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 March 31, 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) 262-4541
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, 6,109,960 outstanding at May 8, 1996
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SHELTER COMPONENTS CORPORATION
INDEX
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FINANCIAL INFORMATION PAGES
- --------------------- ______
PART I
- ------
Item 1 Financial Statements:
Consolidated Balance Sheets -- March 31, 1996
and December 31, 1995 3
Consolidated Statements of Income -- three
months ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows -- three
months ended March 31, 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
FINANCIAL DATA SCHEDULE EXHIBIT 27
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
March 31, 1996 December 31, 1995
------------- -----------------
ASSETS
CURRENT ASSETS
Cash $ 25 $ 24
Trade receivables, net 32,479 25,452
Inventories 46,628 50,049
Deferred income taxes 1,412 1,412
Prepaid expenses and other 666 457
-------- --------
Total current assets 81,210 77,394
PROPERTY, PLANT AND EQUIPMENT, NET 21,223 17,587
COST IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization 11,414 11,554
OTHER ASSETS 802 879
-------- --------
Total assets $114,649 $107,414
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ --- $ 4,723
Current maturities of long-
term debt 2,009 2,009
Accounts payable, trade 29,550 23,159
Accrued expenses and income
taxes payable 6,711 5,774
-------- --------
Total current liabilities 38,270 35,665
-------- --------
LONG-TERM DEBT 21,929 19,596
-------- --------
DEFERRED INCOME TAXES 888 944
-------- --------
OTHER DEFERRED LIABILITIES 63 41
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value --- ---
Common stock, $.01 par value 61 61
Additional paid-in capital 11,661 11,613
Retained earnings 41,813 39,545
-------- --------
53,535 51,219
Less, Treasury stock 36 51
-------- --------
Total stockholders' equity 53,499 51,168
-------- --------
Total liabilities and stock-
holders' equity $114,649 $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
March 31,
1996 1995
-------- --------
Net sales $119,796 $108,898
Cost of sales 102,280 92,427
-------- --------
Gross profit 17,516 16,471
Other income - commissions 513 752
-------- --------
18,029 17,223
Selling, general and administrative
expenses 13,847 12,665
-------- --------
Operating income 4,182 4,558
Interest income 24 12
Interest expense (488) (618)
-------- --------
Income before income taxes 3,718 3,952
Income taxes 1,450 1,529
-------- --------
Net income $ 2,268 $ 2,423
======== ========
Earnings per common and common
equivalent share $ .37 $ .40
======== ========
Weighted average common and common
equivalent shares outstanding 6,175 6,121
======== ========
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)
Three Months Ended
March 31,
1996 1995
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 6,462 $(1,606)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (4,134) (824)
Acquisitions of businesses --- (400)
Other, net 63 57
------- -------
Net cash used in investing activities (4,071) (1,167)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 28,517 69,321
Repayment of debt (30,907) (66,548)
------- -------
Net cash provided by (used in)
financing activities (2,390) 2,773
------- -------
Increase in cash 1 0
Cash, beginning of period 24 19
------- -------
Cash, end of period $ 25 $ 19
======= =======
SUPPLEMENTAL INFORMATION:
Non cash investing and financing activities:
Acquisition of a business:
Liabilities assumed --- $ 9,438
Short-term debt issued --- 1,500
Long-term debt issued --- 5,522
Common stock issued --- 2,926
------- ------
--- $19,386
======= =======
The accompanying notes are a part of the consolidated financial statements.
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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE A--BASIS OF PRESENTATION
The financial statements have been prepared from the unaudited financial
records of the Company. In the opinion of management, the financial
statements include all adjustments consisting only of normal recurring
adjustments necessary for a fair presentation 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 March 31, 1996 and December 31, 1995 consisted of the following
components (in thousands):
March 31, 1996 December 31, 1995
-------------- -----------------
Raw materials $ 7,237 $ 8,272
Work in process 3,772 4,986
Finished goods 8,794 6,866
Goods held for resale 26,825 29,925
------- -------
$46,628 $50,049
======= =======
NOTE C--DEBT
In January 1996, the Corporation paid a $4.7 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.
Outstanding borrowings under the $25 million revolver at March 31, 1996 were
$4 million bearing interest at 6.19% (.75% over LIBOR rates).
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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 Corporation elected to consolidate its three distribution entities,
(Shelter Components of Indiana, Inc., Thunander Corporation, and BABSCO, Inc.)
into one legal entity effective January 1, 1996, under the name "Shelter
Distribution, LP". The consolidation of these operations is intended to
better serve the Corporation's customers as well as to eliminate duplicate
selling, general and administrative expenses between the three operations.
