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, 2002
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)
(574) 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, 2002: 4,531,541
1
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
March 31, 2002 & December 31, 2001 3
Unaudited Condensed Statements of Operations
Three Months Ended March 31, 2002 & 2001 4
Unaudited Condensed Statements of Cash Flows
Three Months Ended March 31, 2002 & 2001 5
Notes to Unaudited Condensed Financial Statements 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
PART II: Other Information 14
Signatures 15
2
PART I: FINANCIAL INFORMATION
PATRICK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
MARCH 31 DECEMBER 31
2002 2001
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,146,849 $ 5,914,283
Trade receivables 20,834,113 13,722,216
Inventories 28,812,970 28,625,747
Income tax refund claims receivable 3,046,799 3,046,799
Prepaid expenses 789,101 804,398
Deferred tax assets 2,014,000 2,014,000
----------- -----------
Total current assets 60,643,832 54,127,443
----------- -----------
PROPERTY AND EQUIPMENT, at cost 90,186,408 90,935,808
Less accumulated depreciation 56,898,018 56,302,359
----------- -----------
33,288,390 34,633,449
----------- -----------
INTANGIBLE AND OTHER ASSETS 3,066,223 3,208,928
----------- -----------
Total assets $96,998,445 $91,969,820
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,671,428 $ 3,671,428
Accounts payable 12,222,382 7,180,706
Accrued liabilities 4,067,569 4,192,487
----------- -----------
Total current liabilities 19,961,379 15,044,621
----------- -----------
LONG-TERM DEBT, less current maturities 15,114,288 15,114,288
----------- -----------
DEFERRED COMPENSATION OBLIGATIONS 2,238,078 2,226,390
----------- -----------
DEFERRED TAX LIABILITIES 81,000 81,000
----------- -----------
SHAREHOLDERS' EQUITY
Common stock 17,632,001 17,620,517
Retained earnings 41,971,699 41,883,004
----------- -----------
Total shareholders' equity 59,603,700 59,503,521
----------- -----------
Total liabilities and shareholders' equity $96,998,445 $91,969,820
=========== ===========
See accompanying notes to Unaudited Condensed Financial Statements
3
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31
2002 2001
NET SALES $ 75,242,789 $ 68,294,737
------------ ------------
COST AND EXPENSES
Cost of goods sold 65,506,487 61,209,742
Warehouse and delivery expenses 3,425,023 3,409,400
Selling, general, and administrative expenses 5,630,312 6,350,296
Interest expense, net 231,407 237,729
------------ ------------
74,793,229 71,207,167
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 449,560 (2,912,430)
INCOME TAXES (CREDIT) 179,800 (1,164,900)
------------ ------------
NET INCOME (LOSS) $ 269,760 $ (1,747,530)
============ ============
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE $ .06 $ (0.39)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,529,770 4,517,977
See accompanying notes to Unaudited Condensed Financial Statements.
4
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOWS
THREE MONTHS ENDED
MARCH 31
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 269,760 $(1,747,530)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,658,442 1,906,734
(Gain) on sale of fixed assets (3,666) (7,863)
Other 174,458 277,013
Change in assets and liabilities:
Decrease (increase) in:
Trade receivables (7,111,897) (5,532,442)
Income tax refund claims receivable - - - (1,132,036)
Inventories (187,223) 1,416,697
Prepaid expenses 15,297 14,729
Increase (decrease) in:
Accounts payable and accrued liabilities 4,681,099 5,337,158
Income taxes payable 235,658 - - -
----------- -----------
Net cash provided by (used in) operating activities (268,072) 532,460
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (391,580) (477,608)
Proceeds from sale of fixed assets 31,152 7,863
Other 33,547 (19,515)
----------- -----------
Net cash (used in) investing activities (326,881) (489,260)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock - - - (561,965)
Proceeds from sale of common stock 11,484 - - -
Cash dividends paid (181,065) (188,767)
Other (2,900) (11,443)
----------- -----------
Net cash (used In) financing activities (172,481) (762,175)
----------- -----------
(Decrease) in cash and cash equivalents (767,434) (718,975)
Cash and cash equivalents, beginning 5,914,283 6,716,128
----------- -----------
Cash and cash equivalents, ending $ 5,146,849 $ 5,997,153
=========== ===========
Cash Payments for:
Interest $ 407,517 $ 551,094
Income taxes 4,142 27,136
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) necessary to present fairly the financial position
as of March 31, 2002, and December 31, 2001, and the results of
operations and cash flows for the three months ended March 31, 2002 and
2001.
