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, 2001
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 14th Street, Elkhart, IN 46516
(Address of principal executive offices)
(ZIP Code)
(219) 294-7511
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Shares of Common Stock Outstanding as of April 30, 2001: 4,505,666
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
March 31, 2001 & December 31, 2000 3
Unaudited Condensed Statements of Operations
Three Months Ended March 31, 2001 & 2000 4
Unaudited Condensed Statements of Cash Flows
Three Months Ended March 31, 2001 & 2000 5
Notes to Unaudited Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II: Other Information 13
Signatures 14
2
PART I: FINANCIAL INFORMATION
PATRICK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
MARCH 31 DECEMBER 31
2001 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,997,153 $ 6,716,128
Trade receivables 19,814,116 14,281,674
Inventories 29,521,257 30,937,954
Income tax refund claims receivable 2,163,122 1,031,086
Prepaid expenses 755,288 770,017
Deferred tax assets 1,946,000 1,946,000
------------ ------------
Total current assets 60,196,936 55,682,859
------------ ------------
PROPERTY AND EQUIPMENT, at cost 92,127,175 92,421,319
Less accumulated depreciation 53,014,979 51,831,581
------------ ------------
39,112,196 40,589,738
------------ ------------
INTANGIBLE AND OTHER ASSETS 6,079,628 6,247,573
------------ ------------
Total assets $105,388,760 $102,520,170
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,671,428 $ 3,671,428
Accounts payable 12,636,356 7,040,285
Accrued liabilities 3,151,536 3,555,008
------------ ------------
Total current liabilities 19,459,320 14,266,721
------------ ------------
LONG-TERM DEBT, less current maturities 18,785,716 18,785,716
------------ ------------
DEFERRED COMPENSATION OBLIGATIONS 2,071,892 2,042,198
------------ ------------
DEFERRED TAX LIABILITIES 1,176,000 1,176,000
------------ ------------
SHAREHOLDERS' EQUITY
Common stock 17,449,877 17,689,417
Retained earnings 46,445,955 48,560,118
------------ ------------
Total shareholders' equity 63,895,832 66,249,535
------------ ------------
Total liabilities and shareholders' equity $105,388,760 $102,520,170
============ ============
See accompanying notes to Unaudited Condensed Financial Statements
3
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31
2001 2000
NET SALES $ 68,294,737 $ 99,824,073
------------- -------------
COST AND EXPENSES
Cost of goods sold 61,209,742 89,070,610
Warehouse and delivery expenses 3,411,000 4,106,037
Selling, general, and administrative expenses 6,348,696 6,861,282
Impairment charges - - - 6,937,163
Interest expense, net 237,729 313,633
------------- -------------
71,207,167 107,288,725
------------- -------------
LOSS BEFORE INCOME TAXES (2,912,430) (7,464,652)
INCOME TAXES (CREDIT) (1,164,900) (2,862,300)
------------- -------------
NET LOSS $ (1,747,530) $ (4,602,352)
============= =============
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.39) $ (0.86)
============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,517,977 5,346,346
See accompanying notes to Unaudited Condensed Financial Statements.
4
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOWS
THREE MONTHS ENDED
MARCH 31
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,747,530) $(4,602,352)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,906,734 2,464,823
Impairment charges - - - 6,937,163
Deferred income taxes - - - (2,654,000)
(Gain) loss on sale of fixed assets (7,863) 2,368
Other 277,013 147,194
Change in assets and liabilities:
Decrease (increase) in:
Trade receivables (5,532,442) (7,334,715)
Income tax refund claims receivable (1,132,036) - - -
Inventories 1,416,697 (3,661,087)
Prepaid expenses 14,729 (101,866)
Increase (decrease) in:
Accounts payable and accrued liabilities 5,337,158 7,787,064
Income taxes payable - - - (406,572)
----------- -----------
Net cash provided by (used in) operating activities 532,460 (1,421,980)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (477,608) (1,097,110)
Proceeds from sale of fixed assets 7,863 2,000
Other (19,515) (22,500)
----------- -----------
Net cash (used in) investing activities (489,260) (1,117,610)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (561,965) (3,534,001)
Cash dividends paid (188,767) (210,549)
Other (11,443) (21,320)
----------- -----------
Net cash (used In) financing activities (762,175) (3,765,870)
----------- -----------
(Decrease) in cash and cash equivalents (718,975) (6,305,460)
Cash and cash equivalents, beginning 6,716,128 6,686,182
----------- -----------
Cash and cash equivalents, ending $ 5,997,153 $ 380,722
=========== ===========
Cash Payments for:
Interest $ 551,094 $ 638,240
Income taxes 27,136 176,611
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 accruals and the adjustment for the impairment of certain
long-lived assets as discussed in Note 5) necessary to present fairly
the financial position as of March 31, 2001, and December 31, 2000, and
the results of operations and cash flows for the three months ended
March 31, 2001 and 2000.
