenses decreased from 3.7% in 1995 to 3.6% in the third quarter of 1994. The increase in dollars is due primarily to the
increase in sales.1996 first quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.1approximately $348,000, or 7.6%, from $4.5
million or 30.7%, in the 1995, third
quarter. This increase is primarily the result of increased wages at the
manufacturing and distribution facilities and an increaseto $4.9 million in bad debt expense.1996. As a percentage of net sales,
theseselling, general and administrative expenses increaseddecreased from 4.3%5.3% in 1995 to 5.1%5.2%
in the third quarter of 1995 as compared to 1994.1996.
Operating Income. Operating income increaseddecreased by $0.65 million, or 15%,
fromapproximately $680,000
because of the third quarter of 1994 to the same 1995 quarter. This is due primarily
to the increase inreduced gross profit somewhat offset by theand increases in Selling,
Generalwarehouse and Administrative Expenses.delivery, and
selling, general and administrative expenses. As a percentage of net sales,
operating income increaseddecreased from 5.0%4.7% in 1995 to 3.7% in the 1994 third quarter to 5.2% in the 1995 third1996 first quarter.
Interest Expense. Interest expense was higherdecreased by approximately $51,000 from
$348,000 in 1995 to $297,000 in the 1995 thirdfirst quarter because of higher rates and higher1996. The Registrant's
borrowing levels than in 1994.the 1996 period were slightly higher but at lower rates.
Net Income. Net income increaseddecreased by approximately $371,000 from $2.3
million in 1995 to $1.9 million in 1996 for the 1995 thirdfirst quarter by $0.34
million, or 13.7% when compared to the same 1994 quarter.ended March 31.
This increasedecrease is primarily dueattributable to the factors discusseddescribed above.
Nine MonthsQuarter Ended September 30,March 31, 1995 Compared to Nine MonthsQuarter Ended September 30,March 31, 1994
Net Sales. Net sales increased by $25.6$10.1 million, or 10.3%13.2%, from $76.9
million for the nine
monthsquarter ended September 30,March 31, 1994, to $87.0 million in the first nine months ofquarter
ended March 31, 1995. This sales increase was primarily attributable to production unit increases in
units produced by the Manufactured Housing industrymanufactured housing, recreational vehicle and Registrant sales to its other
building products industries. The Manufactured Housing industry, which accountsindustries served by the Registrant, and increased demand for
65%Registrant's products. This increase, although less as a percentage than the
previous two years first quarters, is further evidence of Registrant s sales, is producing at a rate 12% ahead of 1994.the continuing
improvement in these industries.
Gross Profit. Gross profit increased by $6.3$2.4 million, or 20%25.5%, from $9.5
million in the first nine months of 1995 over 1994.quarter 1994, to $11.9 million in the first quarter 1995.
As a percentage of net sales, gross profit increased from 12.6%12.4% in thefirst quarter
1994 nine months to 13.8%13.7% in the 1995 nine months.1995. This increase in gross profit resulted from improvement in labor efficiency,
more stabilized commodity markets, more favorable purchasing practicesfewer cost
increases of certain of the Registrant s raw materials,Registrant's products during the period compared to
1994, and an improvement in Workers Compensation insurance
costs.certain inventory items having cost below market cost.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
$0.9$0.4 million or 10%13.1%, from $9.1$2.9 million in 1994, to $3.3 million in the first
nine months of 1994, to $10
million in the 1995 nine months. This increase is primarily the result of
increased sales.quarter 1995. As a percentage of net sales, warehouse and delivery expenses
increased from 3.6% inremained the first nine months ofsame at 3.7% for 1994 to 3.7% in the 1995 nine
months.and 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2.9$1.0 million, or 27.1%29.6%, from $10.9$3.5 million
in the first nine months of 1994, to $13.8$4.5 million in the 1995 nine months.
Such increase is primarily a result of increased wages at the manufacturing and
distribution facilities and an increase in bad debt expense.1995. As a percentage of net sales, selling,
general and administrative expenses increased from 4.4%4.6% in
the first nine months of 1994 to 5.1%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 1995 nine months.higher
sales levels.
Operating Income. Operating income increased by $2.4$1.0 million, or 21.3%32%, from
$11.4$3.1 million in the first nine months of 1994, to $13.8$4.1 million in the
1995 nine months.1995. This increase is primarily
attributable to the $2.4 million increase in gross profit, somewhat offset by the increases in selling, general and
administrative expenses.profit. As a percentage of
sales, operating income increased from 4.6%4.1% in the first nine months of 1994 to 5.0%4.7% in the 1995 nine months.1995.
Interest Expense. Interest expense increased $0.37 millionby $124,000 from $224,000 in
the first
nine months of 19951994, to $348,000 in 1995. This increase was due to higher borrowing balancesinterest rates and
higher interest rates
during the comparable periods.average borrowing levels.
Net Income. Net income increased by $1.25$0.5 million or 19.1%, from $6.6$1.8 million in
the 1994, nine months, to $7.8$2.3 million in the first nine months of 1995. This increase in net income is primarily
attributable to the factors discusseddescribed 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 March 15,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 providesprovided for a $10 million term loan with a
maturity in February, 1999 and a credit revolver loan of up to $13 million which
matureswith
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 also financed in late 1994 the acquisition of land,
building, and equipment in Oregon with a $6,000,000 industrial revenue bond. At
September 30, 1995, $4.0 million of the bond proceeds have been used for
construction of the project and $2.0 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 housingManufactured Housing and recreational
vehicleRecreational
Vehicle industries tend to behistorically 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 housingManufactured Housing and
recreational
vehicles,Recreational Vehicles, the first quarterquarters of 19941995 and 19951994 and the fourth
quarters of 19931994 and 19941993 were unusual in their high sales and gross profit
levels during those winter months when compared to prior years.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) ExhibitExhibits
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 November 13, 1995May 10, 1996 /S/Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date NovemberMay 10, 19951996 /S/David D. Lung
David D. Lung
(President)
Date NovemberMay 10, 19951996 /S/Keith V. Kankel
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)