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, 1997 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, 1997: 5,895,766
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
September 30, 1997 & December 31, 1996 3
Unaudited Condensed Statements of Income
Three Months Ended September 30, 1997 & 1996, and
Nine Months Ended September 30, 1997 & 1996 4
Unaudited Condensed Statements of Cash Flows
Nine Months Ended September 30, 1997 & 1996 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
1997 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 743,759 $ 2,041,482
Investment in Marketable Securities --- 4,400,000
Accounts Receivable, Net 30,479,368 15,208,671
Inventories 39,011,176 39,342,506
Other 392,907 393,520
Total Current Assets $ 70,627,210 $ 61,386,179
PROPERTY AND EQUIPMENT, at cost $ 74,943,194 $ 65,630,289
Less Accumulated Depreciation 28,944,740 25,870,995
$ 45,998,454 $ 39,759,294
INTANGIBLE AND OTHER ASSETS $ 7,782,837 $ 5,460,793
Total Assets $ 124,408,501 $ 106,606,266
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-term Debt $ 1,138,517 $ 1,138,517
Accounts Payable 24,384,689 10,545,175
Accrued Expenses and Taxes Payable 3,429,659 4,056,031
Total Current Liabilities $ 28,952,865 $ 15,739,723
LONG-TERM DEBT, NET OF CURRENT MATURITIES $ 25,824,847 $ 26,151,527
DEFERRED COMPENSATION OBLIGATIONS $ 1,211,107 $ 1,069,357
DEFERRED INCOME TAX CREDITS $ 1,350,000 $ 1,350,000
SHAREHOLDERS' EQUITY
Common Stock $ 21,897,072 $ 22,138,494
Retained Earnings 45,172,610 40,157,165
Total Shareholders' Equity $ 67,069,682 $ 62,295,659
Total Liabilities and
Shareholders' Equity $ 124,408,501 $ 106,606,266
NOTE: The balance sheet at December 31, 1996 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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $ 105,126,304 $ 105,686,233 $308,661,520 $306,849,116
COST AND EXPENSES
Cost of Goods Sold $ 91,747,614 $ 91,206,330 $269,998,652 $266,172,613
Warehouse and Delivery Expenses 4,051,929 3,920,554 11,361,380 10,903,550
Selling and Administrative Expenses 5,611,317 4,915,825 15,879,957 15,074,356
Financial Expenses, Net 283,069 236,539 878,879 823,347
$ 101,693,929 $ 100,279,248 $298,118,868 $292,973,866
INCOME BEFORE INCOME TAXES $ 3,432,375 $ 5,406,985 $ 10,542,652 $ 13,875,250
INCOME TAXES 1,358,500 2,122,300 4,140,700 5,441,500
NET INCOME $ 2,073,875 $ 3,284,685 $ 6,401,952 $ 8,433,750
EARNINGS PER COMMON SHARE $ .35 $ .55 $ 1.08 $ 1.41
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,895,766 5,973,212 5,929,581 5,968,790
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
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,401,952 $ 8,433,750
Adjustment to Reconcile Net Income to Net Cash:
Depreciation and Amortization 4,183,235 3,357,973
Other (220,675) (19,533)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (14,587,386) (8,211,180)
Inventories 1,485,830 (1,866,533)
Other 11,530 242,614
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 12,811,087 7,801,741
Income Taxes Payable and Deferred Taxes 390,627 563,117
Deferred Compensation 141,750 111,607
Net Cash Provided by Operating
Activities $ 10,617,950 $10,413,556
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $ (8,456,178) $ (7,820,443)
Acquisition of Business (5,810,400) ---
Proceeds from Sales of Marketable Securities 4,400,000 ---
Other (107,840) 90,558
Net Cash (Used in) Investing Activities $ (9,974,418) $ (7,729,885)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Options $ 16,125 $ 174,724
Principal Payments on Debt (326,680) ---
Reacquisition of Common Stock (935,750) 1,479,476)
Cash Dividends (708,302) (714,912)
Other 13,352 9,269
Net Cash (Used in) Financing Activities $ (1,941,255) $ (2,010,395)
Increase (Decrease) in Cash and Cash Equivalents $ (1,297,723) $ 673,276
CASH and CASH EQUIVALENTS, BEGINNING $ 2,041,482 $ 1,349,709
CASH and CASH EQUIVALENTS, ENDING $ 743,759 $ 2,022,985
CASH PAYMENTS FOR:
Interest $ 1,505,061 $ 1,282,207
Income Taxes $ 4,080,073 $ 5,012,305
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 the financial position as
of September 30, 1997, and December 31, 1996, and the results of operations
and cash flows for the three months and the nine months ended September 30,
1997 and 1996.