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 Company's
December 31, 2000 audited financial statements. The results of
operations for the three month periods ended March 31, 2001 and 2000
are not necessarily indicative of the results to be expected for the
full year.
3. The inventories on March 31, 2001 and December 31, 2000 consist of the
following classes:
March 31 December 31
2001 2000
Raw materials $16,768,044 $17,130,635
Work in process 2,160,112 2,040,040
Finished 4,081,624 4,647,673
------------- -----------
Total manufactured goods 23,009,780 23,818,348
Distribution products 6,511,477 7,119,606
------------- -----------
TOTAL INVENTORIES $29,521,257 $30,937,954
=========== ===========
Inventories are stated at the lower of cost (first-in, first-out (FIFO)
method) or market.
4. Loss per common share for the three months ended March 31, 2001 and
2000 have been computed based on the weighted average common shares
outstanding of 4,517,977 and 5,346,346 respectively. Stock options
outstanding are immaterial and had no effect on earnings per share.
Dividends per common share for the three months ended March 31, 2001
and 2000 were $.04 per share.
5. The Company recognized a non-cash accounting charge in the first
quarter of 2000 related to an impairment of certain long-lived assets
as required by SFAS 121. The carrying values of these assets were
calculated on the basis of discounted estimated future cash flow and
resulted in a charge to operations of $6,937,163 or $.80 per share, net
of tax. This charge was recognized as an impairment of assets in the
March 31, 2000 financial statements. The SFAS 121 charge had no impact
on the Company's 2000 cash flow or its ability to generate cash flow in
the future. As a result of the SFAS 121 charge, depreciation and
amortization expense related to these assets will decrease in future
periods.
6. The Company's reportable segments are as follows:
Laminating - 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 laminated products are utilized to
produce furniture, shelving, wall, counter, and cabinet products with a
wide variety of finishes and textures.
Distribution - Distributes primarily pre-finished wall and ceiling
panels, particleboard, hardboard and vinyl siding, roofing products,
high pressure laminates, passage doors, building hardware, insulation,
and other products.
Wood - Uses raw lumber including solid oak, other hardwood materials,
and laminated particleboard or plywood to produce cabinet door product
lines.
Other - Includes aluminum extruding, a painting and distributing
division, an adhesive division, a pleated shade division, a
6
plastic thermoforming division (closed effective February 2, 2001), and
a machine manufacturing division.