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, 2001 audited financial statements. The results of
operations for the three month periods ended March 31, 2002 and 2001
are not necessarily indicative of the results to be expected for the
full year.
3. The inventories on March 31, 2002 and December 31, 2001 consist of the
following classes:
March 31 December 31
2002 2001
Raw materials $15,914,144 $15,908,710
Work in process 1,844,261 2,049,879
Finished goods 4,338,878 4,335,875
----------- -----------
Total manufactured goods 22,097,283 22,294,464
Distribution products 6,715,687 6,331,283
----------- -----------
TOTAL INVENTORIES $28,812,970 $28,625,747
=========== ===========
Inventories are stated at the lower of cost (first-in, first-out (FIFO)
method) or market.
4. Income (loss) per common share for the three months ended March 31,
2002 and 2001 have been computed based on the weighted average common
shares outstanding of 4,529,770 and 4,517,977 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, 2002
and 2001 were $.04 per share.
5. 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 extrusion, painting and distribution,
manufacture of adhesive products, pleated shades, and a manufacturer of
laminating equipment.
6
The table below presents unaudited information about the revenue and
operating income of those segments:
THREE MONTHS ENDED MARCH 31, 2002
---------------------------------
SEGMENT
LAMINATING DISTRIBUTION WOOD OTHER TOTAL
---------- ------------ ---- ----- -----
Net outside sales $ 34,364,744 $ 25,645,520 $ 8,242,519 $ 6,990,006 $ 75,242,789
Intersegment sales 1,584,646 198,420 194,678 2,532,834 4,510,578
--------------------------------------------------------------------------------------------
Total sales $ 35,949,390 $ 25,843,940 $ 8,437,197 $ 9,522,840 $ 79,753,367*
--------------------------------------------------------------------------------------------
EBIT (loss)** $ 1,122,357 $ 108,366 $ (15,248) $ 87,793 $ 1,303,268
Total assets $ 32,892,571 $ 13,787,582 $ 6,139,067 $ 7,721,635 $ 60,540,855
THREE MONTHS ENDED MARCH 31, 2001
---------------------------------
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)** $ (390,833) $ (32,493) $ (125,276) $ (851,750) $ (1,400,352)
Total assets $ 33,701,515 $ 14,054,885 $ 6,561,935 $ 11,629,527 $ 65,947,862
Reconciliation of segment operating income to consolidated operating income
2002 2001
---- ----
EBIT** for segments $ 1,303,268 $(1,400,352)
Corporate incentive agreements 413,901 197,242
Consolidation reclassifications 41,515 (50,171)
Gain on sale of property
and equipment 3,666 7,863
Unallocated corporate expenses (830,514) (1,351,420)
Other (250,869) (77,863)
------------ -----------
Consolidated EBIT** $ 680,967 $ (2,674,701)
============ ============
*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
The three month period ended March 31, 2002 was the first quarter to
show an increase in sales over the previous year since the second quarter of
1999. The third quarter of 1999 marked the beginning of the Company's declining
revenue. Net sales for the twelve month period ending December 31, 1999 finished
at a record high of $457 million and continued to decline up through the twelve
month period ending December 31, 2001 which finished at $293 million. This 36%
decline in sales volume over a two year period is the result of the overall
downturn in the Manufactured Housing and Recreational Vehicle industries.
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 2001 and 2000, the Manufactured
Housing industry was down nearly 23% and 29%, respectively, 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.
Shipments for the first quarter of 2002 were flat compared to the same period in
2001. These conditions are expected to continue through the rest of this year.
The Recreational Vehicle industry decline 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 2000 and a 14% decline in units shipped and produced in 2001. The
first quarter of 2002 had positive results with an increase in units shipped and
produced of almost 8% compared to the previous year. Preliminary signs indicate
that this industry is slowly coming out of the down cycle that is has
experienced for the last 18 months.
While conditions in these two industries are uncertain, the Company has
made significant cost cutting measures, plant closings, and consolidations over
the past two years to more efficiently operate at reduced volumes. The Company's
sales for the quarter ended March 31, 2002 were 47% to Manufactured Housing, 28%
to Recreational Vehicle, and 25% to other industries.
