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, 1995 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: 5,951,866
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
September 30, 1995 & December 31, 1994 3
Unaudited Condensed Statements of Income
Three Months Ended September 30, 1995 & 1994, and
Nine Months Ended September 30, 1995 & 1994 4
Unaudited Condensed Statements of Cash Flows
Nine Months Ended September 30, 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
<TABLE>
<CAPTION>
(Unaudited) (Note)
SEPTEMBER 30 DECEMBER 31
1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 601,369 $ 666,986
Accounts Receivable, Net 27,390,890 18,445,638
Inventories 34,340,074 36,087,900
Other 298,481 291,194
Total Current Assets $ 62,630,814 $55,491,718
INVESTMENTS AND OTHER ASSETS $ 7,164,646 $ 7,954,751
PROPERTY AND EQUIPMENT $ 53,235,137 $45,047,383
LESS ACCUMULATED DEPRECIATION 22,434,342 21,225,209
$ 30,800,795 $23,822,174
Total Assets $100,596,255 $87,268,643
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-
term Debt $ 700,000 $ 1,724,000
Accounts Payable 15,394,431 14,916,309
Accrued Expenses and Taxes
Payable 4,322,214 3,840,354
Total Current Liabilities $ 20,416,645 $20,480,663
LONG-TERM DEBT, LESS CURRENT
MATURITIES $ 26,900,000 $21,150,000
DEFERRED COMPENSATION OBLIGATIONS $ 918,621 $ 838,971
DEFERRED TAX LIABILITIES $ 1,550,000 $ 1,360,000
SHAREHOLDERS' EQUITY
Common Stock $ 21,482,870 $21,457,167
Retained Earnings 29,328,119 21,981,842
Total Shareholders' Equity $ 50,810,989 $43,439,009
Total Liabilities and
Shareholders' Equity $100,596,255 $87,268,643
NOTE: The balance sheet at December 31, 1994 has been taken from the audited
financial statements at that date and condensed.
See accompanying notes to Unaudited Condensed Financial Statements.
</TABLE>
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $94,125,637 $86,011,213 $273,716,121 $248,148,702
COST AND EXPENSES
Cost of Goods Sold $80,913,172 $74,840,589 $236,037,230 $216,771,418
Warehouse and Delivery 3,436,484 3,173,078 9,981,814 9,075,136
Selling and Administrative 4,801,757 3,673,039 13,850,944 10,892,299
Financial Expenses, Net 316,132 228,718 1,025,514 646,720
$89,467,545 $81,915,424 $260,895,502 $237,385,573
INCOME BEFORE INCOME TAXES $ 4,658,092 $ 4,095,789 $ 12,820,619 $10,763,129
INCOME TAXES 1,816,000 1,597,300 5,000,000 4,197,600
NET INCOME $ 2,842,092 $ 2,498,489 $ 7,820,619 $ 6,565,529
EARNINGS PER COMMON SHARE $ .48 $ .41 $ 1.32 $ 1.07
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,947,431 6,058,770 5,943,991 6,135,353
See accompanying notes to Unaudited Condensed Financial Statements.
</TABLE>
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOW
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 7,820,619 $ 6,565,529
Adjustment to Reconcile Net Income
to Net Cash:
Depreciation and Amortization 2,472,907 2,175,306
Other (142,038) (126,742)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (8,681,024) (6,412,931)
Inventories 2,153,155 (8,242,065)
Other 6,008 (139,443)
Increase (Decrease) in:
Accounts Payable and Accrued
Expenses 907,474 6,479,863
Income Taxes Payable and Deferred
Taxes 242,508 246,214
Deferred Compensation 79,650 74,160
Net Cash Provided by
Operating Activities $ 4,859,259 $ 619,891
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $(8,833,410) $(3,502,805)
Acquisition of Assets of U.S. Door (3,346,596) ---
Change in Cash Held in Escrow 2,603,959 ---
Other 373,810 46,611
Net Cash (Used in) Investing
Activities $(9,202,237) $(3,456,194)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings Under Debt Agreements $18,000,000 $ 5,250,000
Sale of Common Stock 25,703 286,521
Principal Payments on Debt (13,274,000) (1,030,245)
Reacquisition of Common Stock --- (1,917,874)
Cash Dividends (474,342) ---
Net Cash Provided by Financing
Activities $ 4,277,361 $ 2,588,402
(Decrease) in Cash and Cash
Equivalents $ (65,617) $ (247,901)
CASH and CASH EQUIVALENTS, BEGINNING $ 666,986 $ 465,460
CASH and CASH EQUIVALENTS, ENDING $ 601,369 $ 217,559
See accompanying notes to Unaudited Condensed Financial Statements.
</TABLE>
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, and December 31, 1994, and the results of operations
and cash flows for the three months and the nine months ended September 30,
1995 and 1994.
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, 1994
audited financial statements. The results of operations for the three
months and nine months periods ended September 30, 1995 and 1994 are not
necessarily indicative of the results to be expected for the full year.
3. The inventories on September 30, 1995 and December 31, 1994 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
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 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 number of
shares outstanding was 5,947,431 for the three months 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.