The table below presents unaudited information about the revenue and
operating income of those segments:
THREE MONTHS ENDED MARCH 31, 2001
---------------------------------
SEGMENT
LAMINATING DISTRIBUTION WOOD OTHER TOTAL
---------- ------------ ---- ----- -----
Net outside sales $ 31,059,688 $ 22,062,225 $ 7,504,874 $ 7,667,950 $ 68,294,737
Intersegment sales 1,052,729 94,690 208,251 2,943,611 4,299,281
Total sales $ 32,112,417 $ 22,156,915 $ 7,713,125 $ 10,611,561 $ 72,594,018*
----------------------------------------------------------------------------------------
EBIT (loss)** $ (390,540) $ (32,786) $ (125,276) $ (851,750) $ (1,400,352)
----------------------------------------------------------------------------------------
Total assets $ 33,701,515 $ 14,054,885 $ 6,561,935 $ 11,629,527 $ 65,947,862
THREE MONTHS ENDED MARCH 31, 2000
---------------------------------
Net outside sales $ 43,563,694 $ 35,874,665 $ 9,663,555 $ 10,722,159 $ 99,824,073
Intersegment sales 1,827,626 8,810 271,253 4,938,076 7,045,765
----------------------------------------------------------------------------------------
Total sales $ 45,391,320 $ 35,883,475 $ 9,934,808 $ 15,660,235 $106,869,838*
----------------------------------------------------------------------------------------
EBIT (loss)** $ 494,138 $ 397,038 $ (662,869) $ (52,396) $ (175,911)
Total assets $ 43,482,827 $ 22,183,794 $ 8,077,183 $ 16,516,899 $ 90,260,703
Reconciliation of segment operating income to consolidated operating income
2001 2000
---- ----
EBIT** for segments $(1,400,352) $ 175,911
Consolidation reclassifications (50,171) (185,163)
Gain (loss) on sale of property
and equipment 7,863 (2,368)
Impairment charge - - - (6,937,163)
Unallocated corporate expenses (1,351,420) (425,012)
Other 119,379 222,776
------------- ------------
Consolidated EBIT** $(2,674,701) $(7,151,019)
============ ===========
*Does not agree to Financial Statements due to consolidation eliminations.
**Earnings (loss) before interest and taxes
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Due to the overall downturn in the Manufactured Housing and
Recreational Vehicle industries, the Company's sales in fiscal 2000 declined 21%
from the previous year to $362 million. The downturn in the Manufactured Housing
industry began in the fourth quarter of 1999 due to retail sales lots being
overstocked and unit production being reduced approximately 7% that year. In
fiscal 2000 the Manufactured Housing industry was down nearly 29% in units
shipped and produced due to the limited availability of dealer and retail
financing, as well as excessive retail inventory levels, which included
repossessed units. The decline in the Recreational Vehicle industry began in the
second quarter of 2000 due to the Recreational Vehicle dealers making inventory
corrections. The end result of this was an approximate 7% decline in units
shipped and produced in that particular industry for the twelve months ended
December 31, 2000. The first quarter of 2001 showed similar results as shipments
and production in the Manufactured Housing industry were down approximately 42%
and shipments in the Recreational Vehicle industry were down nearly 24% from the
same quarter of 2000. The Company's sales to the Manufactured Housing and
Recreational Vehicle industries were down approximately 35% and 31%,
respectively. These conditions are expected to continue through the end of
fiscal 2001. The Company's sales are 48% to Manufactured Housing, 26% to
Recreational Vehicle, and 26% to other industries.
The following table sets forth the percentage relationship to net sales
of certain items in the Company's Statements of Operations:
Quarterly Ended
March 31,
2001 2000
Net sales 100.0% 100.0%
Cost of sales 89.6 89.2
Gross profit 10.4 10.8
Warehouse and delivery 5.0 4.1
Selling, general & administrative 9.3 6.9
Impairment charges - - - 6.9
Operating loss (3.9) (7.1)
Income taxes (credits) (1.7) (2.9)
Net loss (2.6) (4.6)
RESULTS OF OPERATIONS
Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000
Net Sales. Net sales decreased by $31.5 million, or 31.6%, from $99.8
million in the quarter ended March 31, 2000 to $68.3 million in the quarter
ended March 31, 2001. This decrease was a direct result of an estimated 42%
decrease in units shipped and produced in the Manufactured Housing industry and
an estimated 24% decrease in units shipped in the Recreational Vehicle industry
in the first quarter 2001.
Gross Profit. Gross profit decreased by $3.7 million, or 34.1%, from
$10.8 million in the first quarter of 2000 compared to $7.1 million in the same
quarter of 2001. As a percentage of net sales, gross profit decreased 0.4% from
10.8% in the first quarter of 2000 to 10.4% in the first quarter of 2001. The
overall decrease was due to a 31.6% decrease in consolidated net sales. The
decrease in gross profits as a percentage of net sales indicates that market
conditions are still highly competitive resulting in the inability of the
Company to increase selling prices without losing business.
