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, 1996 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, 1996: 5,993,766
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
June 30, 1996 & December 31, 1995 3
Unaudited Condensed Statements of Income
Three Months Ended June 30, 1996 & 1995, and
Six Months Ended June 30, 1996 & 1995 4
Unaudited Condensed Statements of Cash Flows
Six Months Ended June 30, 1996 & 1995 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)
JUNE 30 DECEMBER 31
1996 1995
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 6,305,364 $ 1,349,709
Accounts Receivable, Net 26,605,375 20,427,355
Inventories 33,871,917 35,462,152
Other 128,047 387,782
Total Current Assets $ 66,910,703 $ 57,626,998
PROPERTY AND EQUIPMENT, at cost $ 60,856,466 $ 56,189,860
Less Accumulated Depreciation 24,585,958 23,140,702
$ 36,270,508 $ 33,049,158
INTANGIBLE AND OTHER ASSETS $ 5,458,217 $ 5,239,766
Total Assets $ 108,639,428 $ 95,915,922
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-term Debt $ 700,000 $ 700,000
Accounts Payable 16,829,964 9,589,103
Accrued Expenses and Taxes Payable 5,221,811 4,057,446
Total Current Liabilities $ 22,751,775 $ 14,346,549
LONG-TERM DEBT, LESS CURRENT MATURITIES $ 26,200,000 $ 26,200,000
DEFERRED COMPENSATION OBLIGATIONS AND OTHER $ 1,028,908 $ 919,821
DEFERRED TAX LIABILITIES $ 1,510,000 $ 1,461,000
SHAREHOLDERS' EQUITY
Common Stock $ 21,114,675 $ 21,626,489
Retained Earnings 36,034,070 31,362,063
Total Shareholders' Equity $ 57,148,745 $ 52,988,552
Total Liabilities and Shareholders' Equity $ 108,639,428 $ 95,915,922
NOTE: The balance sheet at December 31, 1995 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
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $107,395,342 $92,559,763 $201,162,883 $179,590,484
COST AND EXPENSES
Cost of Goods Sold $ 92,952,138 $80,063,957 $174,966,283 $155,124,058
Warehouse and Delivery Expenses 3,618,343 3,294,961 6,982,996 6,545,330
Selling and Administrative Expenses 5,233,875 4,473,013 10,158,531 9,049,187
Financial Expenses, Net 289,927 361,618 586,808 709,382
$ 102,094,283 $88,193,549 $192,694,618 $171,427,957
INCOME BEFORE INCOME TAXES $ 5,301,059 $ 4,366,214 $ 8,468,265 $ 8,162,527
INCOME TAXES 2,096,700 1,702,800 3,319,200 3,183,400
NET INCOME $ 3,204,359 $ 2,663,414 $ 5,149,065 $ 4,979,127
EARNINGS PER COMMON SHARE $ .53 $ .45 $ .86 $ .84
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,965,951 5,943,492 5,966,554 5,942,157
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
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,149,065 $ 4,979,127
Adjustment to Reconcile Net Income to Net Cash:
Depreciation and Amortization 2,185,144 1,587,458
Other (13,729) (23,967)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (6,178,020) (4,018,320)
Inventories 1,590,235 (1,821,313)
Other 259,735 (38,137)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 7,608,535 276,525
Income Taxes Payable and Deferred Taxes 847,614 235,224
Deferred Compensation 73,678 53,160
Net Cash Provided by Operating Activities $ 11,522,257 $ 1,229,757
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $ (5,281,613) $ (5,452,835)
Acquisition of Assets of U.S. Door - - - (3,346,596)
Change in Cash Held in Escrow - - - 2,015,201
Other 97,633 42,363
Net Cash (Used in) Investing Activities $ (5,183,980) $(6,741,867)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings Under Debt Agreements - - - $ 6,000,000
Sale of Common Stock 174,724 6,255
Principal Payments on Debt - - - (524,000)
Reacquisition of Common Stock (1,080,288) - - -
Cash Dividends (477,058) (237,034)
Net Cash Provided by (Used In) Financing Activities $ (1,382,622) $ 5,245,221
Increase (Decrease) in Cash and Cash Equivalents $ 4,955,655 $ (266,889)
CASH and CASH EQUIVALENTS, BEGINNING $ 1,349,709 $ 666,986
CASH and CASH EQUIVALENTS, ENDING $ 6,305,364 $ 400,097
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, 1996, and December 31, 1995, and the results of operations and cash
flows for the three months and the six months ended June 30, 1996 and 1995.
