UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 Identification Number)
Incorporation or Organization)
27217 County Road 6, Elkhart, Indiana 46514
(Address of Principal Executive Offices)
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 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
----- -----
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, 6,036,106 outstanding at August 10, 1995
<PAGE>
SHELTER COMPONENTS CORPORATION
INDEX
-----
FINANCIAL INFORMATION
- ---------------------
PART I
- ------
Item 1 Financial Statements:
Consolidated Balance Sheets -- June 30, 1995
and December 31, 1994
Consolidated Statements of Income -- three and six
months ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows -- six
months ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
- ------- -----------------
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
- ----------
EXHIBITS
- --------
Exhibit 11.1 - Statement Regarding Computation of Per Share
Earnings
<PAGE>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
CONSOLIDATED BALANCE SHEETS
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
June 30, 1995 December 31, 1994
------------- -----------------
ASSETS (Unaudited)
CURRENT ASSETS
Cash $ 20 $ 19
Trade receivables, net 29,400 20,985
Inventories 49,324 44,766
Deferred income taxes 1,285 1,285
Prepaid expenses and other 198 258
-------- -------
Total current assets 80,227 67,313
PROPERTY, PLANT AND EQUIPMENT, NET 17,102 14,403
COST IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization 11,392 4,290
OTHER ASSETS 1,476 1,326
-------- -------
Total assets $110,197 $87,332
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 4,831 $ ---
Current maturities of long-
term debt 1,995 1,810
Accounts payable, trade 24,730 19,991
Accrued expenses and income
taxes payable 6,837 4,736
-------- -------
Total current liabilities 38,393 26,537
-------- -------
LONG-TERM DEBT 24,849 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 11,421 8,399
Retained earnings 34,740 29,867
-------- -------
46,222 38,324
Less, Treasury stock 122 208
-------- -------
Total stockholders' equity 46,100 38,116
-------- -------
Total liabilities and stock-
holders' equity $110,197 $87,332
======== =======
The accompanying notes are a part of the consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- ------- -------- --------
Net sales $116,406 $84,124 $225,304 $155,054
Cost of sales 99,549 71,321 191,976 130,717
-------- ------- -------- --------
Gross profit 16,857 12,803 33,328 24,337
Other income, commissions 810 795 1,562 1,366
-------- ------- -------- --------
17,667 13,598 34,890 25,703
Selling, general and administrative
expenses 12,667 9,805 25,332 18,705
-------- ------- -------- --------
Operating income 5,000 3,793 9,558 6,998
Interest income 12 10 24 22
Interest expense (714) (201) (1,332) (385)
-------- ------- -------- --------
Income before income taxes 4,298 3,602 8,250 6,635
Income taxes 1,669 1,440 3,198 2,653
-------- ------- -------- --------
Net income $ 2,629 $ 2,162 $ 5,052 $ 3,982
======== ======= ======== ========
Earnings per common and common
equivalent share $ .43 $ .37 $ .83 $ .68
======== ======= ======== ========
Weighted average common and common
equivalent shares outstanding 6,118 5,832 6,116 5,845
======== ======= ======== ========
Cash dividends per share $ .03 $ .03 $ .03 $ .03
======== ======= ======== ========
The accompanying notes are a part of the consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands)
Six Months Ended
June 30,
1995 1994
------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,065 $1,991
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (1,379) (1,171)
Acquisitions of businesses (400) (732)
Other, net 57 45
------- ------
Net cash used in investing activities (1,722) (1,858)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 136,956 32,451
Repayment of debt (140,304) (32,422)
Cash dividends paid (180) (174)
Proceeds from exercise of stock options 186 15
------- ------
Net cash used in
financing activities (3,342) (130)
------- ------
Increase in cash 1 3
Cash, beginning of period 19 17
------- ------
Cash, end of period $ 20 $ 20
======= ======
SUPPLEMENTAL INFORMATION:
Non cash investing and financing activities:
Acquisition of a business:
Liabilities assumed $ 9,350 $ 777
Short-term debt issued 1,500 ---
Long-term debt issued 5,631 ---
Common stock issued 2,926 ---
------- ------
$19,407 $ 777
======= ======
The accompanying notes are a part of the consolidated financial statements.
