Patrick Industries Reports Second Quarter Results

    ELKHART, Ind., Aug. 1 /PRNewswire-FirstCall/ -- Patrick Industries,
 Inc. ( PATK) today announced its operating results for the second
 quarter ended June 30, 2007, highlighted by the completion of the Adorn,
 LLC acquisition and the related beginning phases of operational
 integration.
     Patrick, a leading manufacturer and distributor of building and
 component products for the Recreational Vehicle (RV), Manufactured Housing
 (MH) and Industrial markets, reported a net loss of $1.3 million, or $0.25
 per share, on net sales of $113.1 million for the second quarter of 2007,
 compared with net earnings of $1.3 million, or $0.27 per share, on net
 sales of $94.7 million for the same quarter of 2006.
     The second quarter of 2007 included a $1.1 million restructuring charge
 associated with the synergistic facility rationalization opportunities
 presented by the recent acquisition of Adorn in May 2007. The restructuring
 charge includes costs associated with severance and other employee
 termination related activities, and other contract termination costs
 related to the closing and consolidation of several Patrick operating units
 and manufacturing work centers.
     Additionally, the Company accrued costs of approximately $1.7 million
 in the Adorn opening balance sheet related to the consolidation of five
 Adorn operations into the Patrick platform. Patrick also reported other
 charges during the quarter including certain liability settlement costs of
 approximately $0.3 million, amortization of debt financing costs and
 intangible assets of approximately $0.2 million, and charges of
 approximately $0.8 million due to certain employee related retirement
 vesting obligations.
     Patrick reported net sales of approximately $191.3 million, and a net
 loss of approximately $1.9 million, or $0.38 per share for the first six
 months of 2007, including restructuring charges of approximately $1.1
 million. Last year's six-month period included net earnings of $2.0
 million, or $0.42 per share, on net sales of $184.0 million.
     "Our focus in the quarter was on completing the Adorn acquisition, an
 important step in our strategic plan of becoming a premier manufacturer and
 distributor of building and component products to the RV and MH
 industries," said Paul E. Hassler, President and CEO of Patrick Industries.
 "We also made progress during the quarter in executing on our transition
 plan of integrating and consolidating Adorn's operations into Patrick. As
 part of our consolidation efforts to date, we have closed two Adorn
 facilities, reallocated certain customer production in several business
 units to more opportune locations, and consolidated Patrick's unprofitable
 hardwood door operating unit in Woodburn, Ore. into Adorn's
 state-of-the-art cabinet door facility in Elkhart, Ind."
     "We further finalized our senior management organization structure and
 completed the consolidation of the corporate offices. We expect to have the
 majority of the consolidation and facility rationalization completed by the
 end of the year. During the quarter, we further paid down approximately
 $9.4 million in senior term debt as a result of working capital initiatives
 driven from the consolidation. We expect to see improvements from the
 synergies of the acquisition and other initiatives in the third and fourth
 quarters of 2007, and will begin shifting our focus to driving the top line
 and new product introductions."
     The combined MH and RV market sectors represented approximately 67
 percent of the Company's sales in the second quarter of 2007, compared to
 74 percent for the second quarter of 2006. Industrial and other sales,
 which include sales to the kitchen cabinet, office furniture, store
 fixtures and other industries, represented approximately 33 percent of the
 Company's sales for the 2007 second quarter, compared with 26 percent for
 the same quarter of 2006. The year-over-year change in market mix is
 primarily a result of the continued weakness in the MH and RV market
 sectors and the addition of American Hardwoods to Patrick's Industrial
 market share.
     "We added $27.8 million in profitable sales from our recently acquired
 Adorn operations, which represented six weeks of activity from the closing
 date of May 18, 2007, and was immediately accretive to earnings," said
 Hassler. "Our American Hardwoods operation, which we acquired in January
 2007 and was also immediately accretive to earnings, added $3.8 million of
 profitable sales in the 2007 second quarter. Our recent product
 introductions added approximately $1.5 million in sales for the quarter and
 approximately $3.0 million year-to-date, and we are optimistic this will
 accelerate as we continue to gain market share for these products."
     "Excluding sales from acquisitions and new products, our sales declined
 by approximately 15 percent in the quarter, primarily due to softness in
 our primary markets," added Hassler. "Industry sales of manufactured homes
 were down 30 percent year-to-date and industry sales of RVs were down 14
 percent as of May 2007, the most recent data available from industry
 sources. Industry analysts are forecasting a 10 percent decline in RV
 shipments for 2007, with the industry recovering to modest growth in 2008.
 Several of our MH customers have reported improved backlogs, which is a
 positive sign in this difficult market."
     Patrick reported gross margin of approximately 10.6 percent for the
 second quarter of 2007 compared with gross margin of 12.4 percent in the
 same quarter of 2006. The year-over-year decline in gross margin includes
 the restructuring and other charges as well as other litigation related
 settlement costs during the quarter. Patrick reported an operating loss of
 $0.6 million for the second quarter of 2007, compared to operating income
 of $2.5 million in the same quarter of 2006, primarily due to the
 restructuring and other charges related to the Adorn acquisition.
     "Both the RV and MH industries are facing challenges in 2007. However,
 we are well positioned to expand in these difficult markets and execute on
 our strategic plan based on market penetration, enhanced capacity
 utilization, improving operating efficiencies, product development and the
 exploration of strategic and accretive acquisition opportunities," Hassler
 concluded.
     About Patrick Industries
     Patrick Industries, Inc. (www.patrickind.com) is a major manufacturer
 of component products and a distributor of building products serving the
 Manufactured Housing, Recreational Vehicle, kitchen cabinet, home and
 office furniture, fixture and commercial furnishings, marine, and other
 Industrial markets and operates coast-to-coast through locations in 14
 states. Patrick's major manufactured products include cabinet and wall
 components, countertops, adhesives, and aluminum extrusions. The Company
 also distributes drywall and drywall finishing products, interior passage
 doors, flooring, vinyl and cement siding, ceramic tile, high pressure
 laminates, and other miscellaneous products.
     Forward-Looking Information
     This press release contains certain "forward-looking statements" within
 the meaning of the Private Securities Litigation Reform Act of 1995 with
 respect to financial condition, results of operations, business strategies,
 operating efficiencies or synergies, competitive position, growth
 opportunities for existing products, plans and objectives of management,
 markets for the Company's common stock and other matters. Statements in
 this press release that are not historical facts are "forward-looking
 statements" for the purpose of the safe harbor provided by Section 21E of
 the Exchange Act and Section 27A of the Securities Act. Forward-looking
 statements, including, without limitation, those relating to our future
 business prospects, revenues and income, wherever they occur in this press
 release, are necessarily estimates reflecting the best judgment of our
 senior management at the time such statements were made, and involve a
 number of risks and uncertainties that could cause actual results to differ
 materially from those suggested by forward-looking statements. The Company
 does not undertake to update forward- looking statements to reflect
 circumstances or events that occur after the date the forward-looking
 statements are made. You should consider forward- looking statements,
 therefore, in light of various important factors, including those set forth
 in this press release. There are a number of factors, many of which are
 beyond the Company's control, which could cause actual results and events
 to differ materially from those described in the forward-looking
 statements. These factors include pricing pressures due to competition,
 costs and availability of raw materials, availability of retail and
 wholesale financing for manufactured homes, availability and costs of
 labor, inventory levels of retailers and manufacturers, levels of
 repossessed manufactured homes, the financial condition of our customers,
 interest rates, oil and gasoline prices, the outcome of litigation, volume
 of orders related to hurricane damage and operating margins on such
 business, and adverse weather conditions impacting retail sales. In
 addition, national and regional economic conditions and consumer confidence
 may affect the retail sale of recreational vehicles and manufactured homes.
                         UNAUDITED FINANCIAL HIGHLIGHTS
 