8
Warehouse and Delivery Expenses. Warehouse and delivery expenses
decreased $0.7 million from $4.1 million in the first quarter of 2000 to $3.4
million in the first quarter of 2001. As a percentage of net sales, warehouse
and delivery expenses increased 0.9% from 4.1% in the first quarter of 2000 to
5.0% in the first quarter of 2001. This increase is attributable to lower sales
levels and higher shipping costs specifically related to the increase in
gasoline prices over the past year and transportation companies running at
capacity.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses decreased $0.5 million, or 7.4%, from $6.8 million in
the quarter ended March 31, 2000 to $6.3 million in the quarter ended March 31,
2001. As a percentage of net sales, selling, general, and administrative
expenses increased 2.4% from 6.9% in the first quarter of 2000 to 9.3% in the
first quarter of 2001. The overall decrease is due to the Company making cost
and staffing reductions. The increase in costs as a percentage of net sales is
due to reduced volumes as a result of the decline in shipments in the
Manufactured Housing and Recreational Vehicle industries.
Impairment Charges. As discussed in Note 5 to the financial statements,
the Company recognized an impairment charge of $6.9 million in the first quarter
of 2000.
Operating Loss. The operating loss decreased from $7.2 million in the
first quarter of 2000 to $2.7 million in the first quarter of 2001. The
operating loss for the first quarter of 2000 is due primarily to the impairment
charges of $6.9 million and similar operating costs from quarter to quarter. The
operating loss for the first quarter of 2001 is due to the decline in sales
volume related to the industries which the Company serves.
Interest Expense, Net. Interest expense, net of interest income,
decreased 24.2% from $314,000 in the first quarter of 2000 to $238,000 in the
same period in 2001. This decrease is attributable to more funds invested in the
first quarter 2001 as a result of reduced working capital needs, as well as
lower long-term debt levels due to normal debt service requirements.
Net Loss. The Company experienced a net loss after interest and taxes
in the first quarters of 2000 and 2001 of $4.6 million and $1.7 million,
respectively. These losses are attributable to the factors described above.
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
Net Sales. Net sales decreased by $7.5 million, or 7.0%, from $107.3
million in the quarter ended March 31, 1999 to $99.8 million in the quarter
ended March 31, 2000. This decrease was a direct result of an estimated 21%
decrease in units shipped and 22% decrease in units produced in the Manufactured
Housing industry in the first quarter 2000.
Gross Profit. Gross profit decreased by $3.2 million, or 23.1%, from
$14.0 million in the first quarter of 1999 compared to $10.8 million in the same
quarter in 2000. As a percentage of net sales, gross profit decreased 2.2%, from
13.0% in the first quarter of 1999 to 10.8% in the first quarter 2000. This
decrease was due to a 7.0% decrease in consolidated net sales as well as highly
competitive market conditions affecting margins. Several of our operations have
reduced prices in order to maintain sales which has resulted in lower gross
profits.
Warehouse and Delivery Expenses. Warehouse and delivery expenses
increased $0.3 million, from $3.8 million in the first quarter 1999 to $4.1
million in the first quarter 2000. As a percentage of net sales, warehouse and
delivery expenses increased from 3.6% in the first quarter of 1999 to 4.1% in
the first quarter 2000. This increase is attributable to lower sales levels and
higher shipping costs specifically related to the increase in gasoline prices in
the first quarter 2000.
Selling, General, and Administrative Expenses. For the period ended
March 31, 1999, a $0.6 million gain on sale of assets has been included in the
selling, general, and administrative expenses. Exclusive of the gain on the sale
of assets, selling, general, and administrative expenses increased 1.4% in the
quarter ended March 31, 2000 compared to the same period in 1999. These expenses
remained fairly constant at $6.8 million for both quarters. As a percentage of
net sales however, March 31, 2000 expenses were 6.9% compared to 6.3% for the
three-month period ended March 31, 1999.
