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, 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 July 31, 1997: 5,895,766
PATRICK INDUSTRIES, INC.
INDEX
Page No.
PART I: Financial Information
Unaudited Condensed Balance Sheets
June 30, 1997 & December 31, 1996 3
Unaudited Condensed Statements of Income
Three Months Ended June 30, 1997 & 1996, and
Six Months Ended June 30, 1997 & 1996 4
Unaudited Condensed Statements of Cash Flows
Six Months Ended June 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)
JUNE 30 DECEMBER 31
1997 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 257,981 $ 2,041,482
Investment in Marketable Securities 4,900,000 4,400,000
Accounts Receivable, Net 27,437,599 15,208,671
Inventories 37,934,664 39,342,506
Other 432,140 393,520
Total Current Assets $ 70,962,384 $ 61,386,179
PROPERTY AND EQUIPMENT, at cost $ 71,323,930 $ 65,630,289
Less Accumulated Depreciation 28,175,686 25,870,995
$ 43,148,244 $ 39,759,294
INTANGIBLE AND OTHER ASSETS $ 5,125,156 $ 5,460,793
Total Assets $ 119,235,784 $ 106,606,266
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-term Debt $ 1,138,517 $ 1,138,517
Accounts Payable 20,058,167 10,545,175
Accrued Expenses and Taxes Payable 4,359,786 4,056,031
Total Current Liabilities $ 25,556,470 $ 15,739,723
LONG-TERM DEBT, NET OF CURRENT MATURITIES $ 25,934,477 $ 26,151,527
DEFERRED COMPENSATION OBLIGATIONS $ 1,163,857 $ 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 43,333,908 40,157,165
Total Shareholders' Equity $ 65,230,980 $ 62,295,659
Total Liabilities and Shareholders' Equity $ 119,235,784 $ 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 SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $ 106,599,506 $107,395,342 $203,535,216 $201,162,883
COST AND EXPENSES
Cost of Goods Sold $ 93,271,870 $ 92,952,138 $178,251,038 $174,966,283
Warehouse and Delivery Expenses 3,913,889 3,618,343 7,309,451 6,982,996
Selling and Administrative Expenses 5,415,413 5,233,875 10,268,640 10,158,531
Financial Expenses, Net 307,901 289,927 595,810 586,808
$ 102,909,073 $102,094,283 $196,424,939 $192,694,618
INCOME BEFORE INCOME TAXES $ 3,690,433 $ 5,301,059 $ 7,110,277 $ 8,468,265
INCOME TAXES 1,448,500 2,096,700 2,782,200 3,319,200
NET INCOME $ 2,241,933 $ 3,204,359 $ 4,328,077 $ 5,149,065
EARNINGS PER COMMON SHARE $ .38 $ 0.54 $ .73 $ .86
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,929,140 5,965,951 5,946,769 5,966,554
See accompanying notes to Unaudited Condensed Financial Statements.
</TABLE>
PATRICK INDUSTRIES, INC.
UNAUDITED CONDENSED STATEMENTS OF
CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,328,077 $ 5,149,066
Adjustment to Reconcile Net Income to Net Cash:
Depreciation and Amortization 2,725,881 2,185,143
Deferred Income Taxes - - - 49,000
Other (41,097) (13,729)
Change in Assets and Liabilities:
Decrease (Increase) in:
Accounts Receivable (12,228,928) (6,178,020)
Inventories 1,407,842 1,590,235
Other (38,620) 259,735
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 9,321,841 7,608,535
Income Taxes Payable 496,829 798,614
Deferred Compensation 94,500 73,678
Net Cash Provided by (Used in) Operating Activities $ 6,066,325 $ 11,522,257
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures $ (5,750,567) $ (5,281,613)
Investment in Marketable Securities (500,000) (4,400,000)
Other 10,545 97,633
Net Cash (Used in) Investing Activities $ (6,240,022) $ (9,583,980)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Options $ 16,125 174,724
Principal Payments on Debt (217,050) - - -
Reacquisition of Common Stock (935,750) (1,080,288)
Cash Dividends (473,129) (477,058)
Net Cash Provided by (Used In) Financing Activities $ (1,609,804) $ (1,382,622)
Increase (Decrease) in Cash and Cash Equivalents $ (1,783,501) $ 555,655
CASH and CASH EQUIVALENTS, BEGINNING $ 2,041,482 $ 1,349,709
CASH and CASH EQUIVALENTS, ENDING $ 257,981 $ 1,905,364
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, 1997, and December 31, 1996, and the results of operations and
cash flows for the three months and the six months ended June 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 months and six months periods ended June 30, 1997 and 1996 are not
necessarily indicative of the results to be expected for the full year.