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,
2002 2001
Net sales 100.0% 100.0%
Cost of sales 87.1 89.6
Gross profit 12.9 10.4
Warehouse and delivery 4.6 5.0
Selling, general & administrative 7.5 9.3
Operating income (loss) 0.9 (3.9)
Income taxes (credits) 0.2 (1.7)
Net income (loss) 0.4 (2.6)
RESULTS OF OPERATIONS
Quarter Ended March 31, 2002 Compared to Quarter Ended March 31, 2001
Net Sales. Net sales increased $6.9 million, or 10.2%, from $68.3
million for the quarter ended March 31, 2001 to $75.2 million for the quarter
ended March 31, 2002. This increase is attributable to an approximate 8%
increase in units shipped and produced in the Recreational Vehicle industry
coupled by a change in the sales mix of core industries to which the Company
supplies. The Company's sales to the Manufactured Housing, Recreational Vehicle,
and other industries was 47%, 28%, and 25%, respectively, for the quarter ended
March 31, 2002. At December 31, 2001 the Company's sales to these industries was
51%, 24%, and 25%, respectively.
Gross Profit. Gross profit increased by approximately $2.6 million, or
37.4%, from $7.1 million in 2001 to $9.7 million in 2002. As a percentage of net
sales, gross profit increased approximately 2.5%. The increase in gross profit
is due to increased sales as well as the Company making significant strategic
cost cutting measures in 2000 and 2001, including plant closings and
consolidations, eliminating low margin business, and certain fixed overhead
expenses.
Warehouse and Delivery Expenses. Warehouse and delivery expenses
remained constant at $3.4 million for the quarters
8
ending March 31, 2002 and 2001. As a percentage of net sales, warehouse and
delivery expenses decreased 0.4%, from 5.0% in the first quarter of 2001 to 4.6%
in the first quarter of 2002. The decrease, as a percentage of net sales, is
attributable to increased sales levels which has allowed the Company to ship
more full truckloads than in the previous year and a reduction in the fleet size
that the Company owns or leases.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses decreased by $0.7 million, or 11.3%, from $6.3 million
in the quarter ending March 31, 2001 to $5.6 million for the quarter ending
March 31, 2002. As a percentage of net sales, selling, general, and
administrative expenses decreased 1.8%, from 9.3% the first quarter of 2001 to
7.5% in the first quarter of 2002. The decreases in both dollars and as a
percentage of net sales is due to the Company making significant strategic cost
cutting measures in 2001 which has reduced the fixed portion of these expenses.
Operating Income (Loss). The Company experienced operating income of
$681,000 in the first quarter of 2002 compared to an operating loss of $2.7
million in the first quarter of 2001. The increase in operating income is due to
the factors described above.
Interest Expense, Net. Interest expense, net of interest income
decreased 2.7%, or $7,000 from $238,000 in the first quarter of 2001 compared to
$231,000 in the first quarter of 2002. The slight change represents a decrease
in interest expense due to lower long term debt levels and a corresponding
decrease in interest income due to the declining interest rates over the past
year on funds invested.
Net Income (Loss). The Company had net income of $270,000 for the first
quarter of 2002 compared to a net loss of $1.7 million in the first quarter of
2001. The increase in net income is attributable to the factors described above.
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 were still highly competitive resulting in the inability of the
Company to increase selling prices without losing business.
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. 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.
9
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.
BUSINESS SEGMENTS
Quarter Ended March 31, 2002 Compared to Quarter Ended March 31, 2001
Laminating Segment Discussion
Net sales increased by 12.0%, or $3.8 million, from $32.1 million in
quarter ended march 31, 2001 to $35.9 million in the same period in 2002. This
increase is attributable to the approximate 8% increase in units shipped and
produced in the Recreational Vehicle industry coupled with an increase in sales
as a result of consolidating certain business units into this segment in 2001.
EBIT increased $1.5 million from a loss of $0.4 million in the first
quarter of 2001 to income of $1.1 million in the first quarter of 2002. This
increase is attributable to increased sales as well as the strategic cost
cutting measures that the Company took in 2000 and 2001.
