For Immediate Release
Patrick Industries, Inc. Reports First Quarter 2010 Financial Results
ELKHART, IN – April 29, 2010 – Patrick Industries, Inc. (NASDAQ: PATK), a major manufacturer and distributor of building and component products for the recreational vehicle (RV), manufactured housing (MH) and industrial markets, today reported increased sales and net income for the first quarter ended
March 28, 2010.
For the first quarter of 2010, Patrick reported a 41% increase in net sales to $63.5 million from $44.9 million in the same period in 2009, based largely on improving conditions in the RV industry, which represented approximately 62% of the Company’s sales in the quarter. Wholesale unit shipments in the RV industry increased approximately 97% in the first quarter of 2010 versus the prior year period. The Company estimates that unit shipments in the MH industry, which represented approximately 25% of the Company’s consolidated sales in the first quarter of 2010, were down approximately 7% from the first quarter of 2009, marking the sixteenth consecutive quarter of declining shipments compared to prior periods. The industrial market sector, which accounted for approximately 13% of the Company’s first quarter sales and is tied to the residential housing market, began to show signs of improvement in the first quarter of 2010 with new housing starts increasing approximately 20% from the first quarter of 2009 on a seasonally adjusted basis. Sales to this market generally lag new residential housing starts by six to twelve months.
“Increased sales volume and stable fixed manufacturing costs contributed to an 80% increase in our gross profit for the quarter compared to the first quarter of 2009. Gross profit improved as a percent of net sales to 10.2% in 2010 from 8.0% in 2009. Operating expenses as a percent of net sales improved on increased sales volume reflecting our ability to leverage our resources and not add significant incremental fixed costs to accommodate increased revenues,” said Todd Cleveland, President and CEO. Total warehouse and delivery and selling, general and administrative expenses as a percent of net sales were 10.1% in the first quarter of 2010 compared to 14.1% in 2009.
Net income also improved from the prior period to $0.9 million, or $0.09 per diluted share in the first quarter of 2010 from a loss of $4.1 million, or $0.45 per diluted share in the first quarter of 2009. First quarter 2010 net income included an after-tax net gain of approximately $2.8 million, or $0.28 per diluted share on the sale of the Company’s Oregon and California facilities, and a non-cash charge of approximately $0.3 million, or $0.03 per diluted share related to mark-to-market accounting for common stock warrants. Discontinued operations in first quarter 2009 primarily reflected a net after-tax gain of $0.3 million, or $0.03 per diluted share, on the sale of certain assets and business of American Hardwoods, Inc.
“We are cautiously optimistic about the recent trends in two of the primary markets we serve. The RV industry continued to show signs of recovery in the first quarter of 2010. While the MH industry continues to be negatively impacted by a lack of financing and the availability of credit, the residential housing market showed signs of improvement in the first quarter of 2010,” said Mr. Cleveland. “The current momentum and strength in the RV industry, which began in the fourth quarter of 2009, coupled with our lean operating structure, dedicated team members and business partners, and focused approach, has helped us improve both our sales and profitability quarter over quarter, and set the stage for us to be able to take advantage of further improvements in the marketplace. Additionally, in the first quarter, we completed the sale of two of our manufacturing and distribution facilities in Oregon and California and used the proceeds to further reduce our leverage position. Furthermore, we completed the acquisition of a cabinet door business and moved production into one of our existing facilities. This acquisition, our first since the acquisition of Adorn in 2007, provided a significant amount of new cabinet door business and contributed to the expansion of our revenue base compared to the prior year,” Cleveland further stated.
From January 1, 2010 to March 31, 2010, the Company paid down approximately $9.1 million in principal on its term loan, of which approximately $8.3 million was funded by the net proceeds from the sale of the Company’s Oregon and California facilities. The Company is currently continuing to operate in both facilities under a license agreement and lease agreement, respectively.
As previously disclosed in the 2009 Form 10-K, the Company is working to refinance or replace its existing credit facility, which is scheduled to expire on January 3, 2011. Since the Company did not enter into a financing agreement with its bank lenders before the issuance of the balance sheet for the first quarter of 2010, generally accepted accounting principles require that all of the Company’s outstanding long-term indebtedness as of March 28, 2010 be classified as a short-term liability until such time as the refinancing or replacement of the current credit facility is completed.
“While we anticipate that the residual effects of the economic downturn will potentially continue throughout the remainder of 2010, particularly in the MH market sector, we are energized as we continue to expand our product offerings through the addition of new product lines and potential acquisitions, execute on our organizational strategic agenda, and further drive our ‘Customer First’ performance oriented culture,” said Mr. Cleveland.
About Patrick Industries
Patrick Industries, Inc. (www.patrickind.com) is a major manufacturer of component products and distributor of building products serving the recreational vehicle, manufactured housing, kitchen cabinet, household furniture, fixtures and commercial furnishings, marine, and other industrial markets and operates coast-to-coast through locations in 12 states. Patrick’s major manufactured products include decorative vinyl and paper panels, wrapped mouldings, cabinet doors and components, interior passage doors, slotwall and slotwall components, and countertops. The Company also distributes drywall and drywall finishing products, electronics, adhesives, cement siding, interior passage doors, roofing products, laminate flooring, and other miscellaneous products.