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, 1995
audited financial statements. The results of operations for the three
months and six months periods ended June 30, 1996 and 1995 are not
necessarily indicative of the results to be expected for the full year.
3. The inventories on June 30, 1996 and December 31, 1995 consist of the
following classes:
June 30 December 31
1996 1995
Raw Materials $20,827,787 $23,105,916
Work in Process 800,205 877,805
Finished 2,947,038 3,197,561
Total Manufactured Goods $24,575,030 $27,181,282
Distribution Products 9,296,887 8,280,870
TOTAL INVENTORIES $33,871,917 $35,462,152
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 six months ended June
30, 1996 and 1995 have been computed based on the weighted average number of
shares of common stock. The weighted average number of shares outstanding was
5,965,951 for the three months and 5,966,554 for the six months ended June 30,
1996 and 5,943,492 for the three months and 5,942,157 for the six months ended
June 30, 1995.
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 annually from $184 million in 1992 to over $362
million in 1995.
The following table sets forth the percentage relationship to net sales of
certain items in the Registrant's Statements of Operations:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 86.5 86.5 87.0 86.4
Gross Profit 13.5 13.5 13.0 13.6
Warehouse and Delivery 3.4 3.6 3.5 3.6
Selling, General & Administrative 4.9 4.8 5.0 5.0
Operating Income 5.2 5.1 4.5 5.0
Net Income 3.0 2.9 2.6 2.8
</TABLE>
RESULTS OF OPERATIONS
Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995
Net Sales. Net sales increased by $14.8 million, or 16.0%, from $92.6
million for the quarter ended June 30, 1995, to $107.4 million in the quarter
ended June 30, 1996. This sales increase was attributable to a 12% increase in
units shipped by the Manufactured Housing industry, which represents
approximately 68% of the Registrant s sales. The Registrant s sales to the
Recreational Vehicle industry were higher in this years second quarter because
the industry, which represents approximately 16% of Registrant s sales, was
experiencing a slight increase in units shipped.
Gross Profit. Gross profit increased by approximately $1.9 million, or
15.6%, from $12.5 million in the second quarter of 1995, to $14.4 million in the
same 1996 quarter. As a percentage of net sales, gross profit remained about
the same as the second quarter of 1995.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
approximately $323,000, or 9.8%, from $3.3 million in 1995, to $3.6 million in
the second quarter of 1996. As a percentage of net sales, warehouse and
delivery expenses decreased from 3.6% in 1995 to 3.4% in the 1996 second
quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $761,000, or 17.0%, from $4.5
million in 1995, to $5.2 million in 1996. As a percentage of net sales,
selling, general and administrative expenses remained about the same.
Operating Income. Operating income increased by approximately $863,000
because of the increased sales and the operating expenses remaining steady as
percentages to sales. As a percentage of sales, operating income increased from
5.1% in 1995 to 5.2% in the 1996 second quarter.
Interest Expense. Interest expense decreased by approximately $72,000 from
$362,000 in 1995 to $290,000 in the second quarter of 1996. The Registrant s
borrowing levels in the 1996 period were slightly lower and at lower rates.
Net Income. Net income increased by approximately $541,000 from $2.7
million in 1995 to $3.2 million in 1996 for the second quarter ended June 30.
