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, 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, 7,646,388 outstanding at August 12, 1996.
Page 1 of 11
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SHELTER COMPONENTS CORPORATION
INDEX
-----
FINANCIAL INFORMATION PAGES
- - - --------------------- ______
PART I
- - - ------
Item 1 Financial Statements:
Consolidated Balance Sheets -- June 30, 1996
and December 31, 1995 3
Consolidated Statements of Income -- three and six
months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -- six
months ended June 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 10
SIGNATURES 11
Page 2 of 11
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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)
June 30, 1996 December 31, 1995
------------- -----------------
ASSETS
CURRENT ASSETS
Cash $ 25 $ 24
Trade receivables, net 35,008 25,452
Inventories 52,771 50,049
Deferred income taxes 1,412 1,412
Prepaid expenses and other 693 457
-------- --------
Total current assets 89,909 77,394
PROPERTY, PLANT AND EQUIPMENT, NET 21,116 17,587
COST IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization 11,272 11,554
OTHER ASSETS 701 879
-------- --------
Total assets $122,998 $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 36,106 23,159
Accrued expenses and income
taxes payable 8,010 5,774
-------- --------
Total current liabilities 46,125 35,665
-------- --------
LONG-TERM DEBT 19,586 19,596
-------- --------
DEFERRED INCOME TAXES 888 944
-------- --------
OTHER DEFERRED LIABILITIES 86 41
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value --- ---
Common stock, $.01 par value 77 61
Additional paid-in capital 11,757 11,613
Retained earnings 44,516 39,545
-------- --------
56,350 51,219
Less, Treasury stock 37 51
-------- --------
Total stockholders' equity 56,313 51,168
-------- --------
Total liabilities and stock-
holders' equity $122,998 $107,414
======== ========
The accompanying notes are a part of the consolidated financial statements.
Page 3 of 11
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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,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $137,958 $116,406 $257,754 $225,304
Cost of sales 118,277 99,549 220,557 191,976
-------- -------- -------- --------
Gross profit 19,681 16,857 37,197 33,328
Other income - commissions 605 810 1,118 1,562
-------- -------- -------- --------
20,286 17,667 38,315 34,890
Selling, general and administrative
expenses 15,146 12,667 28,993 25,332
-------- -------- -------- --------
Operating income 5,140 5,000 9,322 9,558
Interest income 44 12 68 24
Interest expense (450) (714) (938) (1,332)
-------- -------- -------- --------
Income before income taxes 4,734 4,298 8,452 8,250
Income taxes 1,846 1,669 3,296 3,198
-------- -------- -------- --------
Net income $ 2,888 $ 2,629 $ 5,156 $ 5,052
======== ======== ======== ========
Earnings per common and common
equivalent share $ .37 $ .34 $ .67 $ .66
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding (a) 7,749 7,648 7,734 7,645
======= ======== ======== ========
Cash dividends per share (a) $ .02 $ .02 $ .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.
Page 4 of 11
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands)
Six Months Ended
June 30,
1996 1995
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,330 $ 5,065
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (4,550) (1,379)
Acquisitions of businesses --- (400)
Other, net (29) 57
------- -------
Net cash used in investing activities (4,579) (1,722)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 43,076 136,956
Repayment of debt (47,809) (140,304)
Cash dividends (185) (180)
Proceeds from exercise of stock options 168 186
------- -------
Net cash used in
financing activities (4,750) (3,342)
------- -------
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 -- $ 9,350
Short-term debt issued -- 1,500
Long-term debt issued -- 5,631
Common stock issued -- 2,926
------
$19,407
=======
The accompanying notes are a part of the consolidated financial statements.
Page 5 of 11
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SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 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 June 30, 1996 and December 31, 1995 consisted of the following
components (in thousands):
June 30, 1996 December 31, 1995
-------------- -----------------
Raw materials $ 8,049 $ 8,272
Work in process 4,568 4,986
Finished goods 8,286 6,866
Goods held for resale 31,868 29,925
------- -------
$52,771 $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.
Outstanding borrowings under the $25 million Revolver at June 30, 1996 were
$1.8 million bearing interest at the prime rate (8.25%).
