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 September 30, 1996
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)
2831 Dexter Drive, Elkhart, Indiana 46514
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (219) 262-1514
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, 7,652,637 outstanding at November 7, 1996.
PAGE 1
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SHELTER COMPONENTS CORPORATION
INDEX
-----
FINANCIAL INFORMATION PAGES
- --------------------- ______
PART I
- ------
Item 1 Financial Statements:
Consolidated Balance Sheets -- September 30, 1996
and December 31, 1995 3
Consolidated Statements of Income -- three and nine
months ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -- nine
months ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II OTHER INFORMATION 9
- ------- -----------------
SIGNATURES 10
- ----------
PAGE 2
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands)
September 30, 1996 December 31, 1995
------------------ -----------------
ASSETS
CURRENT ASSETS
Cash $ 25 $ 24
Trade receivables, net 36,701 25,452
Inventories 53,446 50,049
Deferred income taxes 1,412 1,412
Prepaid expenses and other 1,070 457
-------- --------
Total current assets 92,654 77,394
PROPERTY, PLANT AND EQUIPMENT, NET 21,942 17,587
COST IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization 11,132 11,554
OTHER ASSETS 593 879
-------- --------
Total assets $126,321 $107,414
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ --- $ 4,723
Current maturities of long-
term debt 1,957 2,009
Accounts payable, trade 36,663 23,159
Accrued expenses and income
taxes payable 8,413 5,774
-------- --------
Total current liabilities 47,033 35,665
-------- --------
LONG-TERM DEBT 18,694 19,596
-------- --------
DEFERRED INCOME TAXES 888 944
-------- --------
OTHER DEFERRED LIABILITIES 108 41
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value --- ---
Common stock, $.01 par value 77 61
Additional paid-in capital 11,806 11,613
Retained earnings 47,752 39,545
-------- --------
59,635 51,219
Less, Treasury stock 37 51
-------- --------
Total stockholders' equity 59,598 51,168
-------- --------
Total liabilities and stock-
holders' equity $126,321 $107,414
======== ========
The accompanying notes are a part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $139,311 $119,349 $397,065 $344,653
Cost of sales 118,992 101,711 339,549 293,687
-------- -------- -------- --------
Gross profit 20,319 17,638 57,516 50,966
Other income - commissions 709 788 1,827 2,350
-------- -------- -------- --------
21,028 18,426 59,343 53,316
Selling, general and administrative
expenses 15,298 13,119 44,291 38,451
-------- -------- -------- --------
Operating income 5,730 5,307 15,052 14,865
Interest income 34 25 102 49
Interest expense (460) (581) (1,398) (1,913)
-------- -------- -------- --------
Income before income taxes 5,304 4,751 13,756 13,001
Income taxes 2,069 1,846 5,365 5,044
-------- -------- -------- --------
Net income $ 3,235 $ 2,905 $ 8,391 $ 7,957
======== ======== ======== ========
Earnings per common and common
equivalent share (a) $ .42 $ .38 $ 1.08 $ 1.04
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding (a) 7,783 7,684 7,749 7,658
======== ======== ======== ========
Cash dividends per share (a) $ --- $ --- $ .02 $ .02
======== ======== ======== ========
(a) All periods reflect a 5-for-4 stock split effective 7/8/96.
The accompanying notes are a part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands)
Nine Months Ended
September 30,
1996 1995
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $11,693 $11,495
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (6,057) (2,470)
Acquisitions of businesses --- (411)
Other, net 8 (218)
------- -------
Net cash used in investing activities (6,049) (3,099)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 73,146 163,540
Repayment of debt (78,823) (171,974)
Cash dividends (185) (180)
Proceeds from exercise of stock options 219 219
------- -------
Net cash used in
financing activities (5,643) (8,395)
------- -------
Increase in cash 1 1
Cash, beginning of period 24 19
------- -------
Cash, end of period $ 25 $ 20
======= =======
SUPPLEMENTAL INFORMATION:
Non cash investing and financing activities:
Acquisition of a business:
Liabilities assumed --- $ 9,469
Short-term debt issued --- 1,500
Long-term debt issued --- 5,527
Common stock issued --- 2,926
------- -------
--- $19,422
======= =======
The accompanying notes are a part of the consolidated financial statements.
PAGE 5
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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
NOTE A--BASIS OF PRESENTATION
The financial statements have been prepared from the unaudited financial
records of the Corporation. In the opinion of management, the financial
statements include all adjustments consisting only of normal recurring
adjustments, necessary for a fair statement of the results of operations
and financial position for the interim periods.