     (dollars in 000's except           THREE MONTHS ENDED   SIX MONTHS ENDED
      per share amounts)                      JUNE 30,           JUNE 30,
 
     INCOME STATEMENT                      2007     2006      2007       2006
 
     Net sales                         $113,125  $94,692  $191,273   $183,973
     Cost of goods sold                 100,213   82,993   169,547    161,272
     Restructuring charges                  938      ---       938        ---
         Gross profit                    11,974   11,699    20,788     22,701
     Warehouse and delivery expenses      5,177    3,903     8,944      7,923
     Selling, general, and
      administrative expenses             7,222    5,277    12,798     10,714
     Restructuring charges                  183      ---       183        ---
          Operating income (loss)          (608)   2,519    (1,137)     4,064
     Interest expense, net                1,525      325     2,096        659
         Income (loss) before
         income taxes                    (2,133)   2,194    (3,233)     3,405
     Income taxes (credit)                 (847)     888    (1,293)     1,393
               NET INCOME (LOSS)        ($1,286)  $1,306   ($1,940)    $2,012
 
     BASIC INCOME (LOSS) PER COMMON
      SHARE                              ($0.25)   $0.27    ($0.38)     $0.42
     DILUTED INCOME (LOSS) PER COMMON
      SHARE                              ($0.25)   $0.27    ($0.38)     $0.41
         Weighted average shares
          outstanding, basic              5,422    4,864     5,166      4,848
         Weighted average shares
          outstanding, diluted            5,422    4,903     5,166      4,887
 
 
 
                                                           June 30,   June 30,
     BALANCE SHEET                                           2007       2006
 
     CURRENT ASSETS
       Cash and cash equivalents                               $83       $609
       Trade receivables, net                               32,682     25,497
       Inventories                                          48,484     45,312
       Income taxes receivable                               1,031        ---
       Prepaid expenses and other                            3,343      1,920
       Deferred tax assets                                   1,866      1,141
         Total current assets                               87,489     74,479
 
     PROPERTY AND EQUIPMENT, NET                            58,759     38,977
     GOODWILL AND OTHER INTANGIBLE ASSETS                   71,200        ---
     OTHER ASSETS                                            3,483      2,824
 
           TOTAL ASSETS                                   $220,931   $116,280
 
     CURRENT LIABILITIES
       Current maturities of long-term debt                 $8,750     $2,767
       Short-term borrowings                                   ---      1,942
       Accounts payable                                     27,286     23,021
       Accrued expenses                                     11,144      4,685
           Total current liabilities                        47,180     32,415
 
     LONG-TERM DEBT LESS CURRENT MATURITIES                 78,250     15,639
     DEFERRED COMPENSATION AND OTHER                         3,363      1,749
     DEFERRED TAX LIABILITIES                               16,437      1,011
 
     SHAREHOLDERS' EQUITY                                   75,701     65,466
 
           TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $220,931   $116,280
 
 

SOURCE Patrick Industries, Inc.