3. The inventories on June 30, 1997 and December 31, 1996 consist of the
following classes:
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
<S> <C> <C>
Raw Materials $ 23,724,808 $ 24,204,345
Work in Process 1,334,765 1,029,127
Finished 3,496,584 5,311,075
Total Manufactured Goods $ 28,556,157 $ 30,544,547
Distribution Products 9,378,507 8,797,959
TOTAL INVENTORIES $ 37,934,664 $ 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 six months ended
June 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 5,929,140 for the three months and 5,946,769 for the six
months ended June 30, 1997 and 5,965,951 for the three months and
5,966,554 for the six months ended June 30, 1996.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." SFAS No. 128 requires the presentation of both basic earnings per
share and diluted earnings per share. Basic earnings per share will be
computed by dividing net income by the weighted-average number of common
shares outstanding. SFAS No. 128 will be effective for the Company's 1997
annual report. If SFAS No. 128 had been in effect during the first six
months of 1997, there would have been no change in basic earnings per
share.
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 showed lower increases in the fourth
quarter of 1996 and decreases in the first six months of 1997.
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 87.5 86.6 87.6 87.0
Gross Profit 12.5 13.4 12.4 13.0
Warehouse and Delivery 3.7 3.4 3.6 3.5
Selling, General & Administrative 5.1 4.9 5.0 5.0
Operating Income 3.8 5.1 3.8 4.5
Net Income 2.1 3.0 2.1 2.6
</TABLE>
RESULTS OF OPERATIONS
Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996
Net Sales. Net sales decreased by $0.8 million, or .7%, from $107.4
million for the quarter ended June 30, 1996, to $106.6 million in the quarter
ended June 30, 1997. This sales decrease was attributable to a 2.9% decrease
in units shipped by the Manufactured Housing industry, which represents
approximately 67% of the Registrant's sales. The Registrant's sales to the
Recreational Vehicle industry were the same in this years second quarter as
compared to the 1996 second quarter. The industry, which represents
approximately 16% of Registrant's sales, was experiencing a slight decrease
in units shipped.
Gross Profit. Gross profit decreased by approximately $1.1 million, or
7.7%, from $14.4 million in the second quarter of 1996, to $13.3 million in
the same 1997 quarter. As a percentage of net sales, gross profit decreased
from 13.4% in 1996 to 12.5% in the 1997 second quarter. 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 approximately $295,000, or 8.2%, from $3.6 million in 1996, to $3.9
million in the second quarter of 1997. As a percentage of net sales,
warehouse and delivery expenses increased from 3.4% in 1996 to 3.7% in the
1997 second quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $181,000, or 3.5%, from
$5.2 million in 1996, to $5.4 million in 1997. As a percentage of net sales,
selling, general and administrative expenses increased from 4.9% in 1996 to
5.1% in the second quarter of 1997.
Operating Income. Operating income decreased by approximately $1,593,000
because of the decreased sales and the increased operating expenses as
percentages to sales. As a percentage of sales, operating income decreased
from 5.2% in 1996 to 3.8% in the 1997 second quarter.
