Business Context and Reporting Period
Company: Patrick Industries, Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 1996
Industry: Manufacturer and distributor of products for the Manufactured Housing (68% of sales) and Recreational Vehicle (16% of sales) industries.
Key Financial Metrics
| Metric | 3 Months Ended June 30, 1996 |
6 Months Ended June 30, 1996 |
|---|---|---|
| Net Sales | $107,395,342 | $201,162,883 |
| Net Income | $3,204,359 | $5,149,065 |
| Earnings Per Share | $0.53 | $0.86 |
| Gross Profit Margin | 13.5% | 13.0% |
| Operating Income Margin | 5.2% | 4.5% |
| Net Cash from Operations | N/A | $11,522,257 |
| Cash and Equivalents | $6,305,364 | $6,305,364 |
| Total Debt (Current + Long-Term) | $26,900,000 | $26,900,000 |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 16.0% ($14.8M) for the quarter and 12.0% ($21.6M) for the six months compared to 1995. Growth was driven by a 12% increase in units shipped by the Manufactured Housing industry.
- Profitability: Net income rose 20.3% ($541k) for the quarter and 3.4% ($170k) for the six months. Operating income increased 20.3% for the quarter but only 2.1% for the six months.
- Margins: Gross profit margin remained stable at 13.5% for the quarter but declined to 13.0% for the six months due to lower volume, higher raw material costs in the aluminum extrusion division, and plant relocation costs in Oregon.
- Liquidity: Cash and cash equivalents increased significantly from $1.35M (Dec 31, 1995) to $6.31M (June 30, 1996), driven by strong operating cash flow of $11.5M.
- Debt: Total debt remained stable at $26.9M. Interest expense decreased due to lower borrowing levels and interest rates following a September 1995 private placement of $18M in senior notes.
Outlook, Risks, and Management Commentary
- Seasonality: Operations are seasonal, with sales and profits typically highest in the second and third quarters due to temperate climate conditions.
- Liquidity Position: Management believes cash generated from operations and existing credit agreements (reduced revolver availability to $5M) are sufficient to fund working capital and capital expenditures.
- Capital Expenditures: Capital expenditures for the six months were $5.3M, consistent with the prior year period.
- Risks/Contingencies: No material legal proceedings or defaults on senior securities were reported. Inflation was not considered to have a material effect on operations.
- Unusual Items: The decline in six-month gross margin was attributed to specific operational factors including plant relocation costs and competitive pricing pressures.
Investor Verification Checklist
- Verify the sustainability of the 12% increase in Manufactured Housing unit shipments driving revenue growth.
- Monitor the impact of raw material costs and plant relocation expenses on future gross margins.
- Confirm compliance with financial covenants under the amended Credit Agreement with NBD Bank, N.A.
- Assess the adequacy of the reduced $5M credit revolver for future working capital needs.
- Review the timeline for the seven annual principal repayments on the $18M senior notes beginning in 1999.