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 June 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 July 31, 1995: 5,943,492
PATRICK INDUSTRIES, INC.
INDEX
PART I: Financial Information
Unaudited Condensed Balance Sheets
June 30, 1995 & December 31, 1994
Unaudited Condensed Statements of Income
Three Months Ended June 30, 1995 & 1994, and
Six Months Ended June 30, 1995 & 1994
Unaudited Condensed Statements of Cash Flows
Six Months Ended June 30, 1995 & 1994
Notes to Unaudited Condensed Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I: FINANCIAL INFORMATION
PATRICK INDUSTRIES, INC. CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Note)
JUNE 30 DECEMBER 31
1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 400,097 $ 666,986
Accounts Receivable, Net 22,728,186 18,445,638
Inventories 38,314,542 36,087,900
Other 342,626 291,194
Total Current Assets $61,785,451 $55,491,718
OTHER ASSETS $ 5,170,931 $ 3,370,013
CASH HELD IN ESCROW $ 2,569,537 $ 4,584,738
PROPERTY AND EQUIPMENT $50,548,094 $45,047,383
LESS ACCUMULATED DEPRECIATION 22,016,113 21,225,209
$28,531,981 $23,822,174
Total Assets $98,057,900 $87,268,643
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-term
Debt $ 1,700,000 $ 1,724,000
Accounts Payable 15,083,660 14,916,309
Accrued Expenses and Taxes
Payable 4,059,752 3,840,354
Total Current Liabilities $20,843,412 $20,480,663
LONG-TERM DEBT, LESS CURRENT
MATURITIES $26,650,000 $21,150,000
DEFERRED COMPENSATION OBLIGATIONS $ 892,131 $ 838,971
DEFERRED TAX LIABILITIES $ 1,485,000 $ 1,360,000
SHAREHOLDERS' EQUITY
Common Stock $21,463,422 $21,457,167
Retained Earnings 26,723,935 21,981,842
Total Shareholders' Equity $48,187,357 $43,439,009
Total Liabilities and
Shareholders' Equity $98,057,900 $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 SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $92,559,763 $85,239,980 $179,590,484 $162,137,489
COST AND EXPENSES
Cost of Goods Sold $80,063,957 $74,570,527 $155,124,058 $141,930,829
Warehouse and
Delivery 3,294,961 3,027,646 6,545,330 5,902,058
Selling and
Administrative 4,473,013 3,687,183 9,049,187 7,219,260
Financial Expenses,
Net 361,618 193,989 709,382 418,002
$88,193,549 $81,479,345 $171,427,957 $155,470,149
INCOME BEFORE INCOME
TAXES $ 4,366,214 $ 3,760,635 $ 8,162,527 $ 6,667,340
INCOME TAXES 1,702,800 1,466,700 3,183,400 2,600,300
NET INCOME $ 2,663,414 $ 2,293,935 $ 4,979,127 $ 4,067,040
EARNINGS PER COMMON
SHARE $ .45 $ .37 $ .84 $ .66
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,943,492 6,174,030 5,942,157 6,174,281
See accompanying notes to Unaudited Condensed Financial Statements.