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% over 1991, and in 1993 net sales increased
40% over 1992. In 1994, the Registrant continued its growth and recorded its
highest annual sales of $331 million.
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 2.9 2.7
RESULTS OF OPERATIONS
Quarter Ended September 30, 1995 Compared to Quarter Ended September 30,
1994
Net Sales. Net sales increased by $8.1 million, or 9.4% in this year's
third quarter over the same 1994 period. This increase was primarily
attributable to production unit increases in the Manufactured Housing industry,
from whom the Registrant records 65% of its sales.
Gross Profit. Gross profit increased by $2.0 million, or 18.3% and as a
percentage of net sales increased from 13.0% in 1994 to 14.0% in this year's
third quarter. This increase in gross profit resulted from more stabilized raw
material costs and improvement in Workers Compensation insurance costs.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
by $0.26 million, or 8.3%. This is the same 3.7% as a percentage to net sales
as the third quarter of 1994. The increase in dollars is due primarily to the
increase in sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.1 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 increase in bad debt expense.
As a percentage of net sales, these expenses increased from 4.3% to 5.1% in
the third quarter of 1995 as compared to 1994.
Operating Income. Operating income increased by $0.65 million, or 15%,
from the third quarter of 1994 to the same 1995 quarter. This is due primarily
to the increase in gross profit somewhat offset by the increases in Selling,
General and Administrative Expenses. As a percentage of net sales, operating
income increased from 5.0% in the 1994 third quarter to 5.2% in the 1995 third
quarter.
Interest Expense. Interest expense was higher in the 1995 third quarter
because of higher rates and higher borrowing levels than in 1994.
Net Income. Net income increased in the 1995 third quarter by $0.34
million, or 13.7% when compared to the same 1994 quarter. This increase is
primarily due to the factors discussed above.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994
Net Sales. Net sales increased by $25.6 million, or 10.3%, from the nine
months ended September 30, 1994, to the first nine months of 1995. This sales
increase was primarily attributable to production unit increases in the
Manufactured Housing industry and Registrant sales to its other building
products industries. The Manufactured Housing industry, which accounts for 65%
of Registrant s sales, is producing at a rate 12% ahead of 1994.
Gross Profit. Gross profit increased by $6.3 million, or 20%, in the first
nine months of 1995 over 1994. As a percentage of net sales, gross profit
increased from 12.6% in the 1994 nine months to 13.8% in the 1995 nine months.
This increase in gross profit resulted from improvement in labor efficiency,
more stabilized commodity markets, more favorable purchasing practices of the
Registrant s raw materials, and an improvement in Workers Compensation insurance
costs.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
$0.9 million, or 10%, from $9.1 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. As a percentage of net sales, warehouse and delivery expenses
increased from 3.6% in the first nine months of 1994 to 3.7% in the 1995 nine
months.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2.9 million, or 27.1%, from $10.9 million
in the first nine months of 1994, to $13.8 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. As a percentage of
net sales, selling, general and administrative expenses increased from 4.4% in
the first nine months of 1994 to 5.1% in the 1995 nine months.
Operating Income. Operating income increased by $2.4 million, or 21.3%,
from $11.4 million in the first nine months of 1994, to $13.8 million in the
1995 nine months. This increase is primarily attributable to the increase in
gross profit, somewhat offset by the increases in selling, general and
administrative expenses. As a percentage of sales, operating income increased
from 4.6% in the first nine months of 1994 to 5.0% in the 1995 nine months.
Interest Expense. Interest expense increased $0.37 million in the first
nine months of 1995 due to higher borrowing balances and higher interest rates
during the comparable periods.
Net Income. Net income increased by $1.25 million, or 19.1%, from $6.6
million in the 1994 nine months, to $7.8 million in the first nine months of
1995. This increase in net income is primarily attributable to the factors
discussed 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,
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 provides for a $10 million term loan with a
maturity in February 1999 and a credit revolver loan of up to $13 million which
matures in February 1997. In September, 1995 with funds from the 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 housing and recreational
vehicle industries tend to be 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 housing and recreational
vehicles, the first quarter of 1994 and 1995 and the fourth quarters of 1993 and
1994 were unusual in their high sales and gross profit levels during those
winter months when compared to prior years.
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) Exhibit 27 Financial Data Schedule
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, 1995 /S/Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date November 10, 1995 /S/David D. Lung
David D. Lung
(President)
Date November 10, 1995 /S/Keith V. Kankel
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 601,369
<SECURITIES> 0
<RECEIVABLES> 27,940,890
<ALLOWANCES> 550,000
<INVENTORY> 34,340,074
<CURRENT-ASSETS> 62,630,814
<PP&E> 52,235,137
<DEPRECIATION> 22,434,342
<TOTAL-ASSETS> 100,596,255
<CURRENT-LIABILITIES> 20,416,645
<BONDS> 0
<COMMON> 21,482,870
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 100,596,255
<SALES> 273,716,121
<TOTAL-REVENUES> 273,716,121
<CGS> 236,037,230
<TOTAL-COSTS> 259,869,988
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,025,514
<INCOME-PRETAX> 12,820,619
<INCOME-TAX> 5,000,000
<INCOME-CONTINUING> 7,820,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,820,619
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>