Impairment Charges. As discussed in Note 5 of the financial statements,
the Company recognized an impairment charge of $6.9 million in the first quarter
of 2000.
9
Operating Income (Loss). The Company experienced a quarterly operating
loss of $7.2 million compared to operating income in the first quarter of 1999
of $4.0 million. The operating loss in the first quarter of 2000 was due to the
factors described above.
Interest Expense, Net. Interest expense, net of interest income,
decreased 14.4% from $366,000 in the first quarter of 1999 to $314,000 in the
same period in 2000. This decrease is attributable to more funds invested in the
first quarter 2000 as well as lower long-term debt levels due to normal debt
service requirements.
Net Income (Loss). The Company experienced a net loss after interest
and taxes in the first quarter of 2000 of $4.6 million compared to net income of
$2.2 million in the period ended March 31, 1999. This decrease is due primarily
to the factors described above.
BUSINESS SEGMENTS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Laminating Segment Discussion
Net sales decreased in the first quarter of 2001 by $13.3 million, or
29.3%, from $45.4 million in the period ended March 31, 2000 to $32.1 million in
the period ended March 31, 2001. This decline in sales volume was due to
approximately 42% less shipments nationwide in the Manufactured Housing industry
as well as declines of up to 44% in some of the Company's principal market
areas.
EBIT declined 179.0% in the laminating segment from income of $0.5
million in the period ended March 31, 2000 compared to a loss of $0.4 million in
the period ended March 31, 2001. As a percentage of net sales, EBIT decreased
2.3% from positive 1.1% in the first quarter 2000 to negative 1.2% in the first
quarter 2001. This decline is due to the decrease in sales volume.
Distribution Segment Discussion
Net sales decreased $38.3%, or $13.7 million, from $35.9 million in the
first quarter 2000 to $22.2 million in the first quarter 2001. This decrease is
due primarily to the decline in units shipped and produced in the Manufactured
Housing industry.
EBIT decreased 108.3%, or $430,000, due to the decrease in sales and
competitive pricing situations.
Wood Segment Discussion
Net sales decreased 22.4%, or $2.2 million, from $9.9 million in the
period ended March 31, 2000 to $7.7 million in the period ended March 31, 2001.
This decline is consistent with the overall decline in the Recreational Vehicle
industry, which is the primary industry to which this segment serves.
EBIT for this segment has increased $537,000 from an operating loss of
$663,000 in period ended March 31, 2000 to an operating loss of $125,000 in the
same period in 2001. Management's continued commitment to improving operating
results in this segment and returning it to profitability caused the improvement
of two of the segment's major operating units. The decrease in the operating
loss is partially due to reduced depreciation of approximately $250,000 as a
result of the Company recognizing a non-cash accounting charge in the first
quarter of 2000 related to the impairment of certain long-lived assets, as
discussed in Note 5.
Other Segment Discussion
Net sales in the other segment decreased by 32.2%, or $5.1 million,
from $15.7 million in the three months ended March 31, 2000 to $10.6 million in
the three month period ending March 31, 2001. This decrease is primarily
attributable to a 24% decline in shipments in the Recreational Vehicle industry
as well as a 29% reduction in sales in the Company's aluminum extrusion division
which sells to areas mainly outside the Manufactured Housing and Recreational
Vehicle industries.
EBIT decreased from an operating loss of $52,000 in the period ended
March 31, 2000 to an operating loss of $852,000 in the same period in 2001. This
is the result of a 32.2% decrease in sales volume as well as competitive pricing
situations which
10
negatively affected margins in this segment.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Laminating Segment Discussion
Net sales decreased in the first quarter of 2000 by $1.3 million, or
2.8%, from $46.7 million in the period ended March 31, 1999 to $45.4 million in
the period ended March 31, 2000. This decline in sales volume was due to
approximately 21% less shipments nationwide in the Manufactured Housing industry
and declines over 30% in some of the Company's market areas.