Forward-Looking Statements
This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: pricing pressures due to competition, costs and availability of raw materials, availability of commercial credit, availability of retail and wholesale financing for residential and manufactured homes, availability and costs of labor, inventory levels of retailers and manufacturers, levels of repossessed residential and manufactured homes, the financial condition of our customers, the ability to generate cash flow or obtain financing to fund growth, future growth rates in the Company’s core businesses, interest rates, oil and gasoline prices, the outcome of litigation, adverse weather conditions impacting retail sales, our ability to remain in compliance with our credit agreement covenants, and our ability to refinance or replace our credit facility. In addition, national and regional economic conditions and consumer confidence may affect the retail sale of recreational vehicles and residential and manufactured homes. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Further information regarding these and other risks, uncertainties and factors is contained in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and in the Company's Form 10-Qs for subsequent quarterly periods, which are filed with the Securities and Exchange Commission (“SEC”) and are available on the SEC’s website at www.sec.gov.
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Contact:
Julie Ann Kotowski
Patrick Industries, Inc.
574-294-7511 / kotowskj@patrickind.com
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| (thousands except per share data) | FIRST QUARTER ENDED | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | March 28, 2010 | March 29, 2009 | ||||||
| NET SALES | $ | 63,500 | $ | 44,915 | ||||
| Cost of goods sold | 57,022 | 41,323 | ||||||
| Gross profit | 6,478 | 3,592 | ||||||
| Operating expenses: | ||||||||
| Warehouse and delivery | 2,634 | 2,677 | ||||||
| Selling, general and administrative | 3,806 | 3,665 | ||||||
| Amortization of intangible assets | 126 | 88 | ||||||
| Gain on sale of fixed assets | (2,791 | ) | (11 | ) | ||||
| Total operating expenses | 3,775 | 6,419 | ||||||
| OPERATING INCOME (LOSS) | 2,703 | (2,827 | ) | |||||
| Stock warrants revaluation | 282 | (60 | ) | |||||
| Interest expense, net | 1,511 | 1,838 | ||||||
| Income (loss) from continuing operations before income tax benefit | 910 | (4,605 | ) | |||||
| Income tax benefit | - | (174 | ) | |||||
| Income (loss) from continuing operations | 910 | (4,431 | ) | |||||
| Income from discontinued operations | - | 459 | ||||||
| Income taxes | - | 174 | ||||||
| Income from discontinued operations, net of tax | - | 285 | ||||||
| NET INCOME (LOSS) | $ | 910 | $ | (4,146 | ) | |||
| BASIC NET INCOME (LOSS) PER COMMON SHARE: | ||||||||
| Continuing operations | $ | 0.10 | $ | (0.48 | ) | |||
| Discontinued operations | - | 0.03 | ||||||
| Net income (loss) | $ | 0.10 | $ | (0.45 | ) | |||
| DILUTED NET INCOME (LOSS) PER COMMON SHARE: | ||||||||
| Continuing operations | $ | 0.09 | $ | (0.48 | ) | |||
| Discontinued operations | - | 0.03 | ||||||
| Net income (loss) | $ | 0.09 | $ | (0.45 | ) | |||
| Weighted average shares outstanding - Basic | 9,270 | 9,114 | ||||||
| - Diluted | 9,852 | 9,114 | ||||||
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| (thousands) | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | March 28, 2010 | Dec. 31, 2009 | ||||||
| (Unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 154 | $ | 60 | ||||
| Trade receivables, net | 21,819 | 12,507 | ||||||
| Inventories | 21,036 | 17,485 | ||||||
| Prepaid expenses and other | 5,843 | 1,981 | ||||||
| Assets held for sale | - | 4,825 | ||||||
| Total current assets | 48,852 | 36,858 | ||||||
| Property, plant and equipment, net | 25,547 | 26,433 | ||||||
| Goodwill | 2,861 | 2,140 | ||||||
| Intangible assets, net | 7,544 | 7,047 | ||||||
| Deferred financing costs, net | 1,113 | 1,463 | ||||||
| Other non-current assets | 3,051 | 3,096 | ||||||
| TOTAL ASSETS | $ | 88,968 | $ | 77,037 | ||||
| CURRENT LIABILITIES | ||||||||
| Current maturities of long-term debt | $ | 24,958 | $ | 10,359 | ||||
| Short-term borrowings | 18,000 | 13,500 | ||||||
| Accounts payable | 14,709 | 5,874 | ||||||
| Accrued liabilities | 5,979 | 5,275 | ||||||
| Total current liabilities | 63,646 | 35,008 | ||||||
| Long-term debt, less current maturities and discount | - | 18,408 | ||||||
| Deferred compensation and other | 6,648 | 5,963 | ||||||
| Deferred tax liabilities | 1,309 | 1,309 | ||||||
| TOTAL LIABILITIES | 71,603 | 60,688 | ||||||
| SHAREHOLDERS’ EQUITY | 17,365 | 16,349 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 88,968 | $ | 77,037 | ||||
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