UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ________.
Commission file number 1-9844
SHELTER COMPONENTS CORPORATION
(Exact name of Registrant as specified in its charter)
INDIANA 22-2825183
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27217 COUNTY ROAD 6
ELKHART, INDIANA 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(219) 262-4541
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
<PAGE>
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods 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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common, $.01 par, 6,008,084 outstanding at May 9, 1995
<PAGE>
SHELTER COMPONENTS CORPORATION
<TABLE>
<CAPTION>
INDEX
FINANCIAL INFORMATION PAGES
<S> <C> <C>
PART I
Item 1 Financial Statements:
Consolidated Balance Sheets -- March 31, 1995
and December 31, 1994 3
Consolidated Statements of Income -- three
months ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -- three
months ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II OTHER INFORMATION 10
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
SIGNATURES 11
EXHIBITS
Exhibit 11.1 - Statement Regarding Computation of Per Share
Earnings 12
Exhibit 27 - Financial Data Schedule
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 19 $ 19
Trade receivables, net 28,807 20,985
Inventories 53,686 44,766
Deferred income taxes 1,285 1,285
Prepaid expenses and other 221 258
-------- --------
Total current assets 84,018 67,313
PROPERTY, PLANT AND EQUIPMENT, net 17,104 14,403
COST IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization 11,435 4,290
OTHER ASSETS 1,463 1,326
-------- --------
Total assets $114,020 $ 87,332
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 4,831 $ ---
Current maturities of long-
term debt 1,810 1,810
Accounts payable, trade 25,019 19,991
Accrued expenses and income
taxes payable 6,866 4,736
-------- --------
Total current liabilities 38,526 26,537
-------- --------
LONG-TERM DEBT 31,155 21,824
-------- --------
DEFERRED INCOME TAXES 855 855
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value --- ---
Common stock, $.01 par value 61 58
Additional paid-in capital 11,316 8,399
<PAGE>
Retained earnings 32,296 29,867
-------- --------
43,673 38,324
Less, Treasury stock 189 208
-------- --------
Total stockholders' equity 43,484 38,116
-------- --------
Total liabilities and stock-
holders' equity $114,020 $ 87,332
======== ========
<FN>
The accompanying notes are a part of the consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Net sales $ 108,898 $ 70,930
Cost of sales 92,427 59,396
--------- ---------
Gross profit 16,471 11,534
Other income, commissions 752 571
--------- ---------
17,223 12,105
Selling, general and administrative
expenses 12,665 8,900
--------- ---------
Operating income 4,558 3,205
Interest income 12 12
Interest expense (618) (184)
--------- ---------
Income before income taxes 3,952 3,033
Income taxes 1,529 1,213
--------- ---------
Net income $ 2,423 $ 1,820
========= =========
Earnings per common and common
equivalent share $ .40 $ .31
========= =========
Weighted average common and common
equivalent shares outstanding 6,131 5,854
========= =========
<FN>
The accompanying notes are a part of the consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (1,606) $ 552
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (824) (638)
Acquisition of a business (400) ---
Other, net 57 10
-------- --------
Net cash used in investing activities (1,167) (628)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 69,321 8,851
Repayment of debt (66,548) (8,773)
-------- --------
Net cash provided by
financing activities 2,773 78
-------- --------
Increase in cash 0 2
Cash, beginning of period 19 17
-------- --------
Cash, end of period $ 19 $ 19
======== ========
SUPPLEMENTAL INFORMATION:
Non cash investing and financing activities:
Acquisition of a business:
Liabilities assumed $ 9,350 $ ---
Short-term debt issued 1,500 ---
Long-term debt issued 5,631 ---
Common stock issued 2,926 ---
-------- -------
$ 19,407 $ ---
======== =======
<FN>
The accompanying notes are a part of the consolidated financial statements.
</TABLE>
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995
NOTE A--BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Shelter Components Corporation and its wholly-owned
subsidiaries (individually and collectively referred to as the
"Corporation"). The unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1995 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1995. For further information,
refer to the consolidated financial statements and notes thereto
included in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1994.
The Consolidated Balance Sheet at December 31, 1994 has been
derived from the Audited Consolidated Financial Statements at
that date, but does not include all disclosures required by
generally accepted accounting principles.