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, 1996
audited financial statements. The results of operations for the three and
nine month periods ended September 30, 1997 and 1996 are not necessarily
indicative of the results to be expected for the full year.
3. The inventories on September 30, 1997 and December 31, 1996 consist of the
following classes:
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
<S> <C> <C>
Raw Materials $ 24,165,738 $ 24,204,345
Work in Process 1,543,963 1,029,127
Finished 3,927,482 5,311,075
Total Manufactured Goods $ 29,637,183 $ 30,544,547
Distribution Products 9,373,993 8,797,959
TOTAL INVENTORIES $ 39,011,176 $ 39,342,506
</TABLE>
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, 1997 and 1996 have been computed based on the weighted
average number of shares of common stock. The weighted average number of
shares outstanding was 5,895,766 for the three months and 5,929,581 for the
nine months ended September 30, 1997 and 5,973,212 for the three months and
5,968,790 for the nine months ended September 30, 1996.
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 1991 as net sales increased annually from $143 million to over $403 million
in 1996. This revenue growth slowed in the fourth quarter of 1996 and in the
first nine months of 1997 there was no growth.
The following table sets forth the percentage relationship to net sales of
certain items in the Registrant's Statements of Income:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 87.3 86.3 87.5 86.7
Gross Profit 12.7 13.7 12.5 13.3
Warehouse and Delivery 3.9 3.7 3.7 3.6
Selling, General & Administrative 5.3 4.7 5.1 4.9
Operating Income 3.5 5.3 3.7 4.8
Net Income 2.0 3.1 2.1 2.8
</TABLE>
RESULTS OF OPERATIONS
Quarter Ended September 30, 1997 Compared to Quarter Ended September 30,
1996
Net Sales. Net sales decreased by $0.6 million, or 0.5%, from $105.7
million for the quarter ended September 30, 1996 to $105.1 million in the
quarter ended September 30, 1997. This small sales decrease was attributable to
a 3.5% decrease in units shipped by the Manufactured Housing industry, which
represents approximately 66% of Registrant s sales. The Registrant s sales to
the Recreational Vehicle industry were somewhat higher in this years third
quarter. The industry, which represents approximately 16% of Registrant s
sales, was experiencing a slight decrease in total units shipped but remained
strong in shipments of the units that utilize Registrant s products.
Gross Profit. Gross profit decreased by approximately $1.1 million, or
7.6%, from $14.5 million in the third quarter of 1996, to $13.4 million in the
same quarter of 1997. As a percentage of sales, gross profit was lower by 1.0%.
This decrease was attributable to reduced volumes in certain operations,
competitive market pressure on product pricing, and increased costs of health
insurance and workers compensation insurance.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
by $0.1 million, or 3.4%, from $3.9 million in 1996, to $4.0 million in the
third quarter of 1997. As a percentage of net sales, warehouse and delivery
expenses increased from 3.7% to 3.9%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $0.7 million, or 14.1%, from
$4.9 million in 1996, to $5.6 million in 1997. As a percentage of net sales,
these expenses increased from 4.7% to 5.3% in the third quarter of 1997 compared
to 1996. These expenses were higher because of increased health insurance,
workers compensation insurance, and computer and software costs.
Operating Income. Operating income decreased by approximately $1.9 million
because of the decreased sales and the increased operating expenses as
percentages of sales. As a percentage of sales, operating income decreased from
5.3% to 3.5% in the 1997 third quarter.
Financial Expense, Net. Financial expense, net increased by almost
$47,000. The Registrant s borrowing levels were about the same during most of
the 1997 third quarter compared to 1996, but invested funds were lower.