Page 6 of 11
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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 six month periods ended June 30, 1996 and 1995, expressed
as a percentage of net sales:
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 85.7 85.5 85.6 85.2
------ ------ ------ ------
Gross profit 14.3 14.5 14.4 14.8
Other income - commissions .4 .7 .4 .7
------ ------ ------ ------
14.7 15.2 14.8 15.5
Selling, general & administrative
expenses 11.0 10.9 11.2 11.3
------ ------ ------ ------
Operating income 3.7 4.3 3.6 4.2
Interest expense, net .3 .6 .3 .6
------ ------- ------ ------
Income before income taxes 3.4 3.7 3.3 3.6
Income taxes 1.3 1.4 1.3 1.4
------ ------- ------ ------
Net income 2.1% 2.3% 2.0% 2.2%
======= ======= ====== ======
Net sales increased by $22 million (19%) for the quarter ended June 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 a 12% increase in
homes produced for the second quarter over the same quarter last year. For
the six month period ending June 30, 1996, net sales increased by $32
million (14%) when compared to the first half of 1995. This increase in net
sales, when compared to the 9.5% increase in manufactured homes produced
during the first half 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 14.3% and 14.5% for the
quarters ended June 30, 1996 and 1995, respectively. For the six month
periods ended June 30, 1996 and 1995, gross profit was 14.4% 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. Also, 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 of 11
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Selling, general and administrative expenses as a percentage of net sales
were 11.0% and 10.9% for the quarters ended June 30, 1996 and 1995,
respectively. For the six months ended June 30, 1996 and 1995, this
percentage was 11.2% and 11.3%, respectively. The Corporation has recently
begun 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 $714,000 in the second quarter of 1995 to
$450,000 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 10% ($2.3 million) during the second
quarter. Interest expense for the six months ended June 30, 1996 and 1995
was $938,000 and $1,332,000, respectively. Debt was reduced 18%
($4.7 million) during the first six months of 1996.
Federal and state income taxes as a percentage of net income before taxes
were between 39% and 40% for all periods presented.
Net income as a percentage of sales was 2.1% and 2.3% for the quarters ended
June 30, 1996 and 1995, respectively. For the six month periods ended June
30, 1996 and 1995, these percentages were 2.0% and 2.2%, 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. Difficulties experienced in certain
of the Corporation's manufacturing operations during the second quarter where
intense price competition strained the results of operations, also
contributed to the slight decline in the net income percentage.
Management anticipates that the Corporation can improve its net operating
margins in the near future, particularly in the Corporation's manufacturing
operations. Recently, certain of the Corporation's manufacturing processes
have experienced difficulties associated with the tremendous increase in
demand that has stretched capacity utilization beyond efficient operating
levels. Management is addressing these issues in an effort to increase
capacity and restore production efficiencies.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities totaled $9.3 million for
the six months ending June 30, 1996, primarily consisting of $5.2 million in
net income, $1.5 million of depreciation and amortization, and a $2.6 million
net decrease in the components of working capital. Although the Corporation
experienced normal seasonal increases in inventories and accounts receivable,
these were more than offset by increases in accounts payable reflecting the
Corporation's proactive efforts to improve its net working capital management.
Capital expenditures during the six months ended June 30, 1996 were
$4.5 million including the purchase of $3.6 million of real estate previously
leased. Depreciation expense for the first six months of 1996 was
approximately $1.0 million.
Page 8 of 11
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For the six months ended June 30, 1996, the Corporation reduced its interest
bearing debt by $4.7 million from $26.3 million at December 31, 1995 to
$21.6 million at June 30, 1996. The reduction of debt reflects the
$9.3 million of cash flow provided by operations less $4.6 million of
capital expenditures and other investing activities. 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 less than $2 million
was outstanding as of June 30, 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.
Page 9 of 11
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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 30, 1996.
b. The following Directors were elected Class C Directors
for a three-year term expiring in 1999. The tabulation
of votes on the election of these Directors was as follows:
Authority
For Withheld
William J. Barrett 6,095,481 428,476
Herbert M. Gardner 6,095,481 428,476
Cornelius J. Murphy 6,095,481 428,476
Gerald R. Stults 6,095,481 428,476
The other Directors whose term of office continued
after the meeting are as follows:
Class "A" Directors: Class "B" Directors:
Arthur M. Borden William N. Harper
William B. Riblet Ronald D. Minzey
Richard E. Summers Larry D. Renbarger
Mark C. Neilson
c. At the annual meeting, the shareholders were also asked to
vote on an amendment to the Corporation's Key Employee
Stock Incentive Plan increasing the number of shares of
common stock issuable under this plan by 205,078 shares
from 732,422 shares to 937,500 shares. The tabulation
of votes was as follows:
For Against Abstained
To amend Key Employee
Stock Incentive Plan 6,184,339 318,699 20,199
d. At the annual meeting, the shareholders were also asked
to ratify the selection by the Board of Directors of
Price Waterhouse LLP as certified public accountants for
the Corporation for the year ending December 31, 1996.
For Against Abstained
Ratification of
Price Waterhouse LLP 6,514,533 7,198 2,228
Item 5 OTHER INFORMATION
Not applicable
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
None
b. Reports on Form 8-K:
None
Page 10 of 11
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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: August 14, 1996 By: /S/ Larry D. Renbarger
----------------------------------
Larry D. Renbarger
Chief Executive Officer and Director
Dated: August 14, 1996 By: /S/ Mark C. Neilson
----------------------------------
Mark C. Neilson
Secretary/Treasurer
(Principal Financial & Accounting
Officer) and Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 35,576
<ALLOWANCES> 568
<INVENTORY> 52,771
<CURRENT-ASSETS> 89,909
<PP&E> 32,263
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<BONDS> 19,586
0
0
<COMMON> 77
<OTHER-SE> 56,236
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<SALES> 257,754
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<CGS> 220,557
<TOTAL-COSTS> 220,557
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<LOSS-PROVISION> 17
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