NOTE B--INVENTORIES
Inventories at March 31, 1995 and December 31, 1994 consisted of
the following components:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
(in thousands)
<S> <C> <C>
Raw materials $ 9,872 $ 8,232
Work in process 4,665 3,890
Finished goods 6,031 5,029
Goods held for resale 33,118 27,615
-------- --------
$ 53,686 $ 44,766
======== ========
</TABLE>
NOTE C--DEBT
In connection with the acquisition of the operations and net
assets of BABSCO, Inc. ("BABSCO") (see Note D), the Corporation
<PAGE>
issued promissory notes payable to the seller, totalling $7.1
million, including a demand note of $1.5 million which was
subsequently paid in March. The remaining notes consist of a
$4.8 million unsecured demand note due January 1996 and an
$800,000 unsecured five-year term note due in quarterly
installments beginning April 1, 1995. Also the Corporation
assumed a $1.2 million, 7.84% mortgage on certain real estate
acquired concurrent with the acquisition of BABSCO.
On February 21, 1995, the Corporation issued $15 million, 9.24%,
unsecured senior notes under a note agreement with its existing
senior noteholder. The proceeds of these notes were used to
repay outstanding bank borrowings and pay-off certain of the
liabilities and obligations assumed in the acquisition of BABSCO.
Interest is payable quarterly and principal is payable in eight
consecutive annual installments of $1,875,000 commencing March
1998.
On March 27, 1995, the Corporation refinanced outstanding
borrowings under its existing bank credit agreements with a $25
million, unsecured, revolving line of credit (the "Revolver").
The Revolver requires monthly interest payments based on the
bank's prime rate or certain basis points above the LIBOR rate
depending on the pricing option selected and the Corporation's
leverage ratio, as defined. The Revolver also requires an annual
commitment fee of 1/8% per annum based on the unused portion, and
all amounts outstanding under the Revolver will be due at
maturity, April 30, 1997. Outstanding borrowings under the
revolver at March 31, 1995 were $11 million.
NOTE D--BUSINESS ACQUISITIONS
In January 1995, the Corporation, through its newly-formed
wholly-owned subsidiary, Nubabsco, Inc. ("Nubabsco"), acquired
the business operations and operating assets of BABSCO, Inc.
("BABSCO"), located in Elkhart, Indiana and having additional
operations in Plymouth and Warsaw, Indiana and Mt. Joy,
Pennsylvania.
BABSCO is a wholesale distributor of a full line of electrical
products to the recreational vehicle, manufactured housing and
modular housing industries, and to electrical contractors in the
Northern Indiana and Southern Michigan region. The Corporation
subsequently changed the name of Nubabsco to BABSCO, Inc.
The total purchase price was $18.3 million, consisting of three
promissory notes totalling $7.1 million, 269,058 restricted
shares of common stock with a market value of approximately $2.9
million, and $8.3 million of assumed liabilities as of the
closing date. The promissory notes include a $1.5 million demand
note, an $800,000 note payable in quarterly installments over
five years and a $4.8 million note due in January 1996. The $7.4
million excess of the purchase price over the fair value of
acquired assets ("goodwill") is being amortized over a 20-year
<PAGE>
period. The acquisition has been accounted for using the
purchase method of accounting, with the operating results of the
acquired business being included in the Corporation's
consolidated financial statements from the effective date of the
acquisition, January 2, 1995.
Concurrent with the acquisition of BABSCO, the Corporation also
acquired certain real estate for $1.6 million from the sole
shareholder of BABSCO for cash of $400,000 and the assumption of
a $1.2 million, 7.84% mortgage on the acquired real estate.
Unaudited pro forma financial information for 1994, as if this
acquisition had occurred on January 1, 1994 is as follows (in
thousands, except per share amounts):
Three Months Ended
March 31, 1994
Net sales $81,339
Net income 1,952
Earnings per common share--primary .32
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales increased by $38 million (54%) for the quarter ended
March 31, 1995 compared to the 1994 quarter. $15 million of the
sales increase is attributed to the operations of BABSCO, Inc.
("BABSCO"), which was acquired January 1995. The remaining $23
million increase reflects a 32% improvement over net sales for
the comparable operations in the 1994 quarter, and exceeded the
(estimated) 18% increase in homes produced in the Manufactured
Housing industry, the Corporation's primary market. The
Corporation continues to improve its market share in certain
products and territories.
Gross profit as a percentage of net sales was 15.1% and 16.3% for
the quarters ended March 31, 1995 and 1994, respectively. The
reduction in gross profit margins is largely due to the
significant increase in lower margin distribution sales. In
addition, the Corporation experienced considerably higher sales
volume in its laminating operations (Design Components), also
yielding gross profit margins below the Corporation's average.
The pricing environment continues to be very competitive in both
the Manufactured Housing and Recreational Vehicle markets, as the
Corporation generally competes with smaller, regional suppliers
for market share.
Selling, general, and administrative expenses as a percentage of
net sales were 11.6% and 12.5% for the quarters ended March 31,
1995 and 1994, respectively. The decrease in this percentage
reflects the higher volume of net sales during the period,
without significant increase in fixed costs.