</TABLE>
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 31
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,979,127 $ 4,067,040
Adjustment to Reconcile Net Income to Net Cash:
Depreciation and Amortization 1,587,458 1,416,338
Other (23,967) (3,600)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (4,018,320) (6,475,213)
Inventories (1,821,313) (3,400,374)
Other (38,137) (173,083)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 276,525 5,491,146
Income Taxes Payable and Deferred Taxes 235,224 179,739
Deferred Compensation 53,160 49,440
Net Cash Provided by
Operating Activities $ 1,229,757 $ 1,151,433
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $(5,452,835) $(2,088,368)
Acquisition of Assets of U.S. Door (3,346,596) ---
Change in Cash Held in Escrow 2,015,201 ---
Other 42,363 96,674
Net Cash (Used in) Investing Activities $(6,741,867) $(1,991,694)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings Under Debt Agreements $ 6,000,000 $ 2,249,000
Sale of Common Stock 6,255 5,422
Principal Payments on Debt (524,000) (779,245)
Reacquisition of Common Stock --- (957,259)
Cash Dividends (237,034) ---
Net Cash Provided by Financing Activities $ 5,245,221 $ 517,918
(Decrease) in Cash and Cash Equivalents $ (266,889) $ (322,343)
CASH and CASH EQUIVALENTS, BEGINNING $ 666,986 $ 465,460
CASH and CASH EQUIVALENTS, ENDING $ 400,097 $ 143,117
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 June 30, 1995, and December 31, 1994, and the results of operations
and cash flows for the three months and the six months ended June 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 six months periods ended June 30,
1995 and 1994 are not necessarily indicative of the results to be
expected for the full year.
3. The inventories on June 30, 1995 and December 31, 1994 consist of the
following classes:
June 30 December 31
1995 1994
Raw Materials $25,178,889 $23,630,848
Work in Process 673,485 738,439
Finished 2,966,826 3,618,587
Total Manufactured Goods $28,819,200 $27,987,874
Distribution Products 9,495,342 8,100,026
TOTAL INVENTORIES $38,314,542 $36,087,900
4. The earnings per common share for the three months and six months ended
June 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 5,943,492 for the three months and 5,942,157 for the
six months ended June 30, 1995 and 6,174,030 for the three months and
6,174,281 for the six months ended June 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 Operations:
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 86.5 87.5 86.4 87.5
Gross Profit 13.5 12.5 13.6 12.5
Warehouse and Delivery 3.6 3.6 3.6 3.6
Selling, General & Administrative 4.8 4.3 5.0 4.5
Operating Income 5.1 4.6 5.0 4.4
Net Income 2.9 2.7 2.8 2.5
RESULTS OF OPERATIONS
Quarter Ended June 30, 1995 Compared to Quarter Ended June 30, 1994
Net Sales. Net sales increased by $7.3 million, or 8.6% in this year's
second quarter over the same 1994 period. this increase was primarily
attributable to production unit increases in the Manufactured Housing
industry and sales increases to Registrant's other building products
industries. The Recreational Vehicle industry did not show production gains
during this period.
Gross Profit. Gross profit increased by $1.8 million, or 17.1% and as a
percentage of net sales increased from 12.5% in 1994 to 13.5% in this year's
second quarter. This increase in gross profit resulted from fewer cost
increases of certain of the Registrant's products during the period compared
to 1994, and certain inventory items having cost below current market cost.
Warehouse and Delivery Expenses. Warehouse and delivery expenses
increased by $0.27 million, or 8.8%. This is 3.6% as a percentage to net
sales for both the second quarter of 1995 and 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 $0.79 million, or 21.3%, in the 1995
second quarter. This increase is primarily the result of increases in
marketing and sales commissions and other administrative wages as a result
of the higher sales and profits.
As a percentage of net sales, these expenses increased from 4.3% to
4.8% in the second quarter of 1995 as compared to 1994.
Operating Income. Operating income increased by $.77 million, or
19.6%, from the second quarter of 1994 to the same 1995 quarter. This is
due primarily to the increase in gross profit. As a percentage of net
sales, operating income increased from 4.6% in the 1994 second quarter to
5.1% in the 1995 second quarter.
Interest Expense. Interest expense increased $167,000 in the second
quarter of 1995 due to higher borrowing levels.
Net Income. Net income increased in the 1995 second quarter by $0.37
million, or 16.1% when compared to the same 1994 quarter. this increase is
primarily due to the factors discussed above.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30,
1994
Net Sales. Net sales increased by $17.5 million, or 10.8%, from the
six months ended June 30, 1994, to the first six months of 1995. This sales
increase was primarily attributable to production unit increases in the
Manufactured Housing industry and Registrant sales increases to its other
building products industries. The Recreational Vehicle industry did not
show production gains in the 1995 first six months.