Distribution Segment Discussion
Net sales increased $3.7 million, or 16.6%, from $22.2 million in the
first quarter of 2001 to $25.8 million in the first quarter of 2002. This
increase is due to an increase in sales in the southeast region of the
Manufactured Housing industry.
EBIT increased $141,000 from a loss of $33,000 in the first quarter of
2001 to income of $108,000 in the first quarter of 2002. This increase is due to
the increased sales volume and lower operating expenses compared to the first
quarter of 2001.
Wood Segment Discussion
Net sales increased $724,000, or 9.4%, from $7.7 million in the first
quarter of 2001 to $8.4 million in the first quarter of 2002. This increase is
consistent with the overall increase in the Recreational Vehicle industry, which
is the primary industry to which this segment serves.
The operating loss in this segment decreased from a loss of $125,000 in
the first quarter of 2001 to a loss of $15,000 in the first quarter of 2002. The
Company has made significant strides in the improvement of certain operating
divisions in this segment, however, certain other divisions in this segment have
experienced operating inefficiencies causing them to be unprofitable. The
results from these unprofitable divisions have mitigated the overall positive
results of the segment.
Other Segment Discussion
Net sales in the Other segment decreased 10.3%, or $1.1 million, from
$10.6 million in the quarter ending March 31, 2001 to $9.5 million in the
quarter ending March 31, 2002. This decline is due to the closing and
consolidation of one division in the first quarter of 2001 and two divisions in
the 4th quarter of 2001 in this segment.
10
Operating income in this segment increased from a loss of $852,000 in
the first quarter of 2001 to operating income of $88,000 in the first quarter of
2002. This increase is attributable to the closing and consolidation of three
unprofitable divisions in this segment in 2001.
Quarter Ended March 31, 2001 Compared to Quarter 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 $538,000 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.
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 negatively affected margins in this segment.
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 $2,571,428 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.
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 common stock
repurchase program as currently contemplated. The changes in inventory and
accounts receivable balances, which affect the Company's cash flows, are part of
normal business cycles that cause them to change periodically.
A summary of our contractual cash obligations remaining at March 31,
2002 and for the twelve month periods ending 2003 through 2006 is as follows:
--------------------------------------------------------------------------------------------
Payments due by period
- --------------------------------------- --------------------------------------------------------------------------------------------
Contractual Obligations Total 2002 2003 2004 2005 2006
- --------------------------------------- ---------------- -------------- -------------- --------------- -------------- --------------
---------------- -------------- -------------- --------------- -------------- --------------
Long-term debt, including interest** $18,034,147 $4,336,880 $4,368,757 $4,159,176 $3,949,599 $1,219,735
---------------- -------------- -------------- --------------- -------------- --------------
Operating Leases $4,670,832 $1,878,173 $1,592,658 $849,135 $311,178 $39,688
---------------- -------------- -------------- --------------- -------------- --------------
Total contractual cash obligations $22,704,979 $6,215,053 $5,961,415 $5,008,311 $4,260,777 $1,259,423
---------------- -------------- -------------- --------------- -------------- --------------
**Interest payments have been calculated using the fixed rate of 6.82% for the
Senior notes and the average 2001 annual interest rate of 3.11% for the
Industrial Revenue Bonds.
We also have a commercial commitment as described below:
- --------------------------------------------------------------------------------
Other Commercial Total Amount Outstanding Date of
Commitment Committed at 03/31/02 Expiration
- --------------------------------------------------------------------------------
Line of Credit $10,000,000 $0 January 28, 2003
- --------------------------------------------------------------------------------
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 2002.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are summarized in the footnotes to
our financial statements. Some of the most critical policies are also discussed
below.
As a matter of policy, we review our major assets for impairment. Our
major operating assets are accounts receivable, inventory, and property and
equipment. 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, 2002 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.
12
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.
PURCHASE OF PROPERTY
The Company agreed to purchase in 2002 a presently leased building
complex near its principal offices in Elkhart, Indiana for $2 million from a
major shareholder and Chairman Emeritus of the Company.
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
13
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
14
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 9, 2002 /S/Harold E. Wyland
----------- -------------------------------
Harold E. Wyland
(Chairman of the Board)
Date May 9, 2002 /S/David D. Lung
----------- -------------------------------
David D. Lung
(President)
(Chief Executive Officer)
Date May 9, 2002 /S/Keith V. Kankel
----------- -------------------------------
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)