Interest expense increased from $184,000 to $618,000 reflecting
the increased borrowings necessary to fund increased working
capital levels, borrowings to pay off liabilities assumed or
incurred in the acquisition of BABSCO, and higher prevailing
interest rates during the 1995 quarter.
Federal and state income taxes as a percentage of income before
income taxes were 39% and 40% for the quarters ended March 31,
1995 and 1994, respectively.
Net income as a percentage of net sales was 2.2% and 2.6% for the
quarters ended March 31, 1995 and 1994, respectively. The
decrease in net margins reflects the initial impact on net
margins of the acquisition of BABSCO in January 1995 coupled with
the increased volume of lower margin distribution sales during
the period.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased by $4.7 million from $40.8 million to
$45.5 million during the quarter ended March 31, 1995, reflecting
the $4.9 million of working capital acquired in the January 1995
acquisition of BABSCO. The Corporation experienced negative cash
flows from operations of $1.6 million, primarily reflecting the
seasonal increase in accounts receivable.
Total interest-bearing debt increased from $23.6 million at
December 31, 1994 to $37.8 million due to the $8.3 million of
debt issued and assumed in connection with the acquisition of the
net assets and certain real estate of BABSCO, coupled with $3.1
million of bank debt assumed in the acquisition and $2.8 million
increase in borrowings to support the increase in working
capital, particularly trade receivables.
Capital expenditures during the quarter ended March 31, 1995 were
$824,000 compared with depreciation expense of $466,000 during
the quarter, reflecting the need to upgrade certain manufacturing
equipment. Capital expenditures during 1995 are expected to
approximate the Corporation's projected annual depreciation of
$1.9 million.
Management believes the Corporation's financial condition remains
strong and expects operations to generate cash flows adequate to
support working capital and capital expenditure requirements. In
addition, the Corporation has a $25 million credit facility, of
which $11 million was outstanding as of March 31, 1995.
<PAGE>
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
Not applicable
Item 2 CHANGES IN SECURITIES
Not applicable
Item 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4 SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 5 OTHER INFORMATION
Not applicable
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
11.1 - Statement Regarding Earnings Per Share
(Page 12)
27 - Financial Data Schedule
b. Reports on Form 8-K:
The Registrant filed a report on Form 8-K
dated January 27, 1995 to report the
acquisition of the net assets of BABSCO, Inc.
The following financial statements were filed
as an amendment to the Form 8-K on Form 8-K/A
dated April 3, 1995.
Financial Statements of Businesses Acquired:
1. Audited financial statements of BABSCO, Inc.
as of December 31, 1994 and for the year then
ended.
2. Proforma consolidated financial statements of
Shelter Components Corporation as of December
31, 1994 and for the year then ended.
<PAGE>
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.
SHELTER COMPONENTS CORPORATION
(Registrant)
Dated: May 9, 1995 By: /S/ LARRY D. RENBARGER
Larry D. Renbarger
Chief Executive Officer
and Director
Dated: May 9, 1995 By: /S/ MARK C. NEILSON
Mark C. Neilson
Secretary/Treasurer
(Principal Financial
& Accounting
Officer) and Director
Exhibit 11.1
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER COMMON SHARE
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
PRIMARY:
Weighted average common shares outstanding 5,997 5,706
Weighted average of incremental share for
common stock equivalents under the key
employee incentive stock option plan:
Outstanding options 119 147
Options exercised 5 1
------ ------
Total 6,121 5,854
====== ======
Net income $2,423 $1,820
====== ======
Earnings per share (a) $ .40 $ .31
====== ======
<FN>
a) Fully diluted earnings per share were the same as primary earnings
per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 19,000
<SECURITIES> 0
<RECEIVABLES> 29,450,000
<ALLOWANCES> 538,000
<INVENTORY> 53,686,000
<CURRENT-ASSETS> 84,018,000
<PP&E> 25,915,000
<DEPRECIATION> 8,811,000
<TOTAL-ASSETS> 114,020,000
<CURRENT-LIABILITIES> 38,526,000
<BONDS> 31,155,000
<COMMON> 61,000
0
0
<OTHER-SE> 43,423,000
<TOTAL-LIABILITY-AND-EQUITY> 114,020,000
<SALES> 108,898,000
<TOTAL-REVENUES> 109,650,000
<CGS> 92,427,000
<TOTAL-COSTS> 92,427,000
<OTHER-EXPENSES> 12,665,000
<LOSS-PROVISION> 78,000
<INTEREST-EXPENSE> 606,000
<INCOME-PRETAX> 3,952,000
<INCOME-TAX> 1,529,000
<INCOME-CONTINUING> 2,423,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,423,000
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