Net Income. Net income decreased by $1.2 million from $3.3 million in 1996
to $2.1 million in 1997 for the third quarter ended September 30. This decrease
from 3.1% of sales to 2.0% is attributable to the factors described above.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net Sales. Net sales increased by $1.9 million, or 0.6%, from $306.8
million for the nine months ended September 30, 1996, to $308.7 million in the
nine months ended September 30, 1997. This small sales increase was
attributable to more than 3% decrease in the first nine months in units shipped
by the Manufactured Housing industry, which represents approximately 66% of
Registrant s sales. The Registrant s sales to the Recreational Vehicle industry
were higher in this years first nine months because the industry, which
represents approximately 16% of Registrant s sales, was experiencing a slight
increase in units shipped of the units that utilize Registrants products. The
first quarter in the 1997 first nine months was the only quarter of increased
sales over the previous year periods.
Gross Profit. Gross profit decreased by approximately $2.0 million, or
5.0%, from $40.7 million in the first nine months of 1996, to $38.7 million in
the same period of 1997. As a percentage of sales, gross profit decreased from
13.3% in the first nine months of 1996 to 12.5% in 1997. This decrease was
attributable to reduced volumes in certain operations and competitive market
pressure on product pricing.
Warehouse and Delivery Expenses. Warehouse and delivery expenses increased
by approximately $0.5 million, or 4.2%, from $10.9 million in 1996, to $11.4
million in the first nine months of 1997. As a percentage of sales, warehouse
and delivery expenses increased from 3.6% in 1996 to 3.7% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $0.8 million, or 5.3%, in
the 1997 first nine months, from $15.1 million to $15.9 million. As a
percentage of net sales, these expenses increased from 4.9% to 5.1% in the first
nine months of 1997 compared to 1996.
Operating Income. Operating income decreased by approximately $3.3
million, or 22.3% from $14.7 million in 1996 to $11.4 million in 1997, because
of the lower sales and the higher operating expenses. As a percentage of sales,
operating income decreased from 4.8% to 3.7% in the 1997 first nine months.
Financial Expense, Net. Financial expense, net increased by approximately
$56,000. The Registrant s borrowing levels were about the same during the first
nine months of 1997 compared to 1996, but invested funds were lower.
Net Income. Net income decreased by approximately $2.0 million from $8.4
million in 1996 to $6.4 million in 1997 for the nine months ended September 30.
This decrease is 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 and seven annual
principal repayments beginning September 15, 1999. These funds were used to
reduce existing bank debt and for working capital needs. Pursuant to the Note
Agreement, the Registrant is required to maintain certain financial ratios, all
of which are currently complied with.
The Registrant has a bank financing agreement (the Credit Agreement) with
NBD Bank, N.A. for a term loan and a revolver loan. 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. The Revolving
Credit Agreement was amended on February 13, 1997 and provides revolver loan
availability of $10,000,000 with maturity in three years. Pursuant to the
Credit Agreement, the Registrant is required to maintain certain financial
ratios, all of which are currently complied with.
The Registrant used the balance of its marketable securities and additional
cash to acquire the assets of United Shade, Inc. in September of 1997.
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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) A Form 8-K (Item 5) was filed on August 20, 1997 regarding the
announcement that Registrant is no longer considering a proposal for the
acquisition of all of its shares.
A second Form 8-K (Item 5) was filed on September 8, 1997
regarding the announcement of the acquisition of United Shade, Inc.
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 12, 1997 /S/Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date November 12, 1997 /S/David D. Lung
David D. Lung
(President)
Date November 12, 1997 /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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 743,759
<SECURITIES> 0
<RECEIVABLES> 30,679,368
<ALLOWANCES> 200,000
<INVENTORY> 39,011,176
<CURRENT-ASSETS> 70,627,210
<PP&E> 74,943,194
<DEPRECIATION> 28,944,740
<TOTAL-ASSETS> 124,408,501
<CURRENT-LIABILITIES> 1,138,517
<BONDS> 0
0
0
<COMMON> 21,897,072
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 124,408,501
<SALES> 308,661,520
<TOTAL-REVENUES> 308,661,520
<CGS> 269,998,652
<TOTAL-COSTS> 297,239,989
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 878,879
<INCOME-PRETAX> 10,542,652
<INCOME-TAX> 4,140,700
<INCOME-CONTINUING> 6,401,952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,401,952
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