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 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 six month period ended June 30, 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 June 30, 1995 and December 31, 1994 consisted of the following
components (in thousands):
June 30, 1995 December 31, 1994
------------- -----------------
Raw materials $ 7,196 $ 8,232
Work in process 3,400 3,890
Finished goods 4,396 5,029
Goods held for resale 34,332 27,615
------- -------
$49,324 $44,766
======= =======
NOTE C--DEBT
In connection with the January 1995 acquisition of the operations and net
assets of BABSCO, Inc. ("BABSCO") (see Note D), the Corporation 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
<PAGE>
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 June 30, 1995 were $5 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 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 Six Months Ended
June 30, 1994 June 30, 1994
------------------ ---------------
Net sales $96,473 $177,812
Net income 2,346 4,298
Earnings per common share .38 .70
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth the consolidated statements of income for the
three and six month periods ended June 30, 1995 and 1994, expressed as a
percentage of net sales:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 85.5 84.8 85.2 84.3
------ ------ ------ ------
Gross profit 14.5 15.2 14.8 15.7
Other income - commissions .7 1.0 .7 .9
------ ------ ------ ------
15.2 16.2 15.5 16.6
Selling, general & administrative
expenses 10.9 11.7 11.3 12.1
------ ------ ------ ------
Operating income 4.3 4.5 4.2 4.5
Interest expense, net .6 .2 .6 .2
------ ------ ------ ------
Income before income taxes 3.7 4.3 3.6 4.3
Income taxes 1.4 1.7 1.4 1.7
------ ------ ------ ------
Net income 2.3% 2.6% 2.2% 2.6%
====== ====== ====== ======
Net sales increased by $32 million (38%) for the quarter ended June 30, 1995
compared to the 1994 quarter. $16 million of the sales increase is attributed
to the operations of BABSCO, Inc. ("BABSCO"), which was acquired January 1995.
The remaining $16 million increase reflects a 19% improvement over net sales
for the comparable operations in the 1994 quarter, and exceeded the 10%
increase in homes produced during the quarter by the Manufactured Housing
industry, the Corporation's primary market. The Corporation continues to
improve its market share in certain products and territories.
For the six month period ended June 30, 1995, net sales increased by $70
million (45%) when compared to the first half of 1994. $31 million of the net
sales increase is due to the acquired operations of BABSCO. The remaining
operations net sales increased by $39 million (25%) which compares favorably
to the 12% increase in manufactured homes produced during the first half of
1995 as compared to the same period in 1994. Sales to the Manufactured
Housing industry represent approximately 75% of the Corporation's net sales.
<PAGE>
Gross profit as a percentage of net sales was 14.5% and 15.2% for the quarters
ended June 30, 1995 and 1994, respectively. For the six-month periods ended
June 30, 1995 and 1994, the gross profit percentages were 14.8% and 15.7%,
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 10.9% and 11.7% for the quarters ended June 30, 1995 and 1994,
respectively. For the six months ended June 30, 1995 and 1994, these
percentages were 11.3% and 12.1%, respectively. The decrease in this
percentage reflects the higher volume of net sales during the period, without
a significant increase in fixed costs.
Interest expense increased for the quarter from $201,000 to $714,000
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. Interest expense for the six months ended June 30, 1995 and 1994 was
$1,332,000 and $385,000, respectively, also reflective of the same factors
mentioned above.
Federal and state income taxes as a percentage of income before income taxes
were between 39% and 40% for all periods presented.
Net income as a percentage of net sales was 2.3% and 2.6% for the quarters
ended June 30, 1995 and 1994, respectively. For the six-month periods ended
June 30, 1995 and 1994, these percentages were 2.2% and 2.6%, respectively.
The decrease in these percentages resulted primarily from lower gross profit
margins as discussed above and the financing costs incurred in connection
with the acquisition of BABSCO.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the quarter ended June 30, 1995, working capital decreased $3.7
million, due to improved inventory management which reduced inventory levels
by $4.4 million during the period. For the six months ended June 30, 1995,
working capital increased $1 million.