The following table sets forth the consolidated statements of income for the
three month periods ended March 31, 1996 and 1995, expressed as a
percentage of net sales:
Three Months Ended
March 31,
1996 1995
------ ------
Net sales 100.0% 100.0%
Cost of sales 85.4 84.9
------ ------
Gross profit 14.6 15.1
Other income - commissions .4 .7
------ ------
15.0 15.8
Selling, general & administrative
expenses 11.5 11.6
------ ------
Operating income 3.5 4.2
Interest expense, net .4 .6
------ -------
Income before income taxes 3.1 3.6
Income taxes 1.2 1.4
------ -------
Net income 1.9% 2.2%
======= =======
Net sales increased by $11 million (10%) for the quarter ended March 31, 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
core market. The Manufactured Housing industry reported a 6.6% increase in
homes produced during the first quarter of 1996 versus the same period in
1995. Commission income fell by 32% due to a reduction in the commission rate
earned on one of the Corporation's distributed product lines.
Gross profit as a percentage of net sales was 14.6% and 15.1% for the quarters
ended March 31, 1996 and 1995, respectively. The decrease in the gross profit
percentage is attributed primarily to competitive pricing pressures
experienced in the Corporation's distribution operations. Also, the
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Corporation's largest customers continue to increase their market share, and
in turn demand lower pricing in exchange for higher purchasing volume. The
Corporation anticipates continued competitive pressure on gross margins
throughout 1996, requiring reductions in operating costs in order to maintain
and improve the Corporation's net operating margins.
Selling, general and administrative expenses for the first quarter of 1996
increased by 9% compared to the same period in 1995. Certain costs
associated with the consolidation of the Corporation's distribution entities
were the primary source of the dollar increase. As a percentage of net sales,
selling, general and administrative expenses decreased from 11.6% in the
first quarter of 1995 to 11.5% in the 1996 quarter. The Corporation
anticipates that this percentage will continue to decline during 1996 as the
process of consolidating the Corporation's distribution operations continues
and redundant costs are eliminated.
Interest expense decreased from $618,000 to $488,000 reflecting the lower
outstanding debt level during the 1996 quarter compared to the 1995 quarter.
The Corporation acquired the operations of BABSCO, Inc. in January 1995
with the issuance of debt and stock. The Corporation subsequently succeeded
in reducing working capital levels, allowing the Corporation to reduce its
acquisition-related debt and related interest expense.
Federal and state income taxes as a percentage of net income before taxes was
39% for the quarters ended March 31, 1996 and 1995.
Net income as a percentage of sales was 1.9% and 2.2% for the quarters ended
March 31, 1996 and 1995, respectively. The decline (as discussed above) is
related to the reduction in the commission rate earned on one of the
Corporation's distributed product lines, decreased gross margins in the
distribution operations, and short-term costs associated with consolidating
the Corporation's distribution entities in January 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities totaled $6.5 million during
the first quarter of 1996, consisting primarily of $2.3 million in net income,
a $3.4 million decrease in inventory levels, and $.7 million of depreciation
and amortization. Historically, the Corporation increases its working capital
levels significantly during the first quarter of the year in response to the
seasonal increase in business, as was the case in the first quarter of 1995.
During the 1996 quarter, however, the Corporation was successful in reducing
its inventory levels, even while sales volume increased, due to increased
attention to asset management.
Capital expenditures during the three months ended March 31, 1996 were $4.1
million including the purchase of $3.6 million of real estate previously
leased. Depreciation expense for the first quarter was $.5 million.
During the first quarter of 1996, the Corporation reduced its interest bearing
debt by $2.4 million from $26.3 million at December 31, 1995 to $23.9 million
at March 31, 1996. The reduction of debt primarily reflects the $6.5 million
dollars of cash flow provided by operating activities less $4.1 million of
investing activities.
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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 only
$4 million was outstanding as of March 31, 1996.
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
All items in Part II are either not applicable or answerable in the negative.
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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: May 8, 1996 By: /S/ Larry D. Renbarger
----------------------------------
Larry D. Renbarger
Chief Executive Officer and Director
Dated: May 8, 1996 By: /S/ Mark C. Neilson
----------------------------------
Mark C. Neilson
Secretary/Treasurer
(Principal Financial & Accounting
Officer) and Director
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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0
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<COMMON> 61
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