The Consolidated Balance Sheet at December 31, 1995 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 September 30, 1996 and December 31, 1995 consisted of the
following components (in thousands):
9/30/96 12/31/95
-------- --------
Raw materials $ 7,705 $ 8,272
Work in process 6,398 4,986
Finished goods 8,126 6,866
Goods held for resale 31,217 29,925
------- -------
$53,446 $50,049
======= =======
NOTE C--DEBT
In January 1996, the Corporation paid a $4.7 million seller note payable
in connection with the January 1995 acquisition of BABSCO, Inc. using
funds available under the Corporation's $25 million bank revolving line of
credit ("the Revolver"). In February 1996, the Corporation paid its annual
$1.5 million principal installment on a 6.4% institutional investor note.
In March 1996, the Corporation exercised its option to purchase certain
operating facilities and real estate (which had previously been under
lease agreements) for $3.6 million, using funds available under the Revolver.
In August 1996, the Corporation prepaid a $1.1 million 7.84% mortgage
assumed in connection with the January 1995, BABSCO, Inc. acquisition
using funds available under the Revolver.
Outstanding borrowings under the $25 million Revolver at September 30, 1996
were $2.0 million bearing interest at the LIBOR rate (6.1875%).
PAGE 6
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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 month and nine month periods ended September 30, 1996 and 1995,
expressed as a percentage of net sales:
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------ ------ ------ ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 85.4 85.2 85.5 85.2
------ ------ ------ ------
Gross profit 14.6 14.8 14.5 14.8
Other income - commissions .5 .6 .5 .7
------ ------ ------ ------
15.1 15.4 15.0 15.5
Selling, general & administrative
expenses 11.0 11.0 11.2 11.2
------ ------ ------ ------
Operating income 4.1 4.4 3.8 4.3
Interest expense, net .3 .4 .3 .5
------ ------- ------ ------
Income before income taxes 3.8 4.0 3.5 3.8
Income taxes 1.5 1.6 1.4 1.5
------ ------- ------ ------
Net income 2.3% 2.4% 2.1% 2.3%
======= ======= ====== ======
Net sales increased by $20 million (17%) for the quarter ended
September 30, 1996 compared to the 1995 quarter. The improvement in net
sales is primarily due to increased demand in the Manufactured Housing
industry, the Corporation's largest market. The Manufactured Housing
industry reported an 8% increase in homes produced for the third quarter over
the same period last year. For the nine month period ending September 30,
1996, net sales increased by $52 million (15%) when compared to the first
three quarters of 1995. This increase in net sales, when compared to the
9.0% increase in manufactured homes produced during the first nine months of
1996 as compared to the same period in 1995, reflects the Corporation's
increased market penetration.
Gross profit as a percentage of net sales was 14.6% and 14.8% for the
quarters ended September 30, 1996 and 1995, respectively. For the nine month
periods ended September 30, 1996 and 1995, gross profit was 14.5% and 14.8%,
respectively. The slight reduction in gross profit margins as a percentage
of net sales is primarily due to competitive pricing pressures experienced in
the Corporation's operations. The Corporation's major customers
continue to increase their market share and, in turn, command lower prices
relative to greater purchase volumes. Competition among suppliers for these
higher volume major customers has also increased.
PAGE 7
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Selling, general and administrative expenses as a percentage of net sales
were 11.0% for the quarters ended September 30, 1996 and 1995. For the nine
months ended September 30, 1996 and 1995, this percentage was 11.2%. The
Corporation continues to realize some of the benefits of having
consolidated its three distribution entities earlier in the year. There
are strategies in place to continue to improve those operations.
Interest expense decreased from $581,000 in the third quarter of 1995 to
$460,000 in the 1996 quarter reflecting the lower total outstanding debt
during the 1996 quarter. Continued strong cash flows allowed the
Corporation to reduce its debt by $1 million during the third quarter.
Interest expense for the nine months ended September 30, 1996 and
1995 was $1,398,000 and $1,913,000, respectively. Debt was reduced by
$5.7 million during the first nine months of 1996.
Federal and state income taxes as a percentage of net income before taxes
were 39% for all periods presented.
Net income as a percentage of sales was 2.3% and 2.4% for the quarters ended
September 30, 1996 and 1995, respectively. For the nine month periods ended
September 30, 1996 and 1995, these percentages were 2.1% and 2.3%,
respectively. The decline is chiefly related to the reduction in the
commission rate earned on one of the Corporation's distributed products and
decreased gross margins in the distribution operations.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities totaled $11.7 million for
the nine months ending September 30, 1996, primarily consisting of
$8.4 million in net income, $2.4 million of depreciation and amortization,
and a $.9 million net decrease in the components of working capital.
Although the Corporation experienced normal seasonal increases in inventories
and accounts receivable, these were offset by increases in accounts payable
and accrued liabilities reflecting the Corporation's proactive efforts to
control its net working capital investment.