During the quarter ended June 30, 1995, the Corporation reduced its
interest-bearing debt by $6.1 million from $37.8 million at March 31, 1995 to
$31.7 million at June 30, 1995. This reduction of debt reflects the net
earnings of $2.6 million for the quarter coupled with the $3.7 million
reduction of working capital discussed previously. For the first six months
of 1995, the Corporation's total interest-bearing debt increased by $8.0
million, which was principally attributable to the BABSCO acquisition.
<PAGE>
Capital expenditures during the six months ended June 30, 1995 were $1.4
million compared with depreciation expense of $921,000 during the period,
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 continue to generate cash flows adequate to support
working capital needs and capital expenditure requirements. Also, the
Corporation has a $25 million revolving bank credit facility, of which only
$5 million was outstanding as of June 30, 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
a. The annual meeting of the shareholders of Shelter
Components Corporation was held on May 17, 1995.
b. The following Directors were elected Class A
Directors for a three-year term expiring in 1998.
The tabulation of votes on the election of
these Directors was as follows:
For Withheld
William N. Harper 4,614,552 243
Ronald D. Minzey 4,614,552 243
Mark C. Neilson 4,614,552 243
Larry D. Renbarger 4,614,552 243
The other Directors whose term of office continued
after the meeting are as follows:
Arthur M. Borden
William B. Riblet
Richard E. Summers
William J. Barrett
Herbert M. Gardner
Cornelius J. Murphy
c. At the annual meeting, the shareholders were
also asked to ratify the selection by the Board
of Directors of Coopers & Lybrand as certified
public accountants for the Corporation for the
year ending December 31, 1995. The tabulation
of votes was as follows:
For Against Abstained
Ratification of
Coopers & Lybrand L.L.P. 4,614,239 156 400
Item 5 OTHER INFORMATION
Not applicable
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
11.1 - Statement Regarding Earnings Per Share
b. Reports on Form 8-K:
None
<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: August 10, 1995 By: /S/ LARRY D. RENBARGER
----------------------------------
Larry D. Renbarger
Chief Executive Officer and Director
Dated: August 10, 1995 By: /S/ MARK C. NEILSON
----------------------------------
Mark C. Neilson
Secretary/Treasurer
(Principal Financial & Accounting
Officer) and Director
<PAGE>
Exhibit 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
PRIMARY:
Weighted average common
shares outstanding 6,021 5,709 6,009 5,707
Weighted average of incre-
mental shares for common
stock equivalents under
the key employee incentive
stock option plan:
Outstanding options 85 118 98 132
Options exercised 12 5 9 6
------ ------ ------ ------
Total 6,118 5,832 6,116 5,845
====== ====== ====== ======
Net Income $2,629 $2,162 $5,052 $3,982
====== ====== ====== ======
Per Share Earnings (a) $ .43 $ .37 $ .83 $ .68
====== ====== ====== ======
a) Fully diluted earnings per share were the same as primary earnings
per share for all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 20,000
<SECURITIES> 0
<RECEIVABLES> 30,008,000
<ALLOWANCES> 608,000
<INVENTORY> 49,324,000
<CURRENT-ASSETS> 80,227,000
<PP&E> 26,364,000
<DEPRECIATION> 9,262,000
<TOTAL-ASSETS> 110,197,000
<CURRENT-LIABILITIES> 38,373,000
<BONDS> 24,849,000
<COMMON> 61,000
0
0
<OTHER-SE> 46,161,000
<TOTAL-LIABILITY-AND-EQUITY> 110,197,000
<SALES> 225,304,000
<TOTAL-REVENUES> 226,866,000
<CGS> 191,976,000
<TOTAL-COSTS> 191,976,000
<OTHER-EXPENSES> 25,332,000
<LOSS-PROVISION> 108,000
<INTEREST-EXPENSE> 1,308,000
<INCOME-PRETAX> 8,250,000
<INCOME-TAX> 3,198,000
<INCOME-CONTINUING> 5,052,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,052,000
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