Gross Profit. Gross profit increased by $4.3 million, or 21.1%, in the
first six months of 1995 over 1994. As a percentage of net sales, gross
profit increased from 12.5% in the 1994 six months to 13.6% in the 1995 six
months. This increase in gross profit resulted from fewer cost increases of
certain of the Registrant's products during the period compared to 1994, and
certain inventory items having cost below current market cost.
Warehouse and Delivery Expenses. Warehouse and delivery expenses
increased $0.64 million, or 10.9%, from $5.9 million in the first six months
of 1994, to $6.5 million in the 1995 six months. This increase is primarily
the result of increased sales. As a percentage of net sales, warehouse and
delivery expenses in the first six months of 1995 and 1994 were the same at
3.6%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.8 million, or 25.3%, from $7.2
million in the first six months of 1994, to $9.0 million in the 1995 six
months. Such increase is primarily a result of increases in marketing and
sales commissions and other administrative wages as a result of the higher
sales and profits. As a percentage of net sales, selling, general and
administrative expenses increased from 4.5% in the first six months of 1994
to 5.0% in the 1995 six months.
Operating Income. Operating income increased by $1.8 million, or
25.2%, from $7.1 million in the first six months of 1994, to $8.9 million in
the 1995 six months. This increase is primarily attributable to the
increase in gross profit. As a percentage of sales, operating income
increased from 4.4% in the first six months of 1994 to 5.0% in the 1995 six
months.
Interest Expense. Interest expense increased $291,000 in the first six
months of 1995 due to higher borrowing levels.
Net Income. Net income increased by $0.9 million, or 22.4%, from $4.1
million in the 1994 six months, to $5.0 million in the first six 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 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. At June 30, 1995, $8.75 million
and $10 million were outstanding on the term loan and the credit revolver
loan, respectively. Pursuant to the Credit Agreement, the Registrant is
required to maintain certain financial ratios, all of which are currently
complied with.
The Registrant has also financed in late 1994 the acquisition of land,
building, and equipment in Oregon with a $6,000,000 industrial revenue
bond. At June 30, 1995, $3.3 million of the bond proceeds have been used
for construction of the project and $2.6 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.
The Registrant has a commitment as of July 19, 1995 from an insurance
company to purchase $18,000,000 of senior unsecured notes from the
Registrant. The ten year notes will bear interest at 6.82%, with semi-
annual interest payments and seven annual principal repayments beginning on
the first day of the fourth year. The closing of this transaction is
scheduled to occur in the third quarter. Upon closing, these funds will be
used to reduce existing bank debt and for working capital needs.
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
(a) The Annual Meeting of Shareholders of the Registrant was held
on May 17, 1995.
(b) Not applicable.
(c) 1. Set forth below is the tabulation of the votes on each
nominee for election as a director:
WITHHOLD
NAME FOR AUTHORITY
Mervin D. Lung 4,960,204 10,141
Keith V. Kankel 4,960,022 10,323
John H. McDermott 4,960,862 9,483
Harold E. Wyland 4,960,462 9,883
2. Not applicable.
(d) Not applicable.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter.
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 August 11, 1995 /S/Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date August 11, 1995 /S/David D. Lung
David D. Lung
(President)
Date August 11, 1995 /S/Keith V. Kankel
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 400,097
<SECURITIES> 0
<RECEIVABLES> 22,958,186
<ALLOWANCES> 230,000
<INVENTORY> 38,314,542
<CURRENT-ASSETS> 61,785,451
<PP&E> 50,548,094
<DEPRECIATION> 22,016,113
<TOTAL-ASSETS> 98,057,900
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 21,463,422
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 98,057,900
<SALES> 179,590,484
<TOTAL-REVENUES> 179,590,484
<CGS> 155,124,058
<TOTAL-COSTS> 170,718,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 709,382
<INCOME-PRETAX> 8,162,527
<INCOME-TAX> 3,183,400
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