This increase is attributable to the factors described above.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net Sales. Net sales increased by $21.6 million, or 12.0%, from $179.6
million for the six months ended June 30, 1995, to $201.2 million in the six
months ended June 30, 1996. This sales increase was attributable to a 10.5%
increase in units shipped by the Manufactured Housing industry, which represents
68% of the Registrant s total sales. The Registrant s sales to the Recreational
Vehicle industry were about the same in both six month periods and represent
about 16% of total sales.
Gross Profit. Gross profit increased by $1.7 million, or 7.1%, from $24.5
million in the first six months of 1995, to $26.2 million in the same period in
1996. As a percentage of net sales, gross profit decreased from 13.6% in the
first six months of 1995 to 13.0% in 1996. This decrease in the gross profit
percentage was the result of first quarter lower volume and higher raw material
costs of sales in the Registrant s aluminum extrusion division, plant relocation
costs at the new Oregon facility, and highly competitive market pricing of
certain products.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
approximately $438,000, or 6.7%, from $6.6 million in 1995, to $7.0 million in
the first six months of 1996. As a percentage of net sales, warehouse and
delivery expenses decreased from 3.6% for 1995 to 3.5% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.1 million, or 12.3%, from $9.1 million
in 1995, to $10.2 million in 1996. As a percentage of net sales, selling,
general and administrative expenses remained the same at 5.0% in 1995 and 1996.
Operating Income. Operating income increased by approximately $183,000, or
2.1%, from $8.9 million in 1995, to $9.1 million in 1996. This increase is
primarily attributable to the $1.7 million increase in gross profit. As a
percentage of sales, operating income decreased from 5.0% in 1995 to 4.5% in
1996.
Interest Expense. Interest expense decreased by $123,000 from $709,000 in
1995, to $587,000 in 1996. This decrease was due to lower interest rates and
borrowing levels.
Net Income. Net income increased by $170,000 from $5.0 million in 1995, to
$5.2 million in 1996. This increase in net income is primarily attributable to
the factors described 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 in 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 provided for a $10 million term loan with a
maturity in February, 1999 and a credit revolver loan of up to $13 million with
maturity in February, 1997. In September, 1995 with funds from the insurance
company 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 believes that cash generated from operations and borrowings
under its credit agreements will be sufficient to fund its working capital
requirements and ordinary capital expenditures as currently contemplated.
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 temperate. Accordingly, the Registrant's
sales and profits are generally highest in the second and third quarters.
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
15, 1996.
(b) Not applicable.
(c) 1. Set forth below is the tabulation of the votes on each nominee
for election as a director:
<TABLE>
<CAPTION>
WITHHOLD
NAME FOR AUTHORITY
<S> <C> <C>
Clyde H. Keith 5,173,295 34,634
Dorothy M. Lung 5,173,195 34,734
Robert C. Timmins 5,173,295 34,634
</TABLE>
2. Not applicable.
(d) Not applicable.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
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 13, 1996 /s/ Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date August 13, 1996 /s/ David D. Lung
David D. Lung
(President)
Date August 12, 1996 /s/ Keith V. Kankel
Keith V. Kankel
(Vice President Finance)
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,305,364
<SECURITIES> 0
<RECEIVABLES> 26,735,375
<ALLOWANCES> 130,000
<INVENTORY> 33,871,917
<CURRENT-ASSETS> 66,910,703
<PP&E> 60,856,466
<DEPRECIATION> 24,585,958
<TOTAL-ASSETS> 108,639,428
<CURRENT-LIABILITIES> 22,751,775
<BONDS> 0
0
0
<COMMON> 21,114,675
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 108,639,428
<SALES> 201,162,883
<TOTAL-REVENUES> 201,162,883
<CGS> 174,966,283
<TOTAL-COSTS> 192,107,810
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 586,808
<INCOME-PRETAX> 8,468,265
<INCOME-TAX> 3,319,200
<INCOME-CONTINUING> 5,149,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,149,065
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