Capital expenditures during the nine months ended September 30, 1996 were
$6.1 million including the purchase of $4.4 million of real estate previously
leased. Depreciation expense for the first nine months of 1996 was
approximately $1.6 million.
For the nine months ended September 30, 1996, the Corporation reduced its
interest bearing debt by $5.7 million from $26.3 million at December 31, 1995
to $20.6 million at September 30, 1996. The reduction of debt reflects the
$11.7 million of cash flow provided by operations less $6.0 million of
capital expenditures. Management believes the Corporation's financial
condition to be strong and expects operations to continue to generate
adequate cash flows to support working capital and capital expenditure
requirements. In addition, the Corporation has a $25 million bank revolving
credit facility, of which $2 million was outstanding as of September 30, 1996.
PAGE 8
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On October 30, 1996, the Corporation announced that it had signed a
"Letter of Intent" to sell the net assets and operations of its carpet
manufacturing subsidiary, Danube Carpet Mills, Inc. of Fort Oglethorpe, GA
to Dixie Yarns, Inc. of Chattanooga, Tennessee for $25 million in cash
subject to certain adjustments. Danube's revenues represent approximately
$75 million (15%) of Shelter's consolidated net sales.
The sale is subject to the expiration of any waiting periods under the
Hart - Scott - Rodino Antitrust Improvements Act of 1976, the buyer's due
diligence, the two Companies completing a definitive agreement, and approval
by the respective Boards of Directors. The companies anticipate closing the
sale on or about December 31, 1996. Shelter management is currently
assessing the various alternative uses of the potential proceeds from such a
sale.
Some matters set forth herein are forward looking statements that are
dependent on certain risks and uncertainties including such factors, among
others, as the state of the housing industry in the United States and in
particular, manufactured housing as well as the state of the recreational
vehicle industry and anticipated continued increases in those markets. Also
affecting the forward looking statements would be things such as competition
in these industries and the Corporation's ability to maintain or increase
gross margins which are critical to profitability whether there are or are not
increased sales. At times, the Corporation's actual performance differs
materially from its projections and estimates regarding the economy, the
housing industry and other key performance indicators. The Corporation's
actual results could vary significantly from the performance projected in the
forward looking statements.
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit 99 - Press Release
b. Reports on Form 8-K:
None
All other items in Part II are either not applicable or answerable in the
negative.
PAGE 9
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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: November 12, 1996 By: /S/ Larry D. Renbarger
----------------------------------
Larry D. Renbarger
Chief Executive Officer and Director
Dated: November 12, 1996 By: /S/ Mark C. Neilson
----------------------------------
Mark C. Neilson
Secretary/Treasurer
(Principal Financial & Accounting
Officer) and Director
PAGE 10
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Exhibit 99
SHELTER COMPONENTS CORPORATION
October 30, 1996
SHELTER COMPONENTS CORPORATION
SIGNS LETTER OF INTENT TO SELL ITS CARPET OPERATIONS
Elkhart, IN, October 30, 1996,--Shelter Components Corporation (SST-AMEX)
announced today that it had signed a "Letter of Intent" to sell the
net assets and operations of its carpet manufacturing subsidiary,
Danube Carpet Mills, Inc. of Fort Oglethorpe, GA to Dixie Yarns, Inc.
(NASDAQ:DXYN) of Chattanooga, Tennessee for $25 million subject to
certain adjustments. Danube's revenues represent approximately $75
million (15%) of Shelter's consolidated net sales, which are
anticipated to surpass $500 million in calendar year 1996. Dixie
owns and operates several businesses in the textile and floor
covering industries, including Carriage Industries, Inc., which, like
Danube, is engaged in the manufacture of carpeting products for the
Manufactured Housing, Modular Housing and Recreational Vehicle
industries.
The sale is subject to regulatory approval, Dixie's due diligence,
the two Companies completing a definitive agreement, and approval by
Shelter's Board of Directors. There can be no assurance that an
agreement will be executed or that the transaction will be
consummated. The companies anticipate closing the sale on or about
December 31, 1996. Shelter management is currently assessing the
various alternative uses of the potential proceeds from such a sale.
Shelter Components Corporation, operating through its various
subsidiaries, is a nationwide distributor of hardware, fasteners,
building products, vinyl windows, floor coverings, plumbing,
electrical products, and decorative wallboard used principally in
the production of manufactured housing, modular housing and
recreational vehicles. Customers are supplied nationally from
strategically located regional distribution warehouses in 14 states.
In addition to the Danube carpet and yarn manufacturing operations,
the Company also thermoforms plastic bath products in Michigan and
Texas, and laminates decorative wallboard in Indiana, Georgia,
Tennessee and Texas.
- -END-
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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<ALLOWANCES> 620
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0
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<COMMON> 77
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