EBIT declined 78.6% in the laminating segment from $2.3 million in the
period ended March 31, 1999 compared to $0.5 million in the period ended March
31, 2000. As a percentage of net sales, EBIT decreased 3.9% from 5.0% in the
first quarter 1999 to 1.1% in the first quarter 2000. The ability to increase
selling prices in the first quarter of 1999 became more difficult in the second
half of that year and in the first quarter of 2000 the Company had to make
concessions in pricing to maintain business as a result of the decline in the
overall industry.
Distribution Segment Discussion
Net sales decreased 12.9%, or $5.3 million, from $41.2 million in the
first quarter 1999 to $35.9 million in the first quarter 2000. This decrease is
due to the decline in units shipped in the Manufactured Housing industry for
which this segment serves.
EBIT decreased 67.8%, or $673,000, due to the decrease in sales and
competitive pricing situations.
Wood Segment Discussion
Net sales decreased 8.9%, or $1.0 million, from $10.9 million in the
period ended March 31, 1999 to $9.9 million in the period ended March 31, 2000.
This decline is due to the overall decline in the industry as well as some
operating divisions choosing not to accept lower margin business.
EBIT in 2000 of $663,000 is less than the loss experienced in the first
quarter of 1999 of $781,000 by $118,000, or 15.2%.
Other Segment Discussion
Net sales in the Other segment increased by 1.9%, or $284,000, from
$15.4 million in the three months ended March 31, 1999 to $15.7 million in the
three month period ending March 31, 2000. This increase is primarily
attributable to increased sales in the Company's aluminum extrusion division
which sells to areas mainly outside the Manufactured Housing industry.
The Other segment experienced an EBIT loss for the first quarter 2000
of $52,000, compared to operating income in the first quarter 1999 of $598,000.
This decrease in operating income was due to one division, which was profitable
in 1999, becoming unprofitable in 2000 and another division continuing to lose
market share due to operational inefficiencies.
11
LIQUIDITY AND CAPITAL RESOURCES
The Company'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 $2,571,060 that began in September, 1999.
These funds were used to reduce existing bank debt and for working capital
needs.
The Company has an unsecured bank Revolving Credit Agreement that
provides loan availability of $10,000,000 with maturity in the year 2003.
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, except one which has been waived. The Company intends to
negotiate an amendment to the Credit Agreement so future compliance can be
maintained. Although there are no assurances that the agreement will be amended,
the Company, at this time, does not foresee any problems.
The Company's Board of Directors from time to time has authorized the
repurchase of shares of the Company's common stock, in the open market or
through negotiated transactions, at such times and at such prices as management
may decide.
The Company believes that cash generated from operations and borrowings
under its credit agreements will be sufficient to fund its working capital
requirements, normal recurring capital expenditures, and the common stock
repurchase program as currently contemplated. The fluctuations in inventory and
accounts receivable balances, which affect the Company's cash flows, are part of
normal business cycles.
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 moderate. Accordingly, the Company's sales
and profits are generally highest in the second and third quarters.
INFLATION
The Company does not believe that inflation had a material effect on
results of operations for the periods presented.
SAFE HARBOR STATEMENT
Statements that do not address historical performance are
"forward-looking statements" within the meaning of the Private Securities
Litigation reform Act of 1995 and are based on a number of assumptions,
including but not limited to; (1) continued domestic economic growth and demand
for the Company's products; and (2) the Company's belief with respect to its
capital expenditures, seasonality and inflation. Any developments significantly
deviating from these assumptions could cause actual results to differ materially
from those forecast or implied in the aforementioned forward-looking statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) There were no reports filed on Form 8-K
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PATRICK INDUSTRIES, INC.
(Company)
Date May 11, 2001 /S/Mervin D. Lung
-------------------------- ----------------------------------
Mervin D. Lung
(Chairman of the Board)
Date May 11, 2001 /S/David D. Lung
-------------------------- ----------------------------------
David D. Lung
(President)
Date May 11, 2001 /S/Keith V. Kankel
-------------------------- ----------------------------------
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)
14