Financial Expenses, Net. Financial expenses, net increased by
approximately $18,000 from $290,000 in 1996 to $308,000 in the second quarter
of 1997. The Registrant's borrowing levels in the 1997 period were about the
same as in 1996, but invested funds were lower.
Net Income. Net income decreased by approximately $962,000 from $3.2
million in 1996 to $2.2 million in 1997 for the second quarter ended June 30.
This decrease is attributable to the factors described above.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased by $2.3 million, or 1.2%, from $201.2
million for the six months ended June 30, 1996, to $203.5 million in the six
months ended June 30, 1997. This small increase was attributable to the 2.9%
decline in production in the Manufactured Housing industry in the first six
months of this year. That industry represents approximately 67% of the
Registrant's total sales. The Recreational Vehicle industry, which
represents approximately 16% of total sales of the Registrant, was also not
able to show production increases in the 1997 first six months.
Gross Profit. Gross profit decreased by $.9 million, or 3.5%, from $26.2
million in the first six months of 1996, to $25.3 million in the same period
in 1997. As a percentage of net sales, gross profit decreased from 13.0% in
the first six months of 1996 to 12.4% in 1997. This decrease in the gross
profit percentage was the result of lower volume in certain operations and
highly competitive market pricing on the Registrant's products.
Warehouse and Delivery Expenses. Warehouse and delivery expenses
increased approximately $326,000, or 4.7%, from $7.0 million in 1996, to $7.3
million in the first six months of 1997. As a percentage of net sales,
warehouse and delivery expenses increased from 3.5% for 1996 to 3.6% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $110,000, or 1.1%, from $10.2 million in
1996, to $10.3 million in 1997. As a percentage of net sales, selling,
general and administrative expenses remained the same at 5.0% in 1996 and
1997.
Operating Income. Operating income decreased by approximately $1,349,000,
or 14.9%, from $9.1 million in 1996, to $7.7 million in 1997. This decrease
is primarily attributable to the $.9 million decrease in gross profit. As a
percentage of sales, operating income decreased from 4.5% in 1996 to 3.8% in
1997.
Financial Expenses, Net. Financial expenses, net increased by $9,000 from
$587,000 in 1996, to $596,000 in 1997. This increase was due to lower levels
of invested funds.
Net Income. Net income decreased by $821,000 from $5.1 million in 1996,
to $4.3 million in 1997. This decrease 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. 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 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, 1997.
(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
Thomas G. Baer 5,484,259 20,306
Merlin D. Knispel 5,484,259 20,306
David D. Lung 5,480,459 24,106
2. Not applicable.
(d) Not applicable.
Item 5. Other Information
As previously announced in news releases on July 3 and July 24, 1997, the
Registrant has received a proposal for the acquisition of all of the shares
of the Registrant's common stock. Although there are no assurances that any
agreement will be reached, discussions are continuing and the Board of
Directors is still considering the proposal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports filed 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 8, 1997 /S/Mervin D. Lung
Mervin D. Lung
(Chairman of the Board)
Date August 7, 1997 /SDavid D. Lung
David D. Lung
(President)
Date August 8, 1997 /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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 257,981
<SECURITIES> 4,900,000
<RECEIVABLES> 27,537,599
<ALLOWANCES> 100,000
<INVENTORY> 37,934,664
<CURRENT-ASSETS> 70,962,384
<PP&E> 71,323,930
<DEPRECIATION> 28,175,686
<TOTAL-ASSETS> 119,235,784
<CURRENT-LIABILITIES> 1,138,517
<BONDS> 0
0
0
<COMMON> 21,897,072
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 119,235,784
<SALES> 106,599,506
<TOTAL-REVENUES> 106,599,506
<CGS> 93,271,870
<TOTAL-COSTS> 102,601,172
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 307,901
<INCOME-PRETAX> 3,690,433
<INCOME-TAX> 1,448,500
<INCOME-CONTINUING> 2,241,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